.jpg)
Chinese authorities is stepping up the fight against inflation: China pricecontrol and more balanced reporting: China downplays price control
Meanwhile in EMG-land things are bleak: EMG Bonds: EMG Chart & EMG Stock: EMG Stock
Pretty much all markets are now at "infliction point" - the sound advice is to scale down short or neutralize, but for now models dictates one destinct theme: SHORT FIXED INCOME! As long as this plays I remain with some downside risk on all markets.
Meanwhile our back-stop Beta- model still long (Beta Model), so..... market needs to decide and soon..... watch Ireland's resolution and it's impact or lack of impact as catalyst for next leg.
Volatility is bid (VIX) and should be so: Volatility is the uncertainty of path - and never in mytrading life has the path been more difficult to predict.
Wednesday, November 17, 2010
The definition of insanity is doing the same thing over and over again and expecting different results - EU fails once again....
Irish bond market come to a full stop - Rates now @ 850 bps (585 over Germany)
EU failed to come up with ANYTHING but empty rhetoric (see attached)
Ireland resisting the bail-out (They do not want to abolish corporate tax)
Game theory: There are NO LONGER any montary reason for Ireland to ask for bail-out - under the clauses of EFSF et al, they will end up paying 700-ish rates which it too high - also they have very high foreign debt, meaning walking away or not paying has no domestic implications
We are entering end game on Europe - if EU fails to deal with Irish hurdle then we will see escalating rates and social tension..........9th inning, but the most likely still Germany caving in - and the German Constitutional Court getting involved as specific help for Irish bank must be defined as SUBSIDIES.
Took of 60% of my down-risk yesterday, but remain with RISK OFF as long as model and chart indicates it..... This week-end becomes crucial in Irish-saga and for risk on or of.
W
Tuesday, November 16, 2010
10 years yield broke upside channel - and FOMC member keeps talking rubbish..
- It has caught market off-guard. Money & Fixed Income funds getting hammered.
- It's against FED's intention.
- The public outrage with QE2 has a the very least the impact it lowers the "feel good" factor - the indirect effect of marginally lower rates... despite this FOMC Dudley made these comments, which to me, is the least convincing support for QE2 I have seen so far...: FED's Dudley in weak support for QE2
- Greece Finance again in quesiton: Greece gets yet another visit from IMF and EU
Ciao,
Monday, November 15, 2010
WSJ: Fresh Attack on Fed Move
It seems FED is under fire? Will it change their action ? Very, very likely.... Steen
Fresh Attack on Fed Move
GOP Economists, Lawmakers Call for Abandoning $600 Billion Bond Purchase
By PETER WALLSTEN
WASHINGTON-The Federal Reserve's latest attempt to boost the U.S.
economy is coming under fire from Republican economists and politicians,
threatening to yank the central bank deeper into partisan politics.
A group of prominent Republican-leaning economists, coordinating with
Republican lawmakers and political strategists, is launching a campaign
this week calling on Fed Chairman Ben Bernanke to drop his plan to buy
$600 billion in additional U.S. Treasury bonds.
"The planned asset purchases risk currency debasement and inflation, and
we do not think they will achieve the Fed's objective of promoting
employment," they say in an open letter to be published as ads this week
in The Wall Street Journal and the New York Times.
The economists have been consulting Republican lawmakers, including
incoming House Budget Committee Chairman Paul Ryan of Wisconsin, and
began discussions with potential GOP presidential candidates over the
weekend, according to a person involved.
The increasingly loud criticism of the Fed comes as some economic
officials outside the U.S. are criticizing the central bank's move to
effectively print money, which has the side effect of pushing down the
dollar on world currency markets. President Barack Obama last week
defended the Fed. The move to buy more bonds, known as quantitative
easing, "was designed to grow the economy," not cheapen the dollar, he
said.
