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Tag Archives: federal reserve

Negative Is The New Subprime

What is nothing? What comes to mind when you imagine nothing? The moment we try to imagine what nothing is, we fail, because nothing cannot be envisioned. There is nothing to envision or ponder or even think about. Nothing is no thing. Yes, the point above is tedious, but the value of nothing in the financial theater is the latest magic trick of the central bankers and the most vital factor governing all investments. If I invest my hard-earned capital in an asset the guarantees a...

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Macro Deterioration

The US-China tensions remain the dominant driver of investor risk appetites.  President Trump has repeatedly accused China of manipulating its currency on twitter, and finally Treasury Secretary Mnuchiin acquiesced after China failed to prevent the dollar from rising above CNY7.0.  China set the reference rate for the dollar lower than models based on the basket the PBOC uses implied for the past three sessions, and this helped stabilize the situation. Contrary to expectations, China...

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The Prospects of a Weaker Dollar Policy

“Let me be clear, what I said was, it’s not the beginning of a long series of rate cuts.”- Fed Chairman Jerome Powell -7/31/2019 “What the Market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, The European Union and other countries around the world….” – President Donald Trump – Twitter 7/31/2019 With the July 31, 2019, Fed meeting in the books, President Trump is up...

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Michael Hudson: Why Frances Coppola’s “The Case for the People’s Quantitative Easing” Is for Banks, Not the People

Yves here. I must confess to not having read Frances Coppola’s new book, but based on Martin Wolf’s and Michael Hudson’s recap of its thesis, I am at a loss to understand how Coppola could see her “people’s quantitative easing” as anything other than another subsidy to banks and bank lending. More and more economists have concluded that the level of financialization in advanced economies serves as a drag on growth. The IMF determined that the optimal level of financial development was that...

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No Matter What The Fed Does, It’s Bullish?

It’s Bullish…Always Last Wednesday, the Federal Reserve announced the latest decision concerning monetary policy which contained three primary components: A cut of 25bps Stopping balance sheet reductions (or Quantitative Tightening or Q.T.) An outlook suggestive this may be the only rate cut for a while. While stocks dropped on disappointment they Fed may not cut further; it didn’t take long for bullish commentators to start suggesting why the cuts were supportive of higher asset prices....

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The Dog Days of August are Upon Us

The die is cast. To defend the uneven expansion and ward off disinflationary forces, monetary authorities will provide more accommodation.  The Federal Reserve delivered its first rate cut in more than a decade and stopped unwinding its balance sheet two months earlier than it previously indicated (worth $100 bln of additional buying of Treasuries and Agencies).  Following the end of the tariff truce, and after the July jobs report,  the market was certain the Fed would cut rates again...

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Mid-Course Correction Sends Greenback Higher

Overview:  The Federal Reserve delivered the first rate cut since the Great Financial Crisis but couched it in terms of a mid-course correction rather than the start of a larger easing cycle.  By doing so, Fed chief Powell cast the cut in less dovish terms than the market expected and the reaction function of the market has been clear.  The US dollar has advanced against nearly all the world's currencies.  The greenback broke through key levels that had been holding capping it, like...

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The Fed’s Massive Debt for Equity Swap

“All assets are priced where they are today because of central banks. That’s modern finance — it’s not about psychology or flows anymore, it’s about what the central banks are going to do next.” – Mark Spitznagel Cause and Effect Rene Descartes, a 17th-century mathematician, asked the fundamental question of how causal power functions. He was interested in how things relate to each other in terms of causality and how the thought of an action gets translated into a physical action. The...

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Technically Speaking: 5-Charts Invested Bears Are Watching Now

In this past weekend’s newsletter, I discussed the rather severe extensions of the market above both the longer-term bullish trend and the 200-dma. To wit: There is also just the simple issue that markets are very extended above their long-term trends, as shown in the chart below. A geopolitical event, a shift in expectations, or an acceleration in economic weakness in the U.S. could spark a mean-reverting event which would be quite the norm of what we have seen in recent years.” “As...

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The FOMC and US Jobs Headline the Week Ahead

There is little doubt that the Federal Reserve will ease monetary policy at the conclusion of the FOMC meeting on July 31.  We never thought the chances of a 50 bp move were anything but negligible, though even at this late stage, the market appears to be pricing in about a one-in-five chance.  Although a minority, and maybe worth a dissent or two (Rosengren? George?), we are sympathetic to those Fed officials that do not see the urgency to ease monetary policy.  Even though Q2...

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