Economists had noticed by the mid-1970’s that what they thought were steady money relationships with the economy had broken down. This divergence was not slight; how could it be given that the era still stands today as the Great Inflation? Ostensibly, a great deal of research on the topic was devoted to monetary policy implications which is a direct assault [...]
With quarterly earnings we get quarterly bank earnings. Interest in them should be heightened by all that has happened since June 2014. And it is, only for seemingly the wrong reasons. Deutsche Bank, the latest, reported shockingly negative preliminary results which only continued the trend. Even though the media largely gets it backwards, at some point as enough time passes [...]
If there is a shift in the credit scheme of the junk bond bubble of late, the reduced volume in issuance would suggest why. While issuance, including high yield and leveraged loans, has been volatile the past few years it had never been so persistently beaten down as it is now. In other words, there had been “slow” periods in [...]
We have been talking about a global “dollar” run for the better part of two weeks, and at least a major “dollar” disruption looming going back three months. To say that any of the latest chaos is “unexpected” is intentionally obtuse, but it has already happened. As it is, I think we can expect FRBNY and the Treasury to issue [...]
US monetary policy is the major driver of the global cost of capital. As a Fed rate cycle approaches, we see the effects of raising required returns across the globe. The increased volatility is a reflection of investors' changing return requirements, risk assessments and the associated unwinding of leveraged exposure. As we approach the anticipated Fed rate hike, look for he [...]
Repo rates absolutely surged at month-end, LIBOR jumped a few more basis points and the eurodollar curve is bid almost everywhere in large chunks. Commodities continue to get smashed, especially crude oil, and currencies are devaluing in almost equally large portions. Even the treasury market is somewhat sporting the tell-tale collateral calls. In short, the “dollar” problems continue into this [...]
If there is something different about the “dollar” in July it is that it has been in widespread pressure on funding. From early May to the beginning of July, the “dollar” was more hit and miss with only regional or limited disruption. Crude prices, for example, rising since the March FOMC, stopped but then traded sideways rather than appreciably lower. [...]
The main thing about “tail events” is how unconventional they can be, a tautology that somehow is necessary. When taking account of financial risks in 2015 it is almost convention that there are bubbles, with rather unnerving complacency about it all. That suggests in some ways the whole idea of bubbles has changed since the first one under eurodollars showed [...]
Here is a summary of this week's research from our strategic partner MRB. Allocation: Trades to consider: "Short global luxury stocks versus multiline retailers." "Short 10-year U.S. Treasuries outright." As always, please feel free to contact me with any questions or concerns. Find out about your personal risk profile and working with Alhambra Click here to sign up for our free [...]
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