The Fed, despite frequent criticism from both parties, has enjoyed
considerable independence from politicians on monetary policy for the
past three decades. Organizers of the new campaign predicted the Fed
will increasingly find itself caught in the political crosshairs,
though. A tea party-infused GOP is eager to heed voters' rejection of
big-government programs, and conservatives say a new move by the Fed to
essentially print more money make it ripe for scrutiny by the incoming
Republican House majority and potentially an issue in Mr. Obama's 2012
re-election campaign.
"Printing money is no substitute for pro-growth fiscal policy," said
Rep. Mike Pence, an Indiana Republican who has been privy to early
discussions with the group of conservatives rallying opposition to the
Fed plan.
He said the signatories to the letter "represent a growing
chorus of Americans who know that we should be seeking to stimulate our
economy with tax relief, spending restraint and regulatory reform rather
than masking our fundamental problems by artificially creating
inflation."
The Fed faces potential pressure of a different sort from the left as
well. Some prominent Democratic congressmen, including the current
chairman of the House Financial Services Committee, have endorsed the
quantitative-easing move.
But if the economy continues to disappoint as November 2012 approaches,
the White House and Democrats in Congress may be pressing the Fed to do
more to sustain the recovery as well.
Some prominent liberal economists, including Nobel laureates Joseph
Stiglitz and Paul Krugman, already have challenged the efficacy of
quantitative easing, arguing that more fiscal stimulus is needed to
restore the economy to health.
Signers of the new manifesto criticizing the Fed include: Stanford
University economists Michael Boskin, who was chairman of President
George H. W. Bush's Council of Economic Advisers and John Taylor, a
monetary-policy scholar who served in both Bush administrations; Kevin
Hassett of the conservative American Enterprise Institute; Douglas
Holtz-Eakin, former Congressional Budget Office director and adviser to
John McCain's presidential campaign; David Malpass, a former Bear
Stearns and Reagan Treasury economist who made an unsuccessful run for a
U.S. Senate seat from New York; and William Kristol, editor of the
Weekly Standard and a board member of e21, a new conservative think tank
seeking a more unified conservative view on economic policy.
A spokeswoman for the Fed said Sunday, "The Federal Reserve...will take
all measures to keep inflation low and stable as well as promote growth
in employment." She noted that the Fed "is prepared to make adjustments
as necessary" to its bond-buying and "is confident that it has the tools
to unwind these policies at the appropriate time."
"The Chairman has also noted that the Federal Reserve does not believe
it can solve the economy's problems on its own," she added. "That will
take time and the combined efforts of many parties, including the
central bank, Congress, the administration, regulators, and the private
sector."
Criticism of the Fed broke out amid the unpopular bailout of Wall Street
and the Senate fight over Mr. Bernanke's second term early this year.
The critiques had ebbed until its new move to buy bonds. But last week,
potential GOP presidential candidate Sarah Palin delivered a stinging
speech on the move and then, in a Facebook post, criticized Mr. Obama
for defending the Fed.
Last Tuesday evening, about 20 economists and others met over sea bass
at the University of Pennsylvania Club in Manhattan and hashed out a
broad strategy. Mr. Ryan, who has gained notice for a plan to balance
the federal budget through deep spending cuts, joined the group as they
discussed ways to encourage the GOP's new House majority to unite behind
what they describe as a "sound money policy."
"We talked about the importance of the right being outspoken and unified
on this," said a participant. Mr. Ryan couldn't be reached Sunday.
Over the weekend, organizers began discussions with possible GOP
presidential candidates, including former Massachusetts Gov. Mitt Romney
and former House Speaker Newt Gingrich. On Tuesday, Mr. Boskin and
another signer, Paul Singer, head of hedge fund Elliott Management, will
brief GOP governors at a conference in San Diego.
"It is unfortunate that economists are over-hyping this and trying to
politicize it," said Bob McTeer, former president of the Federal Reserve
Bank of Dallas and a backer of the Fed's latest step. Mr. McTeer, a
fellow at the National Center for Policy Analysis, a right-leaning think
tank, added: "What populists on the right and the left have in common is
a distrust of the establishment, and to them the Fed personifies the
establishment."
