Thursday, June 29, 2017


As expected, the subjective portion of the stress tests posed no problem.  Everybody passed and as a result the flood of excess capital being returned to shareholders has begun with Citigroup expected to be allow to distribute 135% of its earnings as a result of being in Big Danny's dog house for the past four years.  The entire sector went nuts on the equity side with the expectation of higher returns coupled with the continued expectation for further central bank tightening and the beginning of the unwind of bond portfolios moving bond yields sharply upwards resulting in better lending spreads.  Unfortunately, everything else got killed in the rotation which includes the dollar.

Now we all know that central bankers are among the world's smartest people, right?  So why can't these guys and girls do a bit better in presenting a common front so that most of the Hoi Polloi can figure out what the heck is going on rather than bouncing off walls for the past four days in an effort to get their positions right.  Or maybe, just maybe it's not the central bankers' fault at all.  Might it be that the latest  crop of Masters of the Universe aren't so masterful.  As we keep saying there is about a $10 billion overhang out there that has to get "rationalized" at some point so why not now?  The bet has to be on rising interest rates which, if coupled with fiscal structural adjustment just may present a soft landing.  There is a shot at it.  Better than I thought.  Clearly, Trump ain't no Obama but what I really missed was this new guy in Paris, Macron if he continues on the course he has chartered.  I though the guy was all hat and no cattle but I may well have been wrong which I will happily accept. In fact, if he is the real deal, he margin of victory at the polls could make him unstoppable.  He's so confident that he made nice,nice to The Donald in inviting him to the Bastille Day events.  Great fun by the way.

So just a word to the Very Wise.  Be careful boys and girls because those affected may not be as bright as you think and from the little fat nut in Korea to...well, pick a spot...there's a lot of knarly weather.  What many tend to forget is that there is no difference between a Euro and a Dollar.  There's a time for everything.  Get it right.

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