It is a great honor to feature another podcast with Peter Boockvar for The Financial Repression Authority. Peter is certainly one of the regular commentators that I watch with great interest whenever he is on Bloomberg, Fox Business or CNBC. I think we cover much of the global financial landscape. While it may run long, it is a lot easier than reading a 20,000-word blog post. Pour the scotch and give it a listen.
Posts Tagged ‘Germany’
One of the most important indicators for financial markets is yield curves. They are predictive as they have historically shown coming economic turmoil, or, more importantly, the end of a business cycle. The severity of any recession depends on the amount of debt that has preceded the onset of an economic slowdown. I will remind readers that before the 2007-08 financial crisis, the U.S. 2/10 curve actually INVERTED to NEGATIVE SIX BASIS POINTS. Some financial pundits like to cynically advise consumers that the STOCK markets have predicted 10 of the last 5 recessions, but that is not so with yield curves. The difficulty with the signalling mechanism of yield curves is predicting the time for even during the GREAT RECESSION equity markets continued to rally even as the curve flattened.
Janet Yellen and the FED take center stage tomorrow and the consensus is for NO CHANGE. The market believes the FED will be on hold until March. BUT I OFFER THIS: If I was the FED chair I WOULD RAISE RATES 50 BASIS POINTS to take some of the risk out of the U.S. equity markets. The S&Ps are virtually unchanged since the December FOMC meeting but the market’s enthusiasm for anticipated tax cuts, regulatory relief, and possible currency intervention means the FED cannot wait to let the economy run “hotter for longer,” especially because of the 4.7% U3 unemployment level. If Chair Yellen wishes to burst the TRUMP exuberance it is time to move aggressively to stem the rise of a potential inflationary threat.
I’m still nursing a New Year’s hangover. It takes a long time for the mind to rid itself of all the news the mainstream media deems fit to read. But as the third rock keeps spinning, markets will keep moving and we will strive to untangle the ball of confusion. After today’s tepid ADP data the market has settled into a consensus for 175,000 nonfarm payrolls. Again, I would love to see a number greater than 250,000 just to test the recent market action. BONDS rallied, currencies rallied against the DOLLAR, precious metals are showing early year strength and commodities have held support levels in the age of TRUMFLATIONARY EXPANSIONARY EXPECTATIONS.
Even though Steve Bannon is no Beau Brummel, the music of this early rock song must be ringing in his ears. It seems clear to all but the dumbest media talking heads that the Bannon plan of Trump’s continued flow of tweeting is an attempt to make sure the Trump team controls the NARRATIVE. (See Ben Hunt’s magnificent piece at Epsilon about the significance of narrative.) This is important for investors and traders because of Trump’s ability to control the narrative makes us all focus away from the most events of the greatest possible consequence. Today, the airwaves were echoing the Trump tweet of the President-elect threatening to cancel the orders for two new Air Force One planes, the President’s personal fleet.
This is a tough POST to write for I will criticize a newspaper I have read every day for at least 30 years. (In fact, I still have it delivered on my doorstep and read most of it online in the evening before the hard copy arrives.) The London Financial Times had a front page story, “Troubled Italian Banks Face Fresh Risk of Failing If Renzi Loses Vote.” This is a deplorable headline for it harkens back to the days of the mainstream media warning of dire consequences if Brexit passed and the Trump was elected president. THIS IS SCARE MONGERING. It raises the question: When will the Davos crowd EVER LEARN?
Time it was
and what a time it was, it was
a time of innocence
a time of confidences
long ago it must be
i have a photograph
preserve your memories
they’re all that’s left you [Simon & Garfunkel]
The Mario Draghi brought forth a new and improved standard of “truth obfuscation” at Thursday’s ECB press conference. When Draghi answered a question about the ECB basing its policy on politics he answered: “We are not in a political game.” In his “perception” there is NO POLITICAL WAR BETWEEN THE ECB AND ITS MEMBER NATIONS. This is of course unadulterated nonsense as everything the ECB does is political. During the ECB’s initial state of decision-making, then-President Wim Duisenberg said, “WE HEAR BUT WE DO NOT LISTEN.” The ECB claimed it pays attention to political discussion but its policy is set by objective criteria. Duisenberg brought proof to the nonsense of objectivity as the ECB kept its interest rates ridiculously low to aid the Germans in their cost of financing German unification and making the implementation of the HARTZ IV labor restructuring easier to easier to absorb for the German government. Duisenberg’s policy of negative real yields put severe pressure on the EURO as it dropped in value from its initial price of 117.5 to 82.5 which created credit problems for all of Europe but the Germans. As usual, it raises the question, WHOSE EURO IS IT?
President Mario Draghi takes center stage tomorrow and as usual the press conference will be critical. The ECB official announcement is at 6:45 CDT with the presser 45 minutes later. The consensus is for no change in rates or the current 80 BILLION EUROS in large-scale asset purchases. I would argue that if Mr. Draghi wishes to increase the ECB balance sheet tomorrow HE OUGHT TO INCREASE QE to at least 90 BILLION EUROS. But ought does not imply WILL. The past week has brought severe criticism of Draghi and the ECB from two of the most prominent monetary authorities in Europe. First, Gillian Tett had an article in last Friday’s Financial Times titled, “Investors Are Ill Equipped For Our Unfathomable Future.” Tett reports on the views of Axel Weber, who should have been the President of the ECB, instead of Draghi. Weber said the banking system is much stronger today than for many years. But, Axel warns that financial markets are much more unstable than the banks. Markets are not free markets “because of heavy government intervention.”
It seems that 108 years is enough time to pass to relive history. For those who are not sports fans, Merkle’s Boner is a famous mistake made by New York player Fred Merkel, who didn’t touch second base and was called out erasing the “fact” that the New York Giants had beaten the Chicago Cubs. The major GAFFE led to the Cubs beating the Giants and the CUBS moving to the World Series where they defeated the Detroit Tigers for their last World Series championship only 108 years ago.