The possibility of the Fed causing the curve to invert is real. We will have 12-18 months at most to see what happens economically. The post US curve flattening as Fed doves grow more hawkish appeared first on Credit Writedowns. Become a Patron!
Во вторник, 3 апреля, в Соединенных Штатах Америки не ожидается публикации важной макроэкономической статистики, а из второстепенных данных можно отметить мартовское значение индекса деловой активности в Нью-Йорке, недельный индекс сопоставимых продаж крупнейших розничных сетей (Красная книга), а также данные по продажам авто за март. Кроме того, сегодня состоятся выступления Нила Кашкари (в 15:30 МСК) и Лайел Брейнард (в 23:30 МСК). В календаре корпоративных отчетностей ничего интересного на сегодня не значится. К 13:25 МСК фьючерсы на индекс S&P 500 торгуются с повышением на 0,52%.
Во вторник, 3 апреля, в Соединенных Штатах Америки не ожидается публикации важной макроэкономической статистики, а из второстепенных данных можно отметить мартовское значение индекса деловой активности в Нью-Йорке, недельный индекс сопоставимых продаж крупнейших розничных сетей (Красная книга), а также данные по продажам авто за март. Кроме того, сегодня состоятся выступления Нила Кашкари (в 15:30 МСК) и Лайел Брейнард (в 23:30 МСК). В календаре корпоративных отчетностей ничего интересного на сегодня не значится. К 13:25 МСК фьючерсы на индекс S&P 500 торгуются с понижением на 0,23%.
The potential selection of a white man to head the New York Federal Reserve — the central bank’s second-most powerful job — has sparked a fierce backlash from Sen. Elizabeth Warren and other progressives, who are accusing the Fed of overlooking women and people of color.The expected pick is John Williams, a Ph.D. economist who currently heads the San Francisco Fed. Fueling the torrent of criticism is that Williams’ reserve bank oversees Wells Fargo, the giant lender that has been consumed by scandals, including the opening of possibly millions of fake customer accounts.The public battle has not only created a major controversy for the Fed, it has raised uncomfortable questions about whether Congress has enough oversight over the world’s most important central bank.“The New York Fed has never been led by a woman or a person of color, and that needs to change,” Sen. Kirsten Gillibrand (D-N.Y.) said in a statement. “It's unacceptable that this powerful position is virtually unchecked by Congress.”The conflict comes as the Fed is undergoing a major transformation, with a new chairman appointed by President Donald Trump and as many as four new board members on the way. But the issue of diversity has dogged the central bank for years, with only four of the 12 reserve bank presidents being either women or people of color. That criticism only intensified after Thomas Barkin, a white man from the private sector, was picked in December to lead the Richmond Fed. And Janet Yellen, the first woman to head the Federal Reserve, also became the first central bank chief in decades to be denied a second term, when Trump picked Jerome Powell to replace her in February.“This is a dangerous moment at the Fed because of the strength of populism in the United States,” a former Fed official said in an interview. “By design, it’s not a terribly democratic institution. The demographic makeup of the presidents and board members also puts them at risk because clearly — despite a professed desire to have more diversity — they haven’t succeeded very well.”The co-chairs of the New York Fed search committee, Freelancers Union executive director Sara Horowitz and private equity investor Glenn Hutchins, highlighted diversity as being of high importance, along with expertise in monetary policy, capital markets and crisis management. Williams, who has spent his career at the Fed, doesn’t have direct markets experience but already serves on the central bank’s interest rate-setting committee.The co-chairs said in a statement that they were “committed to identifying a diverse slate of potential candidates.“But others involved in the process were critical of their follow-through.“I haven't been a supporter of congressional intervention in the process for picking regional presidents, but I am increasingly frustrated at the lack of progress in expanding representation,” said Julia Coronado, president of MacroPolicy Perspectives, herself a former Fed staffer.“What started as an open, expansive process aimed at gathering feedback and casting as wide a net as possible seemed to get converted into a rushed and incomplete evaluation of a pretty impressive list of semi-finalists,” said Coronado, who serves on the New York Fed’s economic advisory panel.Warren said in a tweet last month, “Every past head [of the New York Fed] has been white, male & cozy with big banks. How about we try someone with a new perspective and background...?“Williams, under normal circumstances, might be considered a solid pick. One of his biggest proponents is Yellen herself, who elevated him to a top position during her own tenure as head of the San Francisco Fed.“John Williams is a distinguished economist who has made major contributions to monetary policy research and shown wise, good judgment in contributing to actual monetary policy decisions,” Yellen told POLITICO. “He’s been devoted to public service for his entire career and has been a strong leader of the San Francisco Fed.”But that endorsement is little comfort for his detractors, who disagree with Yellen, despite their support for the former Fed chief as a policymaker.“I’m judging John Williams based on the last several years of him being wrong about the levels of maximum employment and pushing for additional [interest rate hikes] prematurely because that mistake puts millions of jobs at risk,” said Shawn Sebastian, who co-leads the Fed Up coalition comprising advocacy groups and unions.Reserve bank heads aren’t appointed by the president. Instead, they are selected by the bank’s private board and approved by the Fed board of governors in Washington, who are presidential appointees confirmed by the Senate. Thus, this position is the most powerful one at the central bank that doesn’t go through the president. That there is no longer a filibuster on presidential nominations has also “completely changed the dynamic of the Federal Reserve,” said Ed Mills, an analyst at investment bank Raymond James.“For the first time, if you are in the minority in the Senate, there’s a chance you have zero say over the makeup of the Fed,” Mills said.Since Congress has no direct say in the New York Fed selection, Warren, a leader of the Democratic Party's progressives, called last week for a Senate Banking Committee hearing featuring the co-chairs of the search committee as well as Williams, if he is selected.“Mr. Williams’ track record raises several questions, including about his fitness to supervise Wall Street banks given the San Francisco Fed’s inadequate supervision of Wells Fargo during its many consumer scandals,” Warren said in a statement.Williams' supporters say the Wells criticism is unfair, pointing to language within the 2010 Dodd-Frank Act that gives the Fed board in Washington, not reserve bank presidents, authority over regulation. His role is more managing the examiners who work under him than making supervisory decisions.Meanwhile, the consumer issues at Wells fall more under the purview of the CFPB and the Office of the Comptroller of the Currency, which conducts day-to-day-oversight of the bank, they say.Still, the New York Fed president is an important voice in developing regulatory policy, since most of the biggest banks are headquartered within that district.The top job at the New York Fed hasn’t been open for nearly a decade. After current President Bill Dudley announced he would retire mid-year, many Democrats and other Fed stakeholders were hoping the central bank would choose a woman or person of color to take his place at the institution, which has a permanent seat on the Fed’s interest rate-setting body.Given that the search committee repeatedly cited diversity as an important goal, Fed watchers were surprised that Williams ended up as the favored choice.A source familiar with the search process defended the result, saying the “obvious choices” who would both be qualified and bring gender or racial diversity generally didn’t want the job. It was seen as particularly important that the pick have a doctorate in economics, since Powell does not.Meanwhile, the source said, many female and minority candidates come out of banking, which wouldn't please progressives distrustful of Wall Street.But other observers were skeptical that every avenue had been considered.Fed Up responded to the suggestion that there were no such qualified candidates who would take the job by releasing a list of nine people they’d recommended to the New York Fed for the job.They include Sarah Bloom Raskin, a former Fed governor and onetime deputy Treasury secretary; Christina Romer, former chairwoman of the Council of Economic Advisers under President Barack Obama; William Spriggs, chief economist at the AFL-CIO; former Minneapolis Fed President Narayana Kocherlakota; and Karen Dynan, former senior economist at the White House Council of Economic Advisers and a former Treasury chief economist.Also on the list: Lisa Lynch, provost at Brandeis University who spent years on the board of the Boston Fed; Erica Groshen, former commissioner of the Bureau of Labor Statistics; Minneapolis Fed President Neel Kashkari; and Katharine Abraham, a former member of Obama’s Council of Economic Advisers.Kocherlakota argued in a Bloomberg View op-ed that the central bank too often tries to go for the safe choice, with too narrow a definition for who is qualified.“The various names that have leaked out of the far too secretive deliberations seem mainly comfortable, rather than challenging,” he wrote, with a note that he was not interested in the position. “That's no accident: the Fed has a long history of opting for comfort over challenge. In part, that's how we've ended up with more than a century of white male New York Fed presidents.”
