pigs diving

Just Some Pre-Slaughter Fun

“In the land of negative yields, even the most conservative firms…are planning to invest in sub-investment grade debt for the first time.  One of the bond market’s brightest luminaries, Jeffrey Gundlach, says you’re better off in front of one steamroller than another in junk because the only money to be made on German bunds is from betting against them.”  Speaking of which, the Gross short appears to be working: “European government bond yields, which have been on a steady downward trend for years, are suddenly trading at their highest levels in more than two months…The yield on Germany’s 10-year Bund, the benchmark in Europe, was trading at 0.43 percent on Monday (currently 0.53%).  It has soared from a record low of 0.05 percent just last month, as investors reassess bullish bets on government bonds in Europe and the U.S., where debt yields have also risen sharply.”  Indeed, “one key reason for the recent increase in US long term interest rates has been surging German rates — basically unwinding a big source of downward pressure on US yields…Unfortunately, a lot of people may soon find out the harsh truth about overpaying for the perceived safety of US Treasurys and German Bunds.”  Meanwhile, something I’ve been curious about recently has been the bond market’s idiosyncratic pricing of Greek debt vs the rest of the piggies.  Greek 10 year debt is currently yielding roughly 900bps more than Italian 10 year debt, and over 800bps above Portuguese debt.  Here’s why that may be the case: “First of all, it’s a lot smaller.  Around €34 billion of Greek government bonds trade on the open market…the Italian government bond market is around 54 times bigger, clocking in at over €1.8 trillion..Traders reckon Greek bonds change hands 20 to 30 times a day across the whole market versus thousands of trades per day in Italian debt.”  Fair enough; but if Greek yields are higher because the market believes the risk of default is higher, than what is the probability of a nice, neat implosion along the Mediterranean with little impact rippling through the debt markets of other highly indebted suinae?  Meanwhile, “a proliferation of images on the Internet and reports in newspapers suggests that creating a leaping, amphibious pig is another realm where China can claim global preeminence.”  


USA: The Curious Incident Of Current Account Deficits And Weaker Net Investment Position

“The U.S. net international investment position — the difference between US assets abroad and foreign claims on the US — has moved substantially deeper into the red in recent years.  But why?  You might be tempted to say that it’s obvious: we’ve been running big budget deficits, borrowing the money from foreigners…But that story implicitly requires a surge in the trade deficit (or more precisely the current account deficit, which includes investment income), which hasn’t happened…The answer, I believe, is that we’re looking at the differential performance of stock markets…The value of foreign holdings of US equities…has surged along with the Obama stock market, while US holdings abroad have seen no comparable boost.”  Meanwhile, here’s the investment thesis behind European equities that no one really wants to admit (it isn’t, y’know, fundamental).


Oil: The Cap Is Now $70, And That Is FINAL


ICYMI: Rapid Communication Is Changing The World: Short Tweets Edition


What: Cryptocurrency Backed By Gold


crochet unicornPeople And Their Toys Tools Technology

“Data collected by the marketing company Lifehack tells us that the average social media user ‘reads’ — or perhaps just clicks on — 285 pieces of content daily, an estimated 54,000 words.  If it is true, then we are reading a novel slightly longer than The Great Gatsby every day…It’s possible that streamlined scrolling of browsers and e-books, as opposed to reading on paper, can lead to what psychologists call ‘the misinformation effect.’”  “The Internet has caused society to experience a transition from a scarcity of signals to a surfeit of signals.  More information means more good information but also more bad information…We are in a world where there is vastly more to know, yet our cognitive capacities remain what they were in the Stone Age.”  “Digital natives — students who grew up with laptops in classrooms — at American University are beginning to show a preference for reading books in print…’I like holding it.  It’s not going off.  It’s not making sounds.’”  Meanwhile, “the online craft bazaar Etsy made its debut on the Nasdaq stock market Thursday, signaling the birth of an unusual public corporation — and not just because its employees carry around compost on bicycles, or because its regulatory filings are peppered with phrases like, ‘We keep it real, always.’  Etsy is one of a growing number of companies, called B Corps, that pledge to adhere to social and environmental accountability guidelines.”  Etsy is “the second for-profit company to go public out of more than 1,000 companies that have that certification…’We have a right to ask more of our corporations, and they should not exist simply to generate profit.’”  Meanwhile, Virtu Financial is a company known for “a culture that encourages its math-minded employees to continuously hone trading algorithms” and it also went public.  “Virtu’s IPO will be the first for a pure high-frequency trading firm and symbolizes how lean, technology-focused companies can have an outsize impact on global trading…’We focus on one thing and one thing only: making the tightest bid and offer on more than 11,000 financial instruments around the world.’”  Meanwhile, “the more unfamiliar someone is with the wild Black Swan-generating randomness, the more he or she believes in the optimal working of evolution…Evolution is a series of flukes, some good, many bad.  But, in the short term, it is not obvious which traits are really good for you…The idea that we are here, that this is the best of all possible worlds, and that evolution did a great job seems rather bogus.”  Meanwhile, “prospecting with a fintech tool is not nearly as fun as the old days, but it is a helluva lot smarter and more efficient.”



