Charles Biderman, founder of the research firm TrimTabs spots a warning sign in the drop of the commodity prices and mistrusts the paper money of the centrals banks.
In every market supply and demand are determining the price. Charles Biderman uses this simple logic as the foundation for his investment philosophy. The outspoken founder of the research firm TrimTabs is convinced that stock prices are a function of liquidity—the amount of shares available to buy and the amount of money available to buy them—rather than fundamental value. Therefore, he carefully tracks the announced actions of companies. In his view they are among the biggest players in the stock market and the driving force behind today’s bull market. For now, Biderman thinks that this trend will push stock prices even higher. For the medium term though, he cautions that the financial markets are poised for a severe crash. He spots the first signs of a global recession in the drop of the commodity prices and warns of the moment when people don’t trust the paper money of the central banks anymore.
Mr. Biderman, once again the economy is not doing well. Nevertheless, the stock market in the United States seems to be in record setting mood. What’s behind the rally?
What’s present in the stock market in the moment are companies, their transactions, buyers and sellers of stock. That’s all what happens in the market. So if you count the number of shares available and how much money is available you might get a sense of what’s going to happen. Since 2011, the amount of shares in the market has been declining every year. Even though individuals are taking money out of the market, companies have spent around $1.6 Trillion in cash on takeovers and stock buybacks.
And what does that mean for stock prices? >> Read More
Just like footballers before the World Cup final, central bankers in emerging markets are readying themselves for the biggest test of their careers: the first rate increase in nearly a decade by the US Federal Reserve.
The timing of this momentous event is uncertain, and disappointing data since the start of the year has made US monetary policy makers more cautious than they were just a few months ago. However, Janet Yellen, Fed chairwoman, remains confident the economy will strengthen and rates are likely to go up this year.
When the Fed eventually moves, economists believe a rate rise is bound to provoke large capital outflows away from Latin America and Asia. This will test the defensive strategies local policy makers have built throughout the long era of ultra-low rates.
“I don’t think emerging market central bankers can ever be properly prepared,” says Simon Quijano-Evans, emerging markets analyst at Commerzbank. “They have accepted that if it does happen, they will just have to deal with it.”
Their first line of defence includes interest rates, which central bankers can increase to persuade investors to stay put rather than moving their money to the US. >> Read More
South Africa on Thursday held its benchmark interest rate steady as policymakers take a wait and see stance on how to deal with a weaker rand, higher inflation and slower growth.
The decision to hold rates at 5.75 per cent was widely expected. Rates have been at this level since July, when officials lifted them a quarter percentage point.
Since the global financial crisis, mankind has learnt to live with a third certainty along with death and taxes — monetary loosening.
Central banks have slashed interest rates to record lows and embarked upon unprecedented programmes of asset purchases in an attempt to raise inflation and restart economic growth.
The common path on which monetary policy makers have strolled, however, is expected to diverge this year. The timing of the partition and the way in which its side effects are managed hold big implications for financial stability and the global recovery.
After years of respectable growth and sizeable falls in unemployment, the US Federal Reserve and the Bank of England have ceased to expand their quantitative easing programmes and are eyeing a first rise in interest rates in nearly 10 years.
The European Central Bank, conversely, is in full loosening mode, having launched a €1.1tn scheme of asset purchases. In Asia, the Bank of Japan is busy with its own bond-buying programme, while the People’s Bank of China has just cut interest rates three times in six months.
>> Read More
Here’s a preview of what to expect in the coming days.
On Wednesday, investors will parse the latest minutes from the Federal Open Market Committee’s April meeting, which are expected to reflect concern about near-term data.
“The April meeting minutes will likely indicate that policymakers will want to see firm evidence that the economy is recovering from the first quarter soft patch,” said Joseph LaVorgna, US economist at Deutsche Bank. Fed chair Janet Yellen, who will speak on the US economic outlook in Providence, Rhode Island on Friday, “may provide further clues as to how the Fed views the latest data released after the April meeting,” he added.
Investors will also be watching for signs of inflation as the labour department offers the latest read on consumer prices. Economists on Wall Street expect inflation to rise 0.1 per cent in April from the prior month, with core CPI, which strips out food and energy costs, is projected to rise 0.2 per cent.
