Seems as though the hottest thing around these days is sovereign debt or at least the easiest to sell. I neglected to mention yesterday that Austria had successfully completed an offering of five billion Euros in two tranches, one of 3 billion for eight years priced to yield -.091% and a 2 billion tranche for 70 years at 1.53%. What's that you ask? SEVENTY Years!? Yep, you read it right, seventy (70) years.
Now I suppose that there are a lot of good reasons to lock ones self into a 70 year obligation at 1.53% when every central bank in the world is telling you they want inflation above 2.00% but I can't think of many. A pension fund perhaps wants the certainty of liquidity in the future but what else? Insurance Companies? Yeah, maybe. But demand was supposed to be over 7 billion which means that there must be a hell of a lot of pension funds and Insurers with the same financial profile, so I guess there was real investor demand. Oh well, it's Austria...waltzes and schlage and the continued belief among a substantial body of the Volk that Beethoven was Austrian and Hitler was German. Lovely bunch. Then again, I wonder if anyone even considers the fact that in 70 years (or less) there may not be a Euro? Guys buying this stuff don't...it's not going to be their problem. And there is always a secondary market, right?
But not to be outdone Mexico waltzes into Europe today and peddles 1.9 billion of Euros in eight year and 15 year tranches at 1.49 and 2.27 per cent respectively. No problema, senor. Way over subscribed.
I suppose to the yield-starved, this looks like a heck of a deal. To Mexico it must look fantastic. Kudos all around. Other than 40-odd thousand Narco killings a year what's the worry? For 15 years, Mexico will be more or less Mexico and 15 years at 2.19%? Sure beats Bunds. And of course there is always a secondary market. Good planning, good results. Just like the Cubbies. Oh, they lost 6-0 last night.
Showing posts with label Cubbies. Show all posts
Showing posts with label Cubbies. Show all posts
Wednesday, October 26, 2016
Wednesday, October 14, 2015
SURORISE, SURPRISE
If you had any allusions about the politicalization of the Federal Reserve, you probably lost them this week.
In well-coordinated seperate announcements, Big Jim Tarullo and Lael Brainard, the two governors most directly connected to the administration, parroted the White House's favorite economists Larry Summers and Little Paulie Krugman along with the house organ, the New York Times in proclaiming--perhaps demanding--that there be no interest rate rise this year. I've been around for a bit and while I have witnessed disagreements among board members, we the public generally found out about them in well-schooled leaks to the press...always unattributable of course...but I have never seen an orchestrated campaign to promote such supposed differences in policy matters such as we are witnessing here.
I suspect two things are at work. Ms. Yellen is clearly Obama's gal but can't say so, and as Chair, she is playing the roll of Caesar's wife but in addition, the two afore-mentioned Governors are probably getting their shots in at Stan Fisher whose views are not quite in line with those of the administration and its sycophants. As everyone knows, Mr. Fisher is the smartest guy in the room; this is a problem.
Now as you know I don't think it makes a bit of difference whether the Fed raises a 1/4 point or not in the near term. The problem, Horatio, is not in the rates but as Angel Gurria pointed out, in the structure of things, and while we are no where near as mucked up as Europe, we are moving in the wrong direction (the Democratic "debate" last night was truly spooky). A rate rise is an attitude adjustment and with attitude comes action and with action comes a reassessment as to whether this liquidity gravy train can go on forever. To that question, you know my answer. But while this "debate" continues, we face some fairly grim situations which perhaps--just perhaps--are becoming recognized.
The economy, touted as moving ahead, isn't doing much at all. With more than 1/3 of the capable workforce not working the 5.1% unemployment rate is a nonsense, a fact sustained by the realization that if we were really close to "full employment," wages would not be stagnant and consumer purchases--save for autos which is all the result of borrowed "free money," would not be going no where. On top of all that, in recent years a growing amount of the business of American corporations has been directed internationally--particularly towards the emerging markets. That is an ugly place to be doing business right now. Which the profit numbers as they emerge in the following weeks.
