Posts Tagged ‘ Fed ’

Big in Japan; Can the Fed trump the BOJ?

September 21, 2016
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Big in Japan; Can the Fed trump the BOJ?

VIX back to the 15 range ahead of a consequential Fed meeting, deep into the economic cycle. Volatility crush continues into actual central bank announcements. Zombie US markets can’t go down but can’t rally either. After recent, underwhelming ECB announcements, markets sense more to come from the Fed, yet a gasping sense reigns omnipresent. What, actually, can the Fed do? After a litany of hawkish babble, commentary, from Fed governors this month, indicating the potential for two rate hikes. Can the expectation fall all the way to zero hikes in 2016? Just on an employment report that missed by 20,000 jobs? It seems that getting expectations down to no hikes in 2016 is the only way to deliver a “dovish surprise”. In this context, market action will be difficult to predict at 2:00...

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Midsummer Issues Persist; Divergent Global Central Bank Actions Create Challenges

November 10, 2015
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Midsummer Issues Persist; Divergent Global Central Bank Actions Create Challenges

The market moves fast. Thankfully, in the rest of the world, trends of all kinds, generally move at a measured pace. The market overreacts to events and day-to-day happenings based on crowd think and behavioral issues. A change in trend will often start with a subtle data point or indicator, which in hindsight, ignites a big, and sustained move in the market. Now is not one of those times. Late summer fears of China slowdown and EM collapse look to have been overblown, and the severity of the selloff too harsh. But the rally of the past two months also contains elements of overreaction; the underlying drivers and risks from the summer aren’t resolved. The world is fundamentally caught in a new dynamic. Credit expansion reached limits in every...

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5 Investment Patterns That Don’t Make Sense

October 14, 2015
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5 Investment Patterns That Don’t Make Sense

2015 is shaping up to be a challenging year for investments. The market swoon in mid-August caught most off-guard, and the subsequent violent recovery arrived right after several prominent investors turned bearish, or at least hedged. Markets don’t need to make any sense, and at times, understanding “why” the market is getting crushed, or exploding, is a futile exercise; it may lead to a grounded feeling, but ultimately, is not too helpful in predicting the next move. Nonetheless, since mid-August, several relationships/patterns emerged that are particularly nonsensical. A short list: 1) A-share returns matter for global stock markets The stock market in China, the world’s second largest economy, is a big mess of a structure. Top Chinese companies are listed in three separate exchanges/geographies, each open to a different...

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Investing Ahead of a European Recession

December 14, 2011
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Investing Ahead of a European Recession

Investing ahead of a recession is like a trip to the dentist for a filling when the Novocain isn’t quite right. You know you are in for some pain, but it’s unclear just how much, and how long it will last. Europe is accepting the German path forward, which will at a minimum, lead to plenty of pain for many countries. Spain, Portugal, Greece, Belgium, Italy, and France are all experiencing, or likely to experience, a recession. Forward looking indicators are declining, confidence is dashed, austerity being implemented, European financial assets down sharply, and interest rates higher. The ECB is taking a minimalist approach to fighting the recession and the 17 countries in the Eurozone have different agendas, interests, and policy aims. In the background of the economic recession, there...

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The Rest of Europe Can’t be German

December 12, 2011
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The Rest of Europe Can’t be German

The EU Summit and ECB meeting which transpired last week are likely to be the final supporting actions by Eurozone officials this year. The tack forward for Europe has been clarified; move ahead with the long and arduous process of fiscal unification, supported by a reactive ECB. The path ensures two outcomes; that there will be flare ups along the way which will negatively impact sovereign debt/currency markets, and that Europe’s economies will continue to slow as the mending process is drawn out. The way forward will be the German way forward, and the rest of Europe will need to accept it in the near term. Germany has the strongest and most robust economy in the Eurozone. German unemployment is low and the euro has already depreciated to levels...

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Analysis of the Fed Minutes – Dovish Tone Remains

October 12, 2011
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Analysis of the Fed Minutes – Dovish Tone Remains

The Fed minutes released today at 2:00pm didn’t provide anything that was too much of a surprise. The general impression I felt after reading the 12 pages was that the Fed remains exceptionally dovish. Economic growth, while not rolling-over, remains disappointing, so the Fed is looking to remain accommodative. Inflation was discussed in dovish terms. Early in the minutes, it’s mentioned that consumer prices appeared to have moderated since earlier in the year. Later in the minutes, the statements go further mentioning that participants agreed that inflation had moderated, though not as substantial as some participants had expected, and that inflation was expected to decline moderately over time. The possibility of QE3 was mentioned early on and “a number of participants” were considering this as a policy option. In...

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Ben Bernanke’s Jackson Hole Speech: A Step In The Right Direction

August 26, 2011
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Ben Bernanke’s Jackson Hole Speech: A Step In The Right Direction

I just read Ben Bernanke’s speech at Jackson Hole, and think it is one of the better speeches he has done in some time. I read some acknowledgement that there is little more the Fed can actually do to improve the US economy. This is of course true. Bernanke realizes he can only create an environment that fosters a recovery and that’s about it. A quote jumps to mind: “The Business of America is Business” This is one of my favorite quotes from President Calvin Coolidge. There is no solution which can come from either the Fed or Washington, the US economy needs to simply get going again the way it always has, through productive business investment, industrial production, research & design, innovation, and putting an American workforce back...

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