“There’s a new term cropping up in startup pitch meetings: ‘One-on-one.’  It means the company is seeking to raise $100 million at a valuation of $1 billion.”  Meanwhile, “Snoop Dogg has invested in a start-up called Eaze, an ‘Uber for weed’…Ashton Kutcher is putting money into Spring, a mobile commerce app that is ‘Tinder for fashion’.  The Winklevoss twins, whose claim to have” it goes on.


USA: Wages For About 80% Of Americans Peaked In 1972


China: Futures Tumble On Regulation To Decrease Borrowing, Increase Short Selling


Oil: Bloomberg Is Calling It

kermit rainbow connection

The Lovers, The Dreamers And Me

Analysts at Citibank and The Economist are coming to Chinese equities’ defense: “The Shanghai index, which includes China’s biggest companies from banks to oil majors, is trading at a forward PE of about 15, in line with its ten-year average.  From this perspective, the rally looks more like a ‘mean-reversion trade’ than something wildly unsustainable.”  “When investors tell us that China is a bubble and expensive all we need to do is highlight…a market which is very certainly an investor favourite, India.  This market is even more expensive relative to all the other markets, and it isn’t as if investor after investor we meet tells us, ‘oh boy that Indian market is hotter than your average Vindaloo.’”  (Side note: valuations suggest that investors are expecting the highest EPS growth rates in India (6.5%), Poland (6.4%), South Africa (6.3%), Indonesia (6.2%) and the Philippines (6%))  “The most striking feature of the Chinese rally in recent weeks has been its crossing of borders…A programme to connect the mainland and Hong Kong stock markets has provided a corridor for channeling excess liquidity out of China.  With A-shares still trading at a 20% premium to H-shares, Chen Li, a strategist at UBS bank, predicts the convergence will continue.”  Meanwhile, “there has been speculation in certain quarters of the markets that a ‘Singapore-China’ stock connect may be in the pipeline.


But Wasn’t Distortion Always The Point Of Extraordinary Monetary Policy?

“The European Central Bank has barely started its €1 trillion-plus asset purchase program and already there are mutterings about how it might need to be wound down early.  There are signs of a solid pick-up in the eurozone economy,” as well as “rising bank lending as firms turn more bullish on their growth prospects.”  Yet “on the other side of the equation there are clear market distortions.”  For example: “all over Europe, banks are being compelled to rebuild computer programs, update legal documents and redo spreadsheets to account for negative rates…some banks have faced the paradox of paying interest to those who have borrowed money from them…In Spain, Bakinter has been forced to deduct some clients’ mortgage principal payments because an interest-rate benchmark tied to Switzerland’s currency has dipped into negative territory.”  Meanwhile, Eurostat says the savings rate is moving back up, which may “send minor alarm bells ringing for those who fear that households may respond to falling consumer prices by postponing discretionary prices.”  Then again, Ben Bernanke says higher wages in Germany are good news for everyone: “In a world that is short of aggregate demand, Germany’s trade surplus redirects spending away from other countries, reducing output and incomes abroad.  Higher wages in Germany should promote spending by German households on both domestic goods and imports, reducing the imbalance.”



