Aug 22. Getting closer

–Reuters: “We are close to our [inflation and employment] targets,” Vice-Chair Fischer said in prepared remarks for a conference in Aspen, Colorado.  In other words, we’re close to hiking.  If Yellen indicates the same on Friday then a hike will occur this year.  The market still gives greater odds of a December move rather than Sept, though October Fed Funds did trade 9956 today, which indicates around a 17% chance for Sept.

–Interesting interview in Barrons this weekend with Stephanie Pomboy.  She forecasts a much weaker US consumer, and notes an overhang of inventories, and thus projects softer growth.  “The consensus is forecasting GDP to more than double in the second half, from 1% to roughly 2.5%. We are far more likely to stay in the 1% area or go lower. Nominal GDP growth for the full year should average around 2%. It is currently 2.4%. This will trigger a major move to risk-off: When it becomes clear that the weakness in the second half, and in 2015 and 2014 before that, wasn’t temporary. Investors and the Fed all presumed that the pre-crisis economic framework was still intact. Five years of steadily decelerating growth and inflation demonstrate things are fundamentally different.” She also mentions, as others have, that corporate profits have declined for five consecutive quarters.  The Daily Shot notes that dividends as a % of earnings at S&P 500 companies is around 38%, near the peak of 2009.  I suppose the other 62% is going into share buybacks (that’s a joke), but in any case it doesn’t seem to be going into capex.

–Off topic… you know those crazy preppers that are always telling you to stockpile water, food and ammunition?  Count in the government of Germany.  (Reuters) “The population will be obliged to hold an individual supply of food for ten days,” the newspaper quoted the government’s “Concept for Civil Defence” – which has been prepared by the Interior Ministry – as saying.  ‘…the precautionary measures demand that people “prepare appropriately for a development that could threaten our existence and cannot be categorically ruled out in the future,”

Hey isn’t that sort of like buying out of the money options in case of catastrophe?

–September treasury options expire Friday.

Posted on August 22, 2016 at 5:17 am by alexmanzara · Permalink
In: Eurodollar Options

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