To fight a deep recession provoked by a global financial crisis, the Fed
has been keeping its target for overnight interest rates near zero since
December 2008, and bought $1.7 trillion in U.S. Treasury debt and
mortgage securities to push down long-term interest rates, hoping to
spur borrowing and spending.
That program ended in the spring.
With unemployment at 9.6%, well above its mandate of "maximum sustainable
employment," and inflation running under its target of a bit below 2%,
the Fed policy committee voted to resume bond-buying to try to move
inflation up a bit and unemployment down.
Signatories to the letter criticizing the Fed insisted they aren't
trying to undercut the central bank's independence.
"It's fair to have a public debate about what the right monetary policy
is," Mr. Holtz-Eakin said. "I'm a long way away from being comfortable
with the idea of the Congress running monetary policy."
Fresh Attack on Fed Move
GOP Economists, Lawmakers Call for Abandoning $600 Billion Bond Purchase
By PETER WALLSTEN
WASHINGTON-The Federal Reserve's latest attempt to boost the U.S.
economy is coming under fire from Republican economists and politicians,
threatening to yank the central bank deeper into partisan politics.
A group of prominent Republican-leaning economists, coordinating with
Republican lawmakers and political strategists, is launching a campaign
this week calling on Fed Chairman Ben Bernanke to drop his plan to buy
$600 billion in additional U.S. Treasury bonds.
"The planned asset purchases risk currency debasement and inflation, and
we do not think they will achieve the Fed's objective of promoting
employment," they say in an open letter to be published as ads this week
in The Wall Street Journal and the New York Times.
The economists have been consulting Republican lawmakers, including
incoming House Budget Committee Chairman Paul Ryan of Wisconsin, and
began discussions with potential GOP presidential candidates over the
weekend, according to a person involved.
The increasingly loud criticism of the Fed comes as some economic
officials outside the U.S. are criticizing the central bank's move to
effectively print money, which has the side effect of pushing down the
dollar on world currency markets. President Barack Obama last week
defended the Fed. The move to buy more bonds, known as quantitative
easing, "was designed to grow the economy," not cheapen the dollar, he
said.
The Fed, despite frequent criticism from both parties, has enjoyed
considerable independence from politicians on monetary policy for the
past three decades. Organizers of the new campaign predicted the Fed
will increasingly find itself caught in the political crosshairs,
though. A tea party-infused GOP is eager to heed voters' rejection of
big-government programs, and conservatives say a new move by the Fed to
essentially print more money make it ripe for scrutiny by the incoming
Republican House majority and potentially an issue in Mr. Obama's 2012
re-election campaign.
"Printing money is no substitute for pro-growth fiscal policy," said
Rep. Mike Pence, an Indiana Republican who has been privy to early
discussions with the group of conservatives rallying opposition to the
Fed plan.
He said the signatories to the letter "represent a growing
chorus of Americans who know that we should be seeking to stimulate our
economy with tax relief, spending restraint and regulatory reform rather
than masking our fundamental problems by artificially creating
inflation."
The Fed faces potential pressure of a different sort from the left as
well. Some prominent Democratic congressmen, including the current
chairman of the House Financial Services Committee, have endorsed the
quantitative-easing move.
But if the economy continues to disappoint as November 2012 approaches,
the White House and Democrats in Congress may be pressing the Fed to do
more to sustain the recovery as well.
Some prominent liberal economists, including Nobel laureates Joseph
Stiglitz and Paul Krugman, already have challenged the efficacy of
quantitative easing, arguing that more fiscal stimulus is needed to
restore the economy to health.
Signers of the new manifesto criticizing the Fed include: Stanford
University economists Michael Boskin, who was chairman of President
George H. W. Bush's Council of Economic Advisers and John Taylor, a
monetary-policy scholar who served in both Bush administrations; Kevin
Hassett of the conservative American Enterprise Institute; Douglas
Holtz-Eakin, former Congressional Budget Office director and adviser to
John McCain's presidential campaign; David Malpass, a former Bear
Stearns and Reagan Treasury economist who made an unsuccessful run for a
U.S. Senate seat from New York; and William Kristol, editor of the
Weekly Standard and a board member of e21, a new conservative think tank
seeking a more unified conservative view on economic policy.
