Seeking Alpha

Salmo trutta

Salmo trutta
Send Message
View as an RSS Feed
View Salmo trutta's Comments BY TICKER:
Latest  |  Highest rated
  • The Midnight Sun - Part 3 - Go? [View article]
    A crucible separates impurities, not confabulates them.

    See also: W.R. Wees "Nobody Can Teach Anyone Anything" - 1971
    May 3, 2015. 11:58 AM | Likes Like |Link to Comment
  • The Transactional Velocity Effect Of Speculation And Financialism [View article]
    That’s a disingenuous argument. No one’s ever talked about Fed-wire transactions and gDp but you (they’re no different than clearinghouse transactions, where some are netted, some reflect credits - not debits…).

    If you don’t like macro-economics, maybe you should familiarize yourself with technical analysis, viz., "Volume is an important aspect of technical analysis because it is used to confirm trends and chart patterns"

    “In finance, technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume.”

    Leastwise, grad students’ dissertations in the 60’s proved otherwise.

    And in 1931 a commission was established on Member Bank Reserve Requirements. The commission completed their recommendations on Feb. 5, 1938 (after deliberating for 7 years). The study was entitled "Member Bank Reserve Requirements -- Analysis of Committee Proposal"

    It's 2nd proposal: "Requirements against debits to deposits"
    May 2, 2015. 06:20 PM | 3 Likes Like |Link to Comment
  • The Midnight Sun - Part 3 - Go? [View article]
    "Libor, as its continuing rise is an indicator of declining Eurodollar liquidity"
    -----------

    Libor's up, because along with oil prices, E-Dollar loan demand is up (corresponding to the bottom in economic activity in the U.S.). The world-wide economy has also bottomed.

    See SA:

    Chris Puplava: "Biggest Inflection Point For 2015 Happening Right Now"

    Bill Gross is right, viz., "a negative yield German bund might be the greatest short of all time".
    -----

    And not all ”liquidity squeezes” are caused by the same factors:

    (1) re-regulation of the financial markets, viz., initial compliance with Dodd-Frank and the SEC’s 2010 Consumer Protection Act (which will discourage the use of commercial paper vs. gov’t securities), and “newly-mandated liquidity coverage ratio (a bank is now required to have 30 days of "liquid" assets on hand; and, of course, U.S. Treasuries count as 100% liquid, while private sector credits, like Walmart paper, only count as 50%!”).

    (2) e.g., Oct 15, 2014, where un-balanced trading volumes, lead to illiquid (wider bid/asked spreads), and unjustified short-term price movements. These are the direct result of the Fed’s monetary policy mistakes, viz., abrupt changes in the rate-of-change in commercial bank credit (and corresponding liability flows).

    (3) Carry trades gone awry. Widely fluctuating interest rates in the funding currency and/or abrupt changes in the exchange value of one or both currency pairs.

    I.e., some liquidity problems are (1) regulatory, some (2) market-based (cost of credit), relating to domestic or international asset-liability (duration), mis-matches, and some are (3) unintentionally Fed driven (contracting CB credit).

    See Bloomberg:

    "Diminishing market depth and a surge in volatility were both on display Oct. 15, when Treasuries experienced the biggest yield fluctuations in a quarter century in the absence of any concrete news. The swings were so unusual that officials from the New York Fed met the next day to TRY AND FIGURE OUT WHAT ACTUALLY HAPPENED"

    And what passes for a liquidity squeeze (trading volume disturbs prices), may actually be a credit crunch (the unavailability of new credit, or curtailment of existing credit). And this may or may not be related to the mis-allocation, or mal-distribution of available credit (e.g., rules and regulations that incentivize and subsidize affordable housing).

    A credit crunch typically exists because there is dis-intermediation (an outflow of funds or negative cash flow), within the non-banks. I.e., there hasn’t been a commercial bank run since the Great-Depression (when the CB’s backstops were introduced in 1933).

    A credit crunch revolves around the use or non-use of voluntary savings, e.g., (1) the FDIC’s unlimited transaction deposit insurance attracted loan-funds (available savings), from the non-banks, precipitating a liquidity crisis, or (2) remunerating excess reserve balances during LSAPs, or open market operations of the buying type (just as raising Reg. Q ceilings for the CBs in Dec. 1965 caused the 1966 S&L credit crisis).

