Upon attending a finance club meeting, I just learned that many of the i-banks get all their training from the same company, and that they are coming to my campus for training workshop. I found this most pleasing for my amusement. It is no wonder that all the people on wall street tend to mimic each others like monkeys or toddlers. No originality, maybe its my previous bias from working at a hedge fund, but finding new talent and ways to do things in a distinct manner is something that i hold important for analytical finance and in general for my way of living. Perhaps it has to do human survival or an idea along those lines, but it something I feel is something big cooperation's should address to better define themselves; is this not a capitalist nation that we live in? Isn't part of capitalism the ability to be able to advertise and differentiate to make companies different or is only there to make it appear so... But anyway, let us just look at delayed treasury quotes off Bloomberg 1:29 am:
| 3-Month | 12/13/2007 | 3.88 / 3.99 | 0.01 / -.000 | 09/14 | |
| 6-Month | 03/13/2008 | 4.05 / 4.20 | 0.01 / -.000 | 09/14 | |
| Notes/Bonds | |||||
| COUPON | MATURITY DATE | CURRENT PRICE/YIELD | PRICE/YIELD CHANGE | TIME | |
| 2-Year | 4.000 | 08/31/2009 | 99-29½ / 4.04 | 0-00 / .000 | 09/14 |
| 3-Year | 4.500 | 05/15/2010 | 101-03+ / 4.05 | 0-00 / -.000 | 09/14 |
| 5-Year | 4.125 | 08/31/2012 | 99-24+ / 4.17 | 0-00 / .000 | 09/14 |
| 10-Year | 4.750 | 08/15/2017 | 102-09+ / 4.46 | 0-00 / -.000 | 09/14 |
| 30-Year | 5.000 | 05/15/2037 | 104-14 / 4.72 | 0-00 / -.000 | 09/14 |
Well it was in a much different state not but a few days before. I remember the 10 year treasury note was around 4.30 something, it seems some normalization is occurring. It only seems like yesterday that the rates were 5.00+... There are many many reason why the fed should not cut rates coming up. For instance, inflation would get out of control.
It is possible that people in the bond market are doing what they did before, another over reaction. Just as during the summer when everyone wanted another cut. The markets are still not reacting purely on fundamentals, though they never in totality do follow fundamentals, but they follow them even less so now. Taking a look on the S&P 500, when i called that support at 1370 (I'm not checking so maybe double check this) I wasn't totally wrong since the low of the next day did hit that low, though the close obviously was significantly higher, but it was a great fight between the bulls and bears that day. But since that day there has been no significant drop to quantify a reason for people to follow fundamentals more so. But about fundamentals people are worried about labor markets, I love how people always get surprised about these instances like they would never come. People should be predicting better, I mean once problems come up and considering how many things are tied together in markets people should have seen that since many firms vested heavily in MBS or CLO CMO's etc... were bellying up which would lead to less jobs. It should have been no surprise for people who immerse themselves everyday in finance for a living, or has it gotten to the point where people are too focused on one tiny little aspect that they forget the "big picture" (yes we work on the little things and do our part, but its the little things that make up the big picture).
