Monday, October 17, 2016


Whether it is a correct view or not, the markets seem to be ready to convince themselves that there will be a change in global central bank policy with, if not an across-the-board tightening (is 1/4% tightening?) then certainly a slow-down in liquidity creation which has been going on for the past ten years.  Consequently, bond took a hit again today with the ten year actually reaching 1.82% before falling back and the Bund is continued positive territory for a good solid stretch now.  But, at the prospect of having the champaigne pump turned off, equities suffered despite a couple of decent earnings reports from entities other than banks in what has been an otherwise disappointing earnings season.

What will be interesting this week will be what signals we get from the Bank of England who, having been on the wrong side for most of the summer may, it seems, be ready to indicate that a continuation of Mark's Mound of Money Making just may slow considerably despite what was indicated just before BREXIT and reiterated since then.  If this is the case, things could really begin to move rate-wise which will be good for.....who...or is it whom?

Well, I as you might guess, fells it will be good for everybody provided the central banks get out and stay out of this thing so that some real values might be identified.  Problem is there will be a few disruptions, particularly in the equities markets, but coming after the election is determined will have less political influence except for the fact that whoever wins will feel the immediate need to fill the space with fiscal stimulus which is of course even worse than the monetary kind---OK, we can argue that--and which deafens any cry and hence need for the economic restructuring that is so desperately needed everywhere.  By this time next year the United States will owe in  public securities well over $21 Trillion and that is a lot of jack, Jack.  Will there be a reaction in markets?  Little Paulie says no.  Me. I'm not so sure but I don't have a Nobel.  Then again, Lil' Paulie has been telling us that Obama Care is a roaring success for the past seven years.  He has been silent on the subject lately and the President of Colombia just won the Peace Prize for a deal his people rejected.  So you tell me?  Who has more creds around this place?

Anyway, back to banks and perhaps another consensus thought.  The big boys, Citi, B of A and JPM all be the street estimates by a rather healthy margin whilst the Savings and Loan Stagecoach got whacked as expected.  The interesting thing, however, is the WHY not the WHAT that caused the success which caused so many sighs of relief and a rediscovered confidence in the system.  Trading.  Yep, that awful business that Dodd/Frank and Crazy Lizzy & Co. wish to obliterate.  We'll talk more about that later but for the moment do you think that there might be a way to build a consensus that maybe--just maybe--trading ain't a bad thing.  In fact, in more ways than one it might be a very good thing.  Perhaps we'll start tomorrow.

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