Monetary Policy

Draghi "MOAR QE Please" Press Conference - Live Feed

Update: DRAGHI SAYS ECB DISCUSSED A FURTHER LOWERING OF DEPOSIT RATE

Draghi hints at December QE expansion, noting that "the degree of monetary policy accommodation will need to be re-examined at our December monetary policy meeting." 

What Will Mario Draghi Announce Tomorrow: Here Is What Wall Street Thinks

Tomorrow morning Mario Draghi is widely expected to if not announce an extension, or expansion, of the ECB's QE program, than to at least jawbone sufficiently, and push the EURUSD lower from its recently anchored level in the 1.10-1.20 range. But what are the specifics of Draghi's announcement: will he merely expand the monetization limit per security, as he did in early September, will he increase the universe of eligibile securities, or will he simply extend the maturity of the non-open ended QE from September 2016 to some indefinite date? The following list, courtesy of Bloomberg, summarizes what the sellside universe believes Draghi will unveil in just under 12 hours.

Did Paul Volcker 'Save' A System That Was Simply Not Worth Saving?

Paul Volcker announced his intention to squeeze inflation out of the system soon after he became Fed chairman. Too bad he didn’t save a better system. Not many men can resist the appeal of free money. Americans proved they were no better at it than others. Falling interest rates and the paper dollar gave them a way to impoverish themselves – by spending money they hadn’t earned. They took the opportunity offered to them. They borrowed and spent... and drove the entire world forward at a furious pace. But now that stage is over.

Goldman Is Getting Nervous: "There Are Significant Risks To Our Forecast For Gold Price Weakness"

The "very serious people" are starting to get nervous, because while most other "commodities" have seen their prices plummet in the biggest crash since Lehman, gold just went green for the year. Enter Goldman Sachs: "While our base case remains for higher US real rates and lower gold prices, there are significant risks that our forecast for gold price weakness is pushed out, should the Fed surprise us and remain on hold in December."

Undermining Property Rights In San Francisco

We have ceased to live in a free market economy a long time ago. The only sector of the economy that has managed to remain relatively free in many ways is the technology sector, because it innovates so rapidly that it tends to stay a step or two ahead of politicians and the oligarchies giving them their orders. They simply cannot catch up quickly enough with regulating all these innovations to death. Lately technology has begun to invade the turf of a number of established service businesses... and that appears to be a problem for the crony 'capitalist' crowd.

Truth Is Being Suppressed By The Tools Of Money

Global Capitalism is trapped in its own Prisoner’s Dilemma; fourty four years after the end of the Bretton Woods System global central banks have manipulated the cost of risk in a competition of devaluation leading to a dangerous build up in debt and leverage, lower risk premiums, income disparity, and greater probability of tail events on both sides of the return distribution. Truth is being suppressed by the tools of money. Market behavior has now fully adapted to the expectation of pre-emptive central bank action to crisis creating a dangerous self-reflexivity and moral hazard. Volatility markets are warped in this new reality routinely exhibiting schizophrenic behavior. The tremendous growth of the short volatility complex across all assets, combined with self-reflexive investment strategies, are creating a dangerous ‘shadow convexity’ that will fuel the next hyper-crash.

We Didn't "Financially Engineer" Our Way Out Of The Great Depression, We Won A World War

The arms race of devaluation is not free and has come at the cost of massive global debt expansion. The world has simply shifted private debt to the public balance sheet. The next major global crash will likely be driven by unhealthy sovereign credit rather than corporate credit. The next Lehman moment will be the financial collapse of a major developed country instead of a bank.

Good Luck, Canada

The US has seen that movie before, it's not a happy ending. Oh, and enjoy that AAA credit rating while it lasts.

Oil Prices Still Not Low Enough To Fix The Markets

Current oil prices are simply not low enough to stop over-production. Unless external investment capital is curtailed and producers learn to live within cash flow, a production surplus and low oil prices will persist for years.

Ominous Signs Of Peak Employment

The current detachment between the financial markets and the real economy continues. The Federal Reserve's continued accommodative stance continues to support asset prices despite a decline in profit margins, an increase in deflationary pressures and a weak economic backdrop. So, while jobless claims and job openings may be touted as signs of an improving job market, the data suggests that we have likely seen the peak for this current economic cycle.

Peak Debt, Peak Doubt, & Peak Double-Down

Investors are too complacent (the Minsky-Moment).  Too many are still trying to profit from the Fed subsidy of past stimulus. Investors remain loaded in risk assets, incentivized by the need to beat peers and benchmarks and comforted into complacency by the Fed ‘put’. The true level of risk is being ignored. The pervasive mentality of seeking maximum risk has become a terrible risk/reward trade for two main reasons...

Futures Halt Three-Day Rally, Drop On Energy Weakness, IBM Earnings

After yesterday's closing ramp "prudently" just ahead of an abysmal IBM earnings report with the lowest revenues since 2002, and the latest rally in capital markets which sent European stocks to their highest level since August on the back of a barrage of global bad data which has unleashed the Pavlovian liquidity dogs screaming for moar central bank bailouts, this morning has seen a modest decline in the Stoxx 600 driven by energy names, while S&P500 futures are set to open lower on IBM's disappointment at least until the latest massive BOJ USDJPY buying spree sends the pair to 120 and the S&P solidly in the green. The biggest political event overnight was the Canadian election, where Trudeau's liberals swept PM Harper from power, capping the biggest political comeback in the country's history; the Canadian dollar is largely unchanged after initially weakening then rising.

"Shadow Convexity" Means The Death Of Modern Portfolio Theory

The entire global financial system is leveraged to the 'Modern Portfolio Theory' concept that stocks and bonds are always anti-correlated. It is impossible to estimate how many trillions of dollars are managed according to the simple 60/40 mantras but let us just assume something north of $1.4 trillion and something south of "more money than God."  However, the truth about the long-term (132-year) historical relationship between stocks and bonds is scary.  The last three decades of extraordinary anti-correlation has been an era of falling rates, globalization, accommodative monetary policy, and very low volatility of CPI. With the global economy now at the zero bound, those days are over.