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Finance 0
It’s Time To Raise Rates
The Fed has argued that it is easier to respond to an upsurge in economic growth from here by staying conservative at the zero bound than it is to continue hiking and the economy takes a downturn from here. Actually this isn`t even correct, as they could very easily just cut rates again much easier than trying to chase runaway inflation. But we think there are more dangerous precedents being set by the Federal Reserve right now. First of all, given the economic condition of the economy based on a broad spectrum of indicators, that if the Federal Reserve cannot normalize interest rates now, that the bar is so high for normalization, this is ... -
Finance 0
Speculators In Currency Futures Still Don’t Believe In The Greenback
The UK voted to leave the EU. The German and Japanese yield curve is negative out through 15 years. The entire Swiss curve have negative yields. There is little doubt that the US economy was recovering from a soft six-month stretch even before the recent string of data. And even then speculators in the futures market mostly added to foreign currency exposures. In five of the eight currency futures, we track, speculators covered their gross short exposure and added to their gross long exposure. Although the adjustments may not be very large, it was sufficient in the Australian dollar to swing the net position back favoring longs for the first... -
Finance 0
Only Spreading Monetary ‘Tightness’
As an apparent consequence of post-Brexit uncertainty, the effective federal funds (EFF) rate moved up from 38 bps in “yield” to 40 bps, and then even 41 bps on June 27. That rather tame reaction is due to the fact that there is nobody aside from primarily GSE leftovers trading in federal funds. That the market rate moved even 3 bps may be significant in terms of projecting systemic liquidity given its long ago descent into irrelevance. The repo market, by contrast, was much more moved by conditions surrounding the UK vote. I still don’t believe that Brexit itself matters all that much, and from the perspective of global liquidity it se... -
Finance 0
Week In Review: CStone Pharma To Develop Novel Drugs For China With $150 Million In Startup Capital
Deals and Financings CStone Pharma, a Shanghai-Suzhou startup, closed a $150 million Series A round to license novel drugs (see story). The company will seek products that address China needs, with a special emphasis in immuno-oncology along with products for cardiovascular diseases, rheumatoid arthritis, hematology and autoimmune diseases. Three China-based firms — Oriza Seed Venture Capital, Boyu Capital, and WuXi Healthcare Ventures — invested the capital. The company said it would use the money to accelerate multiple programs into the clinic and gain rights to innovative products, first for China and ultimately the world. App... -
Finance 0
The Smartest Guy In The Oil E&P Room?
Einhorn’s E&P Shorts David Einhorn slammed a handful of oil frackers” a year ago and laid out his short thesis during the annual Sohn Investment Conference in New York. At the time, we did not agree with all of Eihnorn’s E&P short picks (assuming Einhorn’s short picks include the companies he highlighted in his presentation). Out of the five companies Einhorn mentioned in his presentation, four of them — EOG, CLR, PXD, CXO — are considered to be the best-in-class onshore E&Ps expected to survive this oil down turn. That is, if these four go under, the real Oil Shale Lehman Moment will surely ... -
Finance 0
EUR/USD Forecast July 11-15
EUR/USD suffered in a fresh bout of Brexit-related selling but the slide seems limited. Will the fall accelerate now? Inflation figures stand out. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD. After some calm in markets, reality began biting in on Brexit. Apart from the withdrawal freeze in some UK property funds, the impact on the euro has been via bond yields which are tumbling down. With more and more assets providing negative yield, the ECB has less assets to buy in its 80 billion euro QE program. This spells trouble for Draghi. Services PMIs in the euro-zone still look OK but the... -
Finance 0
Heading For A Recession?
The latest data release for US Treasury Tax Revenues shows the year-over-year growth rolling averages are now in negative territory. Is this a recession flag? Tax revenues are a lagging indicator. The graph below shows the year-over-year growth of tax revenues. Food for Thought: For the Great Recession, the rolling averages went negative in February 2008 – two months after the Great Recession’s start. For the 2001 recession, the rolling averages for tax revenues went negative two months after the official start of the recession. In May 2016, the rolling averages for tax revenues went negative. Leading into the Great Recession, ... -
Finance 0
Wall Street Monkeyshines—Look Ma, No Hands!
The boys and girls on Wall Street are now riding their bikes with no hands and eyes wide shut. That’s the only way to explain Friday’s lunatic buying spree in response to another jobs report that proves exactly nothing about an allegedly resurgent economy. When the S&P 500 first hit 2130 back in May 2015, reported LTM earnings were $99.25 per share, and that was already down 6.4% from the cyclical high of $106 per share in September 2014. Thus, stocks were being valued at a nosebleed 21.5X in the face of falling earnings. During the four quarters since then, reported LTM earnings have slumped by a further 12.3% to $87 per share.... -
Finance 0
Near Perfect Action
A great week of travel and music and stock action as we consolidated very well all week and then Friday saw stocks begin to move higher again which really makes the weekly charts look great. Next blog and letter will be Tuesday as I’m off again until Monday but stocks are looking and acting very very good, so far, as we see the best action we’ve seen since late 2014. While we aren’t really breaking out yet, we are seeing action play out how it should in a strong market so I do hope to see it continue. Super action out of the V pattern and on increasing volume. We rested well, and now are moving higher. I still have a 10% weighting in SP...
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