Wednesday, April 17, 2013
Global Interest Rates Plunging
Further evidence that the reflation schemes of the Western Central Bank are apparently failing can be seen in the collapsing yield across the global bond markets.
News out of Europe this morning that March Auto Sales fell to a TWENTY YEAR LOW has shaken the confidence of investors in the demi-gods manning the turrets of the Central Bank towers. It seems as if even the mighty German economy, which has heretofore been the stalwart among the European economies is not immune from weakness.
Dow Jones is reporting that the Swedish Central Bank just cut that nation's growth outlook for 2014. The Bank of Canada lowered its forecast for this year. Remember, it was just yesterday that we received the projections from the IMF detailing their prognosis for global growth by revising it lower as well.
The result - a mass exodus out of stocks (for the time being) and back into the "safety" of sovereign debt. Investors figure that the Central Banks will be there to mop up any excess supply of bonds in effect watching their backs for them.
Need some evidence? Look at the chart below. The yield on the Ten Year Treasury note has hit a FOUR MONTH LOW in today's session. It was over 2% a little over a month ago and is now down below 1.7%.
This is what has Fed governor Bullard so concerned. These guys can read what is happening. It is also why copper and crude oil, two key economic barometers continue to plunge.
What will the Central Banks do if they current bond buying programs still cannot generate enough consumers/businesses to borrow and spend????
By the way, I laid out the data in this format because this type of chart tends to cut through the "noise" and give a cleaner view of the larger trend.
News out of Europe this morning that March Auto Sales fell to a TWENTY YEAR LOW has shaken the confidence of investors in the demi-gods manning the turrets of the Central Bank towers. It seems as if even the mighty German economy, which has heretofore been the stalwart among the European economies is not immune from weakness.
Dow Jones is reporting that the Swedish Central Bank just cut that nation's growth outlook for 2014. The Bank of Canada lowered its forecast for this year. Remember, it was just yesterday that we received the projections from the IMF detailing their prognosis for global growth by revising it lower as well.
The result - a mass exodus out of stocks (for the time being) and back into the "safety" of sovereign debt. Investors figure that the Central Banks will be there to mop up any excess supply of bonds in effect watching their backs for them.
Need some evidence? Look at the chart below. The yield on the Ten Year Treasury note has hit a FOUR MONTH LOW in today's session. It was over 2% a little over a month ago and is now down below 1.7%.
This is what has Fed governor Bullard so concerned. These guys can read what is happening. It is also why copper and crude oil, two key economic barometers continue to plunge.
What will the Central Banks do if they current bond buying programs still cannot generate enough consumers/businesses to borrow and spend????
By the way, I laid out the data in this format because this type of chart tends to cut through the "noise" and give a cleaner view of the larger trend.
Federal Reserve's Bullard: Worried that Inflation is too Low
That is the headline on one of the Dow Jones newswire this AM.
Bullard is head of the St. Louis Federal Reserve Bank (that is the one with all those nifty databases by the way on economic statistics).
He made a comment about the Personal Consumption Expenditures Price Index or PCE as it is commonly referred to and noted that he was concerned about it "running very low."
I have to give credit to Mr. Bullard when he noted that the Fed is limited in its ability to impact the labor market. He said that is best left to labor market policies themselves.
Bullard appears to be uncomfortable with the Fed's focus on the unemployment number as a target for its bond buying programs.
I bring this up this AM because Copper is breaking down and entering Bear market territory while Crude Oil and gasoline prices are also weak. We will want to keep an eye on that.
Grains are also mixed this morning with the exception of new crop corn that is up over planting delays ... completely unwarranted in my view... associated with the cooler than normal weather in the Midwest, and some strength in wheat. Market participants are constantly underestimating the ability of the US farmer to get a crop in the ground. They will plant in the dark if they have to.
Gold is showing strength at this juncture however as it appears the growing number of reports detailing extraordinary demand for the metal, particularly overseas in Asia, are perhaps making some bears a bit less aggressive this morning. Truth be told, I do not like to see markets pop like this without retesting the recent lows. Spiking bottoms make risk/reward decisions very difficult. Better to see the market move lower and see whether it uncovers more selling or more buying on the way back down. That is a much better signal.
