Oct 20. Conflicting comments

–“Every day that central banks hold out the false hope of a paper solution is a day that chips away at the productive foundations of our economy.” -John Hussman.

–ECB today, with most looking for an extension of QE in December.  The euro made a new low yesterday and is around the Brexit vote low.

–From Reuters, “If the economy stays on its current trajectory I think … we’ll see an interest rate hike later this year,” New York Fed President William Dudley told a modest dinner gathering at the Lotos Club [last night].

–On the other hand, a piece by Ambrose Evans Pritchard in the Telegraph is warning against Fed hikes:

“CrossBorder’s liquidity measure for the US is now at levels comparable to the inflection point a few months before the US recessions of 1990 and 2001, and before the recession starting in November 2007 – and a whole year before Lehman Bank collapsed”
http://www.telegraph.co.uk/business/2016/10/19/fed-risks-repeating-lehman-blunder-as-us-recession-storm-gathers/

–Kyle Bass, on a CNBC interview discussed the negative situation in China, said they must recap banks, but their economy is smaller than the US was in 2008 ($12T vs $17T), while their banking system is three times larger.  Said that the banking recap will slow global growth.  When asked about the US economy, he talked about oil and other commodities firming up, prices and Owner’s Equivalent Rent moving higher, wages going up.  Said 2017 is going to be a stagflationary environment. Concluded with the following:  Do NOT own any long duration bonds.

–The muddled picture extends to commodities.  For example, crude oil rallied and is only a few dollars away from the high of the year set in June, while copper has been selling off and is nearing September’s low (now around 209).

–Interest rates were quiet yesterday, though the curve had a steepening bias (5/30 just above 128, at recent high).

–News today includes:

Jobless Claims 250kPhilly Fed expected 5.0 from 12.8

Exist Homes 5.35m

Leading Index +0.2.

 

Posted on October 20, 2016 at 5:20 am by alexmanzara · Permalink
In: Eurodollar Options

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