August, 2010
Impromptu Markets Live session about to start
We put Markets Live on a summer holiday earlier this week, but we’re firing it back up on Thursday as we’ve judged the newsflow to be ‘good enough’.
So join Miles Johnson, Bryce Elder and Joseph Cotterill discussing all things markets — including the overnight sell-off,
‘There is no money multiplier’
Here’s an elegant solution to the problem of the US’s missing money multiplier.
Just declare it doesn’t exist. Or at least, not as we know it.
That’s just what Seth B. Carpenter and Selva Demiralp are arguing in a new Federal Reserve working paper.
A stunned short-seller never forgets
For sure the 2008 financial crisis lingers on in the minds’ of long-only investors, but perhaps it’s surprising to hear the episode scarred the shorts too. And not just because they got banned, scapegoated or squeezed.
Cor blimey … Correlation
Type JCJ <Index> GP <GO> on your Bloomberg.
You’ll get a chart that looks like this:
It’s the CBOE’s S&P 500 Implied Correlation Index — based on options expiring in January 2011.
Further reading
Elsewhere on Thursday,
- Goldman Sachs is big on jeggings.
- Rogoff and Reinhart try to clarify matters.
- Paul Krugman doesn’t feel clarified.
- Irish debt is under fire.
- The Vix curve is still humpy.
Pink picks
Comment, analysis and other offerings from Thursday’s FT,
Analysis: Financial markets – derivative dilemmas
As regulators start to decide how much trading in derivatives needs to move on to exchanges,
Snap news
Breaking pre-market news on Thursday,
- Dana Petroleum talks with Korean suitors deadlocked — statement.
- Vedanta said to be in advanced talks to take stake in Cairn Energy – report.
- De La Rue chief executive resigns following paper incident — statement.
Guest post: El-Erian on violent market moves
Why such a sharp sell-off in equities on Wednesday, together with a further rally in US government bonds? I suspect, writes Mohamed El-Erian, that three US-related drivers are part of the answer – one is obvious,
Morgan Stanley, doing the Devil’s work?
The Sisters of Charity of Jesus and Mary, the Holy Faith Sisters and also the Irish Veterinary Benevolent Fund all seem to think so.
As the Wall Street Journal reported on Wednesday, these religious sisters are leading a group of 88 investors who complain Morgan Stanley lost them at least €5m by mishandling the sale of “complex securities”
Global imbalances and EM financial markets
The US trade deficit numbers were released today (pdf), but most of what you need to know is in this chart from Calculated Risk:
Exports declined by $2bn in the month, while imports climbed by $5.9bn–and as you can see above,
This is Dave’s moment
Finally. The moment David Rosenberg has been waiting for…
As the Gluskin Sheff economist stated in his regular Breakfast with Dave note on Wednesday (our emphasis):
Well, it took some patience but it looks like the economic environment I was depicting this time last year just shortly after I joined GS+A is starting to play out.
Wall Street’s shifting political loyalties
With congressional elections approaching and the middling pace of economic recovery, it’s reasonable to expect the political temperament in the US will worsen before it improves.
On Tuesday the Center for Responsive Politics,
Fed up
And the early US market take on the Federal Reserve’s latest policy shift was…
Oh dear. European bourses, by comparison, had already given up the fight:
All this after USDJPY ploughing a 15-year low plus some deflated Treasuries.
A blob in commodity flows
Are commodities on the verge of a deflationary price collapse?
Walter J. Zimmerman, the chief technical analyst at United-ICAP, provided an interesting perspective on the matter to Bloomberg on Tuesday:
Hamp – it’s worse than we thought
So the US Treasury’s centrepiece mortgage modification programme — Hamp — is something of a failure. That much we knew already.
But Laurie Goodman over at Amherst Securities brings up another point.
BoE: Great uncertainty and a choppy recovery
As usual, the Bank of England’s latest inflation report has been published with an impressive array of fan charts outlining the Bank’s view on inflation, GDP and other economic factors.
The general trend continues to be the expanding dimensions of the fans themselves — highlighting the growing level of ‘uncertainty’ anticipated by the Bank for the UK economy.
ICO, Spain’s public sector risk taker
Via Spanish business daily Expansion, and run through Google Translate, comes this tidbit on Spain’s exploding supranational credit agency the Instituto Credito Oficiale:
The Bank of Spain notes that the “growing lending activities of the Instituto de Credito Oficial (ICO)”
What the Fed can’t buy
So the Federal Reserve will be buying more US Treasuries, using run-off proceeds to do so.
According to its release, the Fed plans to buy longer-dated USTs in the two-year to 10-year segment.
But the central bank still won’t be buying more than 35 per cent of any single issue.
The Fed’s QEII: What the pundits say
Some commentators and analysts have lauded the Fed’s Tuesday decision to begin reinvesting more than $150bn in annual proceeds from maturing mortgage-backed and agency securities into Treasury debt.
But others echo the suggestion of the FT’s Lex column,
Doing a Connaught (updated)
Oh, not another Connaught.
Here’s some cliff-diving share action on Wednesday for Rok, the maintenance services company which has (quite literally) announced some faulty financial plumbing:
But,
Pyxified, Merrill’s subprime sink
Have you ever heard of Merrill Lynch’s Pyxis CDO/SPV/Insert Structured Finance Acronym?
It’s confusing a lot of people this week, after the NYT’s Louise Story exhumed the deal, which she says was a way for the bank to shift its subprime exposure off-books.
Further reading
Elsewhere on Wednesday,
- The Magma chart.
- “Slam Dunk Stimulus,” the history of the ReFi rumour.
- The focal-point Fed.
- The balance sheet recession lives!
- Quantitative nothingness.
Pink picks
Comment, analysis and other offerings from Wednesday’s FT,
Alan Beattie: Promoting exports a risk for the world economy
Trade imbalances are re-emerging in the world economy. State economic intervention is enjoying a retro-1970s revival.
Snap news
Breaking pre-market news on Wednesday,
- Rok warns on profit after ‘serious failings’ in financial controls — statement.
- Standard Life profit up 10 per cent to £182m – statement.
- ING posts second-quarter profit of €1.2bn — statement.
Mapping US Treasuries – Here be deflation
Or just more Fed easing. Or bubbles. Or even a buyers’ strike.
After Tuesday’s FOMC statement, yields did this — from short to long.
The five-year:
And the seven-year:
And the bench-mark 10-year:
The BoE and central bank forecasting
Central banks are no strangers to criticism, but we wonder if the Bank of England was remotely prepared for the smackdown it was just given by FT economics editor Chris Giles:
The forecasts used by the Bank of England to set interest rates are biased and contain little useful information,
That eagerly-awaited FOMC statement…
The Federal Open Market Committee has released its much anticipated post-meeting statement assessing the economic conditions in the US. From the release (emphasis ours):
Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months.
Pondering the MBS paydown stimulus
Amongst the additional stimulus measures being pondered by analysts ahead of Tuesday’s FOMC meeting is a possible quantitative move which would see the Fed reinvest paydowns from its MBS portfolio back into the sector or by buying Treasuries.
Contrarian institutional investing, hedge fund edition
A third of institutional investors – by common consent the holy grail of hedge fund clients thanks to their willingness to ride out a little bit of vega – say they’re looking to up their allocations to hedge fund managers,