11 Feb FED TESTIMONY AT 10:00
FRB Chair Powell testifies to Congress about the state of the economy. I am certain he will discuss the coronavirus and its possible implications. Perhaps the safest comment to make is no one knows the outcome and there is not a shortage of learned opinions. Powell’s comments can move markets but most are expecting a relatively benign testimony.
Also, today is the New Hampshire primary. Wow! Life is stranger than fiction. Buttigieg, who the media has crowned as moderate even though he is campaigning to pack the Supreme Court, abolish the Second Amendment and end the electoral college, has now become a deficit hawk.
Buttigieg ultimately supports a single payer health care system, free college and expressed interest in exploring MMT. Is there not a contradiction?
Speaking of contradiction, Buttigieg claimed victory in Iowa because he won the delegate count not the popular vote. How can he make this claim for he supports the abolishment of the electoral college?
It is often written the markets are a microcosm of society. Where reality is often ignored but when reality does return, it returns in dramatic action. For example, I ask how can Greece have negative interest rates and the US has positive yields?
Speaking of negative interest rates, the amount of negative yielding debt is around $13.5 trillion, surging about $2 trillion in quick order partially the result of coronavirus scares.
Speaking of a break in reality, I have discussed at length the record amount of monies in five companies. Is this realistic?
Speaking of returning to reality, last week I referenced a Bloomberg article about an algorithmic trading firm that did not have a negative trading day for over 10 years, a streak that ended in 2017.
Yesterday Blomberg wrote another story about the “numerous troubles of high frequency trading firms and their radical change in profitability” (i.e. the lack of thereof). Bloomberg wrote how this trade had become so crowded as everyone was emulating the former market leader, an environment that always ends in failure.
I rhetorically ask are the repo liquidity issues connected to the radical change in the profitability of algo trading firms? I do not know. Perhaps FRB Chair Powell could offer some insight today.
As noted several weeks ago Minneapolis Fed President commented the lack of liquidity in the repo market is a function of issues with hedge funds and other “alternative trading vehicles,” including the possibility of weakness in a major clearing firm or custodian.
What will happen today?
Last night the foreign markets were up. London was up 0.82%, Paris up 0.40% and Frankfurt up 0.82%. China was up 0.39%, Japan closed for a holiday and Hang Sang up 1.26%.
The Dow should open nominally higher ahead of Powell’s testimony. Oil rose from a one year low. The 10-year is off 5/32 to yield 1.59%.