|Zero Bound Fed Funds Rate 0%|
(St. Louis Fed)
Here are some views on what to expect in tomorrow's policy statement.
|Zero Bound Fed Funds Rate 0%|
(St. Louis Fed)
"I recognize that many analysts consider stocks to be cheap on the basis of “forward operating earnings,” but I continue to believe that the 50-70% elevation in profit margins relative to historical norms is an artifact of extreme deficit spending and depressed savings rates, and that as a U.S. recession unfolds, profit margins and forward earnings estimates will collapse. This is currently seen as heresy (as was my assertion just before the tech-collapse that technology earnings would turn out to be cyclical), but that’s how earnings and profit margins work."
|via Boaz Almog's TED slides below|
"But what is the future of quantum levitation and quantum locking? Well, let me answer this simple question by giving you an example. Imagine you would have a disk similar to the one I have here in my hand, three-inch diameter, with a single difference. The superconducting layer, instead of being half a micron thin, being two millimeters thin, quite thin. This two-millimeter-thin superconducting layer could hold 1,000 kilograms, a small car, in my hand. Amazing. Thank you." - Boaz Almog (TED.com transcript)
|Dollar Tree, Dollar General, TJX vs. S&P 500 (via freestockcharts.com)|
|FB after hours trading 7/26|
"Costs and expenses — Second quarter costs and expenses were $1.93 billion, an increase of 295% from the second quarter of 2011, driven primarily by share-based compensation expense. As previously noted in the company's initial public offering prospectus, share-based compensation expense related to pre-2011 restricted stock units (RSUs) was not recognized in advance of the initial public offering, and as a result of the initial public offering during the second quarter, the company recognized $1.3 billion of share-based compensation and related payroll tax expenses. " (earnings release)
|Zynga lowers Draw Something |
expectations (via Flickr)
"But what really dragged on Zynga's stock is the fact that the company lowered its outlook for 2012, saying it now expects bookings in the range of $1.15 billion to $1.225 billion, far short of the up to $1.5 billion Wall Street expected. (source: CNBC.com)"
|XLI Sep $30 Put (Yahoo Finance) Transparency...|
"Hyperinflation is more closely related to deflation than to "normal" high inflation, as hyperinflation can be viewed as the result of a failed attempt at printing money to avoid the deflation that would be caused by austerity."
"My biggest worry is that capitalism and the free markets will get the blame when it really hits the fan. When we get the real crash and everything implodes, and it’s really Armageddon style collapse, my fear (again) is that capitalism and free markets take the blame for problems that were created by government."
"IMF calls for 'decisive action' as Spanish bond yields near danger level. ECB must cut interest rates, start large-scale QE and wade into bond markets to drive down borrowing costs, says critical report."
|S&P 500 - Source: FreeStockCharts.com|
|Corn Future (ZC) - Source: CME Group|
|Source: St. Louis Fed/Dvolatility Designs|
"30-year fixed-rate mortgage (FRM) averaged 3.56 percent with an average 0.7 point for the week ending July 12, 2012, down from last week when it averaged 3.62 percent. Last year at this time, the 30-year FRM averaged 4.51 percent."
"Following a lackluster employment report for June, long-term U.S. Treasury bond yields eased somewhat this week allowing fixed mortgage rates to reach yet another record low. Only 80,000 net new jobs were added to the economy last month, not enough to lower the unemployment rate from 8.2 percent. This was the concern of the Federal Reserve's monetary policy meeting held June 19-20. Minutes released from that meeting on July 11, revealed that a few members felt further monetary stimulus was needed to promote satisfactory growth in employment to meet the Committee's goal."
|Source: PFG brochure|
|source: Youtube (see below)|
Moody's downgrades Italy's government bond rating to Baa2 from A3, maintains negative outlook
Global Credit Research - 13 Jul 2012
Frankfurt am Main, July 13, 2012 -- Moody's Investors Service has today downgraded Italy's government bond rating to Baa2 from A3. The outlook remains negative. Italy's Prime-2 short-term rating has not changed.
The decision to downgrade Italy's rating reflects the following key factors:
1. Italy is more likely to experience a further sharp increase in its funding costs or the loss of market access than at the time of our rating action five months ago due to increasingly fragile market confidence, contagion risk emanating from Greece and Spain and signs of an eroding non-domestic investor base. The risk of a Greek exit from the euro has risen, the Spanish banking system will experience greater credit losses than anticipated, and Spain's own funding challenges are greater than previously recognized.
