From Nic Lenoir of ICAP
Yesterday was yet another sad day for capitalism and the United States. Rewind the clocks a little bit. When the Fed started moving rates towards 0% some observers criticized the policy warning of a repeat of earlier in the decade when low rates fueled the housing bubble. The fed's response at the time: it is not the level of rate that is dangerous, it is when expectations build that they will stay low for an extended period of times which leads to excessively low volatility and credit spreads. What was that again??? Yesterday's statement and the monetary largesse it announced were crafted ONLY to best suit the expectations that had been built in the market. The Federal Reserve has engaged in a positive feedback loop process where it builds up expectations via speeches and leaks and then delivers them to the markets in order to smooth out volatility and encourage excessive lending that can only lead to excessive compression of credit spreads. In fact before this round of QE the Fed asked bank executives what they deemed an acceptable amount of money to best achieve their goal which we discuss below. I don't think anybody really thought banks would encourage the Fed to deliver less liquidity than expected given that just like in every other sewer, you need water to keep the crap floating. In that aim, I suppose yesterday's delivery was an astounding success: most people expected $500Bn to $1Tr so the Fed delivered $600Bn, and since that could have been a slight disappointment, they quickly added that interest re-investment would amount to another $250 to $300Bn which is closer to the upper range, but not so much as to upset too much the inflation hawks. More and more, the Fed is wishy washy trying to kill volatility and ramp the market up quietly, not too fast and avoiding pullbacks. Talk up the economy when people are worried, talk it down when it's good to justify further printing, and most all keep printing... I congratulate the Fed. Not because I agree one bit with their policies, but because they plan and executed their plan to perfection to smoothly achieve their goal. That certainly required a lot of clever orchestrating. Sadly the same great minds planning all this are incapable of understanding the most obvious flaws in the policies they are implementing. Dogma is dangerous because it replaces rational thinking, and in this case the Keynesian theory being implemented is almost a religion for Fed officials who have lost any form of critical thinking ability.
Someone actually pointed out recently [ZH: see here "Niall Ferguson Explains Why Keynesian Policies Are Dooming The World Economy To Round After Round Of Asset Bubbles"] that Keynes himself understood that his theory worked mostly in a "closed economic system". With politicians having pushed free trade for the past 40 years it is hardly the case for the US economy. In fact our economy has pretty much never been more open. No amount of money will solve the structural imbalances, and in my opinion propping up asset prices on a very fragile underlying economic tissue is the best way to inflate a bubble which when it bursts will make 2008 look like a fun afternoon at the pony ranch. Sadly the goal seems hardly to improve the economy here, but rather prop up prices. The Fed chairman makes it clear in his op-ed in the Washington post today:
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372.html?sid=ST2010110305743
Alan Greenspan did get a little heat for admitting that higher stocks is the best way to drive economic growth, though in my opinion not nearly enough, but he was retired when he said it. That is in my opinion the one mistake made by Bernanke in the implementation of his evil plan. Coming out and making that unnecessary statement will draw political backlash from all those who criticize his policies precisely for their very direct consequence: boosting asset prices while having little impact on the economy. Doctor Bernanke goes to extrapolate that higher stock prices will lead to second hand spending... so as I said the other day high-end hair salons will offer free manicures while you get your hair done so you can drop a nice $20 tip to your hand-massage therapist on your way out. Meanwhile the next sign of trouble in the economy all those jobs disappear and we will revert to the structural unemployment rate which keeps getting higher by the minute. Amusingly the Fed Chairman does mention that the Fed alone cannot control the economy. I can't wait for the tea-party fanatics to put a bounty on him slapshot-style.
More technically, the one surprise in the announcement yesterday was the fact the average maturity of the purchases will be between 5 and 6 years. A lot of observers including myself had come to expect more buying in the long end. The Fed removed the 35% limit of ownership it can have of any given Treasury issue, which in theory opens the door for them to buy longer dated bonds since they are the one in more limited supply and that the Fed owns a solid share already. However it does not seem they will make that much use of this additional freedom they gave themselves. I felt that was a bit of a curveball, and as a result the 10s30s curve has gone vertical. The bear conditional flatteners we had recommended and that were in the money quite a bit last week are now under-water, but if you did not take profit, you will probably end up flat since both puts will likely expire out of the money and no premium was paid to enter the trade (that was one of the major drivers behind our rational for the trade).