“One of the most important questions for economists about the past year’s collapse in oil prices is whether it was driven by supply or demand.”  The IMF says “it started out as a bad-news demand story, but turned into the good-news supply story.”  Meanwhile, “China is on an oil-buying spree again.” (alt)


USA: Home Services Is One Of The “Few Pots Of Gold Left”


USA: Aswath Damodaran Ain’t Buyin The Small Cap Premium

Kentucky commonwealth stadium

Dear Fellow Shareholders,

Jamie Dimon’s latest letter to shareholders has an interesting section on “how the table is set” for the next financial crisis (“Where do you want me?” asks future rogue criminal).  First, some good news: “We will enter the next crisis with a banking system that is stronger than it has ever been.”  Harder! Better! Faster! Stron–“There is a greatly reduced supply of Treasuries to go around — in effect, there may be a shortage of all forms of good collateral…It is unlikely that we would want to accept new deposits the next time around because they would be considered non-operating deposits (short term in nature) and would require valuable capital under [new regulations]…Non-bank competitors are increasingly beginning to do basic lending in consumer, small business and middle market…it is my belief that in a crisis environment, non-bank lenders will not continue rolling over loans or extending new credit except at exorbitant prices that take advantage of the crisis situation.”  K.  Speaking of nonbanks, “many big banks have retreated from the repo market following the adoption of costly new regulations…This opens up a potential new revenue opportunity for nonbank brokers and others who aren’t subject to the same regulations.”  And the good taxpayers of Kentucky aren’t (directly) subject to the same regulations: “Stephen Jones, who oversees about $4 billion of state money at the Commonwealth of Kentucky, said he completed his first direct repo trade in January, without using a large, bank-owned broker-dealer.  The state is lending $123 million this month to a REIT called Invesco Mortgage Capital Inc., up from $50 million earlier.”


Basically Nobody Knows The Difference Between A Bubble And A Bull Unless We’re Talking China

“The question of whether or not we are in a tech bubble has been raised regularly for years now…it’s easy to look at numbers, whether that be valuations, revenue multiples, or simple counting stats, but any analysis is incomplete without understanding markets.  In 1999 most consumer markets were simply not ready, whether it be for lack of broadband, logistics build-out, etc…Today, by contrast, many of the most valuable unicorns are consumer-focused companies like Uber or Airbnb.  Moreover, these companies are competing not with other tech companies but rather with entirely new (to tech) industries like transportation or hospitality.”  “Optimism in the face of growing uncertainty is hard to sustain.  That seems to be the crux of the problem facing the market.  The current situation — very optimistic implied earnings growth and deteriorating economic uncertainty — is a temporary condition…If the market’s pricing of earnings growth drops to the long-term realized growth mean of 7%, the S&P 500 would drop 11% to 1850.”  Meanwhile, Dan McCrum has dropped the mic on China.


USA: FAA Appears To Be Giving The OK On Drones For Insurance Companies


USA: “Could A Computer Do My Job?” Is A Decent Question To Be Asking Yourself


Oil: Is Volatile

Nothing Changes Until Everything Changes

The percentage of U.S. women in their 30s and 40s who are childless is rising, new data from the U.S. Census Bureau show…47.6% of U.S. women aged 15 to 44 were without children last year, up from 46.5% in 2012…The number of women aged 40 to 44 who had only one child roughly doubled between 1976 and 2014…These trends have helped push America’s fertility rate to record lows, though it should be noted that U.S. fertility still ranks relatively high compared with Europe and Japan.”  Meanwhile, the IMF says the financial crisis has done lasting, significant damage to global growth: “lower potential growth in advanced economies has been driven in roughly equal measure by slower capital accumulation and labor growth — due primarily to adverse demographics…demographic factors are likely to act as a brake on growth in many advanced and emerging market economies, as populations age and workers retire.”  However, “there is still room for optimism — the future trajectory of potential output is not set in stone.”  Meanwhile, global investment in renewable energy “rebounded in 2014 to a near all-time high of $270 billion.”  And thanks to the rapidly decreasing costs of solar and battery technology, “renewable energy capacity added in 2014 was easily an all-time high…Renewables went from 8.5 percent to 9.1 percent of global electricity generation just in 2014…The takeoff of solar-plus-batteries has only begun to ramp up the exponential curve, and market shares are still small.  But it has begun, and it doesn’t look like we’re going back.”  Meanwhile, a team of engineers at Caltech have “developed a very tiny, very powerful 3D imager that can easily fit in a mobile device…the imager may soon allow consumers to snap a photo of just about anything, and then, with a good enough 3D printer, use it to create a real-life replica ‘accurate to within microns of the original object.’”


