Weekend Weimar

The markets are closed. Now that things have settled down a bit, we will return to Weekend Weimar. This means:-- the markets are closed.-- stop thinking and reading about economics. -- Read a book. Go for a walk. Do anything but think about economics.More tomorr...

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Weekend Weimar

The markets are closed. Now that things have settled down a bit, we will return to Weekend Weimar. This means:-- the markets are closed.-- stop thinking and reading about economics. -- Read a book. Go for a walk. Do anything but think about economics.More tomorr...

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Bernanke Sets The Right Tone

I've been very critical of Bernanke over the last few weeks, largely because I viewed his cut in the discount rate as the first move in a cut in the Fed Funds rate. My concern here was the Fed engaging in a policy which would encourage more reckless lending behavior. This is the exact same policy that got us into the current mess in the first place.But his speech today set the perfect tone. Here is the money quote:It is not the responsibility of the Federal Reserve--nor would it be appropriate--to protect lenders and investors from the consequences...

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Bernanke Sets The Right Tone

I've been very critical of Bernanke over the last few weeks, largely because I viewed his cut in the discount rate as the first move in a cut in the Fed Funds rate. My concern here was the Fed engaging in a policy which would encourage more reckless lending behavior. This is the exact same policy that got us into the current mess in the first place.But his speech today set the perfect tone. Here is the money quote:It is not the responsibility of the Federal Reserve--nor would it be appropriate--to protect lenders and investors from the consequences...

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Real PCEs Increase

From the BEA:Real DPI -- DPI adjusted to remove price changes -- increased 0.5 percent in July, compared with an increase of 0.2 percent in June. Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in July, compared with an increase of less than 0.1 percent in June. Purchases of durable goods increased 0.5 percent, in...

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Real PCEs Increase

From the BEA:Real DPI -- DPI adjusted to remove price changes -- increased 0.5 percent in July, compared with an increase of 0.2 percent in June. Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in July, compared with an increase of less than 0.1 percent in June. Purchases of durable goods increased 0.5 percent, in...

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Why A Rate Cut Won't Help

From Reuters:The credit market is experiencing an unprecedented loss of confidence due to the lack of transparency over where exposures lie rather than underlying credit quality problems, Moody's Investors Service President Brian Clarkson said on Thursday.I'll be repeating this argument often. The central problem in the credit markets right now is concern over what people are actually buying, not whether or not they have enough money. Lowering the cost of money will not change what people think about the market; it will only force people to dump...

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Why A Rate Cut Won't Help

From Reuters:The credit market is experiencing an unprecedented loss of confidence due to the lack of transparency over where exposures lie rather than underlying credit quality problems, Moody's Investors Service President Brian Clarkson said on Thursday.I'll be repeating this argument often. The central problem in the credit markets right now is concern over what people are actually buying, not whether or not they have enough money. Lowering the cost of money will not change what people think about the market; it will only force people to dump...

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Another Hedge Fund Bail-Out

From the WSJ:Barclays Capital rescued from collapse a structured investment vehicle it helped set up last year, after other so-called "SIV-lites" it arranged were forced to wind down.Barclays Capital, the investment-banking arm of Barclays PLC, said it will provide $1.6 billion in financing to Cairn High Grade Funding I, a vehicle of Cairn Capital, a London-based structured credit specialist that manages about $9 billion.The funding will be used to redeem maturing commercial paper, and will stay in place until the underlying securities held by...

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Another Hedge Fund Bail-Out

From the WSJ:Barclays Capital rescued from collapse a structured investment vehicle it helped set up last year, after other so-called "SIV-lites" it arranged were forced to wind down.Barclays Capital, the investment-banking arm of Barclays PLC, said it will provide $1.6 billion in financing to Cairn High Grade Funding I, a vehicle of Cairn Capital, a London-based structured credit specialist that manages about $9 billion.The funding will be used to redeem maturing commercial paper, and will stay in place until the underlying securities held by...

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Is Construction Employment Lower?

From IBD:"Jobless claims drifting up as they have is consistent with a slowdown" in GDP growth in the second half of the year, said John Silvia, chief economist at Wachovia.The uptrend comes as mortgage-related firms slash tens of thousands of jobs amid a housing slump and credit crunch.Housing starts have crashed 40% from their peak. But construction...