A spokeswoman for the Fed said Sunday, "The Federal Reserve...will take
all measures to keep inflation low and stable as well as promote growth
in employment." She noted that the Fed "is prepared to make adjustments
as necessary" to its bond-buying and "is confident that it has the tools
to unwind these policies at the appropriate time."
"The Chairman has also noted that the Federal Reserve does not believe
it can solve the economy's problems on its own," she added. "That will
take time and the combined efforts of many parties, including the
central bank, Congress, the administration, regulators, and the private
sector."
Criticism of the Fed broke out amid the unpopular bailout of Wall Street
and the Senate fight over Mr. Bernanke's second term early this year.
The critiques had ebbed until its new move to buy bonds. But last week,
potential GOP presidential candidate Sarah Palin delivered a stinging
speech on the move and then, in a Facebook post, criticized Mr. Obama
for defending the Fed.
Last Tuesday evening, about 20 economists and others met over sea bass
at the University of Pennsylvania Club in Manhattan and hashed out a
broad strategy. Mr. Ryan, who has gained notice for a plan to balance
the federal budget through deep spending cuts, joined the group as they
discussed ways to encourage the GOP's new House majority to unite behind
what they describe as a "sound money policy."
"We talked about the importance of the right being outspoken and unified
on this," said a participant. Mr. Ryan couldn't be reached Sunday.
Over the weekend, organizers began discussions with possible GOP
presidential candidates, including former Massachusetts Gov. Mitt Romney
and former House Speaker Newt Gingrich. On Tuesday, Mr. Boskin and
another signer, Paul Singer, head of hedge fund Elliott Management, will
brief GOP governors at a conference in San Diego.
"It is unfortunate that economists are over-hyping this and trying to
politicize it," said Bob McTeer, former president of the Federal Reserve
Bank of Dallas and a backer of the Fed's latest step. Mr. McTeer, a
fellow at the National Center for Policy Analysis, a right-leaning think
tank, added: "What populists on the right and the left have in common is
a distrust of the establishment, and to them the Fed personifies the
establishment."
To fight a deep recession provoked by a global financial crisis, the Fed
has been keeping its target for overnight interest rates near zero since
December 2008, and bought $1.7 trillion in U.S. Treasury debt and
mortgage securities to push down long-term interest rates, hoping to
spur borrowing and spending.
That program ended in the spring.
With unemployment at 9.6%, well above its mandate of "maximum sustainable
employment," and inflation running under its target of a bit below 2%,
the Fed policy committee voted to resume bond-buying to try to move
inflation up a bit and unemployment down.
Signatories to the letter criticizing the Fed insisted they aren't
trying to undercut the central bank's independence.
"It's fair to have a public debate about what the right monetary policy
is," Mr. Holtz-Eakin said. "I'm a long way away from being comfortable
with the idea of the Congress running monetary policy."
Sunday, November 14, 2010
Confirmation that China is now the world leading monetary power! Sunday Macro
- Quick run through on this Sunday, but the most important chart being this one: China leads SPX - clearly...and every time!
- Nasty momentum close for SPX: SPX momentum
- Yields since QE2 - not good for FED: Yields since QE2 Yields
- The Secret of Oz: Excellent crisis history piece which has won several tv prizes: TV documentary
- Ireland: Follow the news from Irish Times: Irish Times
Strategy:
Still playing it flexible - long put on commodities, spx, and long US dollar, but still small deltas despite Fridays move - remain extremely sceptical and on the alert for November being the BIG TURNAROUND MACRO MONTH for the year, but all market held where they should; Gold 1360 - EUR and 10 yr yield - VIX is just shy of break-up but not confirmed - now everything hinges on the Ireland to use EFSF or not for the next 48 hours,
The risk being; and this is something I firmly believe in, due to cognitive behaviour, that using EFSF will be postive for less than 24 hrs.
If rates are now higher than pre deal in May, why should deal in November help ? Europe, like the FOMC is running out of options and fast. A Break-up of Europe into two divisions are on the cards.
