I don't have the answer but the question has been driving me crazy so I might as well get it out in the open. I simply no longer believe the economic numbers we have been receiving, especially those from the Bureau of Labor Statistics. In a nut shell, I think they're cooked.
Let's approach this with a little deductive reasoning.
Today was a stinker from the standpoint of confidence. Remember when the 10 year stood at 2.27% just a few short months ago. It fell to 1.72% today. Not surprisingly, the dollar fell to a two year low against the Yen which if one was just watching the yield on dollar one would expect. But the Yen fell deeper in negative yield territory as well. Huh? A flight to quality in Japan? On top of that the Bund was at 0.07. The best--a relative term--economy in Europe looking at negative interest rates? Why? On top of that Max tells me that everybody he knows has a net short position in the 10 year futures which is one hell of a reach it seems to me given the liquidity at the money which continues to be zilch. Don't believe that? Well, in March a primary dealer failed to deliver, which happens from time to time, but this time I am told it was in size. Like the biggest fail in years. The bond boys, who have admittedly become more paranoid that their usual paranoidal state over the past year don't like what they are seeing at all.
And then there are the numbers.
We know manufacturing is in the doldrums, but we have been told for some time now that manufacturing doesn't count any more; ours is a retail and service economy. But the fact is in the first three months consumer spending has slowed as have retail sales. Real income has risen but not by much and yet there appears to be a large labor force surge. Anticipatory? I would agree but investment has slowed and profits are nothing to write home about. On top of that corporate tax receipts were apparently down nearly 10% on a year-to-year basis (not sure of that number) all of which speak to why hiring practises should be more circumspect, but nope, on the employment front things seem to be quite rosy...at least in some areas according to the BLS.
Retail on the Diffusion Index (we're in the weeds, here) which is a measurement of the broad economy show the sector at 58.4 which means more companies were in a hiring mode while in manufacturing, the index crashed to 37.3 in March. But where and how and why? Sales were essentially flat, hours worked actually declined, and profitability was flat to sluggish. There were big box closures all over and apparently, nobody--or very-few--got laid off in the oil patch--which is not what I hear from my buds in the West Texas town of El Paso--where the pay from those jobs (high) can affect retail big time. Can it be that up against a considerable amount of negativity people are just taking on more staff like crazy? Sounds to me like Peter Drucker might be on the verge of a come-back. Maybe the place to invest...since there is very little of that going on either...is in a book store.
Everybody works on models these days and the BLS is no exception. The problem of course is the old one: garbage in, garbage out. And there is absolutely no one or no entity that has any interest in exploring just how the BLS models are constructed...yet. Not that the BLS would give it up without on hell of a fight which would take years. We should be in a position in which we can trust those who are employed on our behalf but I am afraid, especially in the past few years that trust has been eroded...and especially since this is an election year. So there, I've said it. I have come to believe that we are deliberately being provided with information that is incorrect and which could directly affect voting patterns in 6 months. Can't prove it but more and more signs are there and this funny thing called The Market is beginning to pick up on this as well. The game's afoot. If you are out there, Sherlock, I could use some help on this one.
Showing posts with label Bund. Show all posts
Showing posts with label Bund. Show all posts
Tuesday, April 5, 2016
Wednesday, June 3, 2015
ALL ABOUT BONDS
There is really nothing else to say. OK numbers in the U.S. and Sr. Draghi commenting this morning that inflation was up slightly, his QE was going to continue and that he hoped a resolution of the Greek situation would occur, produced an overall belief that things were indeed looking up and it was now time to seek returns rather than merely hope for a return of principal. Everybody sold bonds, driving the ten year Bund to 0.888% and the ten year Note to 2.36%--a level that had not been seen since last year. The range that seemed to be 2.10-2.25% blew up early. 2.25% is still a support level but on the down side this time. Mind you, what has been going on, especially in the Bund, is remarkable, but there is still an tremendous influence due to the lack of liquidity in this market. Nevertheless, there has been a clear change of mood over the past two days and people who held their long positions were, as we have said, very wrong. A lot of money has been lost.
