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Posts Tagged ‘austerity’

2012/04/27: Quick Post: Bifurcated market psychology again: Govvies and Equities both strong

April 27, 2012 Leave a comment

© 2012 ROHR International, Inc. All International rights reserved.

In its way, it’s nothing less than breathtaking. The tremendous resilience of the govvies (at least the primary markets) in the face of the equities seeming to get back on track yesterday is impressive. Let’s allow that each of these asset classes is on a bit of a correction from recent highs. Even so, the degree to which govvies have maintained their overall bid while equities have rallied so strongly since the first of the year is quite a phenomenon. Maybe it is all just a reflection of the massive global central bank liquidity infusions and low interest rates; and that is causing investors to chase yield wherever they can find it.

However, there is very possibly another macro-technical factor at work: a classical corporate earnings announcement season split influence. That is to say positive earnings driving equities buying. At the same time troubling real world economic and political news causes other funds to seek the safety of the primary government bond markets. And that is more so typical of the short term cycle. As such, it is less surprising than might otherwise be the case. We have seen it before, and the operative question is, “What happens next?

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2012/01/26: FOMC de facto QE3 helps everything except US dollar

January 26, 2012 Leave a comment

© 2012 ROHR International, Inc. All International rights reserved.

Looks like Helicopter Ben has morphed into Gusher Ben. Due to both the economics and current elevated fiscal focus, it is impolitic right now for the Fed to expand its balance sheet beyond already bloated levels. That would be the equivalent of dropping dollar bills from helicopters. So instead it seems to have opted-in to a consensus that the Federal Funds rate should remain effectively at zero for much longer than the middle of next year projected at their last meeting.

Aside from the fact that a prediction of where interest rates are going to be fully across the next several years seems quite an overreach in its own right, there are the other knock-on effects. By attempting to inspire confidence with free liquidity indefinitely guaranteed, Mr. Bernanke and the rest of the Fed is actually attempting to push psychology upward from underneath hoping that the enthusiasm will pop like an oil ‘gusher’. This is nothing less than a mind game version of quantitative easing (i.e. de facto Q3.)

Unfortunately for them, the first things that are shooting up once again are the prices of risk assets, as the return of the ‘risk-on’ trade assists everything except the US dollar. Is it just us, or does it feel an awful lot like spring of last year once again? In any event, the increase in commodity prices represents what now seems to be the next round of the Risk Asset Hot Potato game in a zero interest rate environment, which typically raises more questions than real economic activity.

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2011/11/18: Quick Post: Perverse Trend Logic on Bund Down with Equities Thursday Actually Reasonable

November 18, 2011 2 comments

© 2011 ROHR International, Inc. All International rights reserved.

Good old PTL. Just when everyone thinks they have it all sorted out because certain intermarket relationships have become sacrosanct, the market hands everyone a surprise. Except it’s not really a surprise, because one of the first things our mentors taught us more years ago than we care to mention is, “Just when you think you have it all sorted out, the market will hand you a surprise.” And that was certainly the case yesterday for a lot of folks on US equities continuing with the second day of a pretty good drubbing, yet the previously obvious ‘haven’ German Bund also sagged for the second day running.

And now, even though the equities have not recovered much from the past couple of sessions’ sharp selloff, the December Bund future has actually broken down below short-term support in the 137.00 area. And right along with that the US T-note kept its bid yesterday (even allowing it had lagged the Bund on the way up), the Gold market took its own major drubbing, and the euro and the US dollar have done a good job of keeping the bid together while commodity currencies suffer of late.

As bizarre as all of that may seem, it fits in with a particularly narrative that points to the European Sovereign Debt Crisis reaching a critical inflection point…

…which means the Germans are going to have to get their head out of the sand (or will be forced to do so by the rest of Europe and the world) in order to rationalize their current dysfunctional position.

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2011/10/24: Quick Post: Enjoying the Equities Rally? Go Hug a Commie

October 24, 2011 2 comments

That’s right. There is a debt of gratitude due a select subset of the ostensibly anti-capitalist extreme wing of the global labor moment. It has to do with last week’s passage of the most recent in a series of Greek austerity package. While the current Franco-German negotiations on the broader European Debt Crisis rescue plan is now critical later this week (more on that below), none of it could have proceeded without the further Greek austerity measures.

And last week’s approval by the Greek Parliament was a distinctly fraught affair. For one thing, the vote inside the parliament building was an extremely close run thing. It required the dismissal and replacement of one deputy in order in the coalition to secure a majority vote. Dodgy parliamentary practice it best, but it worked.

The more visible and overt battle was outside the parliament building, where mostly peaceful protesters signaled their disgust Greece was basically being blackmailed into submission by the more successful Euro-zone states. Whatever one’s view on that, the even more troubling battle was the overt physical fighting between two key factions.

Was it the Liberals versus the Conservatives? Nope. How about the Socialists versus the Capitalists? Not that either. And what we are talking about here is folks who were actually aggressively attacking each other with projectiles, and even smashing each other with clubs.

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