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Is Construction Employment Lower?

From IBD:"Jobless claims drifting up as they have is consistent with a slowdown" in GDP growth in the second half of the year, said John Silvia, chief economist at Wachovia.The uptrend comes as mortgage-related firms slash tens of thousands of jobs amid a housing slump and credit crunch.Housing starts have crashed 40% from their peak. But construction...

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New High/New Low Index Stil Bearish

Here is the New York new high/new low index and the NASDAQ new high/new low index. Notice these are still trending down. That gives me great pau...

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New High/New Low Index Stil Bearish

Here is the New York new high/new low index and the NASDAQ new high/new low index. Notice these are still trending down. That gives me great pau...

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Today's Markets

The markets traded in two different periods today. First they opened lower on the GDP report. Traders are use to the idea of the Fed cutting rates right now. This news makes that less likely. The SPYs consolidated in a triangle pattern until a little after 13:00, then began the second part of their trading, which was a downward slant move. Overall,...

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Today's Markets

The markets traded in two different periods today. First they opened lower on the GDP report. Traders are use to the idea of the Fed cutting rates right now. This news makes that less likely. The SPYs consolidated in a triangle pattern until a little after 13:00, then began the second part of their trading, which was a downward slant move. Overall,...

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A Look At the QQQQs

While I usually look at the SPYs, there are of course other markets. One of the constant refrains I read in investment letters is large technology companies look interesting largely because they don't buy mortgages. There are some other reasons for liking this sector. So, here are three charts of the QQQQs.The first is a 4-year weekly chart. Like...

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A Look At the QQQQs

While I usually look at the SPYs, there are of course other markets. One of the constant refrains I read in investment letters is large technology companies look interesting largely because they don't buy mortgages. There are some other reasons for liking this sector. So, here are three charts of the QQQQs.The first is a 4-year weekly chart. Like...

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Commercial Paper Market Still Shrinking

From Bloomberg:The U.S. commercial paper market shrank for a third week, extending the biggest slump in at least seven years, as investors balked at buying short-term debt backed by mortgage assets.Asset-backed commercial paper, which accounted for half the market, tumbled $59.4 billion to $998 billion in the week ended yesterday, the lowest since December, according to the Federal Reserve. Total short-term debt maturing in 270 days or less fell $62.8 billion to a seasonally adjusted $1.98 trillion.Commercial paper outstanding has fallen $244.1...

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Commercial Paper Market Still Shrinking

From Bloomberg:The U.S. commercial paper market shrank for a third week, extending the biggest slump in at least seven years, as investors balked at buying short-term debt backed by mortgage assets.Asset-backed commercial paper, which accounted for half the market, tumbled $59.4 billion to $998 billion in the week ended yesterday, the lowest since December, according to the Federal Reserve. Total short-term debt maturing in 270 days or less fell $62.8 billion to a seasonally adjusted $1.98 trillion.Commercial paper outstanding has fallen $244.1...

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GDP Increased to 4%

Here is a link to the original report from the BEA.Here is the report from Bloomberg:Surging exports and business spending propelled U.S. growth to the fastest pace in more than a year before turmoil in the credit markets forced the Federal Reserve to warn of a bleaker outlook.Gross domestic product rose at a 4 percent annual rate in the second quarter, the Commerce Department said in Washington, up from an initial estimate of 3.4 percent. The median forecast of economists polled by Bloomberg News was 4.1 percent.The figures may be the peak of...

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GDP Increased to 4%

Here is a link to the original report from the BEA.Here is the report from Bloomberg:Surging exports and business spending propelled U.S. growth to the fastest pace in more than a year before turmoil in the credit markets forced the Federal Reserve to warn of a bleaker outlook.Gross domestic product rose at a 4 percent annual rate in the second quarter, the Commerce Department said in Washington, up from an initial estimate of 3.4 percent. The median forecast of economists polled by Bloomberg News was 4.1 percent.The figures may be the peak of...

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The Markets Are Working Properly; Let Them Work

From the WSJ:On the short end of the maturity spectrum, demand remained solid as investors continued to turn away from risk and seek safety. As a result, the bond-equivalent yield on three-month T-bills fell as low as 3.91%, though it ended the session off that low at 3.984%.Amid the dash for cash, the government's auction of $18 billion in two-year...

