Geschrieben von hkarner - 7. Februar 2014
One of the most universal consensus calls in the markets today is that interest rates are destined to rise. Thirteen out of 13 major investment banks all think that interest rates for global fixed-income will rise this year. I get nervous when everybody is on the same side of the boat. And so does my good friend and business partner Niels Jensen of Absolute Return Partners in London. This week’s Outside the Box is another of his thoughtful essays, giving us five reasons why interest rates may in fact go down this year. That is not to say that we don’t both agree that rates have to go back up eventually, but to us the timing is not so obvious as it is to the major investment banks. Rather than tip his thunder, I’ll let Niels advocate for his position. (And you can see more of his consistently excellent work at www.arpinvestments.com.)
Challenging the Consensus
“The noble title of ‘dissident’ must be earned rather than claimed; it connotes sacrifice and risk rather than mere disagreement.”
Christopher Hitchens, Polemicist
Herd mentality is one of the strongest and most powerful human instincts. Humans take great comfort from walking the same path as others have walked before them, and nowhere is this more evident than in the field of investments. Most investors are simply incapable of disregarding the consensus when making investment decisions, if for no other reason than because ‘being out there on your own’ is associated with considerable career risk (I wrote about this back in October 2012 – see here). Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Bonds, emerging economies, Interest, Jensen, Mauldin | Leave a Comment »
Geschrieben von hkarner - 4. Dezember 2013
Today’s Outside the Box comes to us from my good friend and business partner Niels Jensen of Absolute Return Partners in London. Niels gives us an excellent summary of how QE has affected the global economy (and how it hasn’t). I have found myself paraphrasing Niels all week.
Then there’s this quote that appeared in the Wall Street Journal this weekend, from Friedrich A. Hayek’s lecture “The Pretense of Knowledge,” delivered upon accepting the Nobel Prize in economics, Dec. 11, 1974:
To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm. In the physical sciences there may be little objection to trying to do the impossible; one might even feel that one ought not to discourage the over-confident because their experiments may after all produce some new insights. But in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority.
Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims. We are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based—a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed. Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Banken, china, Hayek, Inflation, Interest, Jensen, Keynes, Mauldin, QE, Remnimbi, reserve currency | Leave a Comment »
Geschrieben von hkarner - 14. November 2013
Posted By Markus Diem Meier On 13. November 2013 @ 05:00, Never Mind the Markets: http://blog.tagesanzeiger.ch/nevermindthemarkets
Die Europäische Zentralbank hat ihren Leitzins auf ein historisches Tief von noch 0,25 Prozent gesenkt. In Deutschland ist man darüber empört und in der Schweiz besorgt. Dabei ist selbst der tiefere Zinssatz noch viel zu hoch.
Für den angemessenen Leitzins gibt es unter Ökonomen und Notenbankern eine beliebte einfache Formel: die Taylor-Regel. Sie zeigt, wo der Leitzins in Abhängigkeit der vorherrschenden Konjunkturlage einer Volkswirtschaft sein muss, damit die Geldpolitik wieder zu einem konjunkturellen Ausgleich führt. Je stärker die Inflation die Zielinflation einer Notenbank unterschreitet und je tiefer das konjunkuturelle Wachstum unter dem Normalwachstum (dem so genannten Potenzialwachstum) liegt, je tiefer muss der Leitzins sein und umgekehrt. Die Arbeitslosigkeit ist in der Regel indirekt berücksichtigt, da ein zu tiefes (konjunkturelles) Wachstum (im Vergleich zum Potenzialwachstum) mit einer hohen konjunkturellen Arbeitslosigkeit einhergeht. Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Deflation, ECB, Growth, Inflation, Interest, LTRO, Tagesanzeiger | Leave a Comment »
Geschrieben von hkarner - 20. September 2013
Studie: Ökonomisch betrachtet benötigen Südeuropas Volkswirtschaften negative Zinsen, anderswo sind höhere Renditen sinnvoll
Mario Draghi hat einen erbitterten Feind: John Taylor. Dessen Taylor-Regel gibt an, wie hoch die Zinsen eines Landes angesichts der wirtschaftlichen Lage sein sollten. Und sie zeigt damit die Unzulänglichkeiten der Geldpolitik der Europäischen Zentralbank unter Draghi.