100 Year 4.5% Euro-Denominated Mexican Sovereign Debt

Europe’s plunging borrowing costs marked two new milestones on Wednesday, with Switzerland becoming the first country ever to issue 10-year debt that gives investors a yield under 0%, and Mexico lining up a rare deal to borrow euros that it will repay a century from now…Mexico’s deal, which is set to wrap up later Wednesday, is expected to give investors a yield of about 4.5%.”  Meanwhile, “about 65 percent of the record 60 billion euros of investment-grade bonds sold in March came from overseas companies…and a lot of those sellers are based in the U.S….Debt is so cheap in Europe that U.S. companies are saving money even if they buy currency hedges that have gotten expensive as the dollar’s soared versus the euro…even if the Fed does hike interest rates this year, it may not matter too much to U.S. corporate borrowers.  They’ve found, courtesy of Draghi, a new source of financing that is plenty cheap.”


Snapping Up Bargains

A huge jump in equities purchases by Chinese investors (alt) has produced record trading volumes in Hong Kong, a signal that the prolonged stock rally on the mainland is finally spilling into global markets…On Wednesday, southbound turnover — purchases and sales — through the Stock Connect leapt to HK$21bn ($2.7bn), more than three times the previous daily record set on April 2…Wednesday’s moves took the average premium of domestic listing, known as A shares, over Hong Kong-listed H shares down from 35 per cent to 28 per cent…’We think retail investors from across the border will soon be snapping up bargains on the Hong Kong stock market.  With the A share market still rising in spite of weak economic data and poor corporate earnings in China, we believe Hong Kong H shares are becoming an increasingly attractive alternative.’”  Meanwhile, Chinese tech stocks are now trading at “an average 220 times reported profits…higher than those in the U.S. at the height of the dot-com bubble.”


Oil: Shell To Buy BG Group For About $70 Billion (Alt)

“The deal, if approved by shareholders and regulators, would make Shell the world’s largest producer of liquefied natural gas…would enable the two European energy giants to eliminate overlapping costs to help offset the impact of weaker prices.”  Meanwhile, here’s the U.S. oil story in seven charts.


EU: Should You Invest In A Currency-Hedged International-Equity ETF?


Fed: Bernanke Says Central Banks Shouldn’t Set Policy To Mitigate Financial Stability Risk


EU: Greek Banks Are Linking Arms


What: JPMorgan Is Blowing The Whistle On Its Future Criminals Employees

Rouhani tweet Iran nuclear deal

Negative Yields And The Current Strength In The U.S. Labor Market

“If financial theory is grounded in one principal, it’s the ‘time value of money,’ or the idea that individuals prefer consumption today over consumption in the more uncertain future…Currently 25% of the European sovereign bond market is trading with a negative nominal yield…Why would anyone pay to lend money?  There are several reasons.”  1) “you expect a significant decline in prices,” and 2) buy low, sell to the ECB.  “What does a persistent regime of negative yield mean for investors?”  1) “income-producing stocks in Europe have a natural edge,” 2) strong dollar, and 3) “they are suppressing U.S. rates.  It’s hard to reconcile a sub-2% U.S. 10-year yield with the current strength in the U.S. labor market.”  …


