"Fed officials suggested they had become less concerned in recent weeks about turbulent financial markets and uncertain economic developments overseas ... open[ing] the door more explicitly than they have before to raising rates at a final 2015 meeting in December."
"Three topics dominated our client discussions this week: (1) Hedge fund performance in the wake of the collapse in Valeant Pharmaceuticals (VRX) during the past five days; (2) cash return to shareholders, especially buyback activity; and (3) 3Q results."
Yesterday morning, when previewing the day's tumultuous events, we said that "Futures Are Firm On Hope Draghi Will Give Green Light To BTFD." And boy did Draghi give a green light, that and then some, when his press conference unleashed one of the biggest one-day US equity rallies in 2015. This morning it has been more of the same, with global market momentum on the heels of Draghi's confirmation that Europe's economy is again backsliding (it's a good thing, if only for stocks), leading to momentum for US equity futures, which together with soaring tech/cloud, earnings if no other, are on their way to take out recent all time highs.
"The basic assertion is the following: the U.S. economy is not showing signs of entering into recession, thus stocks are not at risk of falling into a sustained bear market. Unfortunately, this conclusion is not necessarily true. For history has shown on numerous occasions that you do not need to have an economic recession looming on the horizon to see U.S. stocks fall into a bear market."
After yesterday's dramatic late day market rout catalyzed by the tumble in the biotech sector in general, and Valeant in particular, and foreseen in its entirety by Gartman who went bullish just hours before, this morning US equity futures and European stocks have recouped some losses on the recursive, and traditional, hope that Mario Draghi will say something to push risk higher when he speaks in 2 hours at the ECB's press conference in Malta. And yet, just like Yellen a month ago, Draghi faces the paradox of reflexivity that after years of being ignored, is the "new thing" in town: how does he intervene and demonstrate he is readier than ever to set up stimulus, without panicking investors over euro area’s health.
"My expectation is that under President Xi's term, average growth rates are unlikely to exceed three to four percent. And that's not my prediction, that's the upper limit of my prediction."
The single most important “unknown unknown” today is any random event that may unexpectedly cause global central banks to withdraw their stated support of markets. Moral hazard has contributed to a significant build up in short and leveraged volatility creating a shadow ‘volatility gamma’ that reinforces the current trend in volatility direction. Rising volatility is followed by more rising volatility and vice versa. The pattern is creating a pro-cyclical monster of short volatility that, if left unchecked will contribute to a repeat of the May 2010 Flash Crash or 1987 Black Monday Crash. August 2015 was just an appetizer.
Investors Are Terrified Of An EM Debt Crisis, But Are Bullish Because They Think Everyone Else Is TooSubmitted by Tyler Durden on 10/13/2015 10:09 -0500
Welcome to Reflexivity 101.
"We've Never Seen Anything Like This" - Dumbfounded Central Bankers Brace For "Rolling Series Of Crises"Submitted by Tyler Durden on 10/12/2015 19:15 -0500
"I heard time and again this week from governors of emerging-market central banks that it’s not the hike itself that worries them. It’s how much and when it occurs." "Delaying an increase in rates only increases volatility and uncertainty in emerging markets."
Between a convoluted, self-referential reaction function and a cacophony of Fed speakers, the market simply can no longer process the FOMC's message and with that in mind, we bring you RBS’ Alberto Gallo who asks if perhaps we have reached “peak Fedspeak”.
The cyclical fallout from the Great Financial Crisis and the secular deflationary “D’s” of excess Debt, tech Disruption, aging Demographics have been the major catalysts for deflation.
"If only it was that easy to print our way out of a global crisis."
WSJ’s Fed whisperer is always good for a bit of Eccles propaganda and so, for whatever it's worth to you, we present the following Hilsy interpretation of the just-released minutes from the “most important” Fed meeting in recent history.