Banks & Interest Rates Archives - Page 46 of 62

March 16, 2013

Fed's Fisher: Too-big-to-fail banks are crony capitalists | Reuters

Pedro Nicolaci da Costa reports

The largest U.S. banks are “practitioners of crony capitalism,” need to be broken up to ensure they are no longer considered too big to fail, and continue to threaten financial stability, a top Federal Reserve official said on Saturday……

[Richard Fisher, president of the Dallas Fed] said the existence of banks that are seen as likely to receive government bailouts if they fail gives them an unfair advantage, hurting economic competitiveness.

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

March 15, 2013

Dousing the flames with gasoline

We are in the fifth year of recovery from the worst collapse of global financial markets in more than 50 years fueled by massive debt expansion, with non-financial debt rising as a percentage of GDP from 50% in the 1980s to almost 100% in 2008.

Household Credit Market Debt as % of GDP

Household debt subsequently fell to 80% of GDP during the GFC as households diverted income away from consumption to reduce debt. But now we are starting to see worrying signs: consumer debt is again rising as a percentage of disposable income.

Consumer Debt % of Disposable Income

Corporate bond yields have fallen to lows last seen in the 1960s.

Yields on Baa Corporate Bonds

Interest margins for large banks are falling

Large Bank Interest Margins

(Click on the image to open the Yahoo: Steve Keen interview in

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

March 14, 2013

Expanding debt: Dousing the flames with gasoline

We are now in the fifth year of recovery from the worst financial crisis in 50 years — fueled by expanding household debt, rising from 50% of GDP in the 1980s to close to 100% in 2008. Contraction since the GFC has brought US household debt back to 80% of GDP…

Household Debt as % of GDP

But a worrying sign is that consumer debt has started to rise
Consumer Debt as a % of Disposable Income

And Steve Keen points out that margin debt is also rising, fueling the latest stock market rally.

[click on the image to view the video in a separate window]

Holding interest rates at artificially low levels for an extended period risks fueling another credit bubble. The Fed/central bank needs to react quickly to expanding credit in any area of the economy. We all hope for a recovery, but it must be sustainable — with consumption fueled by rising employment rather than rising debt — and not another debt-fueled boom-then-bust.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

March 11, 2013

S&P 500 tests 2007 high

Dow Jones Industrial Average has broken through its previous high at 14,000. Long-term (13-week) Twiggs Money Flow oscillating above zero indicates strong buying pressure.
S&P 500 Index
Bellwether transport stock Fedex breakout above $100 signals rising economic activity.
Fedex

The S&P 500 is testing its 2007 high at 1550. Rising 13-week Twiggs Money Flow indicates strong buying pressure. Reversal below the latest trendline is unlikely at present but would warn of a correction. Target for the current advance is 1600*.

S&P 500 Index

* Target calculation: 1475 + ( 1475 – 1350 ) = 1600

VIX Volatility Index is headed for its 2005 lows at 0.10. While this coincided with the start of a ($SPX) bull market in 1995, it also occurred just before the peak in 2007; so does not offer much reassurance. Breakout above the quarterly high at 0.20 would be a warning sign.
VIX Index
The Nasdaq 100 broke resistance at 2800 despite bearish divergences on both 13-week Twiggs Momentum and 13-week Twiggs Money Flow. Reversal below the latest rising trendline would warn of a correction, while follow-through above 2900 would signal an advance to 3300*. Only breach of primary support at 2500 would signal a reversal.
Nasdaq 100 Index

* Target calculation: 2900 + ( 2900 – 2500 ) = 3300

Rising debt indicates consumers are once again spending. While there are still structural flaws in the US economy, the market is gaining momentum and the current advance shows no signs of ending.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

March 10, 2013

Philip Maymin, Why Financial Regulation is Doomed to Fail | Library of Economics and Liberty

Philip Maymin highlights a problem with volatility:

…..securities with historically low volatility tended to have almost twice as much subsequent risk, while those with historically high volatility tended to have almost half as much subsequent risk. For both the riskiest and least risky securities, therefore, historical risk is a statistical illusion.