Black Swans Shocking Headlines And The Current Weakness In The U.S. Labor Market

“US companies scaled back hiring sharply last month, adding to evidence that the economy has lost momentum since the start of the year….Payrolls increased by 126,000 in March (alt), well below Wall Street expectations (244,000) and snapping a 12-month spell of gains above 200,000…The previous two months’ readings were also revised down by a net 69,000, while the unemployment rate was unchanged at 5.5 per cent…The data pushed the dollar down to the $1.10 mark against the euro, while the yield on the 10-year note fell 8 basis points to 1.84 per cent…None of the 98 economists polled by Bloomberg had forecast such a low figure.”  “Now you’ll see economists ratcheting down their job creation expectations for next month, next quarter, the full year etc.  They’ll also be pushing back their expectations for when the Fed will first raise interest rates from June to September or even sometime in 2016.  The one thing they won’t be doing is ending the forecasting nonsense.”  Meanwhile: Are The Best Days Of The Recovery Behind Us?  Why Are Wages Growing Slowly Despite McDonald’s, Wal-Mart Raises?  Bottom Line: Ouch.


Teraflops Of Tweets And Jay-Z

“Scientists at the firm, Two Sigma Investments LLC, program itcs machines to cull torrents of information from sources like newswires, earnings reports, weather bulletins and Twitter…the firm has more than 100 teraflops of power — more than 100 trillion calculations a second — and more than 11 petabytes of storage, the equivalent of five times the data stored in all U.S. academic libraries.” Meanwhile, “people lost maybe as much as a few hundred thousand dollars because, for a brief stupid minute, they thought Tesla was introducing…a watch?  No, of course they didn’t.  They thought Tesla was introducing a thing called the Model W, and they didn’t read any further than the headline, and they bought Tesla stock hoping the Model W, whatever it was, would be a huge success…And when I say ‘people’ I mean mostly ‘algorithms,’ which are faster and more literal than humans.”  Meanwhile, “shares in music streamer Aspiro, a majority of which was bought earlier this month by hip-hop star Jay-Z, soared on Tuesday to as much as 11 times the price at which remaining shares will be acquired in a compulsory squeeze-out only days away…buyers [look] set to face losses of some 90 percent…’There are reasons to suppose that some have not noticed the communication around the bid.’


Global: Krugman On Summers And Bernanke


Oil: Iran Nuclear Talks End With “Framework” (Alt)

Oil dipped 5% on the news.

Also, here’s a neat gif of Warren Buffett making a lot of money.


WM: Bond Traders Switching To Currencies?

“While the amount of marketable Treasuries outstanding has almost tripled since 2007 to $12.5 trillion at the end of last year, trading has fallen 11 percent.”


WM: ETFs Are All About Active Sector Selection

Airbnb Bets On Boom In Cuba Tourism

retail sales vs consumer confidence China Mar2015Retail sales vs consumer confidence USA Mar2015

Reinvesting The Dividend

Franklin Templeton analysts say “consumers have spent only about 25% of the drop in energy prices and the rest has gone into savings and paying down debt.”  They offer two reasons for why cheaper fuel hasn’t spurred consumer spending: 1) “people think the cheap gas is temporary,” and 2) “an usually cold and snowy” blah blah blah.  Meanwhile, “US drivers consumed the most petrol for the month of January in seven years…totalled 8.7m barrels a day in January, up 6.2 per cent from the same month a year earlier…about 9.5 per cent of estimated world liquid fuels consumption for the month…US traffic volumes had grown 4.9 per cent on the year in January to 237.3bn vehicle miles.”  Meanwhile, Toyota’s North America CEO says “March auto sales are strong as buyers continue to favor light trucks over cars…sales volume is almost 55 percent truck and SUV…In February, industry car sales fell 1.4 percent as light truck sales were up 12 percent.  Larger SUVs had an especially strong month.”


“China’s Stock Market Sure Looks Like A Bubble”

People are pretty worried about Chinese equities: “Now they’re nowhere near their 2007 highs — in fact, they’re barely halfway there — but Chinese stocks are still looking plenty frothy right now…[They’ve] been the world’s best performing asset class the last nine months, up almost 80 percent.  And that’s despite the fact that China’s growth has slowed to a 20-year low and its industrial profits just fell 8 percent.  Why are stocks up so much if the economy isn’t?”  (Why why why)  Meanwhile, one analyst says that “consumer confidence has surged to its highest level in recent years, a highly unusual development considering the weak growth environment,” which is a pretty good point to be making about Developed Markets–oh, nevermind.  To be fair, this should raise a brow or two: “the securities companies that have facilitated the stock market boom are capitalizing on their own ballooning share prices by issuing huge amounts of new stock, raising billions in the process…Increasingly, [Chinese investors] are turning to margin financing, or borrowing funds from brokerage firms to buy stocks — raising the risk of even steeper losses for ordinary investors if the boom turns out to bust.”  Meanwhile, Reuters is picking up on rumors about Chinese deposit insurance to arrive in May.


