Yesterday, bonds fell sharply due to stronger-than-expected housing price and consumer confidence reports. That reflects the belief that the economy is mending, and as a result, the Fed will deliver on its promise to dial back and then end QE. Ten year Treasury yields rose to the 2.10%-2.11% level. Various commentators claim that rates will zoom higher either right over that point or at 2.25%. How worried should we be?
Read more...I welcome readers telling me I’ve missed something, but looking at the Fed’s problem from 50,000 feet, it appears that the the monetary authority appears to have set boundary conditions for its QE exit that it can’t meet.
Read more...Greece’s Prime Minister recently flew to China, to woo Chinese investors. In his bid to be persuasive, he adopted a radical narrative: Greece is a Success Story. A country that almost perished in 2012 is now on the mend; on the road to stabilisation and growth; a wonderful opportunity, currently, for investors to pick up ultra cheap investments and to benefit from the forthcoming growth. How much of this is true, however?
Read more...We’ve been skeptical of the private equity land rush to snap up single family homes for rentals. They’ve been a big enough force in the housing market nationwide to lead some commentators to question how solid the housing “recovery” is. Yet the combination of rising enthusiasm for housing and a richly-valued stock market is leading a raft of PE firms to ready IPOs as a way to take profits and establish valuations for their profit participations.
Read more...Bloomberg flagged that productivity gains in the US are tepid, and that’s a sign of economic weakness:
Read more...By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
Some of the crown jewels of corporate America have reported declining revenues and earnings, and have lowered their forecasts, and in doing so, have unleashed a flood of obfuscation and excuses – from Easter falling on the wrong date to lazy sales reps.
Read more...There’s a remarkable amount of optimism in the US financial media given the underlying health of the economy. Of course, the sort of short term investors that have come to dominate securities trading had been in a “risk on/risk off” pattern for a protracted period before commodities weakness and the remarkable run of the Nikkei has led to some renewed focus on relative values of various macro plays. But the markets are still dominated by an underlying faith in the willingness of central bankers to protect the backs of investors and limit any downside (while, ironically, many of these same investors howl about ZIRP and QE, which were clearly intended to goose the value of financial assets and real estate, with the hope that would lead to more consumer spending).
And why shouldn’t the professional investors (as opposed to widows and orphans who can no longer rely on low risk bond investments to produce adequate income) be pleased as punch?
Read more...Whither gold?
Read more...By David Llewellyn-Smith, founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific’s leading geo-politics website. Cross posted from MacroBusiness
PIMCO famously coined the phrase to “the new normal” to capture what it saw was a structural change to global markets in the wake of the GFC. It was to be period defined by lower returns on assets owing to a combination of delevering, deglobalization, and reregulation. Today that looks like fantasy.
Read more...It’s hard to fathom the celebratory mood in the US markets, save that the moneyed classes are benefitting from a wall of liquidity reminiscent of early 2007, when risk spreads across virtually all types of lending shrank to scarily low levels. Then the culprit was not well understood, although Gillian Tett discerned that CDOs were a huge source of leverage, and in April 2007, an analyst, Henry Maxey at Ruffler, LLC, did an impressive job of piecing together how levered structured credit strategies were driving market liquidity.
Now it’s a lot easier to see what is afoot.
Read more...Ah, the halcyon days of early 2007, when economics and finance bloggers would study the clouds on the horizon and debate what they foretold. Maybe I’m not hanging out in the right circles these days but now that financial markets seem to be completely in thrall to central bankers, there isn’t much point in doing fundamental analysis. As a result, from what I can tell, the level of bullshitting among market pundits has risen considerably.
Read more...Richard Koo of Nomura published an important piece earlier this week which got some attention in the financial blogosphere (Clusterstock, FT Alphaville). It takes issue with a critical part of the economist optimists’ case, namely, that consumer deleveraging is about done and therefore the economy is likely to perform much better in the next few years.
Read more...By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.
Eurozone Flash PMI for January came out overnight and the news was relatively good overall, although it must be noted that contraction continues across the zone.
Read more...GMO, in a compelling analysis, not only confirms the skeptics’ case but provides reasons why the Chinese growth model faces an end game. While it may not be nigh, it seems to be closer than most people think.
Read more...