It's a busy week for economic data, with Friday's payrolls average hourly earnings report on Friday taking the macroeconomic spotlight, in addition to ISM Mfg and Services reports, Trade data, construction spending and March auto sales data earlier in the week. The minutes of the March FOMC meeting will be released on Wednesday. In addition, there are several scheduled speaking engagements by Fed officials this week, including a speech by Chairman Powell on Friday. Wall Street consensus expects nonfarm payrolls to increase by 195k in March, a deceleration from the better-than-expected 313k in February. BofA notes that while the inclement weather in March may not have lowered the trend in job growth, it likely lowered working hours, thereby boosting wage growth to 0.3% mom (2.8% yoy). We wonder if markets will fall for the same ruse as in February, when an identical accounting glitch sparked fears of surging inflation and unleashed the February "volocaust." As Barclays reminds us, the February Employment report was released on March 9, five weeks after the January Employment report was released on February 2. "This may have accounted for some of the outsized performance in February, whereas the march employment report is released only four weeks after the February report." In addition, Barclays thinks concerns about anti-trade policies and regulatory concerns in the tech sector may subdue hiring relative to February. The manufacturing and non-manufacturing ISM indices will also be released; consensus expects a print of 60 for mfg and 59 for non-mfg, consistent with continued growth. The risk is sharply to the downside in the aftermath of recent trade tensions. In light of the recently launched trade war, the February Trade balance reported on Thursday will be especially closely watched for any sharp deterioration in the US trade deficit. Here is Goldman's take on key US events in the coming week: The key economic releases this week are ISM manufacturing on Monday, ISM non-manufacturing on Wednesday, and the employment report on Friday. The minutes of the March FOMC meeting will be released on Wednesday. In addition, there are several scheduled speaking engagements by Fed officials this week, including a speech by Chairman Powell on Friday. Monday, April 2 09:45 AM Markit Flash US manufacturing PMI, March final (consensus 55.7, last 55.7) 10:00 AM ISM manufacturing, March (GS 59.0, consensus 60.0, last 60.8): We estimate the ISM manufacturing index fell 1.8pt to 59.0 in the March report. Regional manufacturing surveys deteriorated on net in March, and much of the weakness was pronounced in mid-to-late month surveys. Our manufacturing survey tracker—which is scaled to the ISM index—declined 1.6pt to 58.4. 10:00 AM Construction spending, February (GS +0.6%, consensus +0.4%, last flat): We estimate construction spending increased 0.6% in February, following an unchanged reading in January that reflected firmer public nonresidential and private residential construction primarily offset by weaker private nonresidential and public residential construction. 06:00 PM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will hold a town hall on monetary policy and the economy with university students in Duluth, Minnesota. Audience Q&A is expected. Tuesday, April 3 09:30 AM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will take part in a moderated Q&A session at the Regional Economic Indicators Forum in Duluth, Minnesota. Audience Q&A is expected. 04:00 PM Total vehicle sales, March (GS 16.6mn, consensus 16.9mn, last 17.0mn): Domestic vehicle sales, March (GS 12.8mn, consensus 13.1mn, last 12.9mn) Wednesday, April 4 08:15 AM ADP employment report, March (GS +215k, consensus +205k, last +235k); We estimate a 215k increase in ADP payroll employment in March, reflecting stronger headline payrolls growth in February and lower jobless claims, two inputs utilized in the ADP model. While we believe the ADP employment report holds limited value for forecasting the BLS’s nonfarm payrolls report, we find that large ADP surprises vs. consensus forecasts are directionally correlated with nonfarm payroll surprises. 09:45 AM Markit Flash US services PMI, March final (last 52.9) 09:45 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Federal Reserve President James Bullard will give a speech at an event jointly hosted by the Arkansas Bankers Association and the Arkansas State Bank Department in Little Rock. Audience Q&A is expected. 10:00 AM Factory orders, February (GS +1.7%, consensus +1.7%, last -1.4%); Durable goods orders, February final (last +3.1%); Durable goods orders ex-transportation, February final (last +1.2%); Core capital goods orders, February final (last +1.8%); Core capital goods shipments, February final (last +1.4%): We estimate factory orders rose 1.7% in February following a 1.4% decrease in January. Core measures for durable goods were fairly strong in February, with gains in both core capital goods orders and core capital goods shipments. 10:00 AM ISM non-manufacturing, March (GS 58.0, consensus 59.0, last 59.5): We expect the ISM non-manufacturing survey to decrease 1.5pt to 58.0 in the March report. Regional non-manufacturing surveys all moved lower in March, led by declines in the New York Fed and Dallas Fed surveys. Overall, our nonmanufacturing survey tracker fell by 1.2pt to 57.1 in March. 11:00 AM Cleveland Fed President Mester (FOMC voter) speaks: Cleveland Fed President Loretta Mester will give a speech on diversity in economics at the Central State University’s Leaders, Executives, Entrepreneurs and Directors (LEED) Program, in Wilberforce, Ohio. Audience Q&A is expected. 02:00 PM FOMC minutes from the March 20-21 meeting: The FOMC raised the funds rate target range by 25bp at its March meeting and published a mixed but generally upbeat post-meeting statement. In the Summary of Economic Projections (SEP), the median dots continued to show three hikes in 2018 but now show 8 cumulative hikes in 2018-2020. In the minutes, we will look for an update of the Committee’s inflation outlook and views about the importance of the modest core inflation overshoot now projected in the SEP. Investors may also pay close attention to any discussion of potential changes to the post-meeting press conference format—in particular a possible increase in their frequency (though we agree with Chairman Powell that any such change would not have near-term policy implications). Thursday, April 5 08:30 AM Initial jobless claims, week ended March 31 (GS 220k, last 215k); Continuing jobless claims, week ended March 24 (consensus 1,870k, last 1,871k); we estimate initial jobless claims moved up 5k in the week ending March 31 after claims fell to a new 49-year low. We note that the level of claims looks somewhat depressed and we see scope for a rebound. Continuing claims – the number of persons receiving benefits through standard programs – rebounded from very low levels in the prior week. 08:30 AM Trade balance, February (GS -$56.7bn, consensus -$56.5bn, last -$56.6bn): We estimate the trade deficit increased further in February. The Advance Economic Indicators report showed an unexpected increase in the goods trade deficit, likely reflecting the later than usual timing of Chinese New Year that also appeared to boost West Coast inbound container traffic in the month. Friday, April 6 8:30 AM Nonfarm payroll employment, March (GS +200k, consensus +189k, last +313k); Private payroll employment, March (GS +200k, consensus +195k, last +287k); Average hourly earnings (mom), March (GS +0.3%, consensus +0.3%, last +0.15%); Average hourly earnings (yoy), March (GS +2.7%, consensus +2.7%, last +2.6%); Unemployment rate, March (GS 4.0%, consensus 4.0%, last 4.1%): We estimate nonfarm payrolls increased 200k in March following a 313k gain in February. Our forecast reflects strong labor market fundamentals partially offset by a sizeable drag from weather, as snowfall was above-average in the first half of March. If realized, our forecast would represent a significant acceleration in underlying job growth from the 180k trend in the second half of 2017. We estimate the unemployment rate declined by one tenth to 4.0% (from 4.14% previously), as continuing claims resumed their downtrend between the survey reference periods. Additionally, surges in labor force participation as large as that seen last month (+0.3pp) are typically associated with a subsequent decline in the jobless rate. Finally, we expect average hourly earnings to increase 0.3% month over month and 2.7% year over year, reflecting somewhat favorable calendar effects. 01:30 PM Fed Chairman Powell (FOMC voter) speaks: Federal Reserve Chairman Powell will give a speech on the economic outlook at an event hosted by the Economic Club of Chicago. Questions from a moderator are expected. 03:00 PM Consumer credit, February (consensus +$15.0bn, last +$13.9bn) Source: BofA, DB, GS
Москва, 24 марта - "Вести.Экономика". Действия администрации президента Трампа во внешней торговле США стали одним из рисков замедления роста американской экономики, и руководству Федеральной резервной системы приходится учитывать данный фактор.
