The old Wall Street expression is “They don’t ring a bell at the top.” This snarky adage is usually employed by those saddened financial managers who ride a successful investment to a peak and then watch in horror as it reverses course to a level below their cost basis. They lay the blame at the feet of the amorphous market that failed to signal it was time to exit the ride.
A pity this notion is misguided, since the market frequently “rings the bell.” It is just that most market participants are not listening. Perhaps they should be listening now.
As I have detailed in the past, there are effectively only three risk vectors in the fixed income markets: duration, credit and convexity. I like to summarize these divining risk characteristics as “When investors receive their returns,” “If investors receive their returns” and “How investors receive their returns.”
Duration risk is usually measured as a function of the shape of the yield curve (as opposed to yield level): the greater the absolute shape (steep or inverted), the larger the embedded risk of an interest rate change. (See Viewpoint – October 2014, “Financial Market Cognitive Dissonance.”) An investment’s credit risk tends to be assessed via its spread to a benchmark Libor rate. Finally, an investment’s convexity risk, often associated with its exposure to path dependency (via embedded or explicit optionality), is usually summarized as a single measure of implied volatility.
And despite the seeming dissimilarities, these risk vectors have exhibited a relationship over the moderate horizon as active investment managers change their risk allocations to optimize along the efficient frontier.
Nowhere else is the impact of central banks more evident than the total decoupling of global stock markets from global economic developments.
However, Bloomberg reports that as money managers attempt to diversify away from what they all know will not end well, Credit Suisse warns the overwhelming flow from central bank interventions “are driving everything” pushing their so-called cross-market contagion indicator to levels more worrisome than anytime since 2008’s Lehman-inspired financial crisis.
Bayer said late on Monday that it was in “advanced” talks over an acquisition of Monsanto and that it was willing to again sweeten its offer for the seeds group.
Germany’s Bayer said in a press release that “while key terms and conditions have not yet been agreed”, it would be willing to pay up to $127.50 a share for Monsanto.
Monsanto in July rejected a $125 a share offer as “financially inadequate and insufficient to ensure deal certainty”, but noted at the time that it was open to continued negotiations.
The tie-up would create the world’s biggest agrochemicals company and would come at as the latest large deal in the chemicals sector. Dow Chemical and DuPont have been working to close a complex merger, while China’s ChemChina is in the process of completing its buyout of Swiss Syngenta.
Monsanto closed on Friday at $107.44 a share. US markets were closed on Monday for the Labor Day holiday.
Another softer final reading leaves EURUSD unfazed and EURGBP back below 0.8400 as we wait on UK services PMI at the bottom of the hour.
The eurozone economy continued to expand at a broadly steady pace in August. The rate of increase edged down to a 19-month low, however, mainly due to a weaker rate of expansion in Germany.
The final Markit Eurozone PMI® Composite Output Index posted 52.9 in August, down from 53.2 in July and below the earlier flash estimate of 53.3. The rate of growth in new order inflows was also the weakest in just over one-and-half years. August data indicated that rates of output expansion ticked lower in both the manufacturing and service sectors.
Manufacturing production rose at the slowest pace since May, while the expansion in service sector business activity was the joint weakest since the start of 2015
Yesterday we asked whether the FBI just threw Clinton under the bus with the following statement which links Hillary’s “inability” to “recall” her transition instructions with her 2012 concussion and blood clot
But it turns out Hillary “could not recall” a lot of things about her tenure as Secretary of State. In fact, during her 3.5 hour interview with the FBI, Hillary couldn’t recall at least 26 questions posed by the FBI, at least some of which were fairly material events during her service which probably should have stood out. Below is a list of just a couple of the things Hillary “could not recall.”
Below is the exchange with FBI investigators where Clinton apparently doesn’t “recall” ever receiving any training from the State Department related to retention of federal records or handling of classified information…she doesn’t even recall when she received her security clearance.
Well, per the Nondisclosure Agreement below, signed by Hillary, we would guess she received her “briefing or training by State” on or around January 22, 2009. So that leads us to derive only 3 logical conclusions, either (1) Hillary committed perjury by signing the NDA below without receiving the training indicated, (2) Hillary lied to the FBI during her interview or (3) Hillary simply has no long-term recollection of many of the key moments of her term as Secretary of State which brings into question her mental competency.
In the upcoming book “Payoff: the Hidden Logic that Shapes Our Motivations,” behavioral economist Dan Ariely detailed a study showing that pizza motivates workers to increase productivity more effectively than money.
Looking for a way to encourage your employees to show better results? The answer might be pizza.
In his book, Ariely recounts an experiment conducted at an Intel semiconductor factory in Israel. For the experiment, factory employees were split into four groups, three of which were promised a reward if they managed to complete stated goals by the end of the day.
Members of the first group were offered about $30 cash apiece. The second group was told that they would receive a compliment from their boss, and members of the third group would get vouchers for pizzas.
An unknown man called in a bomb threat on board a Belavia flight which scheduled to fly from Minsk to Milan, a spokesman of Minsk police Alecander Lasovsky told Sputnik. “A man called from a local phone and reported a bomb on board,” he said. Lastovsky also clarified that flight B2-881, scheduled to depart at 11:50 am local time, was delayed indefinitely. Bomb disposal technicians are on the way to the airport. Meanwhile, the airport’s press service has not commented on this information.
Brazil’s senate voted on Wednesday to impeach President Dilma Rousseff in an historic decision that ends nearly 14 years of rule by her left-wing Workers’ Party of Latin America’s largest economy.
The removal of the former Marxist guerilla for manipulating the budget thrusts her replacement, interim president Michel Temer, into the spotlight at a time when the country is suffering what is expected to be its worst recession in over a century
Sixty-one senators voted for the impeachment, while 20 voted against.
The vote follows a grueling nine-month process that has led to gridlock in policy-making in one the largest emerging markets even as it wrestles with soaring unemployment and growing public discontent with its political classes.
Ms Rousseff’s Workers’ Party was credited with redistributing wealth to the poor in one of the world’s most unequal societies during its rule between 2003 and 2016 but its increasingly interventionist state-led policies helped spark a crisis of confidence among investors.
The impeachment vote has led to clashes left and right in the country with Ms Rousseff’s supporters in her Workers’ Party decrying the impeachment as a parliamentary coup.