A number of folks are opining on how higher long term interest rates will choke off the US recovery. The thinking goes along standard partial equilibrium lines as follows – higher mortgage rates crush the housing recovery, higher government bond yields create bigger deficits, higher corporate funding rates stop business investment and expansion, and higher […]
If someone asked me to put together a fake jobs report that would be the most soothing to a frazzled market, it would have read pretty much as just released. The tick up in the u-rate, on a slightly higher participation rate, was a work of art. It moves us further away from the Evans […]
Many folks are asking, “Why did 10-year yields rise over 50 bps in just a few weeks?” The typical list of answers runs something like this: hawkish Fed tapering comments, stronger economic data, JGB and Nikkei volatility, MBS weakness/hedging, and the always helpful “more sellers than buyers.” While there surely has been some more notable […]
Global coordinated central bank balance sheet expansion, better known as QE, has been rushing through our veins. And the heart of the global economy, developed market equity capital, has been on an adrenaline moon shot. It feels GREAT!!!! The spoo is up about 16 percent YTD, at near record highs. The DAX is up about […]
Literally translated, “Ame futte chi katamaru” means “After the rain, the earth hardens”. It is a Japanese saying that implies – “adversity builds character”. And no matter how you look at this past week, there was an epic thunderstorm and plenty of adversity in the land of the rising sun. One can try to rationalize […]
Ben’s speech at Bard college over this past weekend was touted as a non-event for monetary policy. I beg to differ. I thought this speech told you more than nearly any other about how he views the monetary policy transmission process into the real economy. The speech also reveals his deep seeded love for supply […]
Many in the doom and gloom crowd have warned of impending disaster as JGB prices plummet. The typical story centers upon unsustainable debt levels and higher debt service costs associated with higher rates. The story line generally involves a vicious payment spiral which destroys public finances and spins the country into Armageddon/default – essentially Japan […]
In early 1995 I made my first trip to Japan. At the time, as a young market strategist at Swiss Bank Corporation in London, I had just seen USDJPY cart out nearly every levered trader on its freefall from 105 to 80. And when I arrived in Japan that Spring, I quickly realized how easy […]
I am putting the finishing touches on a commentary that highlights the some of the similarities between the 1995/98 period and the current environment. The focus is on Japan and EM – and needless to say, it will not paint a pretty picture for EM. I hope to send that out shortly. In the meantime, […]
So the verdict is in. Gold is settling down 8 to 10 percent from its pre-crash levels and the world feels mighty fine. Spoos are a few ticks from record highs and the Nikkei is Motte Isuma!! So much for the endless stream of comments suggesting that because of a Gold crash all leverage will […]