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The Markets Are Working Properly; Let Them Work

From the WSJ:On the short end of the maturity spectrum, demand remained solid as investors continued to turn away from risk and seek safety. As a result, the bond-equivalent yield on three-month T-bills fell as low as 3.91%, though it ended the session off that low at 3.984%.Amid the dash for cash, the government's auction of $18 billion in two-year...

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Money

Those who occupy the top positions in Britain's boardrooms have had rather a pleasant year. The BBC report that directors of Britain's leading companies saw their pay jump 37% over the past year. Those in charge of firms listed on London's FTSE 100 index earned, for the first time, more than £1BN in total for the 12 months to the end of June. The best place to be is, of course, a bank - Barclays Bank.Now you know why banks need to keep their charges so hi...

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Today's Markets

What a difference a day -- and more speculation of a rate cut -- makes.As the Briefing noted:Onward and upward remains the driving mantra heading into the final hour of trading. With all eyes on Bernanke this week ahead of his opening remarks at a Fed symposium -- a speech we don't believe will offer as clear-cut a signal about the Fed's next move...

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Today's Markets

What a difference a day -- and more speculation of a rate cut -- makes.As the Briefing noted:Onward and upward remains the driving mantra heading into the final hour of trading. With all eyes on Bernanke this week ahead of his opening remarks at a Fed symposium -- a speech we don't believe will offer as clear-cut a signal about the Fed's next move...

Read More

A Really Good Explanation Of What Has Happened

From Business Week: Making sense of this mess is daunting. One good place to start: the ways various financial players indulged in layer upon layer of leverage, much of it far from transparent. Mortgage lenders threw out common sense underwriting standards. Wall Street sliced and diced the loans, creating the illusion that risk somehow disappeared in the process. Hedge funds then multiplied the leverage by borrowing copiously to buy securities based on the rearranged mortgages. In their version of the game, private equity firms used loads of debt...

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A Really Good Explanation Of What Has Happened

From Business Week: Making sense of this mess is daunting. One good place to start: the ways various financial players indulged in layer upon layer of leverage, much of it far from transparent. Mortgage lenders threw out common sense underwriting standards. Wall Street sliced and diced the loans, creating the illusion that risk somehow disappeared in the process. Hedge funds then multiplied the leverage by borrowing copiously to buy securities based on the rearranged mortgages. In their version of the game, private equity firms used loads of debt...

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Yen and T-Bill

Two keys to the current market situation are the Yen and short-term Treasury bonds. The yen is a proxy for the carry trade (borrowing in another currency and lending/investing in the US), and the T-bill is a proxy for the short-term part of the market. If money is still concerned about volatility, then the T-bill yield will drop. The converse is...

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Yen and T-Bill

Two keys to the current market situation are the Yen and short-term Treasury bonds. The yen is a proxy for the carry trade (borrowing in another currency and lending/investing in the US), and the T-bill is a proxy for the short-term part of the market. If money is still concerned about volatility, then the T-bill yield will drop. The converse is...

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Credit Card Charges

Which? has discovered a game easier than shooting pigs in a barrel, that of criticising the charges made by credit card companies on their hapless customers.Which? state that since the Office of Fair Trading (OFT) ordered a cut in default fees to £12 last year, "ingenious methods" had been used to recoup the income. Needless to say the banking industry has denied that is is acting unfairly, and claims that different fees were inevitable after the OFT ruling. True enough, if they want to maintain their very high levels of profits.Which? highlighted...

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More Charts For the SPYs

Here is a 1-year chart for the SPYs. I added support lines. We have about 1.2% to 1.9% before we hit the lowest support line on the chart.Here's the 3-year chart. Notice1.) The index broke out of a channel in late October 2006. Right now the index is bouncing on top of that channel. I you think of the channel as a mean price channel, than recent...

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More Charts For the SPYs

Here is a 1-year chart for the SPYs. I added support lines. We have about 1.2% to 1.9% before we hit the lowest support line on the chart.Here's the 3-year chart. Notice1.) The index broke out of a channel in late October 2006. Right now the index is bouncing on top of that channel. I you think of the channel as a mean price channel, than recent...

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