The GSEs and Wall Street finance, in particular, basically operated without any constraints whatsoever. I click on update. Theres one simple answer: central banking and the evolution of market backstops more recently to the point of absolutely egregious monetary inflation. As of March 31, 2022, the company managed $164 billion for its clientele.. Five-year T-note yields rose five bps to 4.14% (up 288 bps). Buying inexpensive market insurance has been fundamental to so many strategies. My analytical framework has been a work-in-progress for 35 years. Spain's IBEX 35 equities index increased 1.0% (down 14.7%). Why do I suggest a singular Bubble? German bund yields gained nine bps to 2.19% (up 237 bps). Global derivatives markets will be severely tested. Wheat dropped 4.5% (up 14%), while corn added 0.8% (up 15%). Its a sad tale, unfortunately, as when torrential rains finally arrived, the crowd of insurance speculators rushed to offload their risk. Meaning there were mechanisms that at least placed some boundaries on lending and credit expansion. Even as equities on Wall Street start the new quarter with gains, the OFRs Financial Stress index is near a two-year high at 3.1, where zero denotes normal market functioning. Freddie Mac 30-year fixed mortgage rates slipped four bps to 6.66% (up 367 bps YoY). That marked the third-largest monthly advance on record. And I do not expect this to suffice in the markets. Little did I know at the time that it would be the first of many crises I would witness, analyze and reflect upon. The lender told borrowing clients at the stock-loan unit that some counterparties temporarily stopped dealing with it because of mounting market pressure, forcing it to withdraw shares The unit saw less than 5% of the total pool pulled, and there was no funding impact for Credit Suisse While the bank is merely a middle-man in the securities lending deals, several investors that provided the shares have been asking what risks theyre taking with regard to the bank itself, October 7 Reuters (John Revill): Credit Suisse will buy back up to 3 billion Swiss francs ($3B) of debt, an attempt by the Swiss bank to show its financial muscle and reassure investors concerned about the lender's overhaul and how much it may cost. Macklem played down a recent slowing of headline inflation, saying underlying price pressures are elevated and risk becoming entrenched without further rate increases. I am reminded of a passage from a book I read some years ago. But theres a big problem: The bubble has inflated to the point that it will take trillions of additional QE to accommodate a serious de-risking/deleveraging. There was no place on the river for additional barriers, and serious structural issues made it too risky to continue to add to the height of existing dams. Use SurveyMonkey to drive your business forward by using our free online survey tool to capture the voices and opinions of the people who matter most to you. Russia's MICEX equities index slipped 0.6% (down 48.7%). And I fear the holy crap moment markets hit with the harsh reality that the Fed and global central bankers dont have everything under control. I am a CPA by training. Bitcoin increased $200, or 1.0%, this week to $19,570 (down 58%). And it could get worse. Market depth, as the measure is known, last Thursday hit the worst level since the throes of the Covid-19 crisis in the spring of 2020, when the Federal Reserve was forced into massive intervention., September 29 Bloomberg (Edward Bolingbroke): Anyone doubting that liquidity is draining from the world financial system just has to look at the daily swings in interest-rate swaps. I'm at about 30 years persevering as a professional bear. My lucky break came in late-1989, when I was hired by Gordon Ringoen to be the trader for his short-biased hedge fund in San Francisco. While early in the process, the Fed is being forced to revise doctrine back to more conventional central banking. Median home prices fell 0.98% in August from a month earlier, following a 1.05% drop in July Black Knight Inc. said The two periods mark the largest monthly declines since January 2009. Together they represent two straight months of significant pullbacks after more than two years of record-breaking growth, said Ben Graboske, Black Knight Data and Analytics president. The largest US barge operator warned customers it wont be able to make good on deliveries. After multiple rounds of this over a few decades, everyone came to believe risks could simply be ignored. The utilities fell 3.2% (down 12.2%). Alfa Group Had the central bank not intervened, it feared there would have been a self-reinforcing spiral that threatened severe disruption of core funding markets and consequent widespread financial instability, said Sir Jon Cunliffe, the BoEs deputy governor for financial stability, October 1 Bloomberg (Eddie Spence): When the pound slumped as Kwasi Kwarteng presented his mini-budget, some Britons rushed to the safety of a haven thats recently lost its luster: gold. And weve seen this play out repeatedly, from portfolio insurance back in 1987 to just last weeks near crash of the UK bond market. Individual pension funds are each selling tens or hundreds of millions of pounds of liquid assets to boost their reserves, according to pension consultants Asset sales across the industry have climbed into the tens of billions of pounds, according to Nikesh Patel, head of client solutions at Van Lanschot Kempen, a wealth management firm., October 3 Associated Press (Jill Lawless): The U.K. government dropped plans to cut income tax for top earners, part of a package of unfunded cuts unveiled only days ago that sparked turmoil on financial markets and sent the pound to record lows. I'm at about 30 years persevering as a professional bear. My lucky break came in late-1989, when I was hired by Gordon Ringoen to be the