Capital Markets

The Warren Buffett Economy: How Central-Bank-Enabled Financialization Divided America

Needless to say, the above outlandish graph does not capture capitalism at work. Nor did the speculators who surfed upon this $45 trillion bubble harvest their monumental windfalls owing to investment genius. Instead, it is the perverted fruit of Bubble Finance, and there is no better illustration of this bubble surfer syndrome than the sainted Warren Buffett.

Why Wall Street Loved What The Bank of England Announced Today

Following a handful of underwhelming monetary announcements by the likes of the ECB, BOJ and RBA, today the BOE's Mark Carney unveiled his own version of Draghi's infamous "whatever it takes" gambit, unleashing a kitchen sink of options that went well beyond what Wall Street expected, even quasi-copying Draghi's phrasing, saying the central bank will take "whatever action is necessary" to ensure the UK economy remains strong.

Goldman Finds The Treasury Market No Longer Reacts To Economic Data

According to a just released Goldman analysis, the sensitivity of US Treasury yields to economic data surprises has declined to near record-lows over the last two years. In other words, the market no longer responds to data. What does it respond to? "Treasury yields have reacted more strongly to Fed communication." But where it gets truly perverse, is that the market, by ignoring the economy, is responding to a Fed which in turn is merely responding to the market.

This Has Never Happened Outside Of A Recession

The Fed's latest Senior Loan Officer Survey for July 2016 showed that banks continued to tighten standards on commercial loans in 2016 for both commercial and industrial (C&I) and commercial real estate (CRE). This was the fourth straight quarter of tighter standards: something that has never happened outside of a recession.

Ireland Jails 3 Top Bankers Over 2008 Collapse... Instead Of Bailing Them Out

By means that could be termed dishonest, deceitful and corrupt, they manufactured 7.2 billion euros in deposits by obvious sham transactions,” Judge Martin Nolan of Ireland said as he convicted three top bankers on Friday for their role in the 2008 financial crisis. They are among the first in the world to be sent to prison for their involvement in the global meltdown eight years ago.

Frontrunning: July 28

  • Fed caution hits dollar as Japan anticipation builds (Reuters)
  • Obama asks U.S. voters to 'carry' Clinton to White House, defeat Trump (Reuters)
  • Democrats skewer Trump (Politico)
  • Obama, Biden Toss Barbs at Trump and Say Clinton Is Only Choice (BBG)
  • Did Donald Trump’s Executives Violate the Cuban Embargo? (BBG)

"This One Is Very Surprising" - US Luxury Rental Market Turmoiling As EQR Cuts Guidance For 3rd Time

Those who still assume that US high-paying jobs are doing just fine, the following disclosure from EQR will be disturbing: San Francisco and New York, which account for half of Equity Residential’s projected revenue growth, are seeing a slowdown in hiring for jobs that pay enough to enable renters to afford the new luxury-apartment supply coming in those cities." As Mizuho said "this one is very surprising to us."

Nigeria Says "Don't Panic, Banks Are Fine" Amid Currency Collapse, Inflation Spike Concerns

A month ago we warned of the looming hyperinflation coming to Nigeria (as well as much of Africa). It appears, following the central banks' rate hike to a record 14% (reach for yield anyone) in an attempt to stall the ongoing currency collapse, that Emefiele is worried, warning of "concern over headline inflation spike." Perhaps most worrying though, amid the chaos, Emefiele advised depositors in banks "to go about your business," adding that there was "no need to panic or worry." Hhhmm..

USDJPY Plunges On Japan Stimulus Concerns; US Futures Flat With As Fed Begins Meeting

In a turbulent session for FX, the Yen soared as much as 1.4%, the most in three weeks, after Finance Minister Aso says the government will "leave actual policy measures to BOJ", sending the Nikkei lower by 1.4%. European stocks and U.S. equity index futures are little changed despite the slide in the key carry pair as the Fed starts its two day meeting.

Wall Street Is Confused By Elon Musk's Master Plan - "Credibility Is Challenged... How Do They Fund It?"

As we said last night when reviewing Elon Musk's "Master Plan", Part Deux, "it's one of those thing you read twice, three times, and then look at those around you to see if you somehow missed the deep message." Judging by the litany of responses by the sell-side this morning, we weren't the only ones confused. As the following reactions from Wall Street analysts, the confusion was far-ranging.

What The "Gambler's Fallacy" Tells Us About Where The Market Will Go next

The Dow has closed at a record high for nine days in a row, so it (and U.S. equities generally) MUST be ready for a pullback, right?  Not so fast.  Thinking that reversion to the mean happens swiftly and reliably is something called “The Gambler’s Fallacy”.  To borrow from an old capital markets aphorism, things can stay weird longer than you can stay solvent betting against them.