Earnings season is in full bloom and markets care little about the details as long headlines continue to provide optimism. That’s a pretty low bar since “beating” estimates is a rigged game. However, revenues are much more difficult to tailor by accounting conventions, so they offer a more reliable (not perfect) window into the fundamental circumstances of each company. We [...]
There is a temptation to compare anything of note in financial markets to the panic of 2008. It is exceedingly easy to do, and considering the scale and scope of everything that went wrong all at the same time it is very likely that Autumn 2008 will remain the benchmark. That does not mean it is the sole measure of [...]
I have never liked the word “inflation” in any context. It is far too subjective despite the various ideological attachments that have been assigned. However, humans, as economic agents, perceive “inflation” and it has very real effects on economic decisions and performance, so it has to be accounted for in some way. Inflation in the conventional economics sense is narrowly [...]
There still hasn’t been any official acknowledgement that QE damages effective liquidity by removing usable collateral from the system. By purchasing US Treasury debt securities, including those just auctioned, the Federal Reserve is reducing what is left for the market to repo and, more importantly for fragmented markets, rehypothecate. The closest we have to facing up to the problem is [...]
The bond market rout appears to have settled as various Fed speeches have walked back the idea of tapering QE. The damage has been done in many places, however, regardless of whether QE stays at full throttle $85 billion or drops just slightly to $70 or $65 billion a few months hence. The hardest hit seems to have landed in [...]
In Part 1, I noted the more relevant link between the trade economy and economic performance overall, particularly in contrast to the growing dichotomy in the employment segment or jobs market. The Establishment Survey appears to be showing “strength” (at a reduced standard for what constitutes jobs recovery) at odds with other surveys and certainly with these additional economic data [...]
The explicit link between QE and the unemployment rate is supposed to be a rough proxy for the domestic economy’s response to repeated monetary prodding. The question is “how rough” a proxy. The official unemployment rate, as noted before, might have served some use prior to the bubble days, but of the economy as it exists in post-2008 there is [...]
Gold forward rates continue to demonstrate severe gold strains. While GOFO across several maturities has risen slightly in the past few trading days, it remains negative out to 3-months. It is important to remember both what GOFO is and what it is telling us. To the former, GOFO is not a market indication; it is a “fix”, or a survey [...]
Well, that didn't take long. A couple of months ago, Ben Bernanke started the inevitable process of weaning the markets off his monetary methadone. He talked openly about the process of winding down quantitative easing, tapering bond purchases and eventually normalizing monetary policy - assuming the economy cooperated and sustained its feeble but forward momentum. Unfortunately, the markets threw a [...]
Chairman Bernanke stole the show yesterday, certainly by his accommodative and now contradictory stand. I suppose that is the danger in trying to talk “markets” toward “targets”, much like Greenspan in the late 1990’s. Toward that end, he made at least one prediction that will likely come true (in sharp contrast to the Fed’s history), namely that the unemployment rate [...]
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