Monthly Archives: January 2016

The Ghost Rate

Over the past 48 hours, two significant posts crossed my desk. The first was the news that 4 of the 6 cabal members charged in the LIBOR manipulation scandal were found not guilty. These were brokers who were on trial for a specific charge of working in agreement with Tom Hayes. The case was poorly constructed and the verdicts fell. The public story that Mr. Hayes was responsible for, or the lead agent in, the largest financial scandal in history is a dummed-down version of reality. The truth is, for those of us that were there, the entire market was a ramp up of a change in the reporting set that regulators were too inane to understand, The "OR" in LIBOR stands for "offered rate." The original set was based on the reporting and averaging of submissions of the rate at which one was offered money. As bid/ask spreads collapsed and the rate structure became the benchmark (remember that term) for the global financial system, the cabal asked for-and was granted - the right to submit the rate at which they would borrow money. The difference between "would" and "could" went from minimal to unavailable as the crisis unfolded.

Yesterday, the brilliant mortgage specialist Harley Bassman, now at a small west coast FI firm called PIMCO, penned an excellent piece on the global financial system "benchmark rate." And the winner was?? You guessed it, the sullied reputation. now rarely mentioned rate at which banks don't borrow from one another, LIBOR. Its a great piece and takes pains to differentiate between "risk free" and "benchmark" and open your mind to a possibility. Go read it,

The irony of these 2 stories crossing my stream on consecutive days is not lost on a semi-reclusive former player in the above mentioned mud. Beside the court's inability to prosecute a known crime successfully is the post-crisis understanding that pulling the curtain back on systemic fraud brings scary and systemic litigations. However, I am pleased to see a respected player posit the notion that the rate remains - with all its tarnish - the proper global benchmark to calibrate by. In fact, I have calibrated my concept of the neutral FF rate by it for decades. Sovereign, GSE and corporate risk can be better understood through this "cartel formed" rate, Negative swap spreads are not as difficult a phenomenon to grasp.

Here's my take: The global financial system is benchmarked to a myth. A ghost rate. A rate that exists only in the minds of the participants that in their most private moments know they could not fund at. A rate that were it to quake governments from developed and mercantilist nations would jump to stabilize. The global term structure of rates is based on a sanctioned fraud. But somehow it works.

Classical Friday

30 minute atr

240 minute atr

daily atr

daily pivots

weekly pivots

monthly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
  8:30 am GDP (Consensus 0.9% v Prior 2.0%)
                 International Trade (Consensus $-60.1B v Prior $-60.5B)
                 Employment Cost Index (Consensus 0.6% v Prior 0.6%)
  9:45 am Chicago PMI (Consensus 45.5 v Prior 42.9)
10:00 am Consumer Sentiment (Consensus 93.0 v Prior 93.3)
  1:00 pm Baker-Hughes Rig Count
  3:00 pm Farm Prices
Speaking today:-
  2:45 pm John Williams

 

Classical Thursday

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weekly pivots

monthly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
  8:30 am Durable Goods Orders (Consensus 0.2% v Prior 0.0%)
                Jobless Claims (Consensus 285 K v Prior 293 K)
  9:45 am Bloomberg Consumer Comfort Index
10:00 am Pending Home Sales (Consensus 0.8% v Prior -0.9%)
10:30 am EIA Natural Gas Report
11:00 am Kansas City Fed Manufacturing Index
                3 Month Bill Announcement
                6 Month Bill Announcement
                52 Week Bill Announcement
  1:00 am 7 Year Note Auction

4:30 am Fed Balance Sheet
Money Supply

All things bonds

30 minute atr

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weekly pivots

monthly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
  7:00 am MBA Mortgage Applications
10:00 am New Home Sales (Consensus 500K v Prior 490 K)
10:30 am EIA Petroleum Status Report
11:30 am 2 Year FRN Note Auction
  1:00 pm 5 Year Note Auction
  2:00 pm FOMC Meeting Announcement

Classical Tuesday

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daily atr

daily pivots

weekly pivots

monthly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-

FOMC Meeting begins

8:55 am Redbook
9:00 am FHFA House Price Index (Consensus 0.5% v Prior 0.5%)
S&P Case-Shiller HPI (Consensus 0.7% v Prior 0.9%)
9:45 am PMI Services Flash
10:00 am Consumer Confidence (Consensus 96.0 v Prior 96.5)
Richmond Fed Manufacturing Index
State Street Investor Confidence Index
11:30 am 4 Week Bill Auction
1:00 pm 2 Year Note Action

Classical Monday

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daily atr

daily pivots

weekly pivots

monthly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
10:30 am Dallas Fed Manufacturing Survey (Consensus -14.0 v Prior -20.1)
11:00 am 4 Week Bill Announcement
11:30 am 3 Month Bill Auction
                6 Month Bill Auction

Classical Friday

30 minute atr

240 minute atr

240 minute atr

daily pivots

weekly pivots

monthly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
  8:30 am Chicago Fed National Activity Index
  9:45 am PMI Manufacturing Index (Consensus 51.0 v Prior 51.3)
10:00 am Existing Home Sales (Consensus 5.20 M v Prior 4.76 M)
                Leading Indicators (Consensus -0.1% v Prior 0.4%)
  1:00 pm Baker-Hughes Rig Count

 

Classical Thursday

30 minute atr

240 minute atr

daily atr

daily pivots

weekly pivots

monthly pivots

upside extensions

downside extensions

regression channels

support
On the economic calendar:-
  8:30 am Jobless Claims (Consensus 275 K v Prior 284 K)
                Philadelphia Fed Business Outlook Survey (Consensus -4.0 v Prior -5.9)
  9:45 am Bloomberg Consumer Comfort Index
10:30 am EIA Natural Gas Report
11:00 am EIA Petroleum Status Report
                3 Month Bill Announcement
                6 Month Bill Announcement
                2 Year Note Announcement
                2 Year FRN Note Announcement
                5 Year Note Announcement
                7 Year Note Announcement
  1:00 pm 10 Year TIPS Auction
  4:30 pm Fed Balance Sheet
                Money Supply

 

Classical Wednesday

30 minute atr
240 minute atr
daily atr
daily pivots
weekly pivots
monthly pivots
upside extensions
downside retracements
regression channels
support
On the economic calendar:-
  7:00 am MBA Mortgage Applications
  8:30 am Consumer Price Index (Consensus 0.0% v Prior 0.0%)
                 Housing Starts (Consensus 1.200 M v Prior 1.173)
  8:55 am Redbook

11:30 am 4 Week Bill Auction

Classical Tuesday

30 minute atr

240 minute atr

daily atr

daily pivots

weekly pivots

monthly pivots

upside extensions

downside retracements

regression channels

support and resistance
On the economic calendar:-
10:00 am Housing Market Index (Consensus 62 v Prior 61)
11:00 am 4 Week Bill Announcement
11:30 am 3 Month Bill Auction
                6 Month Bill Auction
  4:00 pm Treasury International Capital