Archive - Jul 2015

Broken markets tanking....

Ignore the constant commotion at the TV studio in downtown Manhattan which once was the New York Stock Exchange (currently owned by the ICE) and is now mostly packed with actors, cheerleaders, set designers and producers, and focus on the real exchange located some 40 miles away in Mahwah, NJ (which for a few months over the winter even had a laser attached to its main microwave tower), where moments ago the scene was the following...

Gold is unchanged but stocks and bond yields are sliding post the somewhat more hawkish FOMC minutes. The USD index is falling (which suggests the minutes were more dovish) just to add some confusion...

While a skim of the FOMC Minutes suggest the committee is balanced on when (or if) to raise rates, WSJ's Jon Hilsenrath has just provided some more color confirming that "Fed officials are cautious about overseas developments but appear unalarmed," suggesting their confident economic growth forecasts point to a September rate hike (unless the whole world collapses obviously).

Since The FOMC's supposedly dovish June meeting, bonds have outperformed stocks rather notably and crude has crashed. The crucial aspect for the Minutes is the balance they struck between market turmoil overseas (dovish) and the domestic economic and housing recovery (hawkish) as to how that fits with an expectation for a 'gradual' post-September lift-off...

• *FOMC SAW CONDITIONS STILL APPROACHING THOSE WARRANTING LIFTOFF (dovish)
  
• *ONE MEMBER READY TO RAISE RATES IN JUNE BUT WILLING TO WAIT (dovish)
• *MANY FED OFFICIALS EXPRESSED CONCERN ABOUT GREECE AT JUNE FOMC (hawkish)
  
• *SEVERAL OFFICIALS VOICED UNCERTAINTY ABOUT CHINESE GROWTH PACE (hawkish)

With macro data having beaten expectations since then, the last best hope for stocks is that global turmoil picks up (as it has in Greece) to keep The Fed on hold (as they remain cornered to regain some ammo before the next 'event' happens). As SF Fed's Williams notes today the "safer course" for raising rates would be to start sooner and proceed gradually.

A tourist went to a cafe in Greece and sent in the following picture of a menu where the prices appear to be back in Drachma...

The reality is that financial insecurity is rising for everyone...

EURO AREA, ECB SAID TO DISCUSS GUARANTEE AS HUMANITARIAN ACTION

The US stock market may be in shambles and the Mahwah Stock Exchange is offline for nearly 2 hours now, but that had no impact on demand for US paper, in fact moments ago the US Treasury just sold $21 billion in 10 Year paper without a single hitch. With a When Issued of 2.233%, the bond priced 0.8% through at 2.225% showing that when one can't buy anything else, one buys what one can, in this case 10 Year paper.

Over the course of the last few years one thing that has been prevalent more than nearly any other time we can recall is just how many so-called "experts" have lined up to proclaim how their prognostications "were surely sound." The rationale? They must be correct in all their assumptions for – "Just look at these markets!" Well suddenly when one looks at these markets – it's not for the reasons the "experts" wanted. Now it's: "What in the world is going on in these markets!?"

As the next Crisis unfolds, it will more and more difficult to get your money out of the financial system.

... if and when the central banks can no longer trade E-Minis with each other, we suggest you panic.

Facing an acute cash shortage and a worsening credit crunch which together threaten to leave government employees in the lurch and cut off the flow of imported goods, Kathimerini says Greece is preparing for the launch of an "alternative currency."