    As I said before the BEA released preliminary 4th qtr. gDp figures:

    Flow5January 13, 2015 at 8:38 AM

    Rates-of-change in monetary flows, our means-of-payment money times its transactions rate-of-turnover, or the proxy for inflation, has fallen by 2/3 since January 2013.

    Rates-of-change in the proxy for real-output held up until July 2014, but has since fallen by 1/2.

    So aggregate monetary purchasing power, or as Keynes called it, nominal-gDp (which is a proxy for all transactions in Irving Fisher's "equation of exchange"), has taken a big hit.

    The Fed has unintentionally set up a liquidity squeeze, collapsing commodities, artificially raising the dollar's exchange value, and suppressing longer-dated bonds. WHERE ARE THE N-gDp TARGETING ADVOCATES WHEN THEY’RE DESPERATELY NEEDED?
    May 2, 2015. 04:47 PM | 1 Like Like |Link to Comment
  • The Transactional Velocity Effect Of Speculation And Financialism [View article]
    "transactions have no direct relationship even to the income"

    Wrong. Rates-of-change in bank debits mirror roc's in N-gDp, R-gDp and inflation.
    May 1, 2015. 08:49 AM | 2 Likes Like |Link to Comment
  • Dead Money U.S. Dollar; The OIS Transformation [View article]
    "Repo rates have been most prone to go negative, a situation known as "specials" in the market, in the days preceding an auction as traders who previously sold the debt seek to buy the securities to cover those positions"

    "The concern is that dealers, which have pared inventories to meet more-stringent capital requirements required by the 2010 Dodd-Frank Act mandated by the Volcker Rule and Basel III, won’t have as much capacity to handle any surge in volumes or volatility"

    "Securities Industry and Financial Markets Association data show the average daily trading volume in Treasuries has fallen to $504 billion this year from $570 billion in 2007, even though the amount outstanding has risen to more than $12 trillion from $4.34 trillion."

    "The Fed is partly to blame. Through its policy of quantitative easing, it now owns about 20 percent of all Treasuries, or $2.39 trillion. Banks hold $547 billion of Treasury and agency-related debt."

    "In addition, the Fed’s holdings have shifted in ways that leave fewer central-bank-owned Treasuries available to be borrowed. The shifts were caused by Operation Twist during the November 2011 to December 2012 period when the Fed sold shorter-dated Treasuries and bought more bonds, plus self-imposed central-bank restrictions on holdings of specific maturities."

    "The Fed’s lack of certain holdings “appears to be driving the surge in fails, which has been concentrated in the on-the-run five- and 10-year notes,” "
    Apr 30, 2015. 02:14 PM | 1 Like Like |Link to Comment
  • The Fed And Duration [View article]
    "Simply put, a lowering or shortening of duration acts as a tightening, and a lengthening of duration acts as an easing. This is so even if the size of the Fed's balance sheet remains constant"
    ---------------

    Not if the SOMA securities purchased by the FRB-NY's "trading desk" are "on the run" (most recently issued). And not if the Treasury's issuance conflicts with monetary policy objectives (is un-collaborated and un-coordinated).
    Apr 30, 2015. 01:20 PM | 1 Like Like |Link to Comment
  • GDP Gap: 10% And Growing [View article]
    It's not possible to close the gDp “gap” without eliminating the payment of interest on excess reserve balances (an extraordinary monetary policy mistake).

    Remunerating excess reserves induces dis-intermediation among just the non-banks (where savings are matched with investments). I.e., it subsidizes and incentivizes commercial bank financing at the expense of non-inflationary real-investment, i.e., eliminates the only vehicle where savings can be “put to work”.
    Apr 29, 2015. 09:54 PM | 3 Likes Like |Link to Comment
  • If The Economy Is Slowing, Why Aren't Rates Falling? [View article]
    It's not about the Fed raising policy rates. The Fed follows interest rate movements. As the Fed stopped monetizing trillions of dollars of Treasury and agency debt, i.e., stopped its quantitative easing programs (which, by taking debt off the seecondary markets; artificially suppressed rates; lowering the interest expense on federal deficits; and created negative "real" rates), then inevitably, the demand side factor, the current and expected colossal government deficit financing, operating in the loan-funds market, takes back over.

