Where are all the bears? Even some of the usual suspects have stopped growling, with David Rosenberg of Gluskin Sheff going so far as to dispute the idea that he’s a permabear. There are a few still carrying the flame – Russell Napier, the stock market historian, thinks the S&P 500 will fall to 500 – but with the S&P now at 1,772 there are few willing to listen to the growls. Read more
Lehman has, at last, been bankrupt for five years. I posted the last of the five-video series we put together for the anniversary here. This post is for those hardy few who have still not had enough of Lehman memorabilia. If you have the time and inclination, try looking through some of these videos, which I made at the time (when I was based in New York and still covered the Short View).
First, this video, which we produced for what we then considered to be the first anniversary of the crisis, in August 2008 a few weeks before Lehman, bears re-watching. The key message to be derived from it is that claims that nobody saw the Lehman bankruptcy coming, or the crisis that surrounded it, do not hold water. It features today’s interviewee, the former Olympic fencer James Melcher, and his comments are particularly prescient: Read more
1997 was not a great year for music lovers. True, Daft Punk burst on to the English speaking world (or at least the British top 10), and Texas, Blur and Jamiroquai were all going strong, but March alone saw Ant & Dec, Boyzone, Wet Wet Wet and the Spice Girls all near the top of the charts.
It was a far worse year for emerging markets investors, and one which is now being resurrected for comparisons like a bad best-of album. Back then, EM investors lost their shirts, and now some are losing them again, as the US Federal Reserve talks about “tapering” its bond purchases.
First, a chart for those who doubt the impact of the taper: this shows shares for each Asian emerging market, with the grey bars showing the weekly rise or fall in Treasury yields (treat this as indicative: I left off the bond yield axis as it was already looking pretty confusing).
Ben Bernanke can move markets, and sometimes his words are too strong for his own good. That may have been true of his press conference last month, when he announced that he planned to start tapering off QE bond purchases later this year, and end them altogether by next summer. That drove a dramatic rise in Treasury yields, and in the dollar.
For a further classic example, look at the speed with which currency markets responded late on Wednesday and early on Thursday to a speech he made in Massachusetts, and to the minutes from last month’s meeting of the Federal Open Market Committee, published on Wednesday. The euro gained 4.5 cents against the dollar in a matter of minutes, while the pound gained almost 4 cents (or about 2.6 per cent). Read more
The US Federal Reserve’s support for the markets can be measured lots of ways, from the impact on bond yields through to comparisons of equity prices and the central bank’s balance sheet. Here’s one I rather like, with a hat tip over to BNP Paribas’s William De Vijlder.
The third round of the Fed’s quantitative easing, or QE∞, is now 41 weeks old, and during that time there hasn’t been a single really bad week, which I defined as a loss of 2.5 per cent or more. The last time there was such a long period without a big down week was during QE2. Before that it hadn’t happened since early 1997.
The total loss of all the down weeks since QE∞ began, including weeks with only a small loss (a somewhat odd measure, obviously offset by plenty of up weeks) has been just under 18 per cent, close to the lowest reached over rolling 41-week periods during the “great moderation” of 2003-2007, and to that reached under QE2. Read more
Ooh la la! French consumer confidence figures just came in, and they aren’t pretty. The index just matched its lows from late 2008, itself the lowest ever.
So far, so eurozone. It isn’t exactly new news that the French economy is in terrible shape. But this chart shows how consumer confidence has broken away from share prices, something it usually tracks closely. Read more
The Federal Reserve has driven US investors into riskier assets by promising lower rates for longer as part of its assault on unemployment. James Mackintosh, investment editor, worries that markets are complacent about the speed with which unemployment is falling, and the risk of an early Fed policy tightening.
Is it more accurate to refer to QE∞ instead of QE3? Unlike the previous doses of US QE, this campaign of asset purchases has no official limit, and will carry on until the unemployment rate has improved “substantially” – a word that the Federal Reserve can define, and redefine, as it sees fit over the years ahead.
I have already argued that this should be regarded as stunningly aggressive. In the latest Note video, Gavyn Davies, a fellow FT blogger, agrees. The key point, he suggests, is that over the last year the Fed’s reaction function has changed. It is not just that the employment situation has worsened but also that, for whatever reason, it has decided to give the full employment part of its mandate greater emphasis than before. There are plenty of possible reasons for this, which we discuss in the video: Read more
The Federal Reserve has given the markets all it hoped for and more: unlimited quantitative easing (QE3), in the form of $40bn a month of mortgage bond purchases, an extension into 2015 of the zero-rate forecast, and a change in the reaction function to say the Fed won’t raise rates until an economic recovery is well under way.
Is this Ben Bernanke’s final shot? His own words suggest not. Here’s a handy checklist of what he’s done so far, and what could be to come, as set out in his 2002 speech on how to fight deflation. These are in the order he set them out in the speech, rather than the order in which they’ve been tried so far. Read more
The argument for gold is very simple: it is hard money at a time when every other major currency is being watered down by central bank money printing.
On that basis, Europeans should have been panic-buying gold this summer as the European Central Bank prepared its plan to hoover up peripheral country bonds (although it will try to “sterilise” the plan, taking in deposits in some form to keep net money issuance stable, even as its balance sheet expands). Read more