Действия администрации президента Трампа во внешней торговле США стали одним из рисков замедления роста американской экономики и руководству Федеральной резервной системы приходится учитывать данный фактор.
В пятницу, 23 марта, в Соединенных Штатах Америки ожидается публикация двух важных макроэкономических показателей. В 15:30 МСК нам предстоит узнать динамику заказов на товары длительного пользования за февраль. Согласно прогнозам, показатель увеличился на 1,5% после снижения на 3,6% в январе. В 17:00 МСК выйдут данные по продажам нового жилья за февраль. Ожидается, что показатель составил 0,623 млн после 0,593 млн в январе. Кроме того, сегодня состоятся выступления Рафаэля Бостика (в 15:10 МСК) и Нила Кашкари (в 17:30 МСК). В календаре корпоративных отчетностей ничего интересного не значится. К 13:40 МСК фьючерсы на индекс S&P 500 торгуются с понижением на 0,40%.
В пятницу, 23 марта, в Соединенных Штатах Америки ожидается публикация двух важных макроэкономических показателей. В 15:30 МСК нам предстоит узнать динамику заказов на товары длительного пользования за февраль. Согласно прогнозам, показатель увеличился на 1,5% после снижения на 3,6% в январе. В 17:00 МСК выйдут данные по продажам нового жилья за февраль. Ожидается, что показатель составил 0,623 млн после 0,593 млн в январе. Кроме того, сегодня состоятся выступления Рафаэля Бостика (в 15:10 МСК) и Нила Кашкари (в 17:30 МСК). В календаре корпоративных отчетностей ничего интересного не значится. К 13:40 МСК фьючерсы на индекс S&P 500 торгуются с понижением на 0,40%.
As time goes by, Bill Gross' letters have become increasingly more bizarre, and at times morbid, and his latest monthly note is no exception. It begins with a flashback to the days of wars, both real and fictional, and Gross' musings if indeed, as many believe, society is becoming more civilized or if we are merely internalizing all of the "murderous beastly" passions that always seem to spill over in some isolated or mass murderous event. As he makes it quite clear, the legendary bond-trading billionaire is skeptical: Some say humanity is making progress, and that civilization is becoming more "civilized", but I wonder. Optimists would point to the global political focus on human rights and the slow, although sporadic, steps forward on racial and gender equality, but these are social morés generally unrelated to humankind's tolerance for evil on a grander scale. "Thou shalt not kill" is a commandment on Moses' tablet for a good reason, and yet our killing of each other in mass quantities continues unabated. Stalin and Hitler's atrocities seem perhaps long ago to younger generations, but then the "killing fields" of Pol Pot, the millions of lost souls in the Middle East, and the ongoing tribal carnage in parts of Africa testify to the "evildoing" of governments or religious factions in defense of Fascism, Communism and yes – Democracy. "God", it seems, wears numerous hats, but almost always in defense of one particular ideology or another. "God Bless America"? Yes hopefully – but why not Cuba or the Congo? Chauvinistic mantras can be bonding but also destructive when used to kill masses of people for specious reasons. America – the self-proclaimed defender of freedom and equal rights – has proved vulnerable to those ideals in Vietnam, Iraq, and now Afghanistan and elsewhere. Careful Bill, thoughts like those would be sufficient to brand you a Russian operative by the rabid "Resistance" which sees the KGB's finger any time someone dares to criticize either the US or the grand "neoliberal" order. Then again, at age 73, Gross is probably not too worried if he will spend the rest of his days in prison following a ruling by some Marxist "people's court", instead he looks inside to unveil the "beast" that prompted him to become a "killer" for a cause not that long ago: Having participated in one of those wars, I suppose I should look inward and question my own behavior when I was the age of 22, or even now at 73. I often do. I guess in part, that is why I question humanity's progress. If I was a willing killer then, how can I expect others and their governments to not do the same? I can't, but it's important for all of us to try to understand why humanity evolves slowly, if at all. For me, William Golding in his brilliant "Lord of the Flies" expressed it best. Searching for a murderous "beast" on a deserted island, a previously innocent group of young boys began to kill each other to ensure their own survival. "Maybe there is a beast", said one child, "but then maybe it's only us." Maybe it is us. Maybe we haven't evolved. Hopefully future robots can be programmed with a better understanding of Moses' commandment, so that when they take over, we will have a more civilized society. Robots maybe... but what about central banks? Because this long preamble by the Janus Henderson Unconstrained Bond Fund manager is just a way for Gross to get to the punchline of his note, something we have repeatedly pointed out here, and which boils down to the following: there is just too much debt in the world to allow rates to rise too high, or as Gross puts it: The U.S. and global economies are too highly leveraged to stand more than a 2% Fed Funds level in a 2% inflationary world Which is why Gross warned that "if more than 2 percent, a stronger dollar would affect emerging market growth and lead to perhaps premature tightening on the part of the ECB and other developed market central banks" and adds that, "the Fed's purported 3 to 4 hikes this year beginning in March are likely exaggerated." But where's the best? Well, it's shown in the chart below, and represents a record $233 trillion in global debt. So in hopes of avoiding a confrontation with the "beast", Gross next lays out his hope that Powell will keep the tightening cycle gradual and 'proceed cautiously': When it comes to financial markets, (both bond and stock) the "beast" is really leverage, and while it's hard to pinpoint when enough is really enough, the Great Recession really informed us that Hyman Minsky was right – "stability leads to instability" as good times and higher prices lead to a false sense of optimism. The Fed, under Jerome Powell, hopefully has learned that lesson, and should proceed cautiously, as must his counterparts around the globe. Perhaps he has learned that "lesson"; however as we first pointed out three months ago, Powell also has learned something else: the Fed has created the world's biggest asset bubble and - with its policies - is actively encouraging it. I think we are actually at a point of encouraging risk-taking, and that should give us pause. Investors really do understand now that we will be there to prevent serious losses. It is not that it is easy for them to make money but that they have every incentive to take more risk, and they are doing so. Meanwhile, we look like we are blowing a fixed-income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that that is our strategy. As for the upcoming showdown between central banks and the "beast" which they themselves created, that leaves Gross skeptical that assets will survive. I write this – not in support of low interest rates and financial repression – indeed I have argued for the necessity of an eventual normal rebalancing if small savers and financial institutions such as pension funds and insurance companies are to continue to perform their critical capitalistic role. In practical terms, this means that Gross believes that after just 2 more hikes the Fed will be done: I believe, as does Fed Governor Neel Kashkari, that our financial systems' excesses cannot be expunged quickly by "liquidating assets" à la Andrew Mellon in the 1930's, but by a mild and gradual re-entry back to privately influenced, as opposed to central bank suppressed, interest rates. 2% Fed Funds in a 2% inflationary world is the current limit in my opinion. As a result, Gross' conclusion is a somewhat contradictory take on his previous call for a bond bear market - he now sees the 10Y trading where it is as the great "global bond bear market" goes back into hibernation... if only for the time being: Investors should therefore look for 3% plus or minus on the 10-year for the balance of 2018. That level should ultimately force German Bunds and UK Gilts to higher yields, perhaps 1% on Bunds and 1.75% on Gilts. Still, in my mind, this is a hibernating global bear bond market, not a beast. That may come later, much like our programmable robots that may control future society. To be sure, between a race of despotic robotic overlords, and a 10Y in the double digits, which would send the S&P back into the triple digits, it is unclear which option our current Wall Street leaders would choose.