UK Parliament >> Read More
The Bank of Japan governor Haruhiko Kuroda is sounding optimistic again, even wildly so.
In a speech marking two years under “QQE”, the unprecedented asset-buying scheme from the BoJ, Mr Kuroda said inflationary expectations have improved “markedly” and he expects to hit the bank’s 2 per cent target by the first half of fiscal 2016 (that is, between April and September of next year).
When the BoJ unleashed an unprecedented monetary stimulus programme in April 2013, the goal was 2 per cent within 2 years.
A Japanese recession last year, coupled with a collapse in global oil prices, made that goal unattainable. Recent year-on-year readings have been near zero. But Mr Kuroda maintains there is “no doubt” that QQE — quantitative and qualitative easing — is having its desired effect.
“The policy effects of QQE are such that they are roughly equivalent to those that would arise from making almost ten 0.25 percent cuts in short-term interest rates in one shot under conventional monetary policy,” he said in Tokyo today.
One area he points to is wages. >> Read More
Federal Reserve chairwoman Janet Yellen said valuations in the stock market were “quite high” — even if overall risks to financial stability remain contained.
Speaking at question-and-answer session in Washington, Ms Yellen also said there was a risk of a “sharp jump” in longer-term bond yields when the Federal Reserve raises short-term rates, which was why the central bank is going out of the way to communicate clearly to markets.
The Fed chairwoman struck a sanguine note about overall risks in the financial sector, saying these were “not elevated at this point”. In particular, there was no sign of a broad-based pick-up in indebtedness, credit growth or maturity transformation, which could serve as hallmarks of potential bubbles.
However, Ms Yellen said she would “highlight that equity-market valuations at this point generally are quite high” when asked about possible risks. “They are not so high when you compare the returns on equities to the returns on safe assets like bonds, which are also very low. But there are potential dangers there.”
Ms Yellen also pointed to very low long-term interest rates and the risk that depressed term premiums could suddenly shoot up — something that was seen in the so-called taper tantrum of 2013. >> Read More
Central bank of Russia cuts interest rates more than forecast to 12.5%
The CBR has cut rates again today to the stumbling economy They were expected to cut to 13.0% from 14.0% but cut to 12.5%
The central banks says;
- Ready to continue cutting as CPI slows
- Current economic conditions to help inflation slow
- Inflation will slow to below 8% in April 2016 and towards 4% target in 2017
- Ruble appreciation will help restrain CPI
- Russia had a considerable drop in GDP Q1 (a picture shared across the globe right now)
The ruble has stabilised around 50/54 after all the Ukraine running around it did
Brazil has raised its interest rates to the highest level since 2008, in an aggressive move aimed at taming high inflation and winning back investor trust.
The central bank lifted the benchmark Selic rate on late Wednesday by 50 basis points to 13.25 per cent – its fourth increase in five months.
The move, which was widely expected by economists, puts Brazil’s interest rate among the highest in the developing world.
Inflation in Latin America’s largest economy remains above target, hurting consumer confidence and businesses at a time when authorities are trying to regain market confidence and avoid losing its coveted investment grade credit rating.
The government of Dilma Rousseff has made reining in high prices its main economic priority — even if the high interest rates risk putting the country into a recession.
The interest rate increase comes despite the rebound in the real since March. The currency has risen more than 10 per cent against the dollar since hitting a low of R$3.29 last month. >> Read More
Federal Reserve officials attributed the economy’s sharp first-quarter slowdown to transitory factors, in effect signaling an increase in short-term interest rates remains on the table for the months ahead although the timing has become more uncertain.
The Fed now needs time to make sure its expectation of a rebound proves correct after a spate of soft economic data. That means the chances of a rate increase by midyear have greatly diminished, a point underscored by the Fed’s statement released Wednesday at the conclusion of a two-day policy meeting.
“Economic growth slowed during the winter months, in part reflecting transitory factors,” the Fed said. The Fed also said that although growth and employment had slowed officials expected economic activity to return to return to a modest pace of growth and job market could continue to improve, “with appropriate policy accommodation.”
The gathering concluded a few hours after the Commerce Department reported the U.S. economy grew at a 0.2% annual rate in the in the first quarter. It was the worst performance in a year, pocked with evidence of a slowing trade sector and anemic business investment. The report also showed annual consumer price inflation slowed in the first quarter.
>> Read More