April 14. New highs Greece and Portugal yields
Interest rate futures continued to rally yesterday as Obama gave a speech about cutting $4T from deficit. Never mind the details, he is moving more towards center and the conversation is about cutting. Just another example of removal of institutional economic support, be it through central bank tightening (China, ECB) or less gov’t spending. Upcoming fights about increasing the debt limit in the US are likely to underscore the theme of less gov’t, and less support for the economy.
–Large option trades in eurodollars were mostly new bearish positions: EDZ1 9900/9925ps bought in size of 75k for 4.5 (open int +75k in 92p). Also a buyer of 30k EOK 9862/9887ps vs 9912c for 2.5. Calls are being heavily offered as the market edges higher in front contracts…appears to be liquidation.
–News today includes PPI expected +1.0% headline with Core of +0.2%. Jobless Claims expected 380k. Kocherlakota and Plosser speaking. I saw an item yesterday about Argentina’s gov’t fining economic forecasters who indicate higher inflation levels than ‘official’ forecasts. “…officials have said they hope the fines will deter economists from “deceiving” the public into making poor financial decisions by publishing inflation estimates that differ considerably from Indec’s CPI data.” Of course, we all know that inflation in the US is low…
–JPM earnings yesterday were ok…but top line revenue growth lower and real estate woes continue …warning flag?
–From MarketWatch: “There have been only four other occasions over the last century when equity valuations were as high as they are now, according to a variant of the price-earnings ratio that has a wide following in academic circles. Stocks on each of those four occasions would soon suffer big declines.” This is the CAPE developed by Robt Shiller… interesting story because most mainstream news services say stocks are cheap or appropriately valued.
http://www.marketwatch.com/story/history-bodes-ill-for-stock-market-2011-04-12?dist=beforebell