|2yr German Bund Yield intraday (Bloomberg.com)|
"Inflationary pressure over the policy-relevant horizon has been dampened further as some of the previously identified downside risks to the euro-area growth outlook have materialized.”;
"Economic growth in the euro area continues to remain weak, with heightened uncertainty weighing on confidence and sentiment." (h/t BusinessWeek)
|1M Euribor/Submission (h/t SoberLook)|
"But just now, details of the meeting are getting out. According to one participant, the meeting was held in a big, wood-paneled room with pictures of past Federal Reserve presidents on the wall. The guest list included Wall Street's most powerful leaders. In attendance: CS First Boston CEO Allen Wheat; CEO James Cayne, along with Warren Spector, from Bear Stearns; Morgan Stanley CEO Phillip Purcell; Lehman Brothers CEO Dick Fuld and Tom Russo, chief legal officer; Goldman Sachs CEO Jon Corzine and CFO John Thain. Travelers CEO, Sandy Weill was there in the morning, as well as the co-CEOs of its Salomon Smith Barney unit, Jamie Dimon and Deryck Maughan. President Herb Allison and CEO Dave Komansky from Merrill Lynch were there, too. Their former Merrill colleague, Edson Mitchell, representing Deutsche Bank, was on the phone."
|3/10/2006 Barclays (source: FSA.gov.uk, 6/27/2012)|
Diagnosing the LIBOR: Strategic Manipulation and Member Portfolio Positions
Thomas YouleyUniversity of Minnesota
February 7, 2009Preliminary and Incomplete
The London Interbank Offered Rate (Libor) is a vital benchmark interest rate to which hundreds of trillions of dollars of financial contracts are tied. We provide new evidence that panel banks may have misreported actual borrowing costs when quoting rates to the Libor survey. This evidence stems from discontinuities involved in the Libor's construction. We introduce a simple model where banks' possession of Libor indexed contracts leads them to quote rates that are clustered at discontinuities and show that such clustering has been severe in the 3-Month U.S. Libor throughout 2009. We then present suggestive evidence that several banks have large exposures to the Libor through their interest rate derivative portfolios and have recently profited from the rapid descent of the Libor.
|The Economist (source: Google+)|
5 July 2012 - Monetary policy decisions
At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:
- The interest rate on the main refinancing operations of the Eurosystem will be decreased by 25 basis points to 0.75%, starting from the operation to be settled on 11 July 2012.
- The interest rate on the marginal lending facility will be decreased by 25 basis points to 1.50%, with effect from 11 July 2012.
- The interest rate on the deposit facility will be decreased by 25 basis points to 0.00%, with effect from 11 July 2012.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today.
|Source: Wikimedia Commons|
"The company, which was providing annual returns of almost 40% up to this point, experienced a flight-to-liquidity. In the first three weeks of September, LTCM's equity tumbled from $2.3 billion at the start of the month to just $400 million by September 25. With liabilities still over $100 billion, this translated to an effective leverage ratio of more than 250-to-1."
REMARKS OF BROOKSLEY BORN
COMMODITY FUTURES TRADING COMMISSION
FUTURES INDUSTRY ASSOCIATION'S
INTERNATIONAL FUTURES INDUSTRY CONFERENCE
Boca Raton, Florida
March 18, 1999
It is a pleasure to be here this morning to address the members of the Futures Industry Association. I look forward to an extremely interesting conference this year as the industry addresses many of the issues confronting it in this era of profound change.
It is difficult to imagine a time of greater change in this industry. Electronic trading systems are replacing floor trading at exchanges around the world. The ultimate role of intermediaries in these new systems is not yet clear. Moreover, instantaneous international communication and transactional capabilities are creating truly global markets. Consequently, domestic exchanges and industry professionals are eager to offer their products and services to customers abroad, while foreign exchanges are just as eager to offer their products to U.S. customers. While futures exchanges are grappling with these technological developments, the number and type of derivative products offered over-the-counter continues to mushroom even as the volume of transactions in that market increases exponentially. Furthermore, technological and market developments are driving many OTC derivatives market participants to express an interest in adopting trading and clearing systems that would cause the OTC market to resemble more closely the exchange-traded markets.
|Ray Dalio at Hedge Fund Industry Awards (video)|
"An In-Depth Look at Deleveragings
The purpose of this paper is to show the compositions of past deleveragings and, through this process, to convey in-depth, how the deleveraging process works.
"Global Manufacturing Sector Contracts in June
The JPMorgan Global Manufacturing PMI™ — a composite index produced by JPMorgan and Markit in association with ISM and IFPSM — fell to three-year low of 48.9 in June, a reading below the neutral 50.0 mark for the first time since November 2011.
Manufacturing production declined for only the second time in the past three years. Although the rate of contraction was only moderate, it was nonetheless the fastest since May 2009. Growth slowed sharply in the US to its weakest in the current 37-month sequence of expansion. Rates of decline gathered pace in China, Brazil and Vietnam, while Japan, South Korea and Taiwan all fell back into contraction.
The Eurozone remained the main source of weakness for the global manufacturing sector. Production in the euro area contracted at a similarly sharp rate to May – which was the steepest drop in almost three years – with declines recorded in Germany, France, Italy, Spain and Greece...." (continue reading)
"But when debt as a percentage of GDP, or debt service as a percentage of household income, or the appropriateness of the term structure (short vs. long) on both borrower and lender balance sheets becomes imbalanced, then the well-oiled capitalistic engine may sputter and in some cases – as in Greece – freeze up.
|China PMI, input prices, export orders (static)|