The solution to all of this is of course for the Fed to hold the course. To do otherwise would of course admit to a monumental policy mistake but more importantly, to a rejection of political theory that has governed our major political parties (yes, Toto, the Repubs are to blame as well) for too many years. Egos will certainly be bruised. But it is quite brilliant to focus the conversation on the Fed; reality can be awkward. And all the while the chance of an "event risk" in the Middle East and other places becomes greater as TOW missiles marked "Made in the U.S.A." are knocking off tanks marked, "Made in Russia." At some point there are going to be Russians in those tanks and old Yuri in Red Square with a bottle of home brew in his belly, will not wish to understand the niceties in the of the difference between 'Made In" or "Supplied By" as the body bags come home.
I've been getting more political in tone the past couple of weeks which I promised I would never do but unfortunately, politics is becoming such a big part in all our activities that it is difficult to avoid.
The new situation in Syria is just going to make the flow of refugees worse and I really fear for Europe. This is a economic as well as a societal catastrophe in the making and one with which I suspect, they are not capable of dealing. We need something to cheer us up...like the Mets beating the Devil's Team, the Dodgers and meeting the Cubbies in the NLCS. New York against Chicago...the First against the Second City...good against evil...at least for seven games. That's my kind of war! Go Mets!
In well-coordinated seperate announcements, Big Jim Tarullo and Lael Brainard, the two governors most directly connected to the administration, parroted the White House's favorite economists Larry Summers and Little Paulie Krugman along with the house organ, the New York Times in proclaiming--perhaps demanding--that there be no interest rate rise this year. I've been around for a bit and while I have witnessed disagreements among board members, we the public generally found out about them in well-schooled leaks to the press...always unattributable of course...but I have never seen an orchestrated campaign to promote such supposed differences in policy matters such as we are witnessing here.
I suspect two things are at work. Ms. Yellen is clearly Obama's gal but can't say so, and as Chair, she is playing the roll of Caesar's wife but in addition, the two afore-mentioned Governors are probably getting their shots in at Stan Fisher whose views are not quite in line with those of the administration and its sycophants. As everyone knows, Mr. Fisher is the smartest guy in the room; this is a problem.
Now as you know I don't think it makes a bit of difference whether the Fed raises a 1/4 point or not in the near term. The problem, Horatio, is not in the rates but as Angel Gurria pointed out, in the structure of things, and while we are no where near as mucked up as Europe, we are moving in the wrong direction (the Democratic "debate" last night was truly spooky). A rate rise is an attitude adjustment and with attitude comes action and with action comes a reassessment as to whether this liquidity gravy train can go on forever. To that question, you know my answer. But while this "debate" continues, we face some fairly grim situations which perhaps--just perhaps--are becoming recognized.
The economy, touted as moving ahead, isn't doing much at all. With more than 1/3 of the capable workforce not working the 5.1% unemployment rate is a nonsense, a fact sustained by the realization that if we were really close to "full employment," wages would not be stagnant and consumer purchases--save for autos which is all the result of borrowed "free money," would not be going no where. On top of all that, in recent years a growing amount of the business of American corporations has been directed internationally--particularly towards the emerging markets. That is an ugly place to be doing business right now. Which the profit numbers as they emerge in the following weeks.
The solution to all of this is of course for the Fed to hold the course. To do otherwise would of course admit to a monumental policy mistake but more importantly, to a rejection of political theory that has governed our major political parties (yes, Toto, the Repubs are to blame as well) for too many years. Egos will certainly be bruised. But it is quite brilliant to focus the conversation on the Fed; reality can be awkward. And all the while the chance of an "event risk" in the Middle East and other places becomes greater as TOW missiles marked "Made in the U.S.A." are knocking off tanks marked, "Made in Russia." At some point there are going to be Russians in those tanks and old Yuri in Red Square with a bottle of home brew in his belly, will not wish to understand the niceties in the of the difference between 'Made In" or "Supplied By" as the body bags come home.
I've been getting more political in tone the past couple of weeks which I promised I would never do but unfortunately, politics is becoming such a big part in all our activities that it is difficult to avoid.
The new situation in Syria is just going to make the flow of refugees worse and I really fear for Europe. This is a economic as well as a societal catastrophe in the making and one with which I suspect, they are not capable of dealing. We need something to cheer us up...like the Mets beating the Devil's Team, the Dodgers and meeting the Cubbies in the NLCS. New York against Chicago...the First against the Second City...good against evil...at least for seven games. That's my kind of war! Go Mets!
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