The problem for gold today remains what it has been seemingly forever now; the gold shares are continuing to sink lower stretching that HUI-Gold ratio to nearly cosmic proportions. Something is going to need to give here fairly soon. Either these gold stocks are going to bottom or the price of gold is going to have to move lower yet.
When you are knocking on levels seen at the very inception of a generational bull market ( it began in 2001 - the ratio is at the exact same level now as it was then), something is amiss. Keep in mind that the ratio at that time was at a low because gold was coming out of a TWENTY YEAR BEAR MARKET that began back in 1980 after it peaked out near $850. Here we are after a decade plus BULL MARKET and already the ratio is down at the same level it was at the end of a TWO DECADE BEAR MARKET. That makes no sense to me whatsoever in just thinking about it.
I am not sure what the market is saying about some of these mining shares but one has to wonder if we are going to soon see some very big changes in that industry.
Incidentally, the US DOLLAR is on the receiving end of safe haven flows today with the Euro, the Pound and Swissie all sharply lower. The commodity currencies are also weak with the Yen coming well off its overnight lows as it too continues to get those safe haven flows for some bizarre reason that I will never be able to understand.
Silver is holding up better than I expected given the sharp down day in the Copper market but it seems to be getting some support from the resilience in gold this morning.
Bullard is head of the St. Louis Federal Reserve Bank (that is the one with all those nifty databases by the way on economic statistics).
He made a comment about the Personal Consumption Expenditures Price Index or PCE as it is commonly referred to and noted that he was concerned about it "running very low."
I have to give credit to Mr. Bullard when he noted that the Fed is limited in its ability to impact the labor market. He said that is best left to labor market policies themselves.
Bullard appears to be uncomfortable with the Fed's focus on the unemployment number as a target for its bond buying programs.
I bring this up this AM because Copper is breaking down and entering Bear market territory while Crude Oil and gasoline prices are also weak. We will want to keep an eye on that.
Grains are also mixed this morning with the exception of new crop corn that is up over planting delays ... completely unwarranted in my view... associated with the cooler than normal weather in the Midwest, and some strength in wheat. Market participants are constantly underestimating the ability of the US farmer to get a crop in the ground. They will plant in the dark if they have to.
Gold is showing strength at this juncture however as it appears the growing number of reports detailing extraordinary demand for the metal, particularly overseas in Asia, are perhaps making some bears a bit less aggressive this morning. Truth be told, I do not like to see markets pop like this without retesting the recent lows. Spiking bottoms make risk/reward decisions very difficult. Better to see the market move lower and see whether it uncovers more selling or more buying on the way back down. That is a much better signal.
The problem for gold today remains what it has been seemingly forever now; the gold shares are continuing to sink lower stretching that HUI-Gold ratio to nearly cosmic proportions. Something is going to need to give here fairly soon. Either these gold stocks are going to bottom or the price of gold is going to have to move lower yet.
When you are knocking on levels seen at the very inception of a generational bull market ( it began in 2001 - the ratio is at the exact same level now as it was then), something is amiss. Keep in mind that the ratio at that time was at a low because gold was coming out of a TWENTY YEAR BEAR MARKET that began back in 1980 after it peaked out near $850. Here we are after a decade plus BULL MARKET and already the ratio is down at the same level it was at the end of a TWO DECADE BEAR MARKET. That makes no sense to me whatsoever in just thinking about it.
I am not sure what the market is saying about some of these mining shares but one has to wonder if we are going to soon see some very big changes in that industry.
Incidentally, the US DOLLAR is on the receiving end of safe haven flows today with the Euro, the Pound and Swissie all sharply lower. The commodity currencies are also weak with the Yen coming well off its overnight lows as it too continues to get those safe haven flows for some bizarre reason that I will never be able to understand.
Silver is holding up better than I expected given the sharp down day in the Copper market but it seems to be getting some support from the resilience in gold this morning.
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