August retail was down, this should be no surprise, retail has been down or not doing so hot for how long now? As least through out summer retail sectors have not been at its best. This shouldn't be shocking news... Considering the amount of consumer spending that i see at my local home. I live in the bronx during the school year, and every day i go up East Fordham Road or farther down, I see an innumerable amount of people shopping, and the Bronx is supposed to be one of the poorest neighborhoods in America? I find it most interesting that the corner bum has a better pair of timberland boots than me and everyone walking around has over $100 pair of nike shoes. Makes me wonder the extent of poverty and the allocation of financial capital. I don't know but I can't speak farther than the east coast, but i think people still like to spend their money even if its begged for. Also, i speak to my local pizzerias... complaining, why? because i have to complain that im a " Poor college student" and why is my pizza now 2.50? Perhaps it has to do with higher commodity prices. I don't think this bodes well with a rate cut in my humble opinion. What is my pizza going to cost in the next year 3.50??? Another reason that the Fed should not cut, Global demand... I'm sure people love talking about oh all these baby boomer's are going to slow and interest rates will be some ridiculous number like 10%(a.k.a Alan Greenspan and his new book). Ok that is a different topic but, in my generation im sure we are still going to continue with making our babies, the promiscuity of students is rampart as ever and people are love making everywhere. I'm sure at least if anything a slow down may occur at the end my life? even still if we aren't going to be making babies other countries will, and growth won't stop there. I'm not trying go to extremes though, its not going to be as literal or drastic as i say, but it something to consider. Global growth will slow, do to the enormous size of emerging nations suck as China, India, Russia, though smaller countries, such as Vietnam, Brazil etc... will also have problems but not as big which means a higher standard of living is more achievable for smaller emerging countries. Global demand or slow down will occur with the challenges theses countries will face in the upcoming decades. But to say slow down in a negative way is not what i mean. If anything steady growth upwards in general. Thats balancing out or averaging the countries who are stagnating and those who are growing. My point for now is that in the short term, due to the recent financial shock of sub prime and credit woes are significant to slow it down temporarily, but we will be back on track. People often forget that its the Feds job to watch inflation primarily and labor, though as Greenspan stated before, halting systemic risk is not part of the job. Bernake is now the chairman, given his track record another hold would not be surprising though cuts may seem to be more warranted now which means a cut is not surprising either. I feel that a cut should not be done, its a quick easy band aid temporary fix that does not fix the mentality, and or the policy of what created the problem to begin with. I mean the past two quarters have been just about 2% GDP growth bordering recession, but it hasn't fallen yet. Id say primary things like housing should be factored in by now but its clearly not the case, as the domestic and even foreign markets are reacting off them. Though my opinion is what it is, i say no cut but hold, it may not be so. The truth is what shows, not what i think it should be or ought to be. As we have seen many bank presidents have spoken forth about credit and sub prime being a bigger problem, but i think this only indicates that, yes, "we as the fed" are listening but, i don't think it translates into a rate cut. Its just what people want to see. And all the people on wall street want to translate it so, so its hard for them to see it otherwise, and so the people on the bond markets follow suit and decide to price it in... All this is saying is that its up in the air where this will go, i mean previously in the past i was able to confidentially say hold, despite market sentiment, but now is more worrisome considering conditions have worsened and one has to admit it. My piece is that i feel its not that bad and still want to lean more towards a hold. The only surprise i can see is a rate hike, well that would definitely be interesting... its not happening.
Another interesting to discuss is the recent move in currencies. With the dollar weakening vs the Euro and Yen presents an interesting environment. I just read that middle class Japaneses home moms have been hit hard by the recent credit shocks. Japan has definitely developed a very very interesting culture on this aspect. Let us examine the delayed Bloomberg currencies for us now 1:57 a.m. :
| USD | EUR | JPY | GBP | CHF | CAD | AUD | HKD | |
| HKD | 7.7881 | 10.8064 | 0.0675 | 15.6342 | 6.5468 | 7.562 | 6.5576 | |
| AUD | 1.1876 | 1.6479 | 0.0103 | 2.3841 | 0.9984 | 1.1532 | | 0.1525 |
| CAD | 1.0299 | 1.429 | 0.0089 | 2.0675 | 0.8658 | | 0.8672 | 0.1322 |
| CHF | 1.1896 | 1.6506 | 0.0103 | 2.3881 | | 1.1551 | 1.0016 | 0.1527 |
| GBP | 0.4981 | 0.6912 | 0.0043 | | 0.4187 | 0.4837 | 0.4194 | 0.064 |
| JPY | 115.355 | 160.0608 | | 231.5694 | 96.9696 | 112.006 | 97.1289 | 14.8117 |
| EUR | 0.7207 | | 0.0062 | 1.4468 | 0.6058 | 0.6998 | 0.6068 | 0.0925 |
| USD | | 1.3876 | 0.0087 | 2.0074 | 0.8406 | 0.971 | 0.842 | 0.1284 |
looking at my previous currency database, the yen is about where it was 12:47 09/05/07 (bloomberg).
Interesting the dollar strengthened a bit from 113.906 9/12/07 8:00 am.
the euro seems to be holding its own, the the dollar barely appreciating vs it.
I had predicted earlier that this move in the markets would help exports and possible the trade deficit, one of the problems Greenspan addressed in his book, but he was projecting way in the futures and I'm sure the dollar would normalize by then so my argument vs that would not be relevant. Either way, with more exports it has to be positive for GDP another reason for why Fed should not cut.
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