The Federal Reserve on Wednesday raised interest rates for the first time this year and signaled it will act more aggressively to head off inflation, potentially threatening President Donald Trump’s hopes for faster economic growth.Fed officials are now essentially split on the question of whether to hike interest rates a total of three times or four this year — a response, in part, to recent tax cuts and increased spending by Congress, which the central bank fears could lead prices to spike.The Fed’s interest rate-setting body, the Federal Open Market Committee, said in a statement that it expects inflation to reach its 2 percent target “in the coming months.” The committee unanimously agreed to raise its main borrowing rate to between 1.5 percent and 1.75 percent, the first action taken under new Chairman Jerome Powell.There is some good news for Trump. Fed officials upgraded their forecast for economic growth this year and next, projecting a 2.7 percent increase in GDP in 2018 and a 2.4 percent increase in 2019. But over the longer term, the central bank still expects growth to hover at or below 2 percent.Trump is aiming for sustained annual GDP growth of 3 percent.“That is well above almost all estimates — current estimates of potential long-run growth,” Powell said of Trump's goal, in his first press conference as head of the Fed. He said Fed officials aren’t sure what the ultimate impact of tax cuts and increased federal spending will be, though he said they hope the moves will boost productivity.“Broadly speaking, participants believe there will be meaningful increases in demand from the new fiscal policy for at least the next, let’s say, three years,” he said, as well as the potential for more investment driven by lower corporate tax rates. “It’s uncertain, though.“Fed officials projected unemployment would fall to 3.8 percent this year and 3.6 percent next year, and then balance out at about 4.5 percent over the longer term. That would be the first time the jobless rate dipped below 4 percent since the 1960s.“The economic outlook has strengthened in recent months,” the FOMC said in its statement.Although the Fed’s median projection is still for three rate increases this year, four hikes are a real possibility, since some of the central bank officials who are most vocal about waiting for further increases — such as Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans — are not voting members this year.The Fed is also projecting three rather than two hikes for 2019.Rep. Erik Paulsen (R-Minn.), who chairs the Joint Economic Committee, praised the Fed’s decision to hike rates and defended the growth from recent tax cuts as making the economy healthier.“America’s new and faster growth is sustainable because Congress and the new administration have pursued policies that bring American workers back to work and allow businesses to invest,” Paulsen said in a statement. “I welcome this move by the Fed as part of its longstanding plan to normalize monetary policy, given that the economy itself is just returning to normal.”Powell faced multiple questions from reporters Wednesday about impending U.S. tariffs on steel and aluminum globally, as well as on China more specifically. He said the committee discussed the topic, although it didn’t affect their current outlook for the economy.“Trade policy has become a concern going forward” for the Fed’s business contacts, he said.He added later that the threat of “more widespread retaliation” is a relatively new risk that the Fed is watching.
Authored by EconomicPrism's MN Gordon, annotated by Acting-Man's Pater Tenebrarum, “God gave me my money.” – John D. Rockefeller Today we step away from the economy and markets and endeavor down the path less traveled. For fun and for free, we wade out into a smelly peat bog. There we scratch away the surface muck in search of what lies below. One should actually be careful about quotes like the one attributed to Rockefeller above, even if it of course sounds good and is very suitable for the topic at hand. In reality he probably said something like it, but it is almost certain he didn’t say it verbatim (contrary to Mr. Blankfein, who is indeed on record for stating that Goldman Sachs was “doing God’s work”). We mention this because we have long noticed that the best-known quotes attributed to all sorts of long dead famous people – the ones one immediately finds on the first page that pops up when googling their names – are more often than not either garbled beyond recognition, or misattributed, or at times even completely made up. A genuine quote is a rare find indeed; at a minimum the most famous quotes have almost always gone through the Chinese horse-whisperer treatment (known as “telephone” in the US). What Mr. Dunne said about Rockefeller is rather more certain, since he put it in writing in the Chicago Evening Post in 1895 – albeit in his “Mr Dooley” voice, imitating an Irish accent. Dooley was a figure Dunne had invented for his satirical columns, the fictional owner of a fictional Irish pub located on the South Side of Chicago (so the quote actually read: “He’s kind iv a society f’r the previntion of croolty to money…”, etc.). [PT] Our unwitting inspiration is none other than long time Goldman Sachs CEO Lloyd Blankfein. The journey that follows was prompted by word he’s preparing to step down as CEO. One account said this could happen by the end of the year. Indeed, times like these are times for honest reflection and celebration. If you recall, in the fall of 2009, not long after warm rays of sunshine began smiling down upon this bull market, Goldman Sachs’ top man, Lloyd Blankfein had an epiphany. The way he put it to The Times of London was that he’s just a banker doing “God’s work”. At the time we weren’t sure what Blankfein was getting at. Were you? Perhaps he was elevating himself, and his firm’s business, to the noble and thankless cause of efficiently allocating capital to its highest and best use. As best we can tell, Blankfein implied that this was, somehow, the work of God. And by Blankfein’s rationale, the work of God and the work of Goldman are one in the same. The Times of London may not have been convinced by Blankfein’s claim. The article did clarify that Goldman Sachs “…makes money by charging hefty fees to the companies and clients it advises and whose assets it manages – typically 2-4 percent. It also makes profits from trading using its own cash.” A famous photograph, showing Mr. Blankfein with Warren “the Oracle of Omaha” Buffett himself, clutching a thick wallet (Mr. Buffett’s, presumably). Buffett seemed to be the “savior” of Goldman Sachs when he invested $5 billion in the company in 2009, a few weeks before the financial crisis ended of its own accord. It was a great decision on the part of Mr. Buffett, but this sweetheart deal sure turned out to be rather costly for existing shareholders of Goldman Sachs. Here is how the deal was structured: Buffett bought a new class of shares, namely $5 billion worth of “perpetual preferred shares”, which sported a 10% dividend yield (!) – costing the firm a hefty $500 million per year. On top of that he received warrants for 43.5 million common shares with an October 1 2013 expiration date and a strike price of $115 per share at no cost. Goldman had the right to buy the preferred shares back at a penalty, which it did in March 2011, paying Buffet $5.64 billion (consisting of the principal, a $500 million prepayment penalty plus $140 million in dividends due for 2011). He had already collected $1.1 billion in dividends by that time, so all in all he made $1.75 billion in cash, a return of 35%. But that is not all – GS agreed to a revised deal on the warrants, and in March 2013 Buffett received $1.35 billion worth of GS stock in exchange for the warrants. The stock was trading at roughly $146 at the time, so he got almost exactly the difference between the strike price and the market price in the form of stock – thus GS issued around 12 million shares to him. So his total return on the $5 billion investment was $3.1 billion or 62% (in the meantime it is more, as the stock has risen quite a bit further). Not too shabby, but if we were GS shareholders we’d certainly have a few questions about the deal – especially as it seems in hindsight that it was completely unnecessary. As Matt notes below, GS had already been bailed out by taxpayers at the time (who did so involuntarily and got not return whatsoever). Did it really need a second bailout courtesy of homely Uncle Warren? [PT] Natural and Moral Order For whatever reason, Blankfein omitted an important facet of his morality play. Roughly