We have the jobs number on Friday and the talk on the street is that it will be a good one. Good is a relative term but in these kinds of markets, relativity and perception are a hell of a lot more important than reality, so it might be a good idea to keep one's seat belt fastened. If jobs don't pan out, and/if the Greek thing goes stalemate, this market can turn on a dime in an even more violent manner.
And speaking of the Greeks, Tsapris headed off to Brussels today with his political guys, recognizing that we are probably at the conclusion of the financial negotiations and the next step will be for the pols on both sides to swallow hard and get something signed up. It will be a nonsense of course as the Greeks really have no way to fulfill anything that the lads can dream up in an economic sense, but the can will proceed down the road in the hope that six months from now there will be the light of a new day. Not exactly an honest perception but perhaps not such a bad one either. As the purchaser of a lottery ticket would say, "Hey, you never know." And perceptions count.
I have the feeling that we are at a bit of a crossroads with the events of the next few days looming larger in importance. I'm surprised but not displeased. I hope things break right but I'm still not sure. I must say I wouldn't mind becoming optimistic for a change but then again...Anyway, we stand watch.
Anon
We have the jobs number on Friday and the talk on the street is that it will be a good one. Good is a relative term but in these kinds of markets, relativity and perception are a hell of a lot more important than reality, so it might be a good idea to keep one's seat belt fastened. If jobs don't pan out, and/if the Greek thing goes stalemate, this market can turn on a dime in an even more violent manner.
And speaking of the Greeks, Tsapris headed off to Brussels today with his political guys, recognizing that we are probably at the conclusion of the financial negotiations and the next step will be for the pols on both sides to swallow hard and get something signed up. It will be a nonsense of course as the Greeks really have no way to fulfill anything that the lads can dream up in an economic sense, but the can will proceed down the road in the hope that six months from now there will be the light of a new day. Not exactly an honest perception but perhaps not such a bad one either. As the purchaser of a lottery ticket would say, "Hey, you never know." And perceptions count.
I have the feeling that we are at a bit of a crossroads with the events of the next few days looming larger in importance. I'm surprised but not displeased. I hope things break right but I'm still not sure. I must say I wouldn't mind becoming optimistic for a change but then again...Anyway, we stand watch.
Anon
Thursday, July 10, 2014
THE SPIRIT IS FLAGGING
The acid test in proving who was a real international banker was to ask the question, "What's the difference between Espirito Sancto and Santo Spirito?" The answer? The former is the oldest, largest bank in Portugal whilst the latter is the Vatican bank. Believe it or not, a lot of folks got that one wrong. Not today. Everybody knows what Espirito Sancto is today.
The markets shuttered at the news that the Espirito Sancto group--not the bank--missed a couple of debt payments. Needless to say, the Euros cocked the entire thing up by not stepping on the idea that it was the bank that was in trouble until the ECB put out a statement that the bank was "ring-fenced" whatever the hell that is supposed to mean. Problem is everyone--including me--is fairly certain that the group, which owns 25% of the bank outright (and God knows how much else behind the curtain) probably owes a bundle to the bank because that is how these things always seem to turn out. Now, most of the know-nothings were quick to reassure all and sundry that Espirito Sancto was simply too small to present a systemic risk: crap. It is THE bank in a member of the EC which brings the whole shooting match into play again. So unless Sr. Draghi gets this one tidied up real quick, there's trouble ahead without any moonlight and music. Memo to Mario: Got you Covered, punto, works real well if spoken quiockly…like tomorrow.
One thing that will not get covered, however, is the mess that is still Europe. Indeed, the only thing looking anywhere decent (and that is a relative term) is Germany and England which is of course a myth because Little Paulie Krugman has told us it's, in effect, a failed state. Italy, doesn't look good; Spain, ditto, France, the most important of them all a political catastrophe and rapidly becoming an economic one. Funny, despite the heroic efforts of the ECB in propping up economies and the Euro with scads of money, the flight to safety is full speed ahead with the 10 year Bund under 1.20% today and the Treasury at 2.55%. Now how the hell the Bund can trade 140b.p. through Treasuries is beyond me but then again perhaps the Euros see what may appear to them to be a non-functioning government Over Here which may count for something. Which brings us to Janet and her band of merry men.