    Any economic recovery will present a“catch 22” situation. An economic upturn will add increased private-sector demand for loan-funds to the insatiable demands of the public-sector. The consequent rise in interest rates, "crowding out", has the potential to short-circuit economic growth.
    Apr 29, 2015. 09:27 PM | 2 Likes Like |Link to Comment
  • Dead Money U.S. Dollar; The OIS Transformation [View article]
    “The drop in the OIS rate, rather than echo policy expectations for deeper and deeper rate cuts, may have been reflective of growing illiquidity in repo markets and an increased desire to term out funding at (almost) any cost”
    -----------------

    The monetary transmission mechanism for (1) domestic banks (policy rates), and (2) the unregulated operation of the international E-Dollar System (liquidity reserves), aren’t exactly synonymous. The E-D market was collapsing (as the flight-to/demand for “safe-assets” set up significant bid/asked in-balances (short-squeeze rally), and was a precursor of the subsequent E-D market’s contraction (which pricked the commodity bubble in July 2008).

    The destabilizing and self-reinforcing contraction of the E-D market had no backstop until the Fed established: “Standing Lines for U.S. Dollar and reciprocal foreign currency arrangements (swap lines) late as always, in Dec. 2007. And “temporary swap lines have now been converted to standing arrangements”.

    “They are designed to improve liquidity conditions in global money markets and to minimize the risk that strains abroad could spread to U.S. markets, by providing foreign central banks with the capacity to deliver U.S. dollar funding to institutions in their jurisdictions.”
    ---------------

    “This run, slightly different from individual depositors rushing to get their money back, has been building in the form of U.S. money market funds and U.S. banks taking back short-term loans of dollars to European banks. The dollar lenders have retreated out of fear that some banks could be insolvent because they own too much bad debt from countries including Greece, Italy, Portugal and Spain.

    To repay the dollars they owe, the European banks could be forced to sell, or call in for repayment, loans they have made in dollars to businesses, including companies in the United States.

    "It could lead to fire sales of assets, which would have further spiraling effects on other firms in the economy," See:

    http://reut.rs/1GG9l4G
    -----------------

    See dollar swap data:

    http://bit.ly/1GG9l4L
    --------------------

    "the wholesale system does not follow "money supply" indications and interpretations"

    Gibberish. The "wholesale system" (the world-wide supply and demand for loan-funds), is inextricably linked to the E-Dollar System. And dollar hegemony still exists in that the E-Dollar System’s liabilities are larger than the domestic member banks'. I.e., "when the U.S. sneezes, the rest of the world still catches a cold”.

    The decline in the roc in money flows, from January 2013 until December 2014, by 2/3 (proxy for inflation), demonstrates this influence (propelled a 22 percent rise in the dollar’s exchange rate).

    See: The Nattering Naybob

    The Fed's Quandary With Uncle ED (Eurodollar)

    From Cecchetti and Schoenholtz:

    "The dollar accounts for 80% of trade finance and 87% of foreign currency market transactions. The fact of the matter is that there is a parallel dollar-based financial system - call it the "Global Dollar system" - that operates outside the United States... [where] mostly financial institutions - have issued dollar liabilities of more than $15 trillion. This volume of Global Dollars exceeds the total liabilities of banks operating within the United States. If dollar swap lines are to be part of the permanent crisis response toolkit, we need a clear set of rules to prevent banks outside the United States from relying too heavily on dollar loans from central banks."