Bei hoher Inflation und hohem Wachstum sollte die Zentralbank die Zinsen anheben. Die Taylor-Regel packt diese einfache Aussage in eine Formel. Für den Euroraum insgesamt wird diese Regel durchaus erfüllt. 0,39 Prozent sollte der Leitzins aktuell sein, angesichts moderater Inflation und kaum vorhandenen Wachstums. Bei 0,5 Prozent hat ihn die Europäische Zentralbank zuletzt festgesetzt.
Doch eine aktuelle Untersuchung von Zsolt Darvas, Ökonom an der Brüsseler Denkfabrik Bruegel, zeigt, dass Europas Währungsraum geteilt bleibt. Die zentralisierte Geldpolitik für die gesamte Eurozone wird den ökonomischen Realitäten in der Union kaum gerecht, betont die Studie, die derStandard.at vorliegt. “Die Ökonomie würde angesichts der Wirtschaftslage in Irland, Spanien oder Griechenland negative Zinsen rechtfertigen”, so Darvas.
In Griechenland wären sogar Zinsen von minus 14 Prozent ökonomisch sinnvoll, in Spanien immerhin Sätze von minus 3,6 Prozent. Und in Portugal wäre die optimale Rate angesichts der flauen Wirtschaftslage minus 4,2 Prozent. Weil aber negative Zinsen für die EZB keine Option sind, könnte die Geldpolitik für Südeuropa etwa mit Anleihekäufen weiter gelockert werden. Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Euro, Finanzkrise, Greece, Interest, Standard | 1 Comment »
Geschrieben von hkarner - 17. Juli 2013
The Fed wants to keep long-term yields depressed, but its policies are riddling the market with risk.
FORTUNE — Last Wednesday, at a conference in Cambridge, Mass., Ben Bernanke sought to clarify the statements that shocked the markets just three weeks earlier. This time, the Federal Reserve Chairman reassured his vast, anxious audience that his pledge to start shrinking the Fed’s $85 billion in monthly purchases of long-term bonds, the latest version of “quantitative easing,” or QE3, didn’t mean that the Fed was abandoning the easy money policies that have cheered the markets for four years. The Fed would support the economy with “highly accommodative monetary policy,” intoned the Chairman, “for the foreseeable future.”
It was just what Wall Street wanted to hear. Over the next two days, the S&P surged 1.6% to an all-time record close.
Bernanke was drawing a crucial distinction between the two, separate types of extraordinary monetary stimulus the Fed’s been deploying.
The first is Bernanke’s long-standing commitment to hold the interest rates the Fed fully controls, those on short-term Treasuries, at exceptionally low levels. That’s the policy the Chairman promises to maintain until unemployment falls sharply, leading most observers to predict no change until 2015.
The second measure is the quantitative easing he now pledges to start winding down in later this year and end by mid-2014 if the economy keeps improving, as Bernanke expects. Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Fed, Fortune, Interest, QE | Leave a Comment »
Geschrieben von hkarner - 25. Juni 2013
Greg Weldon turns his peerless eye towards the stress appearing in China’s interbank market this past few weeks and highlights the terrifying spike in short-term rates that definitely bears watching.
Greg’s charting and analytical skills are second to none, and you can sign up for a free trial of Greg’s work by simply clicking on the link above.
Veröffentlicht in weitere Artikel | Getaggt mit: china, Interest, repo financing, Williams | Leave a Comment »
Geschrieben von hkarner - 13. Juni 2013
Is the World Ready for Higher Interest Rates?
For the last five years, the world’s leading central banks have been combatting the crisis with extremely low interest rates and vast bond purchases. Now the American Fed is breaking ranks, as it cautiously suggests a change in its policy — sending the markets into turmoil.
