Archive - Aug 2015

The More You Know Joe - the new Democratic Frontrunner - the Less You'll Like Him!

Presented with little comment, aside to ask why is Bloomberg "Consumer Comfort" for The NorthEast region at its highest in 8 years, when The Midwest region's "Comfort" is plunging to its lowest since Nove 2014?

The 5.9% rise in the last 2 days is the largest for the S&P 500 since March 11th 2009 - when The Fed announced QE1...

The last two times the Kansas City Fed survey was this low, the US was in recession.The KC Fed survey has missed expected for eight straight months, falling to -9 in August from -7 (missing the -4 estimate). Across the board, underlying components were ugly with Shipments collapsing, Order backlogs echoing earlier surveys in demise, New Orders tumbling, and Prices received crashing.

WTI Crude just surged from $38.50 to over $41 and at the same time the USD Index has been surging. In fact, the correlation regime between these two seemingly negatively correlated assets has entirely shifted since last week's FOMC Statement.

In a well-worn tradition, where it takes one cover to offset a cover, here is Bloomberg Businessweek's latest, which shows that bears were were "covering" everywhere in the market yesterday (and continue to do so today), and certainly on the front page of the latest issue of Bloomberg's publication.

The biggest surprise in today's NAR release came from the following Larry Yun statement: "Uncertainty in the equity markets — even if the Fed raises short-term rates in September — could stabilize long-term mortgage rates and preserve affordability for buyers." So with China, Larry Summer and the IMF now calling for a rate hike, the NAR - of all entities - is suddenly quite happy to see the recent market rout continue, which would keep rates lower and promote "affordability." Guess nobody tell Larry that China has now started dumping bonds.

"China's exchange rate reform had nothing to do with the global stock market volatility, it was mainly due to the upcoming U.S. Federal Reserve monetary policy move," Yao said. "We were wronged."

Ben Bernanke and his cohort central bankers built a Brave New World (SOMA, SOMA, SOMA!) where central bank money printing would boost stock prices and the wealth created would trickle down to workers and cause a booming economy. If you doubted that, you are now seeing proof that maybe this world was a little bit of Lewis Carroll’s Alice in Wonderland along with the Aldous Huxley.

So does this mean a September rate hike is back on the table?

War-torn Ukraine has reportedly reached a restructuring deal with a group of creditors headed by Franklin Templeton, according to the country’s finance minister Natalie Jaresko. The terms of the agreement call for a 20% writedown and a reprofiling that includes a maturity extension of four years and an across-the-board 7.75% coupon. Vladimir Putin isn't interested.

Americans associate the morning with “Time to trade equities”. They hear news – in the case of the last few days, bad news from overseas – first thing in the morning. By the time the market opens, they have made their decisions and entered their orders. About half as many will check in around the close to see how things turned out, but for many the next piece of market news won’t hit their mental “Screen” until 20 hours or so later. 

Encore post...