    From January 2015, BIS working paper 483:

    "In December 2013, about 80% of the dollar bank loans to borrowers resident outside the U.S. were booked at banks outside the U.S. Moreover, these U.S. dollar loans are not funded by borrowing from banks in the U.S. Banks headquartered outside the U.S. shifted after the global financial crisis from a "net due to" position vis-à-vis their branches in the U.S. to a "net due from" these branches. In other words, dollar funding flowed into the U.S. through non-US headquartered banks' balance sheets. Following the money, lower yields on safe Treasury securities led investors to shift flows into riskier bond funds."
    Apr 29, 2015. 02:54 PM | 3 Likes Like |Link to Comment
  • Pop Macroeconomics [View article]
    This author matriculated at Chicago but doesn't know what money is (but that doesn't stop him from trying to "put on a show" either.
    Apr 29, 2015. 01:03 PM | 1 Like Like |Link to Comment
  • The Taylor Rule: A Benchmark For Monetary Policy [View article]
    The Taylor rule is ex-post. And Bankrupt U Bernanke caused the world-wide Great-Recession all by himself (regulatory malfeasance notwithstanding). The man should literally be in jail for high treason.

    Monetary policy objectives should be formulated in terms of desired rates-of-change, roc's, in monetary flows, M*Vt, (our means-of-payment money times its transactions rate-of-turnover), relative to roc's in R-gDp.

    Roc's in N-gDp can serve as a proxy figure for roc's in all transactions [ P*T ] in Irving Fisher's "equation of exchange" (though "raw materials, intermediate goods and labor costs, which comprise the bulk of business spending are not treated in N-gDp"). Roc's in R-gDp have to be used, of course, as a policy standard.
    Apr 29, 2015. 12:51 PM | 1 Like Like |Link to Comment
  • Why Markets Are Manic- The Fed Is Addicted To The 'Easy Button' [View article]
    There's a 25 year "reverse point wave signal" on the S & P 500. Based on the historical record, the RPWS has an 85 percent chance of being correct (see Wells Wilder’s technical analysis). This configuration was originally published in “Technical Analysis of Stock Trends by Edwards and MaGee”

    Regardless, stock P/E ratios will compress when long-term monetary currents (inflation), run counter to what should be a higher short-term current (real-output).
    Apr 28, 2015. 01:48 PM | 2 Likes Like |Link to Comment
  • All-Out Bubble Mania - With Zero Cushion! [View article]
    Casino is apt. Financial investment isn't some original recipe for the new and improved production (larger output and lower unit costs) of widgets, nor does it contribute to sustainable wage growth and the creation of jobs. If the "wealth effect" (and accompanying higher margin debt, M&A activity), was indeed correct (copy and paste), 1929 would have ushered in a new era.

    And “stock ownership among U.S. adults is at its lowest level in Gallup trends since 1998”… “Over 75% of all U.S. stock is owned by households that earn more than $100,000 a year. Only one-third of US households owned stock portfolios worth at least $5,000, as of 2010. The richest 5% of U.S. households owned about 2/3rds of all stock in 2010. The bottom 60% of U.S. households own a mere 2.5% of outstanding shares of stock.”

    I.e., the “wealth effect” is the re-distribution of income – upward, not downward, and is inimical to the operation of a free capitalistic society (and democracy).

    Alas, only debt growing out of real-investment (used to finance plant and equipment expansion, or new construction), or consumption, makes an actual, direct demand, for labor and materials (expands real-output).
    Apr 28, 2015. 01:00 PM | 1 Like Like |Link to Comment
  • Is 2% Core Inflation The Fed's Target, Or A Ceiling? [View article]
    "So long as the interest rate on the seven year security is less than the inflation rate"

    Of course, that's my point, viz., "real" rates predominate (and this excludes the power of compound interest).
    Apr 28, 2015. 11:16 AM | 2 Likes Like |Link to Comment
  • October 15th Bond Market Crash Explained [View article]
    "I'd like to know who is attempting to manipulate the mkts and why"

    Oct 15 was entirely Janet Yellen's mistake. There will always be in-balances in buy/sell orders given a surgically sharp drop in money flows (which no one at the Fed knows how to measure and track).

    Yellen shirks the idea that the Fed should stabilize prices (prevent disorderly and unjustified price movements in the bond market). In fact it is now almost impossible for the FRB-NY's "trading desk" to make those swift adjustments as the Fed has emasculated its open market power (the power to create new money and credit on a weekly basis (today they can't do it even on a quarterly basis).
    Apr 27, 2015. 01:33 PM | 1 Like Like |Link to Comment
COMMENTS STATS
2,893 Comments
2,008 Likes