The Mess That Greenspan Made - Part 5

Much Ado About German Bond Yields

Funny things happen in math when you work with very small numbers very close to zero and, since bond yields have been in that range for some time now but have recently been heading higher, the financial media is fascinated by this, either because they’re bored with what’s going on in the world and are amusing themselves in any way they can or they simply don’t understand that this sort of math is just silly (granted, it’s not silly if you bought European bonds two months ago and now want to sell, but that’s not the point here).

A good example of this kind of silly math is to calculate a P/E ratio for a stock with infinitesimally small (but non-zero) earnings where the result is an unusually large number – say, a P/E of 10,200. Of course if you had divided by zero (which is, effectively what you’re doing here), you get something like #DIV/O! or “Cannot divide by zero”, but this doesn’t stop people from doing it when it’s not zero, but very close to zero.

Anyway, the recent ascent of bond yields in general and German bond yields in particular has attracted quite a bit of attention lately for reasons that should be obvious when looking at the chart below via

Any time you get this big of a move away from zero, all kinds of crazy math results such as that contained in German Bond Investors Just Lost 25 Years of Yield in 14 Days at Bloomberg and people are just fascinated by it.

Thursday Morning Links

Global Bond Selloff Reaches Asia – WSJ
Bond market fireworks flash warning signals – FT
German Bonds Extend Slide as France Sells Debt – Bloomberg
Volatile Bond Markets Are Trying To Tell Us Something – Forbes
Yellen cites ‘potential dangers’ in U.S. stock valuations – Reuters
Stop Yellen! Stocks aren’t that expensive – USA Today
Greece Faces Pending Deadline as ECB Eyes Haircut Option – Bloomberg
Greece Saunters Across the Autobahn – Bloomberg View
Systemic Racism or Isolated Abuses? Americans Disagree – The Atlantic
The amazing Jade Helm conspiracy theory, explained – Vox
Another ‘Bomb Train’ Just Exploded in North Dakota – Vice News
The G.O.P.’s War on Science Gets Worse – New Yorker
Restore the Fourth –

Stocks: 4 things to know before the open – CNN/Money
There Is No Margin of Safety Left – Kass’ Corner
Asia stocks fall after Yellen warning on valuation – MarketWatch
Janet Yellen, A Bear Late and a ‘Dollar’ Short – Alhambra Partners
Dollar Hits Air Pocket, Euro in Epic Short Squeeze – Wolf Street
Why equities may find it tough to wiggle out of the bond-market mess – MarketWatch
Gold slips for second session on higher bond yields – Reuters
Higher Risk For Equities To Correct, Gold At Buy Point – RBC – Kitco
China To Establish Yuan-Denominated Gold Fix – Zero Hedge

NY Governor moves to hike fast-food worker wages – CNN/Money
U.S. Potential Economic Growth: Is It Improving with Age? – NY Fed
German industrial giant Siemens plans to cut 4,500 jobs – BBC
Early Look: China Economy Likely Recuperated A Bit in April – WSJ
China warns Philippine military planes away from disputed sea area – Reuters
All the reasons Europe’s plan to attack migrant boats is a bad idea – Quartz
These are the best places to buy and flip a home – MarketWatch
Where Can Millennials Afford to Buy Homes? – Zillow
The Worst Ex-Chairman Ever – Krugman, NY Times
Bernanke Inc.: Lucrative Life of a Former Fed Chairman – Bloomberg


Q2 GDPNow Now Available

Much is being made about how yesterday’s report of a widening U.S. trade deficit in March has pushed first quarter economic growth into negative territory, from a rate of +0.2 percent to somewhere around -0.5 percent (subject to further revisions).

Naturally, analysts think things will improve as we head toward summer, but it’s worth looking at what the Atlanta Fed’s GDP Now measure has to say about Q2 growth, seeing as they nailed it in Q1 as noted here last week.

Of course, there’s not a whole lot of data available for the second quarter yet – the April ISM Manufacturing Index is about it as far as I can tell from the Atlanta Fed website.

Nonetheless, their forecast is based on something, rather than the perpetually optimistic outlook from most economists and other analysts in the “Blue Chip consensus” who, collectively, missed the Q1 growth rate by a country mile.

Wednesday Morning Links

Did the Economy Shrink in the First Quarter? – WSJ
Greece blames EU and IMF for ‘obstacles’ in talks – euobserver
Five years of bailouts: The grim legacy of Greece’s crisis – AP
ECB Mulls Tighter Greece Rules After 100 Days of Tspiras – Bloomberg
How the US Military Is Preparing for Hostile Threats to Its Satellites – Vice News
Dave Goldberg’s death points to risks of treadmills and smartphones – Washington Post
For Top 25 Hedge Fund Managers, a Difficult 2014 Still Paid Well – NY Times
Goldman’s Newest Business: Online Lending To The Little Guy – BuzzFeed
Getting Rich in America Depends on a Lot More Than a College Degree – Bloomberg
Conspiracy theories, loss of faith and the Patriot Act – The Hill
Feckless feds slap Times Square’s billboards – NY Post
The end of cash? – The Week

U.S. stocks set for rebound with jobs, Yellen in view – MarketWatch
Is the Air Coming Out of the Bond Market Bubble? – Fiscal Times
Dollar Is Losing Grip On The ‘Iron Throne’ Of The Currency Market – Nasdaq
Oil Extends Gain Above $62 as U.S. Crude Supply Glut Seen Easing – Bloomberg
Blame the next global financial crisis on the U.S. dollar – MarketWatch
Bund investors lose 25 years worth of yield in two weeks! – Reformed Broker
Gold down as strong shares, U.S. yields offset weaker dollar – Reuters
China One Step Closer to Becoming World’s Gold Hub – GoldCore
Dollar Better than Gold? Ask Venezuela – Marc to Market
Six Silver Questions and Perspectives – SilverSeek

Q1 GDP likely negative after jump in trade deficit – Forex Live
Q1 Growth Was Weak, But It’s Not A Recession Signal – Capital Spectator
U.S. Economic Confidence Index Down Sharply Last Week – Gallup
UK service sector growth at eight-month high – BBC
China’s Military May Be a Lot Less Dangerous Than It Looks – WSJ
High End Real Estate In Canada In Frenzied Bubble Blow-Off – Acting Man
Government using subprime mortgages to pump housing recovery – The Burning Platform
CoreLogic: House Prices up 5.9% Year-over-year in March – Calculated Risk
Kocherlakota: First-Quarter Economic Softness Is ‘Matter for Concern’ – WSJ
DoubleLine’s Gundlach sees no Fed rate increase in 2015 – Reuters

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