Yellen’s bleak outlook in March 2009

At the January 2009 FOMC meeting, Janet Yellen was cautiously hopeful that fiscal stimulus would lead the economy out of recession before the end of the year, but she worried that the economy would remain mired in a period of high slack and low inflation for many years.

This mood was reinforced by her comments at the March meeting, which included this bit: Read more

The fog of financial crises, FOMC transcripts edition

Given how tense and chaotic was the last half of 2008, Ben Bernanke had to make a number of decisions quickly and without the guidance of any well-established protocol.

In at least a couple of the 2009 transcripts, Ben Bernanke regrets that he bypassed either an FOMC vote or a wider consultation with others at the Fed. Read more

Abenomics and Japanese inequality, again

Another data point for those keeping track of the impact of “Abenomics”, via a recent speech by Bank of Japan governor Haruhiko Kuroda:

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Fed releases 2009 meeting transcripts

Opening one of the transcripts at random, the January 27-28 meeting starts with a casual laugh as Ben Bernanke observes the small number of sitting governors on the FOMC during one of the the most consequential years in monetary policymaking history:

CHAIRMAN BERNANKE. As you know, Governor Kroszner resigned in anticipation of the appointment of the new Governor, Dan Tarullo. But Dan has not yet cleared the Senate, so obviously he won’t be attending the meeting, which leaves the Governors here as an embattled few, [laughter] and I think the lowest number of sitting Governors probably in a very long time. Read more

Markets Live: Wednesday, 4th March, 2015

Live markets commentary from 

This is nuts. But so what?

As long as the music’s playing…

Citi’s credit strategist Hans Lorenzen adds to our euro-nuttiness questions of yesterday. He’s in a more… pragmatic frame of mind. Which doesn’t preclude the use of “frenzied”, but there you go. With our emphasis and his puns throughout:

Is it a bubble? With clear signs of overvaluation, inflows concentrated on return-sensitive investors, spreads largely desensitized to external shocks and fundamentals moving in the opposite direction, the recent and expected further tightening certainly has all the typical hallmarks of one.

But that’s almost beside the point, as we think it will last longer than most people’s investment horizons, leaving them with little choice but to participate. As we see it, the time to exit is the day that the market starts to doubt the ECB’s commitment to buying more.

 Read more

Further reading

Elsewhere on Wednesday,

- The resistible rise of Putin.

- Coppola vs Hausmann on Greek myths and legends.

- When US rates rise…

- The East India Company as the original corporate raiders.

- “In the end, you can sum it up like this: microfinance is a useful little product.”  Read more

FirstFT (the new 6am Cut)

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Israeli leader Benjamin Netanyahu urged the US Congress to defy the Obama administration and block a nuclear deal with Iran. The deal now on the table would begin a “countdown to a potential nuclear nightmare” in the Middle East, he said. Barack Obama retorted that Mr Netanyahu “did not offer any viable alternatives”. (FT) Read more

IMF abdication on Greece

This guest post is from Peter Doyle, an economist and former IMF staffer


In an otherwise sound critique of Mr. Varoufakis’ list of proposals for Greek government policies last week, Mme. Lagarde’s letter to Mr. Dijsselbloem contains an additional, unremarked, but revealing element. After saying that, in the IMF’s view, the Greek list was sufficiently comprehensive to be a valid starting point for a successful conclusion of the review, she added:

… but a determination in this regard should of course rest primarily on an assessment by Member States themselves and by the relevant European institutions.

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Markets Live: Tuesday, 3rd March, 2015

Live markets commentary from 

This is nuts, where have all the bonds gone?

“It’s official, there are no more sellers of bonds.” An investor told us yesterday, and he’s not alone. Bond buying on ECB QE, the Greek loan extension and recent growth data in the periphery has transformed itself into bond hoarding.

- RBS’ Alberto Gallo and team Read more

Who me? Oh, I’m just your average insider trader nabbed by the SEC

I’m a man, 43 years old, pretty successful work wise. I invest about $200,000 and earn about $72,000 per tip. Mergers are my trade of choice.

I’m probably richer than you and I have friends and family who like me enough to get illegal alongside — 23 per cent of those who who tip me or get tipped are family members, 35 per cent are friends, and 35 per cent are business associates. Mostly they live pretty close, like 26 miles close. Which is nice. Read more

What’s the right rate? Or, the case for monetary policy nihilism

When it comes to central banking, we tend towards nihilism: the economy is far too complex for any policy rule, but also too complex to be understood by even the most intelligent, well-meaning technocrats. That presents an insurmountable problem for monetary policymakers, who are forever doomed to be fumbling about in the dark rather than smoothing out the vicissitudes of the cycle.

So we were intrigued to read a new paper by, among others, Goldman’s Jan Hatzius and BAML’s Ethan Harris, which was presented on Friday at the Chicago Booth Monetary Policy Forum, that basically agrees with our view. Read more

Further reading

Elsewhere on Tuesday,

- Walmart’s visible hand.

- Deflation to inflation in one paragraph.

- Day traders: “The chances they’ll end up a winner is less than the parts in a warehouse spontaneously assembling themselves into a beautiful girl.”