one year prior, when the sky was falling during the darkest days of financial crisis, government benevolence, courtesy of the taxpayer – that’s you – had rescued Goldman and the other big banks via the AIG bailout. Was this “God’s work” too? Quite frankly, we don’t know. We don’t pretend to know the will of God. But as Ralph Waldo Emerson elucidated in the essay Nature, there’s a natural order to the world. Following Emerson’s lead, we acknowledge that there are some simple facts of how the world works. There can also be consequences for attempting to thwart them, or for simply getting in their way. We may not like some of these facts. But our opinion really doesn’t matter. From a purely natural sense, Pi is an irrational number. There’s no denying it. Rounding it off after two decimal places doesn’t change the fact that the ratio of a circle’s circumference to its diameter cannot be expressed exactly as a fraction. This is an apparent incongruity to the world and there’s nothing you or anyone else can do to change it. Fun with Pi – yes, it is definitely an irrational number. Inserted into the graph is Ramanujan’s bizarre equation for calculating it, which can compute 8 decimal places of Pi with each term in the series – it is to this day used as the basis of the fastest algorithms for the calculation. [PT] There are also fundamental truths to the moral order of things. You can’t always get what you want. Deficits do matter. Artificially suppressing the cost of money distorts an economy. A fool and his money are soon parted. Fire and gunpowder don’t sleep together. What goes around comes around. Here’s the point... Good Riddance Lloyd Blankfein! While we may not know the will of God, we think we may know what it isn’t. The natural answer to the mortgage backed security crisis was outright bank failures. A mass cascading spill over systemic bank panic should have swept across the land and wiped out all insolvent financial institutions. Nature has no sympathy for the human construct of “too big to fail.” What we mean is the taxpayer bailout of the big banks was likely counter to God’s work. Regardless of what Blankfein says, a business that keeps private profits while socializing its losses is profane. The bailout of the U.S. financial system, by the Emergency Economic Stabilization Act of 2008, took place nearly a decade ago. This is old news. No one, save a small fringe of financial gadflies, still cares about this. But that doesn’t mean it isn’t still important. The ramifications of the bailout continue to be felt throughout financial markets and the economy. Toxic mortgage backed securities still soil the Federal Reserve’s balance sheet. In fact, part of the Fed’s quantitative tightening program involves gradually reducing its holdings of mortgage backed securities. This, along with increases to the federal funds rate, could usher in the next recession. “Quantitative tightening” in action – assets held by the Fed. The insert shows the y/y rate of change, which is still small at the moment, but set to accelerate. [PT] Thus, given word of Blankfein’s approaching departure from Goldman Sachs we refuse to give him a free exit pass. Because when the big bank bailout was hatched out, Blankfein was in the middle of it, egging on Goldman cronies Hank Paulson and Neel Kashkari, and ensuring his bank’s access to a lifeline of taxpayer liquidity. Then, following the bailout, and a great big bonus, he offered the following non-apology: “Certainly, our industry is responsible for things. We’re a leader in our industry, and we participated in things that were clearly wrong and we have reasons to regret and apologize for.” —Lloyd Blankfein, chairman and chief executive, Goldman Sachs, November 17, 2009. Good riddance!
Neel Kashkari, Washington PostTen years after the financial crisis and Great Recession, it is now clear that the 2008 bailouts worked too well — for Wall Street, that is. The Dow Jones industrial average is far above its pre-recession highs. Bank earnings and share prices are setting records. The financial crisis is now just a fading memory. In hindsight, it wasn’t that bad, was it? When asked if we are likely to face another crisis in the near term, Microsoft co-founder Bill Gates recently answered: “Yes . . . Fortunately we got through [the last] one reasonably well.”
The House speaker also said he personally thinks arming teachers is a good idea, but local governments should decide.
Global stocks took another leg down during the early part of Thursday's session, sliding to one-week lows in the wake of Wednesday's unexpectedly market-moving FOMC minutes which confirmed the Fed was on track to raise interest rates several times this year, sending bond yields to new multi-year highs amid prospects for 4 rate hikes on deck (and according to Goldman, even 5 possible). However, after sliding initially, S&P futures have since staged a rebound, rising as much as 20 points from session lows, and are currently back in the green, modestly above 2,700. The rebound was helped by the end of the USD rally, as the dollar’s boost following the Fed minutes proved short-lived as the U.S. currency struggled to gain for a fifth day. Meanwhile, the euro was unfazed by a miss in German IFO data, finding support from broad dollar selling after the London open in a rather slow session. The dollar weakness sent EURUSD back to 1.23, while GBP underperforms after a disappointing GDP revision and the ongoing Brexit saga In other key FX pairs, per BBG: USD/JPY declines 0.4% as a slide in local stocks spurs demand for haven assets EUR/USD edges up; premium to hedge political risks rising, with two-week smile flattening as demand for low-delta puts remains strong amid higher volatility in the front end GBP/USD resumes its slide, trades 0.2% lower, after data showed that the U.K. economy expanded less than previously estimated in 4Q as consumers and businesses absorbed faster price increases Three rate rises are now almost fully priced in for 2018, compared with two as recently as December, and some analysts are even contemplating the possibility of as many as five rate hikes in 2018. And while 10Y TSY yields have traded rangebound within 2 bps of 2.93%, German bunds have unwound the sell-off seen post-FOMC Minutes, following disappointing German IFO data after Wednesday’s weaker-than-forecast European PMIs. The “transatlantic spread” between German and U.S. 10-year borrowing costs widened to near a year high at 220 bps, reflecting the diverging monetary policy expectations between the two countries. The 3% level on 10Y TSY yields is seen as a huge psychological milestone for bulls and bears alike. In the meantime though the yield, which hit four-year highs around 2.96 percent after the minutes, retreated to 2.93%. Two-year yields touched new nine-year peaks. A break in the U.S. 10- year treasury above the psychological level of 3% may prove sufficiently attractive to spur demand among foreign investors. This would support the dollar against CEEMEA currencies, Rabobank EMFX strategist Piotr Matys writes in a note to clients. The next hurdle for markets will be minutes from the European Central Bank’s last meeting at 1230 GMT, with investors keen to see if there was more talk of an eventual unwinding of stimulus. One school of thought says that shifting perceptions about the ECB’s policy outlook had a significant role to play in the surge in U.S. Treasury yields that began in September and picked up speed last month, roiling global stocks. European equities followed Asia peers lower: the Stoxx Europe 600 Index slid as all the major national equity gauges in the region fell. In terms of sector specific moves, material names modestly lag their peers following price action in the complex as well as a disappointing earnings update from Anglo American (-4%) which has sent their shares near the bottom of the FSTE 100; with the index also hampered by lacklustre earnings from the likes of British American Tobacco (-4.6%), Barratt Developments (-4.0%) and BAE systems. However, losses for UK stocks have been capped by a well-received earnings report from Barclays (+5.1%) which allied with upside in AXA shares (+1.2%) post-earnings has also supported the financial sector. Earlier in Asia most shares retreated, though China’s market bucked the trend as it reopened after a holiday. The Nikkei (-1.1%) and Hang Seng (-1.5%) saw losses of over 1%, while ASX 200 (+0.1%) saw initial 0.4% gains trimmed, with price action in Australia largely dictated by the slew of earnings. “The market is pricing in the possibility of a tighter Fed over time,” Evan Brown, director at UBS