Real Interest Rates
Remember real interest rates? By Gresham’s Law. Here we present a consolidated view of real interest rates around the globe.
As usual real interest rates in the perpetually-monetizing West are in deep negative territory (although be warned that they’re moving strongly higher at present).
In contrast, real rates in Japan and the Czech Republic are deteriorating rapidly.
The Treasury Bubble
Guest post by Azizonomics.
What are the classic signs of an asset bubble? People piling into an asset class to such an extent that it becomes unprofitable to do so.
Treasury bonds are so overbought that they are now producing negative real yields (yield minus inflation):
That’s right, after taking into account inflation, many investors in treasuries are standing over a drain and pouring their money down it.
And so America’s creditors are now getting slapped quite heavily in the mouth by the Fed’s easy money inflationist policies.
I propose (much, I am sure, to the consternation of the monetarist-Keynesian “print money and watch your problems evaporate” establishment) that this is a very, very, very dangerous position. And I propose that those economists who are calling for even greater inflation are playing with dynamite.
See, while the establishment seems to largely believe that the negative return on treasuries will juice up the American economy — in other words that “hoarders” will stop hoarding and start spending — I believe that negative side-effects from these policies may cause severe harm.
Remember the Flash Crash?
The Trader has written on the HFT many times over the past years. Just a small reminder of the Flash Crash that occured two years ago. Via Forbes.
Two years ago, an accidental trade in the midst of a jittery market set off a cataclysmic plunge that seemed to defy all reason and pulled back the curtain on high-frequency trading for millions of investors who had no idea that computer-driven strategies account for the lion’s share of daily market volume.
That day, big-name stocks like Accenture,Procter & Gamble, IBM and a number of others traded like penny stocks. With massive plunges in a matter of seconds as the broader market cratered and the Dow Jones industrial average showed a loss of nearly 1,000 points in a matter of minutes before recovering.
The Flash Crash, as it became known in short order, prompted plenty of finger-pointing outside the financial industry and within. Congressmen and regulators made pledges to address the issues and plenty of market watchers warned that mom and pop would be scared out of the market.
There are plenty of recaps you can read on the Flash Crash (here’s one I wrote on the report regulators released on the event), but this video sums up the feeling of that day pretty well:
Eurozone spreads
European spreads are edging higher today. Chart showing how far from the highs we are trading.
Courtesy McDonough of Bloomberg Brief.
The Aftermath of Friday’s BLS “Findings”
Biderman on those BLS figures. Last Fridays’s Bureau of Labor Statistics release said 115,000 new jobs were created in April. However, if you read the footnotes, what Friday’s report really says was that the BLS is 90% certain that April new jobs were between 15,000 and 215,000. Mind you, the BLS did not say 100% only 90% certain. That means it could be negative or wildly positive.
Meanwhile, a 200,000 gap in new jobs is so wide that it makes the entire report meaningless.
Yet, not one story I read said anything other than 115,000 new jobs were added in April, as emphatically as if the 115,000 number came straight from the burning bush. Yes, our good friend Dennis Gartman did write about the plus or minus 100,000 uncertainty, but no one else I saw. Video below.
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