Archive - Feb 25, 2015

and other things to keep an eye on today

Janet Yellen once again repeats that the economy is “looking stronger” although still it has yet to manifest into actual strength.  In fact, it is still so weak that the Fed cannot even suggest that rates will raise anytime over the next several FOMC meetings.  In short, the economy is still very sick. The Pundits (Liesman) are suggesting Janet feels the economy is strong but that the “data just isn’t cooperating”.  What does that even mean?? The market is a red herring of sorts keeping our attention away from the reality of the economy.  And so, to give up the market strength would be synonymous to removing the one remaining support holding up that 100 storey building that is otherwise completely rotted.  Only when the economy is able to withstand a market repricing will the Fed allow the market to reprice.

• Invade Syria already, we know you will: Islamic State in Syria abducts at least 150 Christians (Reuters)
• Greece Struggles to Get Citizens to Pay Their Taxes (WSJ)
• Doubts Shadow Deal to Extend Greek Bailout (WSJ)
• In surprise result, Chicago's Mayor Emanuel faces election run-off (Reuters)
• Obama vetoes Keystone pipeline bill (Reuters)
• Another sign of the top: Cushman & Wakefield Going Up for Sale (WSJ)
• Lure of Wall Street Cash Said to Skew Credit Ratings (BBG) ... and threat of DOJ lawsuits also
• Oil rises to $59 as Saudis say demand growing (Reuters)

Reuters quotes Schauble who said that: "It wasn't easy an easy decision for us but neither was it easy for the Greek government because (they) had told the people something completely different in the campaign and afterwards."   "The question now is whether one can believe the Greek government's assurances or not. There's a lot of doubt in Germany, that has to be understood," said Schaeuble who despite his misgivings, he has urged German lawmakers to approve the Greek extension in a vote in parliament expected on Friday. The finance minister made one thing very clear: No payments will be made to Athens unless Greek govt meets its commitments in full.

Following the first of two Janet Yellen testimonies to Congress, the market read between the lines of what the Fed Chairman said when she hinted that "the Fed needs confidence on recovery and inflation before beginning to raise rates" and realized that the case of a June rate hike is suddenly far less realistic than previously expected, as a result not only did we see another blowoff top in stocks to fresh all time highs, a move which sent the USD lower, has pushed the median EV/EBITDA multiple to the mid 11x (!) range and the forward PE to just shy of 18x ironically coming on a day when the Fed itself warned about "stretched" equity valuations, and led to brisk buying of global Treasurys across the board, pushing the 10 Year in the US back under 2%, and due to the global convergence trade (because if the Fed returns to QE, it will be forced to buy up Treasuries not just in the US but around the globe, since net issuance including CBs globally is now negative) and leading to today's German 5 Year bond auction pricing at a negative yield for the first time ever.

Many argue money should be defined as the medium of exchange--the dollar. The catch is that the dollar only circulates because the government forces it to circulate...