Hold the front page – April 10th 2016

Latest BBC business news headlines – “Martha Lane Fox joins board of Twitter” –  “Brighton Pier sold for £18m” – Cameron “I could have dealt with the tax question better”. All quite fascinating and totally irrelevant compared with the piece of news that the main stream media (MSM) have chosen to miss completely and that is that the Fed is to hold a closed, unexpected meeting under “expedited procedures”, on Monday, to discuss interest rates. Now that is news! The question is, “Why?” Fortunately, we don’t have long to wait to find out as they will publish their discussions immediately after the meeting finishes. The rumour mill is of course in full swing. Over the past week almost anyone with a Fed lapel pin has been wheeled out to discuss the economy and to a man (and a woman) they fall into the camp that sees the glass half empty. More and more data is coming in below expectations. The first stab at the GDP number for Q1 is not released until the 28th but the Fed will already have a pretty good idea as the latest Atlanta Fed GDPNow forecast is just 0.1%. The inference from all this dovish chattering is that they have realized that the rate rise was a big mistake and are about to execute a U-turn – Janet Yellen is…


The narrative is changing…central bank omnipotence is on the wane

Central banks have held the aura of omnipotence for some time now. Alan Greenspan was the first to have a “put” named after him, but the current incumbent is not so sure that she wants that title. She does not appear to be “sure” about many things within her remit, unlike her European counterpart who will do whatever it takes. However, both he and the governor of the Bank of Japan must be wondering, privately, just what the hell is going on. The more they push on their “piece of string” the less inclined are markets to take the bait. One of my favourite commentators, The Slog, sums up the recent spate of central bank pontifications and their true meaning for markets with his exquisite lack of deference. ·         Last week, it was Mario Draghi’s turn to boldly go where only idiots like Abe go, and he grasped the opportunity with both hands. It delivered about 25 minutes of effervescence to the European markets, after which the default position returned to enervation. You might say that the ECB boss had promised not just to pay the crowd to watch Christians being eaten in the Coliseum, but also totally wild and unpredictable lions to do the deed. Instead, a little bloke with a bald head shuffled into the arena and shouted, “Wait, wait – you’re making…


Brexit – where do you stand?

It will come as no surprise to regular readers that your scribe is firmly in the “Leave” camp. As a twenty something in 1975 I voted for the UK to join what was then the European Economic Community. At that referendum the vote was two to one in favour and the EEC was seen in Blighty as more of a trading bloc than the full blown “Union” that it has attempted to become. Few people remember that our first application to join the club in 1963 was vetoed by Charles de Gaulle, who said, prophetically, “that the British government lacks commitment to European integration.” In 1979 we had the beginnings of the march (down the slippery slope) towards a single currency with the establishment of the European Monetary System (EMS), the introduction of the European currency unit (Ecu) and the exchange rate mechanism (ERM). The Ecu was a unit for the community’s internal budget and also took on some of the features of a real currency; it was used for travellers’ cheques and bank deposits. The ERM gave national currencies an exchange rate band denominated in Ecus. All EC members joined except the UK. In 1981, before even Spain and Portugal, Greece joined the EC and then in 1985 Jacques Delors, who along with Helmut Kohl, the German Chancellor, was the driving force behind the…


The cashless society

This piece has been written by Simon Black at Sovereign Man a site well worth a visit http://bit.ly/1PFI877 It explains why the powers that be have started a campaign to do away with cash and gives an insight into the ever parlous state of the banking system. Things are never quite as they would have you believe… This is starting to become very concerning. The momentum to “ban cash”, and in particular high denomination notes like the 500 euro and $100 bills, is seriously picking up steam. On Monday the European Central Bank President emphatically disclosed that he is strongly considering phasing out the 500 euro note. Yesterday, former US Treasury Secretary Larry Summers published an op-ed in the Washington Post about getting rid of the $100 bill. Prominent economists and banks have joined the refrain and called for an end to cash in recent months. The reasoning is almost always the same: cash is something that only criminals, terrorists, and tax cheats use. In his op-ed, Summers refers to a new Harvard research paper entitled: “Making it Harder for the Bad Guys: The Case for Eliminating High Denomination Notes”. That title pretty much sums up the conventional thinking. And the paper goes on to propose abolishing, among others, 500 euro and $100 bills. The authors claim that “without being able to use high denomination…


Negativity, relativity and dark matter

At school, I was taught Newtonian physics. Einstein didn’t get a mention despite having posited his theory on relativity some 60 years earlier and when much later I realised my education had been sorely lacking I wondered what else I hadn’t been told! That’s the trouble with “new” theories, the “old school” takes an eon to get around to changing the common narrative. And so it is with economics although lets not pretend that it is a science or at least not in the conventional sense that a mathematical model can be created to explain the meaning of everything. Until Einstein, physics was fully understood and the position of the planets known (and unknown) could be modelled precisely; relativity gave us a whole new view of the universe. In economics the current belief system is based largely on Keynesianism although as with many religious texts the meaning is widely open to interpretation and a number of his creeds are conveniently overlooked. Modern economics makes the heroic assumption that people act rationally in full accordance with the facts. Not true. Modern economics believes that it is possible to explain the myriad variables in the global economy and predict an outcome. Not true. If you don’t believe me look at the Federal Reserve Bank’s record on forecasting inflation. Comparing their forecast with the actual outcome you get…


To the Girl in the Pink Dress – I’m Wild About You!