Asset Management, who previously worked on the open market trading desk at the New York Fed, told Bloomberg TV in New York. On a day-to-day basis “you’re going to see volatility, you’re going to see equities get a little skittish when yields are rising, but as you look over the long term, fundamentals on the economy are very strong.” However, for now Bloomberg notes that markets remain fragile as February is shaping up as one of the worst months for global equities in more than a year as concerns about a pick-up in inflation and expensive stock prices outweigh evidence of a buoyant U.S. economy. With recent data underpinning the view that inflation is no longer lagging, the OIS space shows traders pricing in just shy of three U.S. rate hikes over the next 12 months. Elsewhere, gold retreated alongside most commodities. WTI and Brent crude trade lower albeit off worst levels after falling victim to the firmer USD despite last night’s unexpected build in the API report. As a reminder, due to the President’s Day Holiday on Monday the weekly DoE report will be released today. In metals markets, gold prices have also been hampered by the firmer USD, however, the move to the downside has perhaps been contained due to the price action seen in EU stocks this morning. Elsewhere, steel prices were seen lower during Asia-Pac trade as Chinese participants slowly returned from holiday, with a bulk of the market not expected to fully return until next week. Bulletin headline summary from RanSquawk European equities (-1%) have kicked the session off on the back-foot as European participants digest the fall-out of yesterday’s FOMC minutes The DXY has nailed 90.000 with the aid of hawkish FOMC minutes, but Usd/Jpy continues to buck the broader trend amidst the ongoing global stock market retracement Looking ahead, highlights ECB minutes, US weekly jobs, DoEs and a slew of speakers Market Snapshot S&P 500 futures down 0.3% to 2,691.50 MSCI Asia Pacific down 0.8% to 175.69 MSCI Asia Pacific ex Japan down 1% to 575.54 Nikkei down 1.1% to 21,736.44 Topix down 0.9% to 1,746.17 Hang Seng Index down 1.5% to 30,965.68 Shanghai Composite up 2.2% to 3,268.56 Sensex unchanged at 33,846.31 Australia S&P/ASX 200 up 0.1% to 5,950.88 Kospi down 0.6% to 2,414.28 STOXX Europe 600 down 0.9% to 377.57 German 10Y yield fell 0.9 bps to 0.712% Euro up 0.02% to $1.2286 Brent Futures down 0.6% to $65.00/bbl Italian 10Y yield fell 2.0 bps to 1.78% Spanish 10Y yield fell 1.2 bps to 1.501% Brent Futures down 0.6% to $65.00/bbl Gold spot down 0.1% to $1,322.89 U.S. Dollar Index up 0.07% to 90.06 Top Overnight News Fed’s Quarles says the natural rate of interest is increasing in the U.S. and that the economy is in the best shape that it has been since the crisis U.K. GDP growth in 2017 was revised down to 1.7% from 1.8%, the weakest since 2012, as price rises led to household budgets being squeezed leading to slowing growth in a number of consumer-facing industries U.K. Prime Minister Theresa May will shut her most senior cabinet ministers away in a room until late Thursday night in an effort to force them to agree what kind of Brexit they want. But officials warn in private that the most divisive decisions may get kicked down the road The U.S. Treasury Department sold $35 billion of five-year notes at a yield of 2.658 percent. Bid/cover ratio fell to 2.44 from 2.48, indicating weaker demand U.S. central bankers sent a strong message Wednesday that an expansion with “substantial underlying economic momentum” could sustain more rate hikes; Treasuries sold off aggressively into the 3pm ET settlement as gains sparked by minutes of FOMC’s Jan. 31 meeting were quickly faded Federal Reserve Bank of Minneapolis President Neel Kashkari said the central bank’s symmetric approach to its 2% inflation target means “the math says we should be able to tolerate 2.5 percent for five years,” after running at 1.5 percent for five years Euro bulls are struggling to push the currency above $1.25 this year, just as the $1.20 level proved a blocking point in 2017 Do 10-year Treasury yields hit 3 percent and retreat, or does positioning signal a sharp move higher? Open interest on 10-year Treasury futures suggests 3 percent may not be the crucial level after all Asian markets trading broadly in the red with exception of the Shanghai Comp (+2.2%) which outperforms are participants plays catch up from their elongated break. The prospect of ‘further’ gradual rate hikes as noted in the most recent FOMC minutes boosted speculation that 4 rate hikes could be on the table particularly that these minutes were before the strong wage data in the most recent NFP and inflation data last week, which had subsequently pushed bond yields higher with the US 10yr yield hitting 2.95%, while equities slumped late in the US session. This transpired in Asia, with the Nikkei (-1.1%) and Hang Seng (-1.5%) seeing losses of over 1%, while ASX 200 (+0.1%) saw initial 0.4% gains trimmed, with price action in Australia largely dictated by the slew of earnings. In credit markets, the belly of the curve underperformed, with JGB 10yr yields tracking UST yields higher, while a firm 20yr JGB auction supported longer dated debt. Japan PM Abe Adviser Hamada says the BoJ should consider buying foreign bonds. PBoC sets CNY mid-point at 6.3530 (Prev. 6.3428). Top Asian News China’s VIX Stops Updating Amid Government Scrutiny of Options Indonesia Sees Jump in 10-Year Bond Yield as ‘Temporary’ India Releases Plan to Strengthen State Telecom Cos; MTNL Surges China Junk Bonds Show More Resilience on Local Investor Support Sembcorp Marine Extends Loss by Most Since 2008 After Earns Miss European equities (-1%) have kicked the session off on the back-foot as European participants digest the fall-out of yesterday’s more hawkish than anticipated FOMC minutes which saw rate-setters take a confident view on the growth and inflation outlook. In terms of sector specific moves, material names modestly lag their peers following price action in the complex as well as a disappointing earnings update from Anglo American (-4%) which has sent their shares near the bottom of the FSTE 100; with the index also hampered by lacklustre earnings from the likes of British American Tobacco (-4.6%), Barratt Developments (-4.0%) and BAE systems. However, losses for UK stocks have been capped by a well-received earnings report from Barclays (+5.1%) which allied with upside in AXA shares (+1.2%) post-earnings has also supported the financial sector. Top European news Neo-Fascist Beaten to a Pulp in Sicily: Italy Campaign Trail HSBC Chairman Is Said to Prepare Board Reduction: Sky Fosun Buys Controlling Stake in Lanvin FCA Probing Barclays Bank’s Treatment of Clients in Default German Business Confidence Slips as Companies Face Bottlenecks In currencies, the DXY has nailed 90.000 with the aid of hawkish FOMC minutes, but Usd/Jpy continues to buck the broader trend amidst the ongoing global stock market retracement and heightened volatility. Flow-wise, heavy supply at and just ahead of 108.00 is still capping the pair, while 108.02 represents Fib resistance and the headline looks increasingly toppy given lower peaks since the recent 107.90 high. Hence, the broader Dollar and index is struggling to maintain gains and mount a challenge of the next upside technical objective at 90.886 despite reclaiming more lost ground vs other G10 rivals. Eur/Usd has lost grip of the 1.2300 handle and could see more downside on the back of a significantly weaker than expected German Ifo survey, especially as the technical picture also looks bearish below its 1.2319 Fib level and with little in the way of support until 1.2206. Cable is testing bids under 1.3900 amidst latest Brexit-related UK political accusations aimed at PM May, but holding above chart support seen around 1.3830. As per the single currency, Sterling may be prone to further losses in wake of a data miss as UK Q4 GDP was downgraded on zero business investment during the quarter (again likely as a result of Brexit). Elsewhere, Usd/majors fairly flat as the DXY hovers just above the 90.000 level. In the commodities complex, WTI and Brent crude trade lower albeit off worst levels after falling victim to the firmer USD despite last night’s unexpected build in the API report. As a reminder, due to the President’s Day Holiday on Monday the weekly DoE report will be released today at the rescheduled time of 1600GMT. In metals markets, gold prices have also been hampered by the firmer USD, however, the move to the downside has perhaps been contained due to the price action seen in EU stocks this morning. Elsewhere, steel prices