- Versus your extreme buy and hold scenario.  Read more

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Google is launching its own mobile network in the US. The internet group has become increasingly frustrated at the slow pace of innovation at incumbent telecoms companies. That stops it providing new services in established markets, Google says, while putting unconnected users around the world out of reach. (FT) Read more

More on the 1 per cent and US inequality since the crisis

Following up on a recent discussion within the economics commentariat (to which we contributed), we emailed economist Ed Wolff to request a further breakdown of his findings on changes in US income and wealth inequality.

Wolff’s analyses data from the Fed’s triennial Survey of Consumer Finances, which considers pre-tax income but does include government transfers. You can read our earlier posts on his work here and hereRead more

Slaughter of the shells

Officials from the SEC have been out with axes and clubs across 24 states and also Canada, effectively putting 128 inactive penny dreadfuls or Pink Sheets out of their corporate misery.

Trading suspensions on Monday brought the number of micro cap companies suspended since the regulator began Operation Shell-Expel in 2012 to 800 — some 8 per cent of the OTC market, where all these previously traded. Read more

Synthetic tranches anyone?

Tight spreads, low volatility and a plethora of under-employed structured credit traders mean it’s time for investors to do just one thing – buy some synthetic structured products of course! Citigroup analysts are recommending the trades today, viz the following:

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Of negative rates and golden retrievers

Yes, yes, we should just look away, Bill Gross wants your clicks. But…

It would be pretentious to say that I resembled Honey in any way, but nonetheless she was the puppy I chose. Honey turned out to be a little bit of a tramp, so maybe there’s the connection. Back in the freewheeling ‘80s when society had not even contemplated poop scooping and blue pick-up bags, Honey would roam the neighborhood, depositing wherever she pleased, but bringing things back home in return.

 Read more

A handy Greek payment timeline

Given the pressure on Vani et al, this cash requirement schedule might be useful….

H/T Malcom Barr at JP Morgan. Read more

Markets Live: Monday, 2nd March, 2015

Live markets commentary from 

Prudence and the PBoC

If you wanna know why China cut policy rates again over the weekend this chart from UBS’s Wang Tao goes a fair distance towards explaining it:

The cut was earlier than expected, but the reasoning is pretty simple. As Tao says (with our emphasis): Read more

Further reading

Elsewhere on Monday,

- “As a sophisticated serial acquirer of businesses, Warren would much prefer to deal with wet behind the ears families lacking professional representation…”

- And how one of Buffett’s tricks is to be rigorous while seeming sentimental.

- Reasons to worry about US equities.

- The strange urge to raise rates. Read more

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Tens of thousands of people marched through Moscow yesterday inmemory of Boris Nemtsov, the slain liberal politician. In the largest opposition demonstration the city has seen in three years, people marched towards the spot where he was murdered on Friday on his way home from a restaurant near the Kremlin. Marchers held placards saying, “Boris, I’m not afraid” and “They killed you, they are killing freedom”. (FT) Read more

Meet the man who could own Aviva France

When he was seven years old, Max-Hervé George was given a magic ticket by his father. It lets him turn back the clock, to invest with perfect hindsight week after week, steadily accumulating a fortune.

The ticket is a life insurance contract and Mr George, now 25, has fought for years in the French courts to preserve its magic. He could be a billionaire by the end of this decade and, by the end of the next, his contract would be worth more than the insurance company which stands behind it, Aviva France.

There is no mystery to the financial magic, however. Instead it is a story of grand stupidity, of how a French insurer wrote the worst contract in the world and sold it to thousands of clients. Read more

When the commodity rents stop flowing…

Ever wonder what the collapse of a commodity means for the hegemonic order that controls access to it?

Look no further than the sugar trade of the 1800s.

A new paper by Christian Dippel, Avner Greif, Daniel Trefler entitled The rents from trade and coercive institutions: removing the sugar coating examines the effect of the sugar price collapse on wages and incarceration rates in colonies established for sugar cane cultivation. Read more

Markets Live: Friday, 27th February, 2015

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“If it were a museum, some say that it would probably be the best museum in the world”

This fab alleged art market fraud story is fast developing…. While it does so, here’s the Bouvier brochure. Click to read:

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Quindell ain’t for sale whole

The latest update from Quindell lands. Contrary to rumors circulating, the company is not talking to Australian law group Slater & Gordon about a takeover of the whole business, just the professional services division where the UK ambulance chasing law firm resides.

Meanwhile, an ongoing review of the books by accounting firm PWC continues, and has taken longer than expected due to “the high level of corporate activity” which went into the formation of a jumble of businesses loosely connected to insurance. Also:

Advice in relation to the Company’s main accounting policies (in particular revenue recognition in the Professional Services Division) is being further considered and no conclusions have been reached.

 Read more

The Bank of England’s balance sheet in looong-term perspective

In celebration of the Bank of England’s One Bank Research conference, the Bank has, for the first time, produced information on its balance sheet going back more than three centuries “in a user-friendly spreadsheet form and as continuous time series.”

There’s lots to digest in there, but one thing we’d like to focus on is the size of the balance sheet relative to the UK economy. Bond-buying initiated under the Bank’s quantitative easing programme boosted the relative size of the Old Lady’s holdings by a large amount relative to the recent past. Relative to the full history, however, QE looks somewhat less exceptional: Read more