He further points out that regulation encourages banks to act in concert, increasing systemic risk, while deposit insurance reduces the level of self-imposed discipline among banks.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

March 8, 2013

Quantitative easing does not address the fundamental problems underpinning struggling western economies. | EUROPP

John Doukas questions the benefits of quantitative easing:

…excessive money supply fails to increase real economic activity because it raises the labour cost while it lowers the cost of capital. Depressing yields at home, as a result of quantitative easing, in an open economy setting, leads yield-seeking investors into higher-risk investments such as emerging markets.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

March 5, 2013

Volcker: Wall Street Kills Regs By Running Out the Clock

Josh Boak at Fiscal Times writes:

…..So when Volcker declared on Monday that the financial regulation system is broken, it’s time to sound the alarm. The gist of his complaint is that Dodd-Frank was passed in the middle of 2010, yet many of its biggest regulations have not been finalized and there is no end in sight.

“I know it’s a complicated bill. I know the markets are complicated,” Volcker said at a conference for the National Association for Business Economics. “Two-and-a-half years later you can’t have a regulatory apparatus that’s devised by the most important piece of legislation in recent years? That suggests something is rather wrong. Something is dysfunctional.”

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

March 4, 2013

Rate cuts: Short-term benefit, long-term pain

Shane Oliver at AMP recently tweeted:

Why rate cuts help household spending: 1/ Aust hholds have approx $750bn in deposits but $1700bn in debt….

…so a 1% rate cuts makes depositors $7.5bn worse off, but borrowers $17bn better off. The net gain for households is $9.5b !

Reason #2 as to why rate cuts help. Depositors r less likely to change spending on rate changes than borrowers (families with mortgage)

He is right that rate cuts stimulate household spending, but that is not the only consideration. Rate cuts also stimulate borrowing and expansion of the money supply — leading to asset bubbles and inflation. They further force savers/investors to take greater risks in the scramble for yield, leaving them exposed if the bubble collapses. If only we could let market forces of credit supply and demand determine the rate — and resist the urge to tinker.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

March 4, 2013

S&P 500 and Nasdaq selling pressure

The S&P 500 is oscillating between 1485 and 1530. I avoided using the word “consolidating” because that implies a degree of calm. Far from it. Bearish divergence on 21-day Twiggs Money Flow continues to warn of medium-term selling pressure. Reversal below 1485 and the rising trendline would indicate a correction. Breakout above 1530 is less likely but would offer a target of 1575*.

S&P 500 Index

* Target calculation: 1530 + ( 1530 – 1485 ) = 1575

On the monthly chart we can see that a correction below the secondary trendline would target primary support and the primary trendline between 1350 and 1400. A 63-day Twiggs Momentum trough above zero would indicate continuation of the up-trend, while retreat below zero would suggest a primary reversal.
S&P 500 Index
The VIX Volatility Index remains close to recent lows at 0.15. This does not provide much long-term reassurance: the VIX was at similar levels in May 2008. Breakout above the recent high at 0.20 would be a warning sign.
VIX Index
The Nasdaq 100 displays a bearish divergence on both 63-day Twiggs Momentum and long-term (13-week) Twiggs Money Flow. Reversal below the rising trendline would strengthen the signal. While breach of primary support at 2500 would signal a reversal.
Nasdaq 100 Index

* Target calculation: 2500 – ( 2900 – 2500 ) = 2100

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

February 25, 2013

S&P 500 breaks support at 1500

The S&P 500 broke support at 1500 and is headed for support at 1475.

S&P 500 Index

On the weekly chart we can see that a correction below 1475 would target support at 1425 (the secondary trendline). Only primary support at 1350, however, would signal a reversal. A 63-day Twiggs Momentum trough above zero would indicate continuation of the up-trend, while retreat below zero would suggest a primary reversal.

S&P 500 Index

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.