So what does QE 2.0 means for financial markets? Well short term it's simple: higher stock prices, lower volatility, lower USD, and higher commodity prices, while bonds keep going up (hard to sell for now if you have an $850Bn buyer in the open and positionning had been trimmed). Swap spreads in the US are being paid aggressively today as Libor is floored but Treasury yields keep dwindling. The only viable strategy is to trade around the government's flows at this point. That is all there is left. Front-run P.O.M.O. and collect pennies while you can. All that will last until something perturbs this unsustainable dynamic. That can happen next week, or next spring... most likely it will happen when there is no one left long volatility and the market will implode as the first "sell market" order of more than 500 mini S&P futures leads to a flash crash that will slam all the circuit breakers out there. Here is the list of the most likely culprits that will end our monetary teenage dream:
1) Trade wars and protectionism as the rest of the world throws the towel and cannot accept anymore liquidity from the Fed flooding their markets. This is a trend that we have long warned about and is in its infancy but could rather rapidly gather steam
2) Europe accidentally withdraws a bit more liquidity than they should have from their system and it leads to some failures which forces the market to acknowledge what is currently happening out in the open without being priced in at all: bankrupt governments, sovereign spreads making new highs, riots in the streets... Note that it would not take much for it so snowball into a disaster. The ECB knows it and that's why they are buying PIIGS bonds while withdrawing liquidity (which is rather schizophrenic)
3) Inflation chokes the recovery. The Fed has pretty much committed to buying bonds until CPI hits 2% (or rather PCE which they prefer) or unemployment hits 6%. However CPI is useless and its definition has been changed and abused so much over the years that we can have flat readings when health care costs rise 9% a year, same for education costs, oil is up 100% YoY, and every other commodity is through the roof as well. So what is more likely is that we will run into an inflationary wall while the CPI is still showing a happy +0.6% reading YoY. Prices at the pump is something that will strike a public nerve and has always led to recessions. I have contended for a while that all that liquidity is going to find its way abroad and ramp up commodity prices more than anything. That will happen, guarantied, the only question is when does it become too much?
4) Domestic political backlash: I guess we will soon know what the recent tea-party candidates put in office are made of. Showdown between Bernanke and Paul anyone?
I left out the mortgage mess since at this point the market has decided to fully ignore this and you can count on Washington to push whatever law/accounting measure/magic spell required to make it disappear... at least on paper! The one thing that becomes obvious is that when the party ends, the next sell-off will most likely be a systemic rejection of the current policies in place, and it will be a lot more violent than people expect. Until then, expect volatility to trade very low while most markets have 2/3% intraday gyrations, setting up for the more and more inevitable 40% down day. Good job Ben, good job...
Good luck trading,
Nic
This post is made possible by Microsoft BizSpark as a new part of the Spark of Genius series that focuses on a new and innovative startup each day. Every Thursday, the program focuses on startups within the BizSpark program and what they’re doing to grow.
Xobni’s Outlook-enhancing social sidebar may seem like one of many tools on the market — think Rapportive, Liaise or Gist — aimed to improve inbox productivity, but the startup is maturing past the stage of simple utility and fast becoming a grown-up business.
Now nearing 6 million total downloads, Xobni’s product arsenal includes a free Outlook plugin, a paid premium version, an enterprise offering, Xobni Mobile for BlackBerry and Xobni One, a contact-centric product that connects
In an interview with
Personal and Social Relevance
Part of Xobni’s appeal is that the tool provides users with time-saving and relevant information on contacts. The startup’s formula includes analysis of explicit information users share on social networks, but also taps into user’s implicit behaviors surfaced through communication patterns.
“Our analytics engine helps us determine important information that you don’t explicitly provide, but that improves your productivity,” says Bonforte. “We can determine if someone is important to you, how important they are, and how they relate to others in your network. We take those analytics to serve you the right information on your contacts at the right time.”
The combination packs a one-two punch of information that really resonates with users, especially those willing to fork over $29.99 for premium features in Outlook and $9.99 for the convenience of Xobni on their BlackBerry.
Evolving for Enterprise Demand
Xobni was built with the professional Outlook user in mind. Bonforte admits that from the very beginning the startup saw a trend in enterprise adoption, but ran up against an unanticipated challenge — IT restrictions around user downloads.
“Before launching our enterprise product, we had over 15% of employees from a very large enterprise (hint: Redmond) using the product. And this wasn’t unusual. We have users in 85% of the Fortune 500,” he says. “But as we grew, we heard more and more that people were having issues getting Xobni on their machines because of IT restrictions.”
The company responded earlier this year by releasing a paid enterprise product designed to allow IT departments to deploy and manage Xobni for small businesses or global corporations with thousands of employees. As a result, Xobni now has hundreds of enterprises paying to license its software.
An E-mail Productivity Platform
What started as a simple tool to boost e-mail productivity has graduated to become a platform of its own. Xobni has raised a hefty $32 million from top notch investors making repeat investments to finance its transformation. Funds have been allocated to deploy the enterprise product and build the cloud-based backend that has enabled the startup to move into the mobile space.