Fuchinobe doesn’t look like the kind of place where speculators have struck it rich. The commuter rail station near the Japanese capital of Tokyo is surrounded by drab apartment buildings and small single-family homes. But the neighborhood is also home to Yuka Yamamoto, 44, a star among Japan’s so-called shufu toshika, or “housewife investors.”
Yamamoto, a chemical laboratory worker by profession, has written about 40 books with investment tips for housewives. She makes television appearances and recently explained what she thinks about the boom that Prime Minister Shinzo Abe and Bank of Japan chief Haruhiko Kuroda have fueled with their relaxed monetary policy known as “Abenomics.” Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Abenomics, Central Banks, Interest, Spiegel | Leave a Comment »
Geschrieben von hkarner - 5. April 2013
Six years of low interest rates in search of some growth
Central banks have cushioned the developed world’s economy in a difficult period. They have yet to boost growth as they had hoped
NEVER in recent economic history have interest rates been so low for so many for so long. It is a safe bet that central banks in America, Britain, the euro zone, Japan and Switzerland will not be increasing short-term interest rates this year. Haruhiko Kuroda began his tenure at the Bank of Japan with a dramatic easing of policy on April 4th. Mark Carney, the new boss at the Bank of England, has licence to ease, too. It would be hardly surprising if rates stayed at the low levels of the past four years throughout 2014 (see chart 1). When rates were first cut to their current levels in 2008-2009, it looked like a temporary expedient; now it looks like normality. Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Central Banks, Economist, Euro, Europe, Finanzkrise, Interest, Japan, money, USA | Leave a Comment »
Geschrieben von hkarner - 31. März 2013
Source: Project Synndicate
CAMBRIDGE – Long-term interest rates are now unsustainably low, implying bubbles in the prices of bonds and other securities. When interest rates rise, as they surely will, the bubbles will burst, the prices of those securities will fall, and anyone holding them will be hurt. To the extent that banks and other highly leveraged financial institutions hold them, the bursting bubbles could cause bankruptcies and financial-market breakdown.
The very low interest rate on long-term United States Treasury bonds is a clear example of the current mispricing of financial assets. A ten-year Treasury has a nominal interest rate of less than 2%. Because the inflation rate is also about 2%, this implies a negative real interest rate, which is confirmed by the interest rate of -0.6% on ten-year Treasury Inflation Protected Securities (TIPS), which adjust interest and principal payments for inflation.
Historically, the real interest rate on ten-year Treasuries has been above 2%; thus, today’s rate is about two percentage points below its historical average. But those historical rates prevailed at times when fiscal deficits and federal government debt were much lower than they are today. With budget deficits that are projected to be 5% of GDP by the end of the coming decade, and a debt/GDP ratio that has roughly doubled in the past five years and is continuing to grow, the real interest rate on Treasuries should be significantly higher than it was in the past. Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Fed, Feldstein, Inflation, Interest, Project Syndicate | Leave a Comment »
Geschrieben von hkarner - 22. Februar 2013
Source: The Wall Street Journal
The Fed’s inevitable Sword of Damocles could be brutal for bonds and stocks. Some of us recall the massacre of 1994..
Can Ben Bernanke fly us through a needle’s eye? Minutes released this week from the last Federal Reserve policy meeting suggest evaluations are taking place that “might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred.” It’s about time. The experiment to kick-start the economy with near-zero interest rates has failed. Maybe our central bankers have figured out that low rates are what is holding back lending and hiring and growth.
Meanwhile, even as the stock market hits highs not seen since 2007, everyone on Wall Street knows interest rates will go up—although no one except Mr. Bernanke knows when. Investors are playing a game of chicken with rates, enjoying the ride but bracing for a downturn when the rates turn up. When rates go up, bonds become more attractive than stocks because you get returns with less risk. Den Rest des Beitrags lesen »
Veröffentlicht in Artikel | Getaggt mit: Fed, Interest, USA, WSJ | Leave a Comment »