As the Great Yellen-dini dazzled with her carefully contorted syntax on Wednesday, aimed at creating inflation out of hot air, the algos went wild for a couple of days and the most shorted stocks (like energy cos in black below) rebounded sharply. But as the dry ice dissipates and the revelation returns that absolutely nothing fundamental has improved…Treasury yields and the loonie have resumed their fated journey south once more. Higher North American growth in 2015? It seems they beg to differ…
As the greenback makes a run to break above 90 on the DXY basket of global currencies (not seen since 2006), emerging markets, commodity prices and US multinational earnings are all feeling the downward pressure. All those assuming that the effects are a short term blip, might be wise to consider the alternative…a sustained, secular uptrend in the US dollar, intensifying asset price deflation for the next several quarters, possibly years…
Bloomberg’s Andrea Wong and Mia Saini examine the potential impact of a strong U.S. dollar on corporate earnings. Here is a direct video link.
Here is a direct video link.
The jabbertalk parsers have rarely been in finer form than following yesterday’s latest Federal Reserve comedy hour. It is truly incredible to hear the Yellen-syllable analysis now engulfing the stock twits. Silliness aside, the fact remains: the Fed thinks it will begin hiking interest rates within the next 4 months. That would not just be ‘tapering’ but actual tightening my friends, and that is not bullish for today’s insanely valued financial assets.
There is much reason to doubt the Fed’s plan, of course. Their growth forecasts have been hopelessly optimistic with every single guess since 2007. And now, energy–the miracle driver of the anemic North American growth we have seen since 2009–is suffering body blows daily from a violent liquidity exodus likely just getting started. With government revenues plunging for the ride, and corporations and aging consumers buried under debt, the next great hope for surprise economic growth is nowhere to be seen.
Indeed, copper and energy prices are steadily weakening once more today as traditional safe-havens–Treasuries and the US dollar continue to rise. Note the move of the Swiss Central Bank today to implement negative deposit rates for their banks, is aimed at pushing safe haven-seeking-cash out of the Swiss Franc–and into other ‘safe-haven’ options like the U$. This is helping to strengthen the rise of the greenback while further weakening commodity and energy prices, US exports and S&P earnings. All our life’s a circle. The US 10 year Treasury yield continues to signal slowing growth.
Danielle was a guest today with Kerry Lutz on The Financial Survival Network talking about recent developments in the world economy and markets. You can listen to an audio clip of the segment here.
The wheels of central planners are coming off all over.
As Russia is re-learning this morning, Central Banks tinker at the edges of sentiment. Sometimes they are successful in swaying it one way and another–at least for a while. But in the end, their ‘bold’ interventions fail miserably, lurching from one crisis to the next, evaporating buckets of taxpayer dollars in the process. See: Russian rate hike fails to stop the Ruble’s crash.
Here is a direct video link to a BBC documentary on the Sterling crash of September 1992 when the British government lost ‘control’.
Contagion is spreading through the world’s closely coupled risk markets.