were seen lower during Asia-Pac trade as Chinese participants slowly returned from holiday, with a bulk of the market not expected to fully return until next week. US Event Calendar 8:30am: Initial Jobless Claims, est. 230,000, prior 230,000; Continuing Claims, est. 1.93m, prior 1.94m 10am: Leading Index, est. 0.7%, prior 0.6% 11am: Kansas City Fed Manf. Activity, est. 18, prior 16 10am: Fed’s Dudley to Speak at New York Fed Briefing on Puerto Rico 12:10pm: Fed’s Bostic Speaks at Banking Conference in Atlanta 3:30pm: Fed’s Kaplan Speaks on Trade Panel in Vancouver DB's Jim Reid concludes the overnight wrap The main thing that jumped yesterday was US yields after the FOMC minutes. Not long after the release yields were actually flat and the S&P 500 up around 1%. However then 10 yr US yields reacted and rose 6bps to 2.951% and the S&P 500 closed -0.55% - the lowest level in a week. The minutes indicated that “a majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate”. On the economy, it noted that “a number of participants indicated that they had marked up their forecasts for economic growth in the near term relative to …the December meeting” and that “several others suggested that the upside risks to the near-term outlook for economic activity may have increased.” On inflation,"almost all participants who commented agreed that a Phillips curve type inflation framework remained useful…”. Elsewhere, some participants said that they saw an appreciable risk that inflation would continue to fall short of the Fed’s objective, but overall inflation is expected to “move up” this year and stabilise around 2% over the medium term. On wage gains, “a number of participants judged that the continued tightening in labour markets was likely to translate into faster wage increases at some point”. Notably, the relatively hawkish minutes was before the January wage growth and CPI / PPI prints, so it seems reasonable to assume that if the Fed was getting more confident in their growth and inflation outlook at their meeting, the subsequent data releases would have only added to their views. Staying in the US, the flash February PMIs were all above market, with the composite PMI at 55.9 (vs. 53.8 previous), services at 55.9 (vs. 53.7 expected) and manufacturing PMI at 55.9 (vs. 55.5 expected). Conversely, Europe’s flash PMIs were a fair bit below expectations but remain at solid levels. The Euro area’s composite PMI came in at 57.5 (vs. 58.4 expected), while the services PMI was 56.7 (vs. 57.6 expected) and manufacturing PMI at 58.5 (vs. 59.2 expected). Across the region, Germany’s composite PMI was 57.4 (vs. 58.5 expected) and France’s composite PMI was 57.8 (vs. 59.2 expected), with both countries’ services and manufacturing PMI also lower than expectations. Given the weaker European PMI numbers yesterday I made a point of speaking to our head Euro Economist Mark Wall last night about his views on them. He was relatively relaxed as his forecasts always assumed some moderation in growth which the PMIs would have to eventually acknowledge if he were to be correct. He said that the momentum in recent months was implying 0.9% qoq GDP growth compared to a DB forecast of 0.6% qoq in H1. Yesterday’s numbers narrows these upside risks in H1. In H2 he continues to see a loss of momentum as capacity bites, credit conditions get capped and competitiveness erodes, etc. He does think the recent financial conditions shock was too fleeting to believe it was the obvious culprit for the weaker numbers though. Even at 0.6%, GDP growth is above trend and despite the weaker PMIs, Mark believes that capacity will continue to be absorbed and the economy tighten. In fact he cited the fact that PMI delivery times lengthened in February, implying a further acceleration in underlying PPI inflation over the next 6-9 months and potential upside risks to inflation in H2. Turning to news on the Brexit transition period where the EU had previously suggested an end date of December 2020. However, according to a draft UK government legal proposal obtained by Bloomberg, it suggests the actual date may be up for some debate. The document indicated “the UK believes the period’s duration should be determined simply by how long it will take to prepare and implement the new processes….that will underpin the future partnership” and that “the UK agrees this points to…around two years, but wishes to discuss with the EU the assessment that supports its prosed end date”. Later on, the Chief of Staff for Brexit Secretary Mr Jackson noted the UK has not changed its transition plans, which is “around two years”. Elsewhere, the EC’s Juncker “still believes that (both sides) should be able to agree (on the withdrawal agreement) by October and agree on the final terms…” Staying in the UK, the December unemployment rate edged up from its c42 year low and rose for the first time since July last year to 4.4% (vs. 4.3% expected), while the average weekly earnings growth was in line and steady mom at 2.5% yoy. Speaking in front of the Treasury Committee, the BOE’s Haldane noted “…the pick-up in wages is starting to take root” and that “intelligence from our agents suggests wage settlements this year were going to pick up, perhaps with a number with a three in front of it….” Further, he added risks for the UK economy were “to the upside”. Elsewhere, the BOE Governor Carney reiterated that cash rates need to rise in the “coming months” but it would be ‘gradual and limited” and refrained from providing guidance on potential timing. The implied Bloomberg odds of a May rate hike rose c4ppt to 61.5%. This morning in Asia, markets are broadly lower with the Nikkei (-1.25%), Hang Seng (-0.98%) and Kospi (-0.58%) all down as we type. Elsewhere, UST 10y yield is down c1bp while the three key Chinese bourses are up 1.8%-2.1% after trading resumed following the New Year holidays. Now recapping other market performance from yesterday. US bourses reversed earlier gains to close modestly lower (S&P -0.55%; Dow -0.67%; Nasdaq -0.22%). Within the S&P, all sectors fell with losses led by the real estate, energy and telco stocks. European markets were mixed but little changed as they closed well before the FOMC minutes were released. The Stoxx 600 edged up 0.16% while the FTSE rose 0.48% but the DAX dipped 0.14%. The VIX fell for the first time in three days to 20.02 (-2.8%). Over in government bonds, core European 10y bond yields fell 1-3bp (Bunds & OATs -1.3bp; Gilts -3.1bp), with the latter partly impacted by the unemployment print. In the US, the treasury sold $35bn of five year notes at a yield of 2.658% with a bid-to-cover ratio of 2.44x (vs. 2.48x previous). Elsewhere, the UST 2y, 5y, 10y yields rose 4.7bp, 4.1bp and 6bp respectively. Turning to currencies, the US dollar index rose for the third trading day (+0.47%), while the Euro and Sterling fell 0.43% and 0.56% respectively. In commodities, WTI oil rose 0.39% to $61.79/ bbl while precious metals were little changed (Gold -0.34%; Silver +0.36%). Away from the markets and onto three Fed speakers overnight. The Fed’s Kashkari said “Wall Street overreacts to everything….we can’t make policy based on market blips up and down”. On rates, he noted, “we debate each word change in the (FOMC) statement…a lot of debate goes into those…and I think (the word) “further” (in the last statement) was intended to say continuing the current path we’re on”. Elsewhere, the Fed’s Harker reiterated his views of two rate hikes in 2018 and unemployment falling to 3.6% by mid-2019 while the Fed’s Kaplan reaffirmed his call for “gradual and patient” tightening and expects an unemployment rate of 3.6% by year end. Notably, none of the three speakers are policy voters this year. Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the January existing home sales was below expectations at 5.38m (vs. 5.6m) and down 4.8% yoy. Notably, the number of homes available for sale fell 9.5% yoy, partly continuing the upward pressure on home prices where the median selling price was up 5.8% yoy. Elsewhere, the UK’s January public sector net borrowing was broadly in line at -£11.6bln (vs. - £11.4bln expected). Looking at the day ahead, the February confidence indicators and the final January CPI report in France are due, followed by the Germany's IFO survey for February and the second estimate of Q4 GDP in the UK. In the US, data releases include initial jobless claims, the January leading indicators index and the February Kansas City Fed manufacturing activity index print. Japan's CPI report for January will be out in the late evening. Away from the data, the Fed's Dudley and Bostic are due to speak.
