China, Not Piketty, Explains ‘Confused Signals’ in U.S. Asset Prices
The FT’s Ed Luce recently took on the “confused signals” being sent by U.S. stock and bond prices moving in sync (upward). Which is it, he asks? Are economic prospects good, as stock prices suggest, or bleak, as bond prices suggest? Both and neither, he offers. High-end retailers like LMVH and Tiffany are doing great, he says, ... Read more
Evidence of Hampered Monetary Policy Transmission Channel in the Euro Area
Mario Draghi cautioned on the ‘hampered’ transmission channel of monetary policy in his now famous London speech last week: To the extent that the size of these sovereign premia hampers the functioning of the monetary policy transmission channel, they come within our mandate. I referred to the clogging of rates policy back in April via ... Read more
Housing Bubbles: Less Frothy but Europe is Behind
Wolfgang Muenchau’s article in the Financial Times, There is no Spanish siesta for the Eurozone, inspired me to update my post on housing bubbles around the world (really just Europe and the US). He argues that Spain’s bubble was much more extreme, and that the price adjustment is less mature compared to the others. I would ... Read more
EA Spreads: Why Should the Trend Change?
They changed the title; but originally the NY Times reported “Euro Zone Agrees to Reinforce Maastricht Rules“. That’s exactly what EA policy makers agreed to last week – not much to bring home.The real shift in policy came from the ECB. Ambrose Evans-Pritchard highlights the ECB’s actions as ensuring some sort of bank profitability, while at ... Read more
Linking Sovereign Risk to Corporate Credit Spreads in Europe
Financial firms in Europe and the US are hitting crisis mode, as illustrated by relative borrowing costs, spreads, to comparable government bonds (see financial spreads chart to left and click to enlarge). World policy leaders anxiously await – and some promise to deliver – a solution to the euro area sovereign debt crisis at the ... Read more