Banks & Interest Rates Archives - Page 49 of 63

February 3, 2013

S&P 500 buying pressure

The S&P 500 displays evidence of buying pressure on the daily chart, with brief retracement to test support at 1500 followed by a surge to a new 5-year high. Expect a test of the 2000/2007 highs at 1550/1565.

S&P 500 Index

Troughs above the zero line on 13-week Twiggs Money Flow indicate longer-term buying pressure. Breakout is likely and would signal an advance to 1750*. Reversal below 1500, however, would warn of a widely predicted correction.
S&P 500 Index

* Target calculation: 1550 + ( 1550 – 1350 ) = 1750

Declining 63-day Twiggs Momentum on the Nasdaq 100, however, warns of a reversal. Respect of resistance at 2800 would strengthen the warning, while retreat below 2500 would complete a head and shoulders reversal. Follow-through above 2900 is less likely, but would confirm a bull market signal from the Dow/S&P 500.
S&P 500 Index

These are times for cautious optimism. Central banks are flooding markets with freshly printed money, driving up stock prices, but this could create a bull trap if corporate earnings, capital investment and employment fail to respond.

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.

February 3, 2013

A Putrid Smell Is Suddenly Emanating From European Banks | Business Insider

Wolf Richter writes:

A nauseating whiff came from Barclays Friday, when it leaked out that it has been under investigation by the Financial Services Authority and the Serious Fraud Office in Britain for illegal fundraising in 2008. Allegedly, the bank secretly loaned £5.3 billion (US $8.4 billion) to one of Qatar’s sovereign wealth funds, which then turned around and with great public fanfare pumped that money back into Barclays — a scheme to raise capital on paper to escape a government takeover during the financial crisis…..

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.

January 30, 2013

Federal Reserve FOMC statement | Press Release

…..Although strains in global financial markets have eased somewhat, the Committee continues to see downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month……

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal……

Read the complete statement at FRB: Press Release–Federal Reserve issues FOMC statement–January 30, 2013.

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.

January 30, 2013

History Of Federal Reserve Tightening | Business Insider

Matthew Boesler writes:

Deutsche Bank Chief U.S. Equity Strategist David Bianco says, “Don’t fear interest rate normalization.” That’s the title of one of his recent research notes, which takes a deep dive into what happened to markets each of the 15 times the Fed has embarked on policy tightening since 1965. Bianco writes, “DB economists and rate strategists forecast an unchanged Fed Funds rate until 2014. However, they forecast a 3.0% 10yr Treasury yield at 2013 end. When QE ends it will likely be akin to early-cycle Fed tightening and the uptick in long-term yields will represent a cyclical rise in rates, both of which are bullish.”

Chart analysis of previous tightening cycles at History Of Federal Reserve Tightening – Business Insider.

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.

January 27, 2013

Financial hangover is Britain's biggest growth headache

David smith writes:

Sir Mervyn King, in Tuesday’s final regional speech as Bank governor, in Belfast, barely mentioned fiscal policy as a factor in the slow recovery. Instead, as well as the high-inflation squeeze on real take-home pay and the eurozone, he focused on another financial factor.

The problem, he said, was “the extent to which the balance sheets of the major UK banks had grown before the crisis hit, and had been financed primarily by borrowing.

“So the subsequent reduction in bank lending – the deleveraging – was greater here than in many other countries. That deleveraging has as its counterpart a reduction in the amount of (broad) money in the economy and a reduced willingness on the part of banks to expand lending.”

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.

January 25, 2013

Visible Hand Of The Fed | Business Insider

Lance Roberts writes:

While the Fed programs that we have witnessed since the financial crisis are historically unique — liquidity driven markets are not. We have witnessed the effects of excess liquidity in the bull market cycle prior to the 2008 financial crisis. The only difference during that cycle was that, through government intervention, real estate was turned into an ATM allowing mortgage equity withdrawals to be the liquidity source for the economy and the 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.

January 16, 2013

The China Beige Book Has Some 'Shocking' Data | CNBC

Ansuya Harjani writes:

“In the fourth quarter, we’re seeing corporate loans decline significantly, very shockingly most of our bankers say less than 20 percent of their lending goes to new loans. Most of its going to debt rollovers or increases, they are not funding expansion. That indicates that this is not a period of strong expansion,” Leland Miller, president at CBB [China Beige Book] told CNBC on Wednesday.

via The China Beige Book Has Some 'Shocking' Data.

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.

December 13, 2012

EU Deal Reached on Bank Supervisor | WSJ.com

GABRIELE STEINHAUSER And LAURENCE NORMAN at WSJ write:

European Union finance ministers reached a landmark deal early Thursday that would bring many of the continent’s banks under a single supervisor, in what governments hope will be a major step toward resolving their three-year-old debt crisis. Ministers said the European Central Bank would start policing the most important and vulnerable banks in the euro zone and other countries that choose to join the new supervisory regime next year. Once it takes over, the ECB will be able to force banks to raise their capital buffers and even shut down unsafe lenders.

This is an important step, centralizing banking control in Brussels. Though there is bound to be dissent amongst member states as to capital buffers and unsafe lending practices.
Read more at EU Deal Reached on Bank Supervisor – WSJ.com.

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.

December 12, 2012

Risk Seen in Fed Bond Buying | WSJ.com

KRISTINA PETERSON at WSJ writes:

The Federal Reserve should stop buying bonds, even as the central bank is poised to purchase more, according to a narrow majority of economists in a new survey by The Wall Street Journal……”It’s distorting market prices and creating problems in the future,” said John Silvia, chief economist at Wells Fargo Securities, who said the Fed’s bond-buying was making long-term Treasurys too expensive without significantly easing problems in the labor market. “The Fed needs to back away and let interest rates rise just a little bit,” he said.

If past performance is anything to go by, Fed quantitative easing (or bond buying) is ineffectual in lifting the employment rate. And the lower that they drive bond yields, the greater the backlash when yields eventually rise. Yields are likely to spike up rapidly as bond-holders attempt to offload positions in order to avoid massive capital losses.

via Risk Seen in Fed Bond Buying – WSJ.com.

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.

December 12, 2012

Fed’s numerical thresholds are a bad idea

The Fed effectively tied its monetary policy to a balloon bobbing in the wind. Pedro da Costa writes on Reuters:

The Federal Reserve on Wednesday took the unprecedented step of tying its low rate policy directly to unemployment, saying it will keep rates near rock bottom until the jobless rate falls to 6.5 percent. That’s as long as inflation, the other key parameter of policy, does not exceed 2.5 percent.

Both unemployment and inflation are moving targets. Unemployment primarily because results are highly dependent on the participation rate: disheartened job seekers who give up looking for work are excluded from unemployment figures. Likewise, inflation measures are highly subjective. Weightings require constant adjustment because of advances in technology and changes in consumption patterns, while cost of housing estimates, which make up 39 percent of core CPI, seem to have little connection with reality. Scott Sumner points out:

The problem seems to be that, according to the Bureau of Labor Statistics, housing prices did not fall. On the contrary, their data shows housing prices actually rising between mid-2008 and mid-2009, despite one of the greatest housing market crashes in history. And prices did not rise only in nominal terms; they rose in relative terms as well, that is, faster than the overall core CPI. If we take the longer view, the Bureau of Labor Statistics finds that house prices have risen about 8 percent over the past six years, whereas the famous Case-Shiller house price index shows them falling by nearly 35 percent…..

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.