Those Aren’t Mountains…
The “esoteric concern on almost everybody’s lips” these days is bond market liquidity: “while banks have cut their inventories of bonds, asset managers have recently been gobbling them up…But the catch is that many asset managers rely on potentially flighty forms of funding (ETFs anyone?)…If US rates suddenly rise, retail investors might flood out of bond funds…If that happens, those funds might discover the bonds are completely illiquid, or untradeable except at rock bottom prices…Thankfully, nobody expects the test to come quite yet.” Whew! Nice. So, what might be driving that expectation? “The sole bright spot is the eurozone”–this is where your lower jaw falls slightly and you start questioning the decision to keep reading this “connect the dots” nonsense — “The gap between US and eurozone growth has, for now, disappeared completely. Overall, the growth rate of the global economy has therefore slowed further…Activity growth needs to recover markedly in the next few weeks if a generalised downgrade to global growth forecasts for the 2015 calendar year is to be avoided.” “Like a pilot spotting a smoking engine at take-off, the US Federal Reserve is having second thoughts about when to raise interest rates…[A delay] may change the shape of the global recovery, crushing hopes for a sharp rebound in the eurozone (On the back of Wednesday’s Fed statement, the euro soared to $1.125), while removing some of the gloom from the outlook for emerging markets…The longer [the Fed] waits before cutting interest rates, the further they can go with loosening monetary policy.” Furthermore, “emerging markets may find a surprise ally in Europe. A stronger euro would make it harder for the ECB to meet its inflation target, [leaving them with] little option but to continue with their QE programme…But they should not take too much comfort. Fed increases are powerful tsunamis — within hours, their effects are felt even on the furthest shores.” Meanwhile, Vanguard says that “while you might expect the prospect of the Federal Reserve raising interest rates to put the brakes on capital inflows into emerging markets, thereby worsening their financing problems, our research suggests that doesn’t have to be the case…While financial crises have coincided with a drying up of capital inflows to emerging markets, that’s been less true of monetary tightening by the Fed.” Getting back to the US for a minute, Gavyn Davies says the “persistent tendency for US growth to disappoint” is due to one or both of the following: “weak aggregate demand, owing to a demand-side form of ‘secular stagnation’; or a permanent slowdown in productivity growth…Ultimately, the behaviour of US inflation will distinguish between the two competing hypotheses, and the Federal Reserve will have to set policy accordingly.” Meanwhile, “if these interest rates were to continue for 10 years, stocks would be extremely cheap now,” says Warren Buffett. Meanwhile, John Hussman understands that using the Greek alphabet is a quick way to a financier’s heart.
The Latest Buzz
“The word ‘wrong’ is really good,” says a senior BuzzFeed video producer. “Started in 2006 as a lab for experimental web content, BuzzFeed has attracted an audience of 200 million monthly unique visitors, making it the sixth-largest site in the U.S. — bigger than eBay, Yahoo, and Wikipedia…It’s known for its viral hits — jokey lists about cute animals — and increasingly, its investments into journalism. But now, like its digital pers, BuzzFeed has aggressively expanded into video…Ideas for new ‘wrong’ videos get thrown around: Snacks you’re eating wrong. Maybe you’re running wrong, or putting your pants on wrong…When Frank asks his team what they’re working on, they rarely tell him the individual piece they’re shooting, but rather the problem they’re trying to solve.” Meanwhile, Twitter’s live-streaming app Periscope has taken pay-per-view piracy to a whole nother level: “Soon, viewers started to notice a trend. If a Periscope session [got] too many ‘hearts (Periscope lingo for favorites), a stream would get shut down…This wasn’t really a problem, however, because like a hydra, we could just go to another Periscope stream somewhere else in the world to watch the fight on someone else’s TV.”
Global: Moody’s Has Become So Senile