This indicator is suggesting slower economy and lower stock prices
Lumber prices over the past 25 years have been a quality leading indicator for the future direction of the economy and the stock market, in both directions.
Back in March, the Power of the Pattern pointed out that Lumber was at the top of a 25-year channel (formed a bearish rising wedge), where 50% declines in Lumber often happen in the past…. [...]
Fed balance sheet grows to record again in latest week
“The Fed’s balance sheet – a broad gauge of its lending to the financial system – stood at $3.276 trillion on April 24, up from $3.252 trillion on April 17.”
U.S. Treasury securities held by the Federal Reserve: All Maturities (TREAST)
2013-04-24: 1,836,227 Millions of Dollars Hide Last 5 Observations
Weekly, As of Wednesday, Not Seasonally Adjusted, Updated: 2013-04-25 3:53 PM CDT
U.S. Fed balance sheet grows again in latest week
“The Fed’s balance sheet liabilities, a broad gauge of its lending to the financial system, stood at $3.210 trillion on April 10, compared with $3.198 trillion on April 3.
The Fed’s holdings of Treasuries totaled $1.814 trillion as of Wednesday, up from $1.806 trillion the previous week”
U.S. Treasury securities held by the Federal Reserve: All Maturities (TREAST)
2013-04-10: 1,814,482 Millions of Dollars Hide Last 5 Observations
I was a super bull of long-term bonds. I stated my case over 3 years ago with a yield target on 30-year maturities of 2.5%. Back then, the timing and structure looked right for another run to new highs. Discussions about hyperinflation were premature.
The pre-condition I had been waiting for has now arrived. In my opinion, we have seen the end of the bull market in bonds.
There is a delicate [...]
NOVEMBER 02, 2012
“We Finally Really Did It” Planet Of The Apes Style – Peter Tchir
Guest post by Peter Tchir.
With part of NYC under water this week, I can’t shake the image of the Statue of Liberty from the end of the Planet of the Apes. In that case, the devastation was something mankind had done to itself. In many ways, it is hard to imagine people making such a big mistake [...]
There has been a lot of concern regarding the potential “unlimited” nature of the ECB’s new bond market intervention plan.
The worry is that the ECB could end up with a balance sheet packed with sovereign debt that no one else wants as everyone rushes to sell to the ECB once the central bank starts buying.
Barclays, like many other research shops, told clients in a note that the details of the ECB’s new bond-buying plan were [...]
If ECB disappoints the market tomorrow, it will trigger sharp worldwide selloff and global recession!
Definition of ‘Black Thursday’
The name given to Thursday, October 24, 1929, when the New York Stock Exchange plummeted, leading to the Great Depression of the 1930s.
The Most Powerful Man In The World Is Going To Speak Tomorrow
Today is turning out to be kind of quiet, but we just want to remind you that tomorrow is going to be pretty nuts.
For weeks, the entire [...]
Prime Minister Mariano Rajoy delayed seeking a second rescue for Spain while pledging to continue bailing out its regions as Valencia requested more money to settle bills and cover debt.
Rajoy spoke today following a meeting in Madrid with French President Francois Hollande. Catalonia, Valencia and Murcia this week claimed more than half of an 18 billion-euro ($23 billion) fund announced by Rajoy last month to help the regions face bond redemptions and finance [...]
Beggars can once again be choosers. In other news, non-news (the Catalan bailout was announced at least two times before) is news again, and magically drives the amnesiac market all over again.
From Cinco Dias, courtesy of the always amusing google translate, which makes any news, no matter how tragic, quite hilarious without fail:
“Catalonia 5,023,000 calls but will not accept the State Policies
The Catalan government today applied to join the Spanish [...]
Talk of replacing Libor with other benchmarks is likely to remain just that for two reasons: No substitute would easily work for all the financial instruments Libor serves, and rewriting derivatives contracts tied to Libor would be an herculean, and legally fraught, task.
The “new and improved” Libor would almost certainly do away with the current gymnastics-scoring-meets-clairvoyance method of calculation.
At present, large banks submit daily estimates of their costs of [...]
This assumption is currently far from being satisfied. The euro area financial market, in all segments and maturities – including the very short term money markets – does not function properly, as banks deposit their excess liquidity with the central bank instead of lending to other banks. Cross-border banking flows have dried up. Households and firms across the union borrow at rates which depend more on the respective sovereign [...]
So much for convincing investors that Europe is fixed.
The European Central Bank’s latest monetary policy decision—a 25 bps rate cut—hasn’t bolstered confidence, either.
UPDATE: Markets across Europe are tanking, although France and Germany are off their lows. No such luck for Spain. A quick look at the scoreboard:
German DAX: -0.6%
French CAC 40: -1.0%
Italian FTSE MIB: -2.1%
Spanish IBEX 35: -2.7%
The IBEX 35 is just getting destroyed:
Even more worrisome is the fact that borrowing costs are shooting higher [...]