Reflexitivity is at work. The trend led to credit bust in 2008, then the loop-feeding led to today' new bubble in credit/bonds, now we could face the unwinding of 30 years cycle - the ever lower rates will not work, and finally as someone said this week:'When in history has higher inflation led to lower rates?' - Indeed, indeed.
Steen
A few good bites below:
http://www.cnbc.com/id/40152003
If you were counting on the big U.S. banks to restore or increase dividends that were pared back or ended during the financial crisis, you might want to think again.
The final portions of a prepared speech by a top Federal Reserve official seemed aimed at pulling-back market expectations that the central bank would soon authorize a resumption of dividends.
The Fed has been preparing guidelines on how banks will be able to change their dividend policies in the first quarter of next year. When that news was reported last week—the Wall Street Journal's headline was "Fed to Let Banks Increase Dividend" — the stocks of several banks rose.
But Fed governor Daniel Tarullo appeared to be trying to tamper the exuberance over the new Fed guidelines.
"Although the details of these guidelines are still being finalized, I can say that our approach to considering such requests will be a conservative one," Tarullo said at a George Washington University Law School Conference on the Dodd-Frank regulatory reforms. (You can read the full speech here.)
Tarullo said that banks will need to show that they can handle risks not captured in the government's stress tests—including the risk of put-back exposure.
"We will expect firms to submit convincing capital plans that demonstrate their ability to absorb losses over the next two years under an adverse economic scenario that we will specify, and still remain amply capitalized," Tarullo said. "We also expect that firms will have a sound estimate of any significant risks that may not be captured by the stress testing, such as potential mortgage put-back exposures, and the capacity to absorb any consequent losses."
The talk about dividends seems to be directly aimed at resetting—that is, lowering—expectations when it comes to dividends. Most of the speech was about Basel III capital requirements—making the dividend discussion stand out all the more. It appears to have been tacked on with the purpose of sending the market a message that many banks may not qualify for dividend hikes.
James Grant on the US dollar: http://www.nytimes.com/2010/11/14/opinion/14grant.html?_r=1&pagewanted=print
Fed Governor Issues Warning on Bank Dividends and Mortgage Put-Backs
 |
Getty Images |
The Fed has been preparing guidelines on how banks will be able to change their dividend policies in the first quarter of next year. When that news was reported last week—the Wall Street Journal's headline was "Fed to Let Banks Increase Dividend" — the stocks of several banks rose.
But Fed governor Daniel Tarullo appeared to be trying to tamper the exuberance over the new Fed guidelines.
"Although the details of these guidelines are still being finalized, I can say that our approach to considering such requests will be a conservative one," Tarullo said at a George Washington University Law School Conference on the Dodd-Frank regulatory reforms. (You can read the full speech here.)
Tarullo said that banks will need to show that they can handle risks not captured in the government's stress tests—including the risk of put-back exposure.
"We will expect firms to submit convincing capital plans that demonstrate their ability to absorb losses over the next two years under an adverse economic scenario that we will specify, and still remain amply capitalized," Tarullo said. "We also expect that firms will have a sound estimate of any significant risks that may not be captured by the stress testing, such as potential mortgage put-back exposures, and the capacity to absorb any consequent losses."
The talk about dividends seems to be directly aimed at resetting—that is, lowering—expectations when it comes to dividends. Most of the speech was about Basel III capital requirements—making the dividend discussion stand out all the more. It appears to have been tacked on with the purpose of sending the market a message that many banks may not qualify for dividend hikes.
James Grant on the US dollar: http://www.nytimes.com/2010/11/14/opinion/14grant.html?_r=1&pagewanted=print
Friday, November 12, 2010
10 years Yield still in channel(click on chart for larger version)... but...
Comment:
- Clear sideways channel which needs to be respected for now
- 50 SMA has now turned from down-to-up in cycle terms (see chart)
- 282/85 bps is key, key level.. 270 today
- This is major surprise - QE2 (POMO) is in full mode today and yields continues higher ?? I'm really surprised
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