IBM: Will Invest $3Bn Over 4 Years Towards “Internet Of Things” Division


USA: Housing Share Of GDP Holds Constant

A Stunning Number Of People Find Work Without Even Looking For It

Music Director Riccardo Muti and the Chicago Symphony Orchestra 2011 European Tour

Music To Draghi’s Ears

“In the negative-yield vortex that is the European bond market, investors are discovering just what lengths they’re willing to go to generate returns…even the most risk-averse investors are taking chances on assets and regions that few would have considered just months ago.”  Mmm, sweet melody, do continue.  “‘When you are paying some governments to own their bonds, 4 percent actually looks very decent’…European enthusiasm for higher-yielding assets has helped U.S. borrowers sell 3.28 billion euros of junk bonds in 2015, the busiest start to a year since the currency started in 1999.” …this symphony is a little heavy on the brass — “Unlike the Fed’s three waves of quantitative easing, the ECB’s version is coming as European governments are trimming budgets.  That means they issue fewer bonds, and European investors have more reason to look abroad for returns instead of paying dearly for relatively scarce assets at home or having cash in euros that they might need to pay to hold on to.  ‘There are more and more euros being printed, but these are hot-potato euros.’”  Also, “the euro’s turbocharger has been removed”: central banks around the world have slowed their accumulation of dollars and euros and are relaxing their control over their currency (i.e. float the currency).  Meanwhile, “a weak euro and signs of an economic recovery have spurred China to step up its push into Europe.  Analysts at Deloitte say depressed asset prices in the euro zone have created ‘vast opportunities for bargain seekers in China.’”  Well.  


Oil: US Still Gushing Oil

“US crude oil stocks rose 22% y/y to a record 458.5 million barrels during the week of March 13…refineries are working overtime to convert crude oil — which the government bans from exporting — into refined products…over the past 12 months through February, global oil supply is up 2.5% y/y, while demand is up 0.7%…North American frackers have flooded the world market with so much oil that the Saudis are aiming to shut them down with lower prices.  It’s not working so far.  The US and Canada produced 13.2mbd during February, up 4.0mbd since August 2012.  That well exceeds the Saudi’s 9.6mbd.”  Also, oil bears can smell a nuclear deal with Iran which might raise sanctions on another 1.0mbd from Iranian oil fields.  Meanwhile, Oil Rigs Shmoil Rigs (The official title of Goldman’s latest memo on oil rigs, I presume).


USA: Center For Financial Stability Sees Increase In Short-Term Credit

“The CFS defines market finance as the total stock of money-market funds, commercial paper and security repurchase, or repo, contracts held by financial institutions — credit instruments that are generated and traded outside of the regulated banking system.  The figure totaled $4.124 trillion in February, up from $4.111 trillion in January but 46% below its peak seven years ago.”


USA: Economic Surprise Index (Alt)

“The surprise index doesn’t rise or fall with the ebb and flow of the economic cycle…It measures a rolling average of how things turn out relative to forecasts…When the index is deeply negative, as it is today, that is usually a good sign for stocks.  Following the weakest 5% of observations since 2003, the S&P 500 rose by 14.4%, on average, during the following six months.


AAPL: Apple Has Roughly 170 Billion Reasons To Scare Their Future Competitors (Alt)


ICYMI: There’s A Few People Calling The Fed’s Bluff

Meanwhile, “often wrong but seldom boring” guy is done pretending.


What: America’s First Kenyan President Inspires Canadian To Run

Meanwhile, Asset Classes in the Obama Years

dollar vs S&P


What Did You Guys Think About European QE?

