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Tag Archives: yields

Powell’s Revelation And A TIP For Defense

“I think we would need to see a really significant move up in inflation that’s persistent before we even consider raising rates to address inflation concerns.” – Jerome Powell 10/30/2019 The recent quote above from Federal Reserve Chairman Jerome Powell is powerful, to say the least. We cannot remember a time in the last 30 years when a Fed Chairman has so clearly articulated such a strong desire for more inflation. In particular, let’s dissect the bolded words in the quote for...

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16/10/2019:Corporate Bond Markets are Primed for a Blowout

My this week's column for The Currency is covering the build up of systemic risks in the global corporate bond markets: https://www.thecurrency.news/articles/1962/constantin-gurdgiev-corporate-bond-markets-are-primed-for-a-blowout. Synopsis: "Individual firms can be sensitive to the periodic repricing of risk by the investors. But collectively, the entire global corporate bond market is sitting on a powder keg of ultra-low government bond yields, with a risk-off fuse lit by the...

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Will Monetary or Fiscal Stimulus Turnaround the Next Recession?

A recession is emerging with interest rate curves inverted, the end of the business cycle at hand, world trade falling, and consumers and businesses beginning to pull back on spending.  The question is: will monetary or fiscal stimulus turn around a recession?  In this post, we find both stimulus alternatives likely to be too weak to have the necessary economic impact to lift the economy out of a recession. Finally, we will identify the key characteristics of a coming recession and the...

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Markets Take Collective Breath Ahead of the Weekend

Overview:  The global capital markets are ending the tumultuous week calmly, but it is far from clear that is will hold long.  Next week's flash PMIs have potential to disappoint, and there is risk of new escalation in the US-China trade conflict as the PRC threatens to take action to countermeasures to the new US tariffs. Most equity markets are higher, but the gains pare the week's losses but extend the losing streak.  The MSCI Asia Pacific's has fallen nearly 7% of the four-week...

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Market Implications For Removing Fed Chair Powell

John Kelly – White House Chief of Staff James Mattis – Secretary of Defense Jeff Sessions – Attorney General Rex Tillerson – Secretary of State Gary Cohn – Chief Economic Advisor Steve Bannon – White House Chief Strategist Anthony Scaramucci – White House Communications Director Reince Priebus – White House Chief of Staff Sean Spicer – White House Press Secretary James Comey – FBI Director “Every week is shark week in the Trump White House,” wrote The Hill contributing author Brad Bannon in...

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Chairman Powell – You’re Fired (Update)

Since President Trump first discussed firing Jerome Powell, out of a sense of frustration that his Fed Chair pick was not dovish enough, he has regularly expressed his displeasure at Powell’s lack of willingness to do whatever it takes to keep the economy booming beyond its potential. Strong economic growth serves Trump well as it boosts the odds of winning a second term. This thought of firing the Fed Chair took an interesting turn yesterday when Mario Draghi, Jerome Powell’s counter-part in...

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Yield Spike

We highlighted the potential risk in our post yesterday, Druckenmiller On Bonds If you listened to the Druckenmiller interview we posted on New Year’s Day,  he thrives in bear markets, not by shorting stocks but being long bonds.  Shorting stocks in a bear market, though more profitable,  he has learned is riskier due to the higher propensity for nutcracking short squeezes.  Druck also worries about the level he is buying at. Nevertheless, this confirms our suspicion the bond market...

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Is It Time To Buy The Home Building Sector (XHB)

Throughout modern financial history, the ability to borrow at a 5% rate on a 30-year mortgage was considered a great deal. Over the past ten years, mortgage rates falling to between 3% and 4% have warped perceptions. Evidence of this fact can be found by the sticker shock and home buyer consternation that the currently available 5% mortgage rate is causing. The rate shock is not limited to home buyers; the home building sector has fallen over 30% since it recorded a record high in January...

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“Blind Faith” Isn’t A Strategy For “Late-Cycle” Markets

 “The journey of a thousand miles begins with one step.”  – Lao Tzu In a tiny first step on December 16, 2015, the Federal Reserve (Fed) did something they had not done in over nine years. From the unprecedented starting point of zero, they raised the Fed Funds rate. Since, they have begun to allow their swollen balance sheet to contract in what can only be characterized as another unprecedented event. Although monetary policy remains extreme and real rates only recently have turned positive,...

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The Fed’s Mandate To Pick Your Pocket – The Real Price Of Inflation

“Inflation is everywhere and always a monetary phenomenon.” – Milton Friedman This oft-cited quote from the renowned American economist Milton Friedman suggests something important about inflation. What he implies is that inflation is a function of money, but what exactly does that mean? To better appreciate this thought, let’s use a simple example of three people stranded on a deserted island. One person has two bottles of water, and she is willing to sell one of the bottles to the highest...

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