Президент Миннеаполиса ФРС Нил Кашкари: экономика США очень хорошо себя чувствует, снижение налогов подняло доверие к США
Президент Миннеаполиса ФРС Нил Кашкари заявил сегодня, экономика США очень хорошо себя чувствует, а снижение налогов подняло доверие к США. Он также подчеркнул, что необходимо подождать и понаблюдать за дальнейшим продвижением инфляции. Также Кашкари отметил, что в мае рынок труда США может быть немного слабее Информационно-аналитический отдел TeleTradeИсточник: FxTeam
Три недавно опубликованные научные работы, похоже, подтверждают то, о чем многие твердят в течение многих лет: “эффективные рынки” не только не эффективны — с точки зрения выполнения информационной функции — они также очень сильно манипулируемы. Одна из научных работ, на которую ссылается Economist, утверждает, что инсайдеры, имеющие связи в правительстве, получали прибыль даже от финансового кризиса, а две другие работы доходят до предложения о том, что вся система торговли акциями сфальсифицирована.В отличие от обычных эпизодов инсайдерской торговли, которые традиционно осуществляются с помощью случайных советов, и которые требуют обширных дорогостоящих расследований, связанных с изучением разнообразных фактов, включающих в себя телефонные звонки, электронные письма или свидетельства информаторов, на которых устанавливается записывающие устройства, — указанные научные работы сделаны на основании анализа статистических паттернов, которые, как утверждает Economist, свидетельствуют о наличии инсайдерской торговли, получившей, вероятно, широкое распространение. В первой работе содержится разбор встреч американских правительственных чиновников с финансовыми институтами, проведенных во время кризиса. Как уже рассказывалось здесь много лет назад, в тот момент публике не были известны критически важные подробности о печально известной программе TARP (которая, кстати, была создана и администрировалась нынешним президентом ФРБ Миннеаполиса Нилом Кашкари, при том что последний буквально каждый день теперь изливает свой гнев по поводу бэйл-аутов “больших-чтобы-упасть” финансовых учреждений), в частности, сколько денег будет задействовано, и как они будут распределены. Этот момент имел огромное значение, поскольку на карту было поставлено выживание некоторых учреждений; в конце концов, были выделены сотни миллиардов долларов. Знать заранее структуру и объем того бэйл-аута — это была бы крайне важная информация для инвесторов того времени.В документе рассматривается поведение 497 финансовых учреждений в период с 2005 по 2011 год, при этом особое внимание было уделено лицам, ранее работавшим в федеральном правительстве и в прочих учреждениях, включая Федрезерв. За два года до запуска TARP трейдинг этих людей не свидетельствовал о их необычной проницательности. Но в течение девяти месяцев после объявления TARP они достигли очень хороших результатов. В документе делается вывод о том, что “политически связанные инсайдеры имели значительное информационное преимущество во время кризиса, и они торговали на рынке, используя это преимущество”.Получается, как будто бы Федрезерв тайно работал с Уолл-стрит, чтобы сделать инсайдеров богаче за счет среднего класса …Другие две работы исследуют данные с 1999 по 2014 год от Abel Noser — фирмы, используемой институциональными инвесторами для отслеживания трейдинговых транзакционных издержек. Из 300 брокеров, информация по которым доступна, эти научные работы сосредоточилась на 30 крупнейших, через которые проходило 80-85% от всего объема торгов.“Авторы нашли доказательства, что крупные инвесторы, как правило, торгуют более интенсивно в периоды, предваряющие важные объявления, что трудно объяснить, если предположить, что они не имеют доступа к необычайно хорошей информации”.Брокеры могли получать такую информацию несколькими способами, из которых самым невинным было “распространение новости” о желании конкретного клиента купить или продать большие объемы акций для создания рынка – примерно то же самое, что может сделать аукционный дом для продажи картины. Но, возможно, и гораздо более вероятно, что банки предоставляли эту информацию своим привилегированным клиентам, чтобы улучшить их бизнес. В подтверждение этого предположения выступает факт, что крупные управляющие активами, которые используют своих собственных аффилированных брокеров, не проигрывают.Как резюмирует Economist, “в результате полученных данных крупные институты могут быть как бенефициарами, так и жертвами такого рода утечек информации, но в целом они являются нетто-приобретателями. Реальными проигравшими, говорится в этих научных работах, являются розничные клиенты и управляющие активами меньшего размера”. И, конечно же, более широкая инвестиционная публика.И самое главное:“Общим для всех документов является признание того факта, что публичные рынки, как давно утверждали сторонники теории заговора, не являются на самом деле публичными” и что “изменение закона, возможно, не исправит ситуацию”.И есть что-то ироничное в том, что указанная статья была опубликована в издании, которое на 26% принадлежит семье Ротшильдов.Опубликовано 11.02.2018 г.Источник: The Economist: It Appears Market Conspiracy Theorists Were RightThe Economist: Похоже, сторонники теории заговора были правы обновлено: Февраль 12, 2018 автором: Тайлер Дерден finview.ru/2018/02/12/the-economist/
Three new recently published scientific papers seem to confirm what many have claimed for years: the "efficient markets" are not only inefficient - from an informational standpoint - they are also badly rigged. Of the three papers, the Economist reports, one argues that well-connected insiders profited even from the financial crisis, while the other two go so far as suggesting the entire share-trading system is rigged. Unlike conventional insider trading cases - which traditionally require fortuitous tip-offs and extensive, expensive investigations, involving the examination of complex evidence from phone calls, e-mails or informants wired with recorders - the papers make imaginative use of pattern analysis from data to find that insider trading is probably pervasive, according to the Economist. The approach reflects a new way of analyzing conduct in the financial markets. It also raises questions about how to treat behaviour if it is systemic rather than limited to the occasional rogue trader. The first paper starts from the private meetings American government officials held during the crisis with financial institutions. As discussed here years ago, what was not made public at the time were critical details about the infamous TARP program (which incidentally was created and administrated by current Minneapolis Fed president Neel Kashkari who paradoxically rages every day against bailouts of Too Big To Fail banks), notably how much money would be involved and how it would be allocated. This mattered hugely as the very survival of some institutions was at stake; in the end, hundreds of billions of dollars were pledged. Knowing the structure and scope of the bail-out in advance would have been a vitally important piece of information for investors during this period. The paper examines conduct at 497 financial institutions between 2005 and 2011, paying particular attention to individuals who had previously worked in the federal government, in institutions including the Federal Reserve. In the two years prior to the TARP, these people’s trading gave no evidence of unusual insight. But in the nine months after the TARP was announced, they achieved particularly good results. The paper concludes that “politically connected insiders had a significant information advantage during the crisis and traded to exploit this advantage.” Almost as if the Fed was working covertly with Wall Street to make insiders richer, at the expense of the middle class... The other papers use data from 1999 to 2014 from Abel Noser - a firm used by institutional investors to track trading transaction costs - which covered 300 brokers, and focused on the 30 biggest, through which 80-85% of the trading volume flowed. "They authors found evidence that large investors tend to trade more in periods ahead of important announcements, say, which is hard to explain unless they have access to unusually good information." The brokers could acquire such information in several ways, of which the most innocent was that brokers “spread the news” of a particular client’s desire to buy or sell large amounts of shares in order to create a market, much as an auction house might do for a painting. But - it is also possible, the papers suggest - and is much more likely that banks give this information to favoured clients to boost their own business. Strengthening this argument is the finding that large asset managers which use their own affiliated brokers do not lose out. As The Economist summarizes, "as a result of the findings, large institutions can be both beneficiaries and victims of this sort of information leakage. But in general they are net gainers. The real losers, the papers conclude, are retail customers and smaller asset managers." And, of course, the broader investing public. As for the punchline: "Common to all the papers is the recognition that the public markets are, as conspiracy theorists have long argued, not truly public at all" and that "changing the law to fix that may not even be feasible." Which one can almost say is ironic, coming from a publication which is 26% owned by the Rothschild family. * * * The papers in question are: "Political connections and the informativeness of insider trades" by Alan D. Jagolinzer, Judge Business School, University of Cambridge; David F. Larcker, Graduate School of Business, Rock Center for Corporate Governance, Stanford University; Gaizka Ormazabal, IESE Business School, University of Navarra; Daniel J. Taylor, the Wharton School, University of Pennsylvania. Rock Center for Corporate Governance at Stanford University, Working Paper No. 222. "Brokers and order flow leakage: evidence from fire sales" by Andrea Barbon, Marco Di Maggio, Francesco Franzoni, Augustin Landler. National Bureau of Economist Research, Working Paper 24089, December, 2017 "The Relevance of Broker Networks for Information Diffusion in the Stock Market" by Marco Di Maggio, Francesco Franzoni, Amir Kermani and Carlo Summavilla. NBER Working Paper, No 23522, June, 2017.
Новым президентом Федерального резервного банка Миннеаполиса стал бывший топ-менеджер инвестбанка Goldman Sachs и фонда облигаций PIMCO Нил Кашкари.