Monetary Policy

Why 'Robbing Peter' To 'Pay Paul Something-For-Nothing' Doesn't Work

Yes, the voters are a nuisance. Still, it pays to let the masses think they are in charge; you can get more out of them that way and the welfare state only really worked as long as people got something for nothing. Nothing-for-something will not be attractive to the voters.

Goldman Turns Downright Gloomy, Warns Market "Despair" Is Coming, Prepare For A Major Drawdown

As Goldman warns in a note overnight, "Large equity drawdowns often mark the end of an equity cycle and tend to coincide with a recession or financial market/geopolitical shock or a combination, which tend to result in a sharp equity correction driven by a decline in both earnings and valuations." As it turns out, Goldman thinks precisely such a "drawdown" is coming...

Futures Levitate To Session Highs As ECB Enters The Bond Market; Crude Hits $51

In an overnight session dominated by the latest political developments out of the US where Hillary Clinton officially claimed the democratic nomination, the financial newsflow focused on China's trade data, where exports fell 4.1% from a year earlier, in line with expectations, but imports dropped 0.4% from a year earlier, the smallest decline since they turned negative in November 2014, driven entire by soaring "imports" from Hong Kong - aka capital outflows - which soared by 243% y/y.  The other main news was the official launch of the ECB's corporate bond buying, which helped drive government bonds yields in German to new record lows, and the average yields on investment-grade corporate debt below 1%.

The New "Hope"

What you think about the market doesn’t matter. What everyone thinks about the market (the consensus) doesn’t matter. What matters is what everyone thinks that everyone thinks about the market, and the way you get ahead of this game is to track the “Missionary statements” of politicians, pundits, and bankers made through the four media microphones where the Common Knowledge of markets is created: The Wall Street Journal, The Financial Times, Bloomberg, and CNBC. Today the investment hope that has crystalized into an investment theme is the notion that soon, just around the corner now, perhaps as a result of the next mystery-shrouded meeting of the world’s central bankers, perhaps as a result of the U.S. election this November, we will enjoy a coordinated global infrastructure spending boom.

Would New All-Time Highs Negate The Bear Market?

... it is not uncommon for the markets to briefly make new “all-time” highs during a correction process as emotional sentiment runs ahead of fundamental and economic deterioration.

American Worker Productivity Drops (Again)

For the second quarter in a row, US worker productivity fell in Q1 (down 0.6% QoQ). Outside of 2015's weather-driven debacle, this is the weakest two quarter tumble in productivity since Q4 2012. Unit labor costs rose 4.5% QoQ in Q1 (revised up from 4.1%) as output actually fell 0.6% (implying a 3.9% rise in compensation). This is the 3rd quarterly drop in output in a row.

"You Are Here"

We are in the midst of a Greater Depression, with the most trying times still ahead. Fourth Turnings never de-intensify. They intensify into a chaotic whirlwind, where the future of our civilization hangs in the balance. The climax of this play is a long way off. The election of Trump in November will trigger the transformational change that always happens during a Fourth Turning. An ill wind is beginning to blow. You can’t avoid the coming storm, but you can mentally and physically prepare. Our choices will make a difference.

Janet Yellen Explains How The Fed Will Keep What's Left Of Its Credibility In June - Live Feed

Will she or won't she? With an increasing number of market participants entirely confused by the Fed's utterly failed communications policy - as it constantly changes its focus from one meeting to another - Janet Yellen's speech today on the economic outlook and monetary policy at the World Affairs Council of Philadelphia seems critical just one week out from a supposedly "live" June meeting (who market-implied rate-hike odds are now just 4%).

Futures Flat Following Friday's Jobs Fiasco: All Eyes On Yellen Again

Every ugly jobs report has a silver lining, and sure enough following Friday's disastrous jobs report, global mining and energy companies rallied alongside commodities after the jobs data crushed speculation the Fed would raise interest rates this month.  “The disappointing U.S. jobs report on Friday means that a summer Fed rate hike is off the table,” said Jens Pedersen, a commodities analyst at Danske Bank. “That has reversed the upwards trend in the dollar, supporting commodities on a broader basis. The market will look for confirmation in Yellen’s speech later today.”

Goldman Finds That China's Debt Is Far Greater Than Anyone Thought

"The trend of China’s leverage has probably deteriorated faster than we previously thought... Compared to our previous estimates, the experience in 2015 suggests that the economy’s dependence on credit has deepened significantly and that it likely needs sizeable flow of credit on a persistent basis to maintain a stable level of growth...Such a scale of deterioration certainly increases our concerns about China’s underlying credit problems and sustainability risk. The possibility that there is such a large amount of shadow lending going on in the system... underscores the lack of visibility on where potential financial stress points may lie and how a possible contagion may play out."