Monetary Policy

Obama: "World Leaders Are Rattled By Donald Trump"

In a statement to the press, Obama said that world leaders are "rattled" by Republican nominee Donald Trump’s public statements. "They are paying very close attention to this election," the president told reporters. "I think it’s fair to say they are surprised by the Republican nominee. They are not sure how seriously to take some of his pronouncements, but they are rattled by it."

Quantitative Easing And The Corruption Of Corporate America

Since the turn of this century, debt-financed share buybacks have severely tested the character of those charged with growing publicly-traded U.S. firms. Should she ignore the potential for further QE-financed share buybacks to exact more untold economic damage, it would be akin to intentionally corrupting Corporate America. The time, though, has come for these wayward companies’ banker and enabler, the Fed, to hold the line, no matter how difficult the next inevitable test of their character may prove to be. It’s time for the Fed to defend the entire Union and end a civil war that pits a chosen few against the economic freedom of the many.

Daiwa: "Round Two Of China Capital Outflows Is About To Begin"

Now that all eyes have turned on China eager to find how it will react to a potential Fed rate hike in June or July, the question is whether the sharp Chinese devaluation unveiled overnight, which sent the Yuan to fresh 5 year lows, will be a one-off event, and whether the PBOC will intervene far more aggressively in the offshore CNY market to keep FX market turmoil to a minimum. According to at least one person, the answer is no.

Nigeria Currency Devaluation Looms As FX Forwards Crash To Record Lows

Despite US equity investors' exuberance over bouncing crude oil prices, the world's crude producers continue to suffer and while Venezuela is in the headlines every day (having already collapsed into chaos), Nigeria appears the nearest to that abyss next. Having urged investors "don't panic" last year, and seeing dollar reserves drying up rapidly earlier this year, recent "lies" about the nation's statistics have raised fears of a looming devaluation as FX forwards have crashed to 291 Naira to the dollar (current peg is 199).

Gundlach Feels Like We Are Back In December, Says "Stocks Are Dead Money" After A Short Squeeze

Jeffrey Gundlach, the chief executive officer of DoubleLine Capital, said on Tuesday that the rally in U.S. stocks, which began on Monday, feels like a short squeeze and characterized U.S. stocks as "dead money." He added that  "all that matters is Yellen. She is still there. I feel like we are back in December again, where everyone thinks that there is a super secret that some Fed officials have this knowledge that the economy is really good."

Global Stocks, Futures Rally, Ignore Sharp Yuan Devaluation On Hopes Fed Is Right This Time

The single biggest event overnight was the PBOC's devaluation of the Yuan to the lowest since March 2011, setting the fixing at 6.5693, the highest in over 5 years and in direct response to a stronger dollar, which however if one looks at the DXY remains well below the recent highs in the 100 range, suggesting for China this is only just beggining. However, the fact that there was not more volatility in onshore and offshore overnight FX also comforted the market that at the same time as its was devaluing the PBOC was also intervening in the FX market, thus providing some assurance it would not allow runaway "risk off" sentiment prevail, nor would it promote another blitz round of capital outflows, leading to another gradual levitation in overnight risk.

Warning Signs Everywhere

You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.”

Stronger Dollar Sends Futures Higher, Oil Lower, Asian Stocks To Two Month Lows

Yesterday's weak dollar headfake has ended and overnight the USD rallied, while Asian stocks dropped to the lowest level in 7 weeks and crude oil fell as speculation returned that the Federal Reserve will raise interest rates as early as next month. The pound jumped and European stocks gained thanks to a weaker EUR.

The Case For Brexit

"I don’t see Brexit as a panacea, but merely the chance to manage one’s own affairs and to conduct one’s own debates over what should or should not be done by the state in one’s name...In Britain’s case, the change would inevitably give rise to economic winners and losers and it may easily be imagined to involve some additional, net short-term expense of time and effort as the country moves to adapt. But to pretend, for example, that Europe will maliciously shut out UK exports or discourage the tourists and holiday-homers from visiting in their droves and so risk a devastating retaliation from its biggest source of external income is worse than a joke."

Knave Dave's picture

This past Thursday marked the one-year anniversary of the US stock market’s death when stocks saw their last high. Market bulls have spent a year looking like the walking dead. They’ve tried to push back up to that distant high that means new life several times, but each time the market falls into a pit again to where the market is once again lower than it was a year ago. These are the last gasps of a stock market (and economy) that is struggling to rise again, which it simply cannot do now that QE has been turned off and the oxygen tank of zero interest is being slowly turned down.

Academic Skullduggery – How Ivory Tower Hubris Wrecks Your Life

Monetary policy may seem technical as clever people debate among themselves whether the optimal policy rule should be one part inflation and one part output gap or one part inflation and two part output gap with various degree of flexibility in its interpretation. In reality it is just a bunch of academics looking at an extremely simplified mathematical representation of the world under the pretense of knowing the consequences of their actions. They do not. It is all made up as they go along and the repercussion for their hubris will be borne by all of us. It is glaringly obvious to us that the extraordinary decisions made by our money masters over the last decade will end in an extraordinary correction of malinvested capital. Applying the scientific method of natural science on a social system is the gravest error of them all.

Everything Changed In 1980 - Why The Fed Is Wrong

Unfortunately, for Mr. Rosengren, since the average American was never allowed to actually deleverage following the financial crisis, and still living well beyond their means, economic growth will remain mired at lower levels as savings continue to be diverted from productive investment into debt service.  The issue, of course, is not just a central theme to the U.S. but to the global economy as well.  After seven years of excessive monetary interventions, global debt levels have yet to be resolved. If the Fed does proceed in hiking rates in the current environment, it will likely be a “policy error” which will be regretted in the not too distant future as debt service costs rise thereby further reducing consumers ability to “consume.”