Archive - Apr 2015 - Story

Zero rates are simply no longer needed. The Fed doesn’t need to stay ‘lower for longer’, because it has already done that.  Waiting until September would mean a much greater possibility of missing their window of opportunity.   Market conditions might deteriorate or geo-political tensions rise in a way that more deeply affects the US.  Alternatively, market froth might grow even frothier, causing a larger market reaction than otherwise would have been the case.  Lastly, it would also be prudent to hike well in advance of the $215 billion of Treasuries on the Fed’s balance sheet that matures in early 2016; which, if left un-reinvested, is a de facto-tightening.

OPEC has been in the line of fire from the western world in light of its stance of not reducing the production levels of its member nations (excluding Iran). Most view this as a strategy to squeeze the American shale production and other non OPEC nations. How much longer can it hold out?

The "ECB Taper" Twitter feed is born and SocGen says QE in Europe has a long ways to go with Mario Draghi having fulfilled only 7% of his promise to monetize the entirety of euro net issuance.

In recent weeks, Ruble appreciation against the USD has pushed it out of its traditional long term alignment with oil prices, and left it as the best-performing global currency of the year. There are several possible factor that can account for this...

If the credit market was "overheating" when only one-third of all loans had no covenants, we wonder what Stein would say now, two years later, when just one-third of all loans have covenants... if anything?

“In my 30-year career, it’s one of the most unattractive risk-return propositions that I’ve seen,” DoubleLine's Bonnie Baha says. Between abysmally low yields, heightened rate sensitivity heading into a rate hike cycle, and balance sheet re-leveraging on the part of US corporations, it’s a bad time to be betting on corporate credit.

Huxley’s words describe a psychological condition termed cognitive dissonance. According to the American Psychological Association, cognitive dissonance is induced when a person holds two contradictory beliefs, or when a belief is incongruent with an action that the person has chosen freely to perform. Cognitive dissonance is on full display today in the financial markets. The U.S. economy has been supported for seven years by a zero interest rate policy, record fiscal deficits and unprecedented surges in the money supply. Despite all of the stimuli, the economy is slogging along well below trend. The actions taken by the Federal Reserve, federal government and governments around the world are unprecedented. In a normally functioning economy such actions would generate massive growth and inflation. Since growth has been tepid and inflation benign, there is obviously something amiss.

With crude production and inventories hitting record highs this week, it is likely no surprise that rig counts continued to decline - falling 40 to 988 total rigs  (and down 42 to 760 oil rigs). This is the 18th week in a row of total rig count declines - equal to the record series from 2008/9. At 48.5%, this is the biggest 18-week decline since 1986.

"A small bubble is something that can be contained. If recent stock gains are signs of a mini-bubble, this is something I would welcome," Japan's Economics Minister says, just as the Nikkei touches fresh highs. And while we thought bubbles were inherently dangerous in any size, we also mistakenly thought the BoJ's multi-trillion yen ETF portfolio could fairly be classified as "large".

While the deal to discuss the deal that may or may not become a deal in June is still lingering in the news cycle, it seems Iran (fresh from its demands for complete sanctions lifting) is comfortable with some sabre-rattling. As the Washington Times reports, citing U.S. Army analysis, Iran’s army is creating military explosive-mounted killer drones, increasing the risk for Israeli and U.S. ships in the Gulf. So while all eyes are firmly focused on the threat of nukes, the US military reports states that "no aspect of Iran’s overt military program has seen as much development over the past decade as Iranian unmanned aerial vehicles.. promises to make American operations in both the Persian Gulf and Gulf Aden [at the Red Sea] more complicated."

For years now we’ve been listening to market cheerleaders like Steve Liesman, Tom Lee and Brian Belski give us their rendition of Little Orphan Annie’s “Tomorrow, tomorrow, the sun will come out tomorrow” but at a certain point the financial engineering runs out of time. But what if it didn't? Today, whether you look at the consumer, the producer, the worker or the borrower - they are all getting sicker.

Having demanded EUR 278.7 billion from Germany for WWII reparations, which was quickly eschewed by Germany, Greece has decided to up the ante. As KeepTalkingGreece reports, Greek Defense Ministry has published a video with rare footage from the occupation of Greece by the Nazis during the World War II. Among others, the footage shows children suffering from malnutrition and emaciated adults, victims of the Great Famine during the Nazi occupation. The video is designed to provide context for the huge claim and the video voice-over states that the Enforced Loan by the Nazis was to blame for the mass starvation of estimated 300,000 people in Athens alone, “Greece lost 13% of its population during the WWII. One part was lost in the battlefield, but the largest part due to Famine and the Nazis’ atrocities.”