To Hedge Or Not To Hedge

On Friday, we looked at the extent to which the S&P may be headed for its sixth consecutive quarter of falling EPS growth. That’s the longest stretch since the crisis. Nevertheless, markets are riding high, most recently thanks to the Bank of England’s kitchen sink moment (rate cut, gilt buying, corporate bond purchases) and a…

Friday (In)Sanity Check

“We don’t see recession risk likely in the near term,” St. Louis Fed chief James Bullard said on Friday. Well, that’s great Jim but when it comes to corporate profits, the recession started four quarters ago and now, it looks set to continue into Q3 2016. We were perusing Bloomberg headlines when we ran across…

Markets “Lulled To Sleep” Despite Big Trouble In Little China

Well, thank goodness for continued strength in crude and rising expectations for global fiscal stimulus because the data dump out of China overnight was pretty disheartening and in a rational world would have probably sparked a steep selloff. Instead Asian bourses were mostly green. As for the data out of China, basically everything missed. Industrial…

How About A Kiwi?

Let’s pretend like you don’t care at all about the kiwi and thus have no idea what the New Zealand central bank did on Wednesday. Now, have a look at the following chart and try to surmise the reason for the sudden spike: You’d certainly be forgiven for thinking that the RBNZ hiked rates. That’s…

One Day After Collapsing, Oil Skyrockets On Saudi Comments, IEA Report

Remember Wednesday’s rout in crude? Well, what a difference a day and a tape bomb makes. At around 9:30 this morning, Dow Jones reported the following: Saudi Arabia’s energy minister says talks with producers could include possible action to stabilize oil market, Global demand still strong; mkt rebalancing taking place Supply outside OPEC is declining…

Revisiting Oil Prices As “Surprise” Inventory Build Sends Crude Tumbling

We’ve talked quite a bit in these pages about what drives oil prices. Our argument, generally speaking, is part common sense and part geopolitics. On the common sense side of things, there’s a supply glut. Plain and simple. You can of course parse the API and EIA data which sometimes agrees and sometimes doesn’t, but…

Bonds Have “Absolutely No Value And Represent Huge Risk”

It was just yesterday when we warned of a “bond bloodbath” in the event central banks ever take the proverbial plunge and attempt to normalize policy. Specifically, we brought you the following graph from Goldman which shows you the extent of the damage should yields mean revert: (Chart: Goldman) As you can see, that’s a…

“You’re Not Being Productive Enough”

Earlier today we discussed how the Bank of England and the ECB’s corporate bond buying programs are likely to drive demand for US investment grade credit. The rationale is pretty simple. Here’s BofAML: “We find that, by deflating sterling and euro credit spreads, the BOE and ECB corporate bond QE programs are creating a lot…

Failure To Launch: Bank Of England Can’t Find Enough Bonds To Buy

Back in March, we got a look at just how absurd the dynamic between central banks and the market has become when the Osaka circuit breaker was tripped after the bid-to-cover in a Bank of Japan bond buying operation jumped to 3.58 from 2.93 the previous week. Basically, everyone had rushed in the previous day…

Talking Dollars On A Snoozer Monday

Let’s talk about dollars. As you might have observed, the broad dollar got quite a boost from Friday’s strong payrolls number: That’s basically just rate hike expectations. It’s a kind of “ok Janet, how are you going to justify not hiking now?” bet. Of course the irony is that that dollar strength can and has…