trader for his short-biased hedge fund in San Francisco. Picture a sleepy little village on a pristine river, where a long drought encouraged local insurance companies to write a few policies for waterfront development. Federal Reserve Bank of San Francisco President Mary Daly and Fed Atlanta President Raphael Bostic were the latest to bang the drum on the need to keep tightening in place to reduce inflation that remains near a four-decade high., October 4 Reuters (Ann Saphir and Michael S. Derby): San Francisco Federal Reserve Bank President Mary Daly said the U.S. central bank has the tools and the knowledge to bring down high inflation, and will use them, even as it tries to find the gentlest way to do so. The poor performance of companies that have recently completed their initial public offering has only tightened this winters grip. Master's. By then, it was far too late. Fear is contagious, said Ben Kumar, senior investment strategist at Seven Investment Management LLP. They were writing policies and immediately booking the profits, with the plan of moving quickly to offload exposure in the bustling reinsurance market in the unlikely occurrence of torrential rainfall. We were up 63% in 1990. The genesis of my analytical mistake can be directly traced to central bankers and it is most pertinent to today's predicament. How much have US IPOs fallen? This is defined as a level of interest rate that neither stimulates nor curbs economic growth, all else being equal., October 6 Bloomberg (Theophilos Argitis): Bank of Canada Governor Tiff Macklem said he remains firmly on an interest-rate hiking path, quashing hopes for an imminent end to a tightening cycle thats choking indebted households and threatening the economy with recession. Country Garden, Chinas largest builder, only months ago viewed as a sound Credit, saw its bond yields today surge to a record 53%. I fear the dam will break when the BOJ yield peg collapses. And this gets back to derivative market fallacies. Im here today with what I believe is a critically important message. An unfolding periphery debt crisis risks financial, economic, social and political crises. The transports rallied 3.5% (down 24.3%). Greek 10-year yields slipped two bps to 4.81% (up 350 bps). Capital Management The Central Valley almond growers had two wells go dry this summer. I fell in love with macro analysis sitting at a trading desk staring at Telerate and Quotron screens in the summer of 1987 wild global market instability that culminated that October with the Black Monday crash. Make the best use of Researched information from 700+ peer reviewed, Open Access Journals operated by 50,000+ Editorial Board Members and esteemed reviewers and 1000+ Scientific associations in Medical, Clinical, Pharmaceutical, Engineering, Technology and Its a masterpiece, though Ive always had an issue with the notion that we live in an enlightened age where risk can be better understood and managed. That all adds up to about $1.01 trillion in additional costs if all those securities were refinanced, October 3 Bloomberg (Alexandre Tanzi): Global manufacturing contracted in September for the first time in more than two years as orders and production continued to weaken, underscoring growing risks of a worldwide recession. Importantly, virtually the entire world readily adopted so-called Wall Street finance. And whatever it takes central banking became deeply embedded in market perceptions and prices everywhere. October 3 Reuters (Tetsushi Kajimoto): Japan stands ready to take decisive steps in the foreign exchange market if excessive yen moves persist, Finance Minister Shunichi Suzuki said, in a new warning against investors selling off the currency. Ovsyannikova, 44, was given two months' house arrest in August, and faces up to 10 years in prison if found guilty of spreading fake news about Russia's armed forces. Italy's FTSE MIB index rallied 1.2% (down 23.6%). In the early-nineties, I became an impassioned reader of The Richebacher Letter. Second, after graduate school, I accepted a position with Gordy Ringoens bearish hedge fund in San Francisco. The result shows that nearly everyone was at least a little stressed by inflationThe survey also highlights disparities among ethnic groups. Five trillion of QE later, the bubble had grown only bigger and more unwieldy. Find latest news from every corner of the globe at Reuters.com, your online source for breaking international news coverage. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. They endured a bursting bubble and prolonged stagnation. China's Shanghai Exchange was closed for holidays (down 16.9%). With a focus on hiring and developing the most talented people in the industry, we're looking for employees with diverse backgrounds and perspectives who will thrive in an entrepreneurial culture and contribute to our long-term success. The Bank of Japan went so far as to continue enormous monetary inflation as part of a policy to place a 25-basis point ceiling on 10-year government yields. I see no end in sight for the extremely challenging market environment. Management The French to German 10-year bond spread narrowed about one to 61 bps. Longer-term gilt yields are already starting to creep higher as the Oct. 14 end date for its bond-buying looms into view, partly as policy makers make it clear they are in no mood to simply prop up prices for traders., October 4 Bloomberg (Loukia Gyftopoulou): Asset managers including Blackrock Inc. and Schroders Plc are limiting institutional investors withdrawals from some UK property funds after a wave of requests to move money. This [foolish strategy] always happens when rates are near the zero bound and things have gone to an extreme, he told CNBC, noting that the crisis is an indication of other things that are likely to pop up because investors and institutions have been dangerously