Category: Markets

Overbought

Overbought

“I had to cover my shorts.” That’s what my friend Matt told me after the company came out with its quarterly earnings and issued upbeat projections. I asked Matt, “how long are you going to keep shorting these companies. This is like the 10th time you’ve been forced to cover.” I don’t remember anymore how Matt responded. But I do […]

Read more ›
Policy divergence revisited

Policy divergence revisited

Three years ago, the Fed had begun tightening and all other central banks were still on easy street. Now, we are at an inflection point where other central banks are likely to tighten more than the Fed. That’s negative for the US dollar and positive for longer duration US Treasuries.

Read more ›
The oil price cliff dive will end the prospect of double-barrelled tightening

The oil price cliff dive will end the prospect of double-barrelled tightening

A pause is being considered at the Fed, even by hawkish FOMC members. The oil price crash now gathering steam makes this pause more likely. Maybe Bullard’s infamous low dot on the Fed’s Summary of Economic Projections is the right way to look at Fed policy.

Read more ›

How monetary policy entrenches secular stagnation

Recent statements by monetary authorities in Canada, the United States and the United Kingdom tells us rate hikes are possible in all three this year. This trio of English-speaking G7 nations is at a different phase of the monetary policy cycle than Europe or Japan. The implications are unclear though.

Read more ›
Is the new rout in oil getting worrying?

Is the new rout in oil getting worrying?

Earlier this morning, the New York Mercantile Exchange was quoting delivery for light sweet crude in July at $43.30. That’s a far cry from the $55 average that analysts had expected for 2017 as recently as last month. And all indications are that this price deflation is not transitory, but lasting. The selloff in oil brings year-to-date losses to some […]

Read more ›
The Fed will continue to tighten despite inflation below target

The Fed will continue to tighten despite inflation below target

New York Fed President William Dudley has reiterating Fed Chair Janet Yellen’s determination to push forward with interest rate hikes despite inflation below 2%. The Fed will continue to have this stance unless and until economic data weakens significantly.

Read more ›
The Fed’s financial stability concerns, auto subprime edition

The Fed’s financial stability concerns, auto subprime edition

Below are some data points from recent credit statistics and analyses, showing trends in the auto credit sector.

Read more ›
The Fed’s financial stability concerns before its June hike

The Fed’s financial stability concerns before its June hike

Hiking rates now after a monster commercial real estate cycle has already developed is akin to closing the stable doors after the horse has already bolted. But this may be a concern of the Fed. Let’s see what the Spring 2017 OCC Risk Assessment says when it comes out.

Read more ›
Why commercial real estate will be central to the next credit bust

Why commercial real estate will be central to the next credit bust

On Sunday, macro strategist Lawrence McDonald made three tweets about corporate real estate I think merit highlighting. They show a corporate real estate market that has been white hot during this particular business cycle. And that means it is one of the credit sectors to watch for signs of distress

Read more ›
What are credit markets signalling about the US economy?

What are credit markets signalling about the US economy?

The US economy has been very resilient during this post-crisis business cycle, as we are now into our ninth year of economic expansion. Soon we could hit a record for the length of an expansion. Yet, with that backdrop, 10-year Treasury yields were at 2.13% this morning – even as the Fed signals more hikes to come in 2017 as well as reverse QE. I think the bond market is signalling continued low growth and low inflation. Some thoughts below

Read more ›
On the Fed’s pause due to dual-barrelled monetary tightening

On the Fed’s pause due to dual-barrelled monetary tightening

Fed Governor Jerome Powell recommended a June hike and 2017 balance sheet reductions, in one of the last public speeches by a Fed official before the June FOMC meeting. When the Fed follows Powell’s game plan, we will be in the unchartered waters of dual-barrelled tightening, with the attendant risks that entails. Some comments below

Read more ›
More on why Trump’s woes aren’t driving markets

More on why Trump’s woes aren’t driving markets

This is a brief follow-up on the last post I wrote about how markets aren’t freaking out about the Trump scandals. I wrote that “this is only one day. What is happening with Trump – while negative – will not change the arc of the US economy and markets.” And we see that this is true today.

Read more ›