First, the RBA finally cut the lending rate by 25 basis points to 2.75%. By the close of the market, the Aussie dollar remained weak as some were surprised by the move. As I promised my readers of NOTES it is the 2/10 yield curve where the indicator of further currency and bank action will be found. The 2/10 steepened a slight three points, but the action ahead will be the key. Failure to take out recent steepener highs will be an indicator that the RBA has more work to do if it wishes to give a boost to the Australian economy.
Posts Tagged ‘Carmen Reinhart’
Notes From Underground: #Irony … Carmen Reinhart Says “Do Not Take Size As An Indicator of Importance”; Harry Rheems DiesMarch 21, 2013
Okay, you must have some fun amongst the idiocy of the Eurocrats. It seems that the best intentions of last Friday night’s decision to sacrifice the pawns in the game have done exactly what I thought the ill-conceived plans would accomplish. For 10 billion euros of bailout capital the fallout has been large drops in equity values. The capital losses are small compared to embarrassment facing the European policy makers. In a Bloomberg article by James Neuger, “Europe Plays I-Didn’t-Do-It Blame Game on Cypriot Deposit Levy,” it seems that German FM Schaeuble, France’s FM Moscovici, Spain’s FM Guidnos and even Finland’s FM Urpilainen all claim that they were opposed to taxing the guaranteed deposits of under a 100,000 euros. They all seem to point to the ECB and IMF as wanting the “bail-in.” This is a classic example of what my friend Andy Schreiber used to say: “Success Has Many Fathers, Failure Is But An Orphan.” The Cypriot situation is a situation that punches way above its weight. Carmen Reinhart, an economist I cite regularly on financial repression, silenced the talking heads on CNBC when she claimed that, “Do not take size as an indicator of importance.”
The Financial Times headline played up the report from the International Energy Agency (IEA) that by 2017 the U.S. will become the world’s largest energy producer. The use of fracking and other newly developed technologies has enabled the exploitation of previously uneconomic carbon deposits. In 1974 I sat in an economic geography class in which the professor claimed that the U.S. was full on shale oil and gas and its development was merely a matter of price. Being a know-it-all about the Club of Rome studies on the limits of growth, I entered into a lively debate with the prof about why he was wrong and the effects of the energy crisis was going to lead to the demise of Kapitalism. If I could remember his name I would send an appropriate apology.
Tuesday brings the release of the FED’S FOMC STATEMENT. Will it see its shadow or will the light be blocked by an extended period of darkness? Since the January 25 statement that announced the FED‘s intentions of holding rates at ZERO until mid-2014, the employment situation in the U.S. has improved, Europe has been “RESOLVED” and China has lowered reserve requirements. In the same time frame the S&Ps HAVE GAINED ALMOST 4%, while 10-year notes are virtually unchanged in price. Let us all bask in the success of Chairman Bernanke’s PORTFOLIO BALANCE CHANNEL. What now?
Do you have to be a weatherman to hear the wind blow? There are many cross currents alive in the investment world as the LTRO is behind us, ISDA defaulted on its role as a referee on global financial issues in the face of political threats from the EUROCRATS, and the Bernanke FED looks to be waiting for a new crisis to erupt before undertaking another further easing. March is always a difficult month for trading YEN as the JAPANESE CALENDAR YEAR ENDS MARCH 31 so repatriation of corporate profits is always a wildcard for any short YEN positions.