Wednesday, April 29, 2015


They said nothing and in so doing perhaps spoke volumes.  Oh, not that rates aren't going up for a while; anybody with a brain knew that or any reader of this blog which is a bit redundant.  But in saying nothing they pretty much admitted that they haven't a clue as to what the hell is going on either which in the long run may be a good thing rather than the nonsensical crap that has been put out lately.  Confession is good for the soul; a bit of reflection may result in more intelligent policies all around.

Consider.  The economy stank last quarter but at least they didn't tell us it was because of the weather.  Well, what then?  Maybe they are trying to figure it out for real which isn't a bad thing.

Thee ten year traded over 2.00% today in spite of lousy numbers, liquidity supposedly spilling out all over, and no sign of tightening.

Sovereign debt yields are below par out to seven years in France and Germany...they are even below par in Spain for some maturities.

There is no liquidity in any fixed income market, especially Treasuries. I could go on and on.   As the Great Dane put it, "The time is out of joint."  I could throw in that corporate profits aren't  exactly setting the world on fire but nevertheless, everybody is geared up to the gills and assets are probably way overvalued but I shall refrain from so doing.  And the Fed policy is no policy which is wonderful if there were to be any policy leadership out of anywhere, but alas, there is not.  I should add on the events in China I suppose but to be honest I neither know nor understand what is going on except that it appears the boss men are trying to turn the direction of the economy 180%...good luck to them and to us.  And speaking of over priced assets....and in the end in some cases, perhaps no assets at All...this is surely the place to watch.

Looking back to 2008, we had what in hindsight was a massive mispricing of risk (actually some people had figured that out in 2006).  Today I fear that we may be looking at a massive mispricing of assets whose value in a different rate scenario is considerably different from their cost of their purchase.  What remains constant, however, is the stock of debt.  I have yet to see a whole lot of people confident that future cash flow is sufficient to service what is out there, particularly if the carry-cost suffers a substantial rise.  Asset appreciation had better be part of this scenario.  I don't think it is.  Keep thinking, Fed, keep thinking.

We're on the road again tomorrow to see the Midwest grandchildren.  No promises, but I'll try for Friday.

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