Monetary Policy

Buying Euphoria Fizzles Ahead Of Make Or Break Tsipras-Merkel Talks

As previously observed (skeptically), a main reason for the surge in the DAX, and thus the S&P, on Friday was premature hope that the Greek talks earlier were a long-overdue precursor to a Greek resolution, and as we further noted yesterday, subsequent bickering and lack of any clarity as we go into today's critical "final ultimatum" meeting between Merkel and Tsipras, is also why the Dax was lower by 1.1% at last check, even if the EURUSD continues to trade like an illiquid, B-grade currency pair whose only HFT purpose is to slam all stops within 100 pips of whatever the current price may be.

Open Letter To Janet Yellen

Dear Chairman,
 
I would like one member of the FOMC to take the time to tell the American public the truth about the last seven years and monetary policy...

Calm Ahead Of Today's Quad-Witching But Vol Surge Ahead

Quad-witching days are volatile on normal days, so in an environment of virtually zero liquidity, in which the market careens from one extreme to another simply based on whether the Fed utters one single word, in which volatility across asset classes is soaring, and in which it is all about igniting algo momentum, today's quadruple withicng should be memorable, which is good since there is virtually no macro data today to speak of. 

Albert Edwards: "It Is Already Too Late To Avert Another Crisis"

"Some highly respected market commentators, most recently Ray Dalio from Bridgewater, have raised the possibility that Fed rate hikes risk a 1937-like slump. It is indeed a dilemma but likely already too late to avert another crisis.... In that respect it is probably too late already. We believe that the die is now cast, the cake is baked and coming out of the oven, and the financially fattened goose is well and truly cooked!"

The Financial Folly Lurking Beneath Yellen’s Patient Lack Of Impatience

Janet’s Yellen’s pettifogging today about her patient lack of impatience was downright pathetic. Her verbal hair-splitting is starting to make medieval ritual incantations sound coherent by comparison. But unlike the financial media’s dopey dithering about “dot plots”, Yellen at least has something to hide behind all the gibberish. Namely, she and her merry band of money printers are becoming more petrified each month that they will trigger a thundering Wall Street hissy fit if they move to “normalize” interest rates - even as they are slowly beginning to realize that continuance of ZIRP much longer will only intensify the market’s addiction to rampant speculation, free money carry trades and the associated risks to financial stability.

Just One Chart

Because it's called a credit "cycle" for a reason...

How Far Will The Euro Fall?

What can strike a balance between the opposing forces operating on the euro-dollar exchange rate? No one can say for sure, but one thing is certain: Whereas the profits from playing transatlantic interest-rate differentials may run to 1% or 2% per year, investors can easily lose that amount in a single day – or even an hour – by buying the wrong currency when the trend turns. As we know from decades of Japanese and Swiss experience, selling a low-interest-rate currency simply to chase higher US yields is often a costly mistake.

A Reminder Of The Fed's Interest Rate Conundrum

Talk of raising interest rates introduces a new Fed conundrum. Over the last few months, Federal Reserve Board members have maintained a less dovish tone which implies the eventuality of rate hikes despite economic data which has been slowing rapidly.... A case can be made that, excluding 2008, the economy is weaker now than prior to the announcement of the previous QE actions and Operation Twist. Further confounding the Fed stance is inflation, which as measured by CPI is running lower than at any time since 2009. Additionally the strong dollar and global deflationary trends point to lower inflation and possibly deflation in the coming months.