From Sober Look:
Investors seem to have a bottomless appetite for investment grade (IG) corporate paper. Issuers are coming to market to borrow money at ridiculously low rates. Even for the longer maturities, the spreads are 1-2% above the corresponding Treasury yield. Here are some examples:
Tyco: 10-year notes at Treasurys + 190bp
Markel: 10-year notes at Treasurys + 225bp (this firm is BBB)
John Deere: 10-year notes at Treasurys + 122bp
Caterpillar: 10-year notes [...]
Here are the facts:
The Fed is failing to meet both of its mandates. Unemployment is still well above where it should be (according to the Fed’s own forecasts) and inflation is trending below its goal of 2%.
Bernanke says the Fed has more tools at its disposal that would help correct both of these shortfalls.
Yet at Wednesday’s meeting, the Fed did the bare minimum, an extension of Operation Twist (buying long bonds and selling [...]
The number of Americans filing new claims for unemployment benefits was little changed last week, according to government data on Thursday that suggested the labor market was struggling to regain momentum.
Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 387,000, the Labor Department said. The prior week’s figure was revised up to 389,000 from the previously reported 386,000.
Economists polled by Reuters had forecast claims falling to 380,000 [...]
Hours before Spain is expected to present the bank “assessment” from Roland Berger and Oliver Wyman on its comprehensive bank insolvency status, the country sold €2.22 billion of two-, three- and five-year government bonds, in a sale which saw solid demand but yields that are simply laughable and are completely unsustainable, culminating with a record yield on 5 year paper. Per Reuters, the Treasury sold 700 million euros worth of [...]
In a meaningless “test” of investor appetite for Spain’s Thursday issuance of 2, 3 and 5 years bonds, Spain today sold €3.04 billion in 12 and 18 month bills, well inside the LTRO maturity, and completely meaningless from a risk perspective – after all even Greece is issuing Bills. Yet for some reason the market which continues to be dumber by the day, somehow took the “successful” auction as an [...]
Fitch cuts Spain by 3 notches to BBB, just 2 notches above junk, reasons: recap bank = 6-9% of GDP, recession thru 2013, high foreign debts
First it Egan-Jones (of course). Then S&P. Now Fitch (which sees the Spanish bank recap burden between €60 and a massive €100 billion!) joins the downgrade party of rating agencies that have Spain at a sub-A rating. Only Moody’s is left. What happens when Moody’s [...]
The Spanish government plans to issue about 30 billion euros ($39 billion) of so-called hispabonds to help regions of the country pay debt maturities and finance the deficit, El Mundo reported today, without citing anyone.
The sale of hispabonds, which would allow regions to issue debt jointly, is scheduled to start in June and is being designed by the economy ministry, the newspaper said.
In yet another 2011 déjà vu moment, Europe’s bank funding window is slamming shut again (the catalyst that brought the 2011 Euro crisis vintage to its heights). Nowhere is this more evident than when comparing monthly debt issuance in the first 4 months of 2012 to the previous two years. Sadly, even despite taking place while the LTRO effect was front and center, Europe still was unable to match [...]
Illinois residents, whose income taxes rose by a record last year to help close a budget deficit, are paying the price again for the state’s fiscal mismanagement.
With its pile of unpaid bills growing about 30 percent this year, the weakest pension-funding ratio among states and falling federal aid, Illinois and its municipalities are paying a penalty above AAA debt that’s twice their five-year average.
Illinois plans to issue $1.8 billion of [...]
It’s all about flow! In fact STOCK actually work’s in the opposite direction. The fact that the Fed already owns Trillions of stock, means they have to SELL it before we talk about moving away from ZIRP and get back to normal. It’s like the lockup period after an IPO.
The government needs to issue $1ttn+ of new debt each year PLUS rollover $2-$3 trillion of maturities. But the smart money has already figured out [...]
Via Peter Tchir of TF Market Advisors,
Italy has issued €157 billion of debt between November of last year and the end of last week. This is direct Italian government issuance and doesn’t include any of the debt the government has guaranteed in the meantime, which seems to be at least €70 billion more, but hey, who counts guaranteed debt.
Of the €157 billion that has been issued, about €122 billion matures within [...]
Spain has never been so close to default and Greece, Ireland and Portugal may need further bailouts, Citigroup Inc. chief economist Willem Buiter said.
“Spain is the key country about which I’m most worried,” Buiter, a former Bank of England policy maker, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “It’s really moved to the wrong side of the spectrum and is now at greater risk of sovereign restructuring than [...]
From Bank of America
The risks to our outlook
The successful Greek PSI addresses – but does not eliminate – a key contagion risk for US financial markets. Clearly risks are reduced due to the absence of major debt maturities in the coming years as well as the escrow account for interest payments. However, risks remain as the second bailout package for Greece may unravel if the country fails to deliver on [...]