Home » Posts tagged 'Market Conditions'
Tag Archives: Market Conditions
Former IMF Chief Economist Admits Japan’s “Endgame” Scenario Is Now In Play
Former IMF Chief Economist Admits Japan’s “Endgame” Scenario Is Now In Play
Which is why 17 months ago we predicted that, contrary to expectations of even more QE from Kuroda, we said “the BOJ will not boost QE, and if anything will have no choice but to start tapering it down – just like the Fed did when its interventions created the current illiquidity in the US govt market – especially since liquidity in the Japanese government market is now non-existent and getting worse by the day.”
As part of our conclusion, we said we do not “expect the media to grasp the profound implications of this analysis not only for the BOJ but for all other central banks: we expect this to be summer of 2016’s business.”
Since then, the forecast has panned out largely as expected: both the ECB and BOJ, finding themselves collateral constrained, were forced to expand into other, even more unconventional methods of easing, whether it be NIRP in the case of the BOJ, or the outright purchases of corporate bonds as the ECB did a month ago.
…click on the above link to read the rest of the article…
The “Terrifying Prospect” Of A Triumph Of Politics Over Economics
The “Terrifying Prospect” Of A Triumph Of Politics Over Economics
All of life’s odds aren’t 3:2, but that’s how you’re supposed to bet, or so they say. They are not saying that so much anymore, or saying that history rhymes, or that nothing’s new under the sun. More and more theys seem to be figuring out that past economic and market experiences can’t be extrapolated forward – a terrifying prospect for the social and political order.
Consider today’s realities:
Global economies have grown to their current scale thanks to a glorious secular expansion of worldwide credit – credit unreserved with bank assets and deposits; credit extended to brand new capitalists; credit that can never be extinguished without significant debt deflation or hyper monetary inflationEconomies no longer form sufficient capital to sustain their scales or to justify broad asset values in real terms
Markets cannot price assets fairly in real terms without risking significant declines in collateral values supporting them and their underlying economies
Politicians that used to anguish (rhetorically) over the right mix of potential fiscal policies, ostensibly to get things back on track (as if somehow finding the right path would have actually been legislated into existence), have come to realize the limits of their power to have a meaningful impact
Monetary authorities have become the only game in town,assassinating all economic logic so they may juggle public expectations in the hope – so far successfully executed – that neither man nor nature will be the wiser.
The good news for policy makers is that man remains collectively unaware and vacuous; the bad news is that nature abhors a vacuum. The massive scale of economies relative to necessary production (not to mention already embedded systemic leverage) suggests this time is truly different.
…click on the above link to read the rest of the article…
F(r)actions Of Gold
F(r)actions Of Gold
The junction of that dyad format is wholesale collateral. It is a difficult and dense topic because it plumbs the very depths of the wholesale arrangement – factors like leasing, swaps and collateralized lending through binary bespoke arrangements.It is there that I think it helps to form the narrative, however, starting by reviewing what the BIS was up to in late 2009 and early 2010. I am going to borrow heavily from an article I wrote in April 2013 that describes the events in question but this is one of those times when you should read the whole thing.
Back in July 2010, the Wall Street Journal caused some commotion when it happened to notice in the annual report for the Bank for International Settlements the sudden appearance of gold swap operations to the tune of 346 tons. Subsequent investigation by media outlets, including the Financial Times, reported that the BIS had indeed swapped in 346 tons of gold holdings from ten European commercial banks. That was highly unusual in that gold swaps are typically conducted between and among central banks.
…click on the above link to read the rest of the article…
Schlumberger’s Terrifying Moment Of Truth About The US Energy Sector
Schlumberger’s Terrifying Moment Of Truth About The US Energy Sector
For many of our customers, available cash and annual budgets were exhausted well before the halfway point for the fourth quarter… as pricing levels for frackers has dropped into unsustainable territory.
Kibsgaard started by explaining why his firm has unveiled the massive layoffs and cost cuts:
we have faced the most severe industry downturn in 30 years
Then explained that this situation is unsustainable for American frackers…
On land in both the U.S. and Canada, the weakening activity resulted in additional commercial pressure for all product lines, and in particular in pressure pumping, where pricing levels dropped further into unsustainable territory for both operating margins and cash flow.
Which means, the pain has already started…
The burgeoning market conditions added to the pressure to the deep financial crisis throughout the oil and gas value chain and prompted operators to make further cuts to the already low EMP investment levels.For many of our customers, available cash and annual budgets were exhausted well before the halfway point for the fourth quarter, leading to unscheduled and abrupt activity cancellations, creating an operating environment that is increasingly complex to navigate, and where the traditional year-end product and multi-client site mix sales were largely muted.
While not ready to call a bottom in the oil market for this year, Kibsgaard said he didn’t think 2017 would be worse… but then again he said that at the start of 2015 too?
Still who cares the stock price is higher… which is all that matters…
…click on the above link to read the rest of the article…
The IMF Just Confirmed The Nightmare Scenario For Central Banks Is Now In Play
The IMF Just Confirmed The Nightmare Scenario For Central Banks Is Now In Play
The most important piece of news announced today was also, as usually happens, the most underreported: it had nothing to do with US jobs, with the Fed’s hiking intentions, with China, or even the ongoing “1998-style” carnage in emerging markets. Instead, it was the admission by ECB governing council member Ewald Nowotny that what we said about the ECB hitting a supply brick wall, was right. Specifically, earlier today Bloomberg quoted the Austrian central banker that the ECB asset-backed securities purchasing program “hasn’t been as successful as we’d hoped.”
Why? “It’s simply because they are running out. There are simply too few of these structured products out there.”
So six months later, the ECB begrudgingly admitted what we said in March 2015, in “A Complete Preview Of Q€ — And Why It Will Fail“, was correct. Namely this:
… the ECB is monetizing over half of gross issuance (and more than twice net issuance) and a cool 12% of eurozone GDP. The latter figure there could easily rise if GDP contracts and Q€ is expanded, a scenario which should certainly not be ruled out given Europe’s fragile economic situation and expectations for the ECB to remain accommodative for the foreseeable future. In fact, the market is already talking about the likelihood that the program will be expanded/extended.… while we hate to beat a dead horse, the sheer lunacy of a bond buying program that is only constrained by the fact that there simply aren’t enough bonds to buy, cannot possibly be overstated.
Among the program’s many inherent absurdities are the glaring disparity between the size of the program and the amount of net euro fixed income issuance and the more nuanced fact that the effects of previous ECB easing efforts virtually ensure that Q€ cannot succeed.
(Actually, we said all of the above first all the way back in 2012, but that’s irrelevant.)
…click on the above link to read the rest of the article…
