Accomplishing the Impossible
#ECB‘s Draghi managed the seemingly impossible: announcing end of #QE & whilst convincingly sounding super dovish, BofAML says. The biggest surprise today: unanimous support for calendar-based forward guidance. That may mean even hawks are worried. German 10y ylds drops to 0.42%. pic.twitter.com/6Q3YyAVARl
— Holger Zschaepitz (@Schuldensuehner) June 14, 2018
Emerging Markets
EM rout continues w/ #Thailand Baht joining EM currency train wreck pic.twitter.com/eyER1DdjoY
— Holger Zschaepitz (@Schuldensuehner) June 15, 2018
Emerging Market Currencies
The stronger dollar + a hawkish Fed + disappointing economic data out of China = yet another blow to emerging-markets assets. EM currencies hit a new 2018 low. pic.twitter.com/fhv28lNbIv
— Lisa Abramowicz (@lisaabramowicz1) June 14, 2018
What’s Next for the Euro?
#Euro teetering on long-term support after a more-dovish-than-exp ECB led to a bearish reversal, BBG writes. Draghi’s plan to wind down QE initially propelled the currency to a 1mth high, only for it to collapse after he pledged to keep record low rates at least until summer 2019 pic.twitter.com/IRXgmemm4u
— Holger Zschaepitz (@Schuldensuehner) June 15, 2018
Eurozone Bond Disconnect
Eurozone Government Bonds are Unsustainably Expensive.
Extremely Disconnected With Reality Due To Massive ECB Intervention.
(Chart shows ETF) pic.twitter.com/p4uUh8oF8V
— Daniel Lacalle (@dlacalle_IA) June 14, 2018
Savers Burnt
Good morning from #Germany where savers get burned by the new #ECB forward guidance. Real German Rates dropped deeper into negative territory after Draghi sees first rate hike by summer 2019 at earliest. 10y German real yields (yields-inflation) at -1.8% near an all-time low. pic.twitter.com/kCGkdLQbHr
— Holger Zschaepitz (@Schuldensuehner) June 15, 2018
Problems Galore
The Problems of Eurozone Banks Go Far Beyond ECB’s Low Rates:
. High exposure to sovereign debt (between 10 and 20% of total assets)
. Lingering non-performing Loans (c€1 trillion)
. ROIC below WACC
. Poor ROTE pic.twitter.com/vPn147esqN— Daniel Lacalle (@dlacalle_IA) June 14, 2018
Here We Go Again
Charles High Smith: Here We Go Again: Our Double-Bubble Economy: https://t.co/q7dsftgZM1 @chsm1th $QQQ $SPY pic.twitter.com/fTpGtFpxGJ
— Lance Roberts (@LanceRoberts) June 14, 2018
Mike “Mish” Shedlock
They have Miami.
What’s wrong with the Argentine peso? Don’t they have a plunge protection team?
This will end badly as investors flee bonds for cash. The losers in bonds will have to sell stocks to pay offset their losses. The next crisis will be in bonds of all kinds. Eventually debt must get paid off or restructured. Combine the crises in 2000-2002 and 2007-2009 and that will be the size, scale and scope of the next crisis. History won’t repeat itself but will rhyme.
Central Banks are (pretending) to tighten and end QE (lol)at the same time money printing will set another all time record (again) this year.CB’s printing so much cash they’re literally runnin out of straw buyers to front the scheme!
That’s one steep slope for the S&P index. Yet the end doesn’t come, but when it does boy will it hurt.