US equity market stat du jour

There were $118 billion of buyback authorizations in February, a 48% increase versus February of 2014 ($80 bln).

February was the strongest month ever and 2015 was the strongest start to the year ever with $152 billion of authorizations recorded year-to-date. We recorded 139 authorizations, which was virtually even with the same period in 2014 (141). Read more

Auditing the Fed (or at least the staff forecasts) part 2

In our previous post, we tracked the big themes and changes in the Fed’s staff forecasts of the real economy in the second half of 2008. Now we’ll look at how the forecasts evolved in the first few months of 2009.

A few highlights up top:

  • The staff was quick to pick up on the research of Carmen Reinhart and Kenneth Rogoff on the impact of financial crises on trend growth, but didn’t fully incorporate the insights into their models
  • One reason is that they dramatically underestimated what happened with foreclosures, partly because of their faith in the effectiveness of the government’s foreclosure prevention efforts
  • They thought QE would be a lot less effective than deeply negative short-term interest rates…
  • …and they thought the Fed’s asset holdings would peak sometime in 2010, even under a “stress” scenario

 Read more

Markets Live: Thursday, 5th March, 2015

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Amara, BCM, and unpaid debts in Burkina Faso

We finally got a copy of the recent appeal judgement in Côte d’Ivoire, a failed attempt by London-listed Amara Mining to have a “conservatory seizure” of its gold mine in the country lifted.

The legal action over the UK-listed miner’s main asset is a result of a dispute with mining contractor BCM over unpaid bills in Burkina Faso, and more litigation awaits, on which more from both sides below the fold.

On the February judgement, click the document for the written French. Broadly, it was an appeal on technical grounds related to the ownership of the company which owns the mining rights, and the nature of the seizure. Read more

So at what point do we see corporate yields going to zero?

Rhetorical question, just to share this chart from Dominik Winnicki and team at Barclays (click to enlarge)…

 Read more

Further Reading

Elsewhere on Thursday…

- The problem of quantum errors.

- It’s the stream, not the post

- I’ll take the premium 24 ways, please Fred. Read more

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China’s ersatz parliament, the National People’s Congress, kicked off today. The leadership set its GDP growth target to “around 7 per cent”, down from the heady heights of much of the past two decades or so and even last year’s 7.5 per cent as the country enters a “new normal”. (FT) Read more

Auditing the Fed (or at least the staff forecasts) part 1

Prediction is very difficult, especially about the future. Even so, it’s an essential discipline for the central banker, who can’t credibly claim to be doing anything useful without having some sense of how those actions will affect the economy relative to the other choices available.

Historically, the track record of the Fed’s staff economists has been better than that of many sell-side forecasters, although that’s a pretty low hurdle. What follows is an investigation of how the Fed’s forecasts evolved from the summer of 2008 through the end of 2009, based on a close reading of the newly-released transcripts. This first post will set the scene for 2009 by focusing on how the outlook changed in the second half of 2008. Read more

Ammunition, then and later

If we’re unsatisfied with the situation and we think the federal funds rate ought to be minus 4 percent, why aren’t we doing even more? Here again, I don’t think we should rule that out, but I feel some sympathy to what President Evans said, which is that, given all the uncertainties we have and the issues about our balance sheet and exit and our uncertainties about the effects of these programs, it’s not obvious that we do have a lot of ammunition left even on this unconventional dimension. Having said that, I think we should obviously keep this possibility alive if the situation warrants it, but it’s not clear to me at this point we should be doing more either.

– Ben Bernanke, September 2009 (from the newly released FOMC meeting transcripts) Read more

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

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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

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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.

 Read more

Markets Live: Tuesday, 3rd March, 2015

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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:

 Read more

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

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