Assuming the EUR/USD settles at parity, the ECB staff projection for inflation would increase by three tenths this year and next, to 0.3%oya and 1.8% respectively, and by two tenths in 2017 to 2.0%.  And so the question appears to be becoming (and yes, it’s funny/absurd how quickly it has become the question), is there any chance of the currency weakening to such an extent that the ECB starts thinking about an early tapering?”  Meanwhile, “Everyone Hates U.S. Stocks” is the headline at Bloomberg: “The U.S. stock market was an island of opportunity for a number of years…It has lost its status, not because it’s negative, but because other places around the world have started becoming more attractive.”  Meanwhile, the Bank for International Settlements says “deflation has been given a bad name because of the link between falling prices and the Great Depression.  Besides that episode, however, the economists say the links between deflation and economic catastrophe are weak.”  Furthermore, “deflation per se is not necessarily a problem — it’s what causes it that counts.”  Meanwhile, LPL Financial thinks that “although the strength of the dollar has important implications, it is more of a symptom of economic and market forces rather than a cause of them.  Although some sector relationships are interesting, the dollar is not very useful as a predictor of stock market performance and we do not expect it to derail this bull market.”  Meanwhile, “the biggest obstacle I see standing in the way of most new stock market enthusiasts is this immense reluctance to personally accept the fact that their own mind games can kill them as investors…The brain’s natural default mechanism is to run with its intuition — that is precisely why you must understand this tendency, lasso that trading brain of yours, and pull it back to the rational-analysis corral.”  Meanwhile, “the Riksbank is leading the currency war, but the losses in the krona will be short lived.”


Fed: Press Conference At 11:30 PST


WM: The Median Investor Is Significantly Underperforming A 60/40 Portfolio


Oil: The Oil Conversation Has Shifted Its Focus To Storage


USA: Some People Think Private Valuations Are Like, Totally Fuzzy And Insane

renminbi new choice

Currency Envy

According to Duke University, two thirds of U.S. exporters say “the appreciation of the dollar has had a negative impact on their businesses.  And nearly one-fourth of big exporters said they have reduced their capital spending plans as a result…’We are in a midst of an ugly contest to see whether the eurozone, Japan or Canada can depreciate the most against the U.S. dollar, and China is probably next.”  There is a growing debate over this last point.  On the one hand, Chinese exporters would benefit from a depreciated currency much in the same way people are expecting German exporters to benefit from a depreciated euro.  On the other hand, China is in the middle of attempting a massive rebalance away from export and investment driven growth, and the $US denominated debt on Chinese corporate balance sheets doesn’t help either.  Which brings us to this: “Britain’s announcement Thursday that it intends to join the Asian Infrastructure Investment Bank, which China is largely funding in hopes of becoming the dominant influence in Asian affairs, has bolstered the fledgling bank’s reputation even before it begins operations…Washington views the Chinese venture as a deliberate challenge to [the World Bank and other global financial institutions], which are led by the United States and, to a lesser extent, Japan.”  Some are expecting this decision to influence authorities in South Korea and Australia who “have seriously considered membership but have held back.”  “Having South Korea as a founding member would be a considerable coup for Beijing.”  Someone in the Obama administration even went so far as telling the Financial Times that they are worried about Britain’s “constant accommodation” of China (alt).  Draaamaaa.  Meanwhile, “in the past year, the dollar’s share of total global financial transactions grew to more than 43 percent from a bit less than 39 percent…At the same time, China’s currency became the world’s fifth favorite medium of exchange, up from seventh at the start of 2014.”  And here’s something fun: Bank of China has a billboard up outside of Bangkok International Airport advertising the renminbi as the “new choice” for “the world currency”.  “China is literally advertising its currency overseas, and it’s making sure that everyone landing at one of the world’s busiest airports sees it…They know that the future belongs to them and they’re flaunting it.”


WM: Basically Everyone Failed To Beat The Market Last Year


Global: A Half Century Of Debt Buildups (Check Out Japan On This Chart)


Oil: Have Oil Prices Hit Their Floor?

Meanwhile, is the February bounce done?


USA: Household Net Worth Numbers

It’s The Guvment, Stupid