Yesterday I was wondering out loud how the markets could appear so sanguine at the Fed's announcement of the cessation of the bond buying program in October. If one takes a quick look it doesn't take long to figure it out. There is no change in the free money policy: reverse repos replace bond buying. Artificiality reigns and central control multiplies. We are rapidly coming to the point where everything in the financial world is mispriced--especially credit--and if it isn't, it's by accident. Of course, there appears very little chance of reversal as politicians both Over Here and Over There are locked into political cum economic policies which although having produced no discernible results in 5 years remain unchallenged, funded by central banks that are locked into academic schemes capable only of academics.
Anyway, while all of this is going on, we have over 50,000 children funneled across our borders and The Leader refusing to enforce laws already on the books. Israel has lined up 40,000 troops on the border with Gaza and the Leader is fund raising in Colorado getting offered a hit from one of its leading citizens. His latest beaut was to call Angie today to apologize for the CIA guy who was apparently spying on our ally…and got caught. Claims he knew nothing about it because the dog ate the memo or something. Think she believed him? Look, I don't think the guy has done a very good job but now I'm beginning to wonder if he gives a damn. That's a whole lot different. I keep crying wolf I know, but then again I keep hearing the howling outside my window. Nothing moment us will happen until Monday as the finals are this weekend. Sleep tight.
The markets shuttered at the news that the Espirito Sancto group--not the bank--missed a couple of debt payments. Needless to say, the Euros cocked the entire thing up by not stepping on the idea that it was the bank that was in trouble until the ECB put out a statement that the bank was "ring-fenced" whatever the hell that is supposed to mean. Problem is everyone--including me--is fairly certain that the group, which owns 25% of the bank outright (and God knows how much else behind the curtain) probably owes a bundle to the bank because that is how these things always seem to turn out. Now, most of the know-nothings were quick to reassure all and sundry that Espirito Sancto was simply too small to present a systemic risk: crap. It is THE bank in a member of the EC which brings the whole shooting match into play again. So unless Sr. Draghi gets this one tidied up real quick, there's trouble ahead without any moonlight and music. Memo to Mario: Got you Covered, punto, works real well if spoken quiockly…like tomorrow.
One thing that will not get covered, however, is the mess that is still Europe. Indeed, the only thing looking anywhere decent (and that is a relative term) is Germany and England which is of course a myth because Little Paulie Krugman has told us it's, in effect, a failed state. Italy, doesn't look good; Spain, ditto, France, the most important of them all a political catastrophe and rapidly becoming an economic one. Funny, despite the heroic efforts of the ECB in propping up economies and the Euro with scads of money, the flight to safety is full speed ahead with the 10 year Bund under 1.20% today and the Treasury at 2.55%. Now how the hell the Bund can trade 140b.p. through Treasuries is beyond me but then again perhaps the Euros see what may appear to them to be a non-functioning government Over Here which may count for something. Which brings us to Janet and her band of merry men.
Yesterday I was wondering out loud how the markets could appear so sanguine at the Fed's announcement of the cessation of the bond buying program in October. If one takes a quick look it doesn't take long to figure it out. There is no change in the free money policy: reverse repos replace bond buying. Artificiality reigns and central control multiplies. We are rapidly coming to the point where everything in the financial world is mispriced--especially credit--and if it isn't, it's by accident. Of course, there appears very little chance of reversal as politicians both Over Here and Over There are locked into political cum economic policies which although having produced no discernible results in 5 years remain unchallenged, funded by central banks that are locked into academic schemes capable only of academics.
Anyway, while all of this is going on, we have over 50,000 children funneled across our borders and The Leader refusing to enforce laws already on the books. Israel has lined up 40,000 troops on the border with Gaza and the Leader is fund raising in Colorado getting offered a hit from one of its leading citizens. His latest beaut was to call Angie today to apologize for the CIA guy who was apparently spying on our ally…and got caught. Claims he knew nothing about it because the dog ate the memo or something. Think she believed him? Look, I don't think the guy has done a very good job but now I'm beginning to wonder if he gives a damn. That's a whole lot different. I keep crying wolf I know, but then again I keep hearing the howling outside my window. Nothing moment us will happen until Monday as the finals are this weekend. Sleep tight.
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