Monthly Archives: January 2017

Sorry Kids

I was listening to some extremely low brow unfunny "progressive talk" radio while the tag line "Because facts matter" was being smashed into my brain. In our last Dog Barks post, we pointed to financial TV and the connection to "fake news." Today, a debate team bench warmer and Mensa failure pile offered up the mental ort that bank stocks were performing well because the yield curve had steepened over the preceding reporting period - or some such. (If you want word for word contact Monica Crowley)

Sorry kids, but facts don't matter. What matters is filling up hours of live feed and bandwidth so you remain connected to your screens. Clearly this individual's understanding of NIM is limited to The Great Owl Book #GIK. Also, the quiet pressure on the curve since Op Twist and Re-Investment has been a topic for serious practitioners for years now.

Here's a thought, vet the guest. Have an anchor ready to challenge "sell side derpitage" (Check my Twitter tag) at ;east on some base level of civility. And finally, think about the offset of a sharper curve - should it ever happen - now that banks are loaded with FI assets of longer duration than past generations.

Dog Paws

The Kibble:

The rotation of the last digit in the Gregorian year count causes an eruption in momentary score keeping that we are not immune to. Our mantra of the past several years has been "Anything but Treasuries." Last year, despite the recurring hype of bullish TLT mouth breathers, the chasm between T's and everything else gapped wider. Although avoiding owning government fixed income for capital gains is easy, shorting said obligations is a tricky professional exercise. Our early thoughts for next year are other countries, especially those still stuck in "The Upside-down" are going to have rough times. The JGB meltdown story was noticeably missing in primary financial news wrap ups. Tops are long drawn out affairs and the 35 year Bond Bull is dying a Francisco Franco length death (GIK).

The Bone:

The Cinco closed at 1.93 and one of our favorite cheat sheet indicators held up again. On Dec 22, the BEA said Q3 GDP advanced 3.5%. Long time readers know we advance a parlor trick that GDP should track the nominal 5 year plus inflation. (1.93 + 1.7 = 3.63 for smart phone addicted Millenials no longer able to perform simple human functions without hand-held assistance.) [Other goofy compasses we watch, like our equilibrium FF rate also held up well last year] Eight years of incredible global monetary lifting has left a significant legacy of advancement despite the pedestrian outrage of the opposition. The trouble with the prosperity is the foundation it rests on now that the flow is being dialed back. The paucity of IPO's is less a warning sign on markets than a trend we highlighted toward keeping money making enterprises private in a world awash in capital.

The Meat:

The market is going to take a shot in the first quarter. There will be a laundry list of pseudo-reasons to apply to the action in a post-truth, post-fact world. Anyone who has watched financial television knows "post-truth" didn't come along in 2016, it just reached drinking age. Global monetary pornography as policy stretched the relationship between "the market" and "the economy." We think an evaluation of the link in a pull back is about to unfold. For context, the best performing thing (I can really called it an asset class) in 2016 was - and I quote - "an electronic currency not backed by a government or central bank but by a code launched in 2009 by an anonymous cryptographer. It works through a network of servers (hopefully not DNC servers) that produce coins by solving complex equations and then sharing information about transactions and ownership." WSJ B10 Dec 31 2016. ( Dog takes deep breath, quaffs clear distilled spirit w olive) Almost all of Bitcoin shenanigans takes place in gambling obsessed  China. The WSJ continues: "When people started complaining on Twitter that Airbnb didn't accept bitcoins as payment CEO Brian Chesky responded; 'Wow, didn't realize this!' This stuff, my friends, doesn't happen at bottoms.