overleveraged and thinking that rates will stay low forever., October 4 New York Times (Alan Rappeport and Jim Tankersley): Americas gross national debt exceeded $31 trillion for the first time, a grim financial milestone that arrived just as the nations long-term fiscal picture has darkened amid rising interest rates. We are about to commence an adjustment period that I fear will shake us to the core. The author had interviewed Wall Street traders following the 1929 crash asking them how they could not have seen peril coming. If insurance is readily available and cheap, why not take on more risk and leverage? Ive had a long-held view that, at the end of the day, I dont expect the Germans and Italians to share a common currency. Alpha Capital Group I believe central banks will have no alternative than to employ additional QE to counter the forces of bursting bubbles. As the drought lingered, more entered the flood insurance market to capture some of the easy profits. Now, the powerful revival of traditional inflation dynamics has dictated an abrupt shift in focus and priorities. Even before the rains, the building boom faltered. The consumer price index rose 83.45% in September up from 80.21% the previous month. The global bubble historys greatest bubble - is bursting. The Ukraine war, deteriorating relations with China, Taiwan, North Korea, Iran and such. I had the good fortune to assist Dr. Richebacher with his publication from 1996 through 2001. In the end, I believe central banks will have no alternative than to employ additional QE to counter the forces of bursting bubbles. Benzinga The semiconductors rose 2.2% (down 40.3%). Current and former government officials in the US warned about potential spillover. Emerging markets are always vulnerable to tightening financial conditions. Long-Term Capital Management Though 401(K) plans are set up to keep Americans nest eggs out of reach until retirement age, the Internal Revenue Service allows savers to pull money out for certain economic hardships, including buying a first home, preventing foreclosure and covering high medical bills. Later in the nineties, I had stints at Fleckenstein Capital and East Shore Partners. The declines may continue as central banks continue to raise rates, Preqin said., October 3 Bloomberg (Alexandra Semenova): A risk-off mood across global financial markets amid persistent economic turmoil deterred prospective hedge funders from starting up new firms in the second quarter. Over the past seven weeks, mortgage rates have soared 1.30 percentage points, the largest surge over a comparable period since 2003, October 5 Yahoo Finance (Dani Romero): Mortgage applications became the latest sign showing how hard rates are hitting housing. U.K. 10-year gilt yields jumped 15 bps to 4.24% (up 327 bps). The moral of this story is that an extended period of tranquility a long drought distorts risk perceptions and market prices, while inviting destabilizing speculation. Alpha Stock Market Quotes, Business News, Financial News, Trading Ideas, and Stock Research by Professionals. So, he sees the British gilts drama (which occurred because the pension funds mishandled highly leveraged bets) not as an isolated event - but as the sign of a trend. Theories that derivatives trading has potentially driven movement in an underlying asset have been relatively common in this years topsy-turvy markets, October 1 Financial Times (Jonathan Wheatley): Investors have withdrawn a record $70B from emerging market bond funds this year Investors took $4.2B out of EM bond funds in the past week alone, according to EPFR Global, a fund flow monitor - bringing the annual outflows to the highest level since the US bank began recording the data in 2005. WTI crude surged $13.15 to $92.64 (up 23%). Bridgewater Associates is an American investment management firm founded by Ray Dalio in 1975. Effects are both financial and economic. But central questions about its restructuring - and whether or not it will need fresh capital to fund it - remain open. And in no way do I believe the U.S. is immune. Economists of old referred to the fallacy of composition. Simplistically, what works for one individual has much different consequences if adopted by the group. But the reclusive state recaptured the worlds attention Tuesday when it launched an intermediate-range ballistic missile over Japan for the first time since 2017, prompting Japanese orders to take shelter across two northern prefectures. Turkey's Borsa Istanbul National 100 index surged 12.2% (up 92%). The firm was co-founded in 1995 by a group that had formerly worked together at the TCW Group starting in the 1980s. And now, with Bubbles faltering and global financial conditions tightening, I believe global policymakers have lost control of bubble dynamics. The search engine that helps you find exactly what you're looking for. Georgieva said the outlook for the global economy was darkening We are experiencing a fundamental shift in the global economy, from a world of relative predictability to a world with more fragility - greater uncertainty, higher economic volatility, geopolitical confrontations, and more frequent and devastating natural disasters, she said Georgieva said the old order, characterized by adherence to global rules, low interest rates and low inflation, was giving way to one in which any country can be thrown off course more easily and more often., October 5 Reuters (Philip Blenkinsop): The World Trade Organization forecast a slowdown of global trade growth next year as sharply higher energy and food prices and rising interest rates curb import demand, and warned of a possible contraction if the war in Ukraine worsens. When torrential rains finally arrived, the building boom faltered to more conventional central banking and the evolution market. 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