“Additionally, we’ve developed a new platform recently that ports Google Gadgets to Outlook. This is a real win for developers who are looking to get into Outlook without the pain,” explains Bonforte.
Xobni has also teamed up with Huddle, makers of collaborative workspaces, to integrate the product inside Outlook. Xobni provides fast access and powerful search around Huddle activity and documents.
It’s these gadgets and Xobni additions that help make Outlook more of a productivity dashboard than e-mail client for users.
But even with all of the product enhancements and new offerings, Xobni’s just now starting to become a money-making business. “We’re in the millions, but not yet tens of millions in revenue,” reports Bonforte. The pressure is now on the startup to prove its business potential and attract more paying enterprise clientele.
Images courtesy of
Sponsored by Microsoft BizSpark
BizSpark is a startup program that gives you three-year access to the latest Microsoft development tools, as well as connecting you to a nationwide network of investors and incubators. There are no upfront costs, so if your business is privately owned, less than three years old, and generates less than U.S. $1 million in annual revenue, you can sign up today.
For more Tech coverage:
eric seiger
The Morning Line: There's <b>News</b> Beyond Zenyatta - NYTimes.com
Friday's horse racing roundup, including a look at the day's Breeders' Cup races.
Facebook Wins Another <b>News</b> Feed Patent
When Facebook originally filed for the patent in the fall of 2006, it was just a month before the company launched its news feed. It argued at the time that as more and more users joined the social network, the amount of information it ...
The good-<b>news</b>/bad-<b>news</b> employment report | Analysis & Opinion |
The mathematics of the monthly payroll report don't always make sense, since it's actually two reports: the household report, covering employment and unemployment status, and the establishment report, showing the number of people being ...
eric seiger
From Nic Lenoir of ICAP
Yesterday was yet another sad day for capitalism and the United States. Rewind the clocks a little bit. When the Fed started moving rates towards 0% some observers criticized the policy warning of a repeat of earlier in the decade when low rates fueled the housing bubble. The fed's response at the time: it is not the level of rate that is dangerous, it is when expectations build that they will stay low for an extended period of times which leads to excessively low volatility and credit spreads. What was that again??? Yesterday's statement and the monetary largesse it announced were crafted ONLY to best suit the expectations that had been built in the market. The Federal Reserve has engaged in a positive feedback loop process where it builds up expectations via speeches and leaks and then delivers them to the markets in order to smooth out volatility and encourage excessive lending that can only lead to excessive compression of credit spreads. In fact before this round of QE the Fed asked bank executives what they deemed an acceptable amount of money to best achieve their goal which we discuss below. I don't think anybody really thought banks would encourage the Fed to deliver less liquidity than expected given that just like in every other sewer, you need water to keep the crap floating. In that aim, I suppose yesterday's delivery was an astounding success: most people expected $500Bn to $1Tr so the Fed delivered $600Bn, and since that could have been a slight disappointment, they quickly added that interest re-investment would amount to another $250 to $300Bn which is closer to the upper range, but not so much as to upset too much the inflation hawks. More and more, the Fed is wishy washy trying to kill volatility and ramp the market up quietly, not too fast and avoiding pullbacks. Talk up the economy when people are worried, talk it down when it's good to justify further printing, and most all keep printing... I congratulate the Fed. Not because I agree one bit with their policies, but because they plan and executed their plan to perfection to smoothly achieve their goal. That certainly required a lot of clever orchestrating. Sadly the same great minds planning all this are incapable of understanding the most obvious flaws in the policies they are implementing. Dogma is dangerous because it replaces rational thinking, and in this case the Keynesian theory being implemented is almost a religion for Fed officials who have lost any form of critical thinking ability.
Someone actually pointed out recently [ZH: see here "Niall Ferguson Explains Why Keynesian Policies Are Dooming The World Economy To Round After Round Of Asset Bubbles"] that Keynes himself understood that his theory worked mostly in a "closed economic system". With politicians having pushed free trade for the past 40 years it is hardly the case for the US economy. In fact our economy has pretty much never been more open. No amount of money will solve the structural imbalances, and in my opinion propping up asset prices on a very fragile underlying economic tissue is the best way to inflate a bubble which when it bursts will make 2008 look like a fun afternoon at the pony ranch. Sadly the goal seems hardly to improve the economy here, but rather prop up prices. The Fed chairman makes it clear in his op-ed in the Washington post today:
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372.html?sid=ST2010110305743
Alan Greenspan did get a little heat for admitting that higher stocks is the best way to drive economic growth, though in my opinion not nearly enough, but he was retired when he said it. That is in my opinion the one mistake made by Bernanke in the implementation of his evil plan. Coming out and making that unnecessary statement will draw political backlash from all those who criticize his policies precisely for their very direct consequence: boosting asset prices while having little impact on the economy. Doctor Bernanke goes to extrapolate that higher stock prices will lead to second hand spending... so as I said the other day high-end hair salons will offer free manicures while you get your hair done so you can drop a nice $20 tip to your hand-massage therapist on your way out. Meanwhile the next sign of trouble in the economy all those jobs disappear and we will revert to the structural unemployment rate which keeps getting higher by the minute. Amusingly the Fed Chairman does mention that the Fed alone cannot control the economy. I can't wait for the tea-party fanatics to put a bounty on him slapshot-style.