If you cant use your own blog site to wish your beautiful wife a Happy Valentine’s Day then what’s the use of having one?! For my regular readers there will be another edition of the “View” along later today so in the meantime have a look at some back issues below. To my gloriously beautiful wife – Happy Valentine’s Day – I love you tons my Bambaji xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Tweet This Post Post to Facebook


How I learned to stop worrying…

A headline last week asked if we should be worried about the banks. There have been relatively few times when worrying about the banks has not been in vogue, but now is not one of them. The cap on UK deposit protection was reduced last year to £75,000 per account, to reflect the strength of sterling as the EU wide bank deposit protection scheme is set at €100,000. Given sterling’s current weakness, it may well have to go back up again! On top of that we are now in a position where any future bank failures, across the EU, will be dealt with by way of a bail in, not a bail out. Under a bail out the banks are given taxpayers money by the government. Under a bail in the banks take money directly from taxpayers’ bank accounts ie if you have more than the deposit guarantee amount you would kiss it goodbye if your bank failed. The residents of Cyprus, including a not insignificant number of ex-pat Brits, found out the hard way how this worked in 2013. They received little sympathy from the main stream media as anyone holding over €100,000 was quite obviously either Russian, an arms dealer or both. There were a few of those, but most of the “serious” money escaped as on the weekend before the banks were…


A picture is worth a thousand words

Well OK charts not pictures, but getting a visual fix on the markets is helpful for some of us. For others technical analysis is akin to astrology or witchcraft, but I prefer to think of it as an aid to behavioural psychology and we all need help on that front. Doug Kass has an interesting way of summing up the debate. A technical analyst and a fundamental analyst are chatting about the markets in the kitchen. One of them accidentally knocks a kitchen knife off of the table, and it lands right in the fundamental analyst’s foot. The fundamental analyst yells at the technician, asking him why he didn’t catch the knife. “You know technicians don’t catch falling knives!” the technician responded. He, in turn, asks the fundamental analyst why he didn’t move his foot out of the way. The fundamental analyst responds: ‘I didn’t think it could go that low!” So click on this link to see the latest Chart Book from the View. Tweet This Post Post to Facebook


The Big Short

Last week saw the opening in the UK of the movie of the same name. It is a must see for market historians as well as diviners of the future. It will remind us of the abject greed, arrogance and unremitting belief in a system that was in fact falling apart; in other words denial was the theme, unobserved by the many. The few were laughed out of court until the dénouement. Is history, in its own peculiar way, repeating itself? The movie ends with the observation that there are now more open CDS contracts than there ever were leading up to the “great” financial crisis. There is also significantly more corporate debt; allegedly much of it investment grade. As in 2007, when the risker end of the asset backed bond market deteriorated, the crisis permeated up the rating scale with some alacrity. High yield bond yields are rising fast, helped admittedly by the carnage in the oil sector, but corporate America has been borrowing to finance share buy backs, at unseemingly rich valuations, which all of a sudden are starting to get cheaper. Here’s a recent example as told by Zero Hedge www.zerohedge.com. When your organic growth is over, your revenue just missed consensus expectations once again, your stock is trading near 4 years lows and you are stuck in the imploding energy sector, what do…


Technical update after an “interesting” week

The year has started with the worst week ever for the S&P 500. This update considers what might be in store for the rest of the year. We recommend clicking here to access the full version with charts that are referred to in the text. A 6% fall in 5 days for the S&P 500 is the worst start to a year in the US…ever. In the great scheme of things this is a completely meaningless statistic, but, taken along with recent market action, could there be some genuine cause for concern? Looking firstly at the UK (page 3), there is something of a line in the sand at 6,000. We are currently at 5,912 and need a three to four-day print, under 6,000 and ending below the August 24th intra-day low of 5768, to make the case for the bears and the “watch out below” scenario. The top patterns, in 2000 and 2008, are very similar to today’s; a rounding shape over a two to three-year period evidencing the distributive phase between buyers and seller, culminating in a significant fall. In the short term the “Armageddon” narrative has been overdone and a rally back towards the falling 200 day moving average is quite likely. There are any number of players keen to put a base under markets – the Fed, the ECB, the BoJ…