Quantitative Easing

Why European Bondholders Refuse To Sell To The ECB

Just weeks before Mario Draghi's "whatever it takes" trillion-euro Q€ bond-buying-fest is set to come true, The ECB faces a problem they likely never expected - unwilling sellers. On the heels of our analysis showing central banks will monetize over 100% of government bond issuance this year, Reuters reports that mere weeks before the ECB begins their program, banks, pension funds and insurers across the continent are hoarding them for regulatory or accounting reasons. "We prefer to hold on to them," said Antoine Lissowski, deputy CEO at French insurer CNP Assurances. "The ECB's policy ... is reaching its limits now."

Welcome To Eccles Island: Where Tulips Bloom In A Polar Vortex

The week just ended laid bare any pretensions that there is not something wrong (seriously wrong) within the natural world of both the macro underpinnings of business as well as finance. Unimaginable just a short 6 years ago, the U.S. equity markets closed at a height once again never before seen in human history highs, (it has more than tripled from the 2008 bottom!) but has done so solely on Keynesian fairy tales. The issue now is: does the fairytale end in a nightmare?

Normality Seems As Distant As Ever: The Global Economy's Chinese Headwinds

Last year, the global economy was supposed to start returning to normal. Interest rates would begin rising in the United States and the United Kingdom; quantitative easing would deliver increased inflation in Japan; and restored confidence in banks would enable a credit-led recovery in the eurozone. Twelve months later, normality seems as distant as ever – and economic headwinds from China are a major cause.

Dollar & Bond Yields Are Plunging

US equity markets are quietly doing what they do - go up and stay up. But in the biggest markets in the world - US Treasury, Japanese bonds, and foreign exchange - something turmoily is happening. Yields are cratering today.. The USDollar is getting hammered on the back of JPY gapping dramatically stronger and EUR surging.

"Do Nothing!"

What's an equity investor to do these days?

Sweden Central Joins The NIRP Club: Lowers Interest Rate To -0.1%, Launches QE

"There are signs that underlying inflation has bottomed out, but the situation abroad is now more uncertain and this increases the risk that inflation will not rise sufficiently fast. The Executive Board of the Riksbank has therefore decided to cut the repo rate by 0.10 percentage points, to -0.10 per cent, and to adjust the repo-rate path down somewhat. At the same time, the interest rates on the fine-tuning transactions in the Riksbank's operational framework for the implementation of monetary policy are being restored to the repo rate +/- 0.10 percentage point. Moreover, the Riksbank will buy government bonds for the sum of SEK 10 billion. These measures and the readiness to do more at short notice underline that the Riksbank' is safeguarding the role of the inflation target as a nominal anchor for price setting and wage formation."

The Problem Of Debt As We Reach Oil Limits

Many people ask why we can’t just cancel all debt, and start over again. To do so would probably mean canceling all bank accounts as well. Most of our current jobs would probably disappear. We would probably be without grid electricity and without oil for cars. It would be very difficult to start over from such a situation. We would truly have to start over from scratch. Those holding paper wealth can’t count on getting very much.

"Central Banks Have To Keep Fooling All Of The People All Of The Time"

Today's obvious mispricing of sovereign bonds is a bonanza for spending politicians and allows over-leveraged banks to build up their capital. This mispricing has gone so far that negative interest rates have become increasingly common. Macroeconomists will probably claim that so long as central banks can continue to manage the quantity of money sloshing about in financial markets they can keep bond prices up. But this is valid only so long as markets believe this to be true. Put another way central banks have to continue fooling all of the people all of the time, which as we all know is impossible.

How QE Helped Main Street

This is a chart that truly screams "Recovery!" In fact, it is quite clear that things are far better now than they have ever been before. If your life seems to be at odds with the obvious economic reality, you are clearly not working hard enough (or perhaps not at all).