Thursday , February 27 2020
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Tag Archives: federal reserve

Our Triple-C Rated Economy: Complacency, Contradictions, and Corona

“I got my toes in the water, ass in the sandNot a worry in the world, a cold beer in my handLife is good today, life is good today” – Toes, Zac Brown Band The economic and social instabilities in the U.S. are numerous and growing despite the fact that many of these factors have been in place and observable for years.    Overvaluation of equity marketsWeak GDP GrowthHigh Debt to GDP levelsBBB Corporate Debt at Record LevelsHigh Leverage and Margin DebtWeak ProductivityGrowing Fiscal...

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Decoding Media Speak & What You Can Do About It

Just recently, the Institutional Investor website published a brilliant piece entitled “Asset Manager B.S. Decoded.” “The investment chief for one institution-sized single-family fortune decided to put pen to paper, translating these overused phrases, sales jargon, and excuses into plain — and satirical — English.” A Translation Guide to Asset Manager-Speak Now is a good entry point = Sorry, we are in a drawdown We have a high Sharpe ratio = We don’t make much money We have never lost money =...

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How Much Shall We Blame the Fed?

I have been having an ongoing debate with a friend who is part of the contingency of people who blame the Fed for many of the evils in the America.The Federal Reserve has been a subject of 717 posts on this site — both pre and post Great Financial Crisis (GFC). While we disagree about many of the policy approaches, we don’t have many factual disagreements. The biggest policy disagreement: I rank the Fed high on the “Who is to blame” scale – we agree that low rates were a major cause. I...

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Markets are Data-Driven, but which Data?

Like a Newtonian law of motion, market participants will continue to rely on a particular trading style or system until it stops working. Betting that volatility stays low is a cash register for many, and there appears to be what Soros called "reflexivity" here, like a self-fulfilling prophecy.  Why is volatility low?  Because it is being sold in various ways besides directly selling options.  Buying equity pullbacks and selling euro bounces, for example, also seem to be expressions of...

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Investors Continue to Look Past the Coronavirus

Overview: The capital markets are heading into the weekend, still trying to look past the coronavirus despite the new cases in Hubei. Tokyo was a notable exception in the Asia Pacific region, as the other major equity markets, like in Hong Kong, China, Taiwan, South Korea, and Australia, advanced. The MSCI Asia Pacific Index rose for the second week. European shares are little changed, and the Dow Jones Stoxx 600 has risen by about 5% over the past two weeks. US shares are firm, and the...

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Will The Corona Virus Trigger A Recession?

As if waking up to an economic nightmare, investors see headlines like these and many others flashing across their Bloomberg terminals: Facebook says Oculus headphone production will be delayed due to virusApple extends country wide store closing for another weekFoxconn delays iPhone productionQualcomm cuts production forecast due to virus uncertaintyStarbucks announces China store closures through Lunar New Year, uncertain when they may reopenUS Steel flashes a warning of a cut in...

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The Greenback Slips in Subdued Activity

Overview: Investors appear to be increasingly looking past the latest coronavirus from China as new afflictions slow. Despite the soggy close of US equities yesterday, Asia Pacific bourses are nearly all higher, led by more than 1% gains in Singapore and Thailand. The Dow Jones Stoxx 600 is at new record highs, led by consumer discretionary and materials sectors. US shares are also trading higher. Safe haven flows into bonds continues to unwind. Benchmark yields are mostly higher, led by...

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Why “Not-QE” is QE: Deciphering Gibberish

“I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.”  – Alan Greenspan Imagine if Federal Reserve (Fed) Chairman Jerome Powell told the American people they must pay more for the goods and services they consume. How long would it take for mobs with pitchforks to surround the Mariner Eccles building?  However, Jerome Powell and every other member of the Fed routinely and consistently convey pro-inflationary ideals, and there...

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New Calm in the Capital Markets Continues, Powell Moves to Center Stage

Overview: Investors are taking solace from reports indicating that the increase in the new coronavirus at ground zero (Hubei) is slowing. After the S&P 500 reversed early losses yesterday to close at new record highs helped keep the bullish sentiment intact. Benchmarks in Hong Kong, South Korea, Australia, and China rose for the sixth session. The Dow Jones Stoxx 600 gained a little more than 0.6% in morning turnover in Europe to a new record high, for its sixth rise in seven...

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US Soars while Rivals are Hobbled

We are approaching the mid-point of the first quarter, and the coronavirus from China is the new key development for businesses and investors.  The economic impact appears to be still growing as the disruption to supply chains, production, and demand continues.  The re-opening of China from the extended Lunar New Year holiday brought some relief to the markets as officials ensured ample liquidity, leaned against short selling, and offered concessions to businesses and encouraged...

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