More technically, the one surprise in the announcement yesterday was the fact the average maturity of the purchases will be between 5 and 6 years. A lot of observers including myself had come to expect more buying in the long end. The Fed removed the 35% limit of ownership it can have of any given Treasury issue, which in theory opens the door for them to buy longer dated bonds since they are the one in more limited supply and that the Fed owns a solid share already. However it does not seem they will make that much use of this additional freedom they gave themselves. I felt that was a bit of a curveball, and as a result the 10s30s curve has gone vertical. The bear conditional flatteners we had recommended and that were in the money quite a bit last week are now under-water, but if you did not take profit, you will probably end up flat since both puts will likely expire out of the money and no premium was paid to enter the trade (that was one of the major drivers behind our rational for the trade).
So what does QE 2.0 means for financial markets? Well short term it's simple: higher stock prices, lower volatility, lower USD, and higher commodity prices, while bonds keep going up (hard to sell for now if you have an $850Bn buyer in the open and positionning had been trimmed). Swap spreads in the US are being paid aggressively today as Libor is floored but Treasury yields keep dwindling. The only viable strategy is to trade around the government's flows at this point. That is all there is left. Front-run P.O.M.O. and collect pennies while you can. All that will last until something perturbs this unsustainable dynamic. That can happen next week, or next spring... most likely it will happen when there is no one left long volatility and the market will implode as the first "sell market" order of more than 500 mini S&P futures leads to a flash crash that will slam all the circuit breakers out there. Here is the list of the most likely culprits that will end our monetary teenage dream:
1) Trade wars and protectionism as the rest of the world throws the towel and cannot accept anymore liquidity from the Fed flooding their markets. This is a trend that we have long warned about and is in its infancy but could rather rapidly gather steam
2) Europe accidentally withdraws a bit more liquidity than they should have from their system and it leads to some failures which forces the market to acknowledge what is currently happening out in the open without being priced in at all: bankrupt governments, sovereign spreads making new highs, riots in the streets... Note that it would not take much for it so snowball into a disaster. The ECB knows it and that's why they are buying PIIGS bonds while withdrawing liquidity (which is rather schizophrenic)
3) Inflation chokes the recovery. The Fed has pretty much committed to buying bonds until CPI hits 2% (or rather PCE which they prefer) or unemployment hits 6%. However CPI is useless and its definition has been changed and abused so much over the years that we can have flat readings when health care costs rise 9% a year, same for education costs, oil is up 100% YoY, and every other commodity is through the roof as well. So what is more likely is that we will run into an inflationary wall while the CPI is still showing a happy +0.6% reading YoY. Prices at the pump is something that will strike a public nerve and has always led to recessions. I have contended for a while that all that liquidity is going to find its way abroad and ramp up commodity prices more than anything. That will happen, guarantied, the only question is when does it become too much?
4) Domestic political backlash: I guess we will soon know what the recent tea-party candidates put in office are made of. Showdown between Bernanke and Paul anyone?
I left out the mortgage mess since at this point the market has decided to fully ignore this and you can count on Washington to push whatever law/accounting measure/magic spell required to make it disappear... at least on paper! The one thing that becomes obvious is that when the party ends, the next sell-off will most likely be a systemic rejection of the current policies in place, and it will be a lot more violent than people expect. Until then, expect volatility to trade very low while most markets have 2/3% intraday gyrations, setting up for the more and more inevitable 40% down day. Good job Ben, good job...
Good luck trading,
Nic
This post is made possible by Microsoft BizSpark as a new part of the Spark of Genius series that focuses on a new and innovative startup each day. Every Thursday, the program focuses on startups within the BizSpark program and what they’re doing to grow.
Xobni’s Outlook-enhancing social sidebar may seem like one of many tools on the market — think Rapportive, Liaise or Gist — aimed to improve inbox productivity, but the startup is maturing past the stage of simple utility and fast becoming a grown-up business.
Now nearing 6 million total downloads, Xobni’s product arsenal includes a free Outlook plugin, a paid premium version, an enterprise offering, Xobni Mobile for BlackBerry and Xobni One, a contact-centric product that connects
In an interview with
Personal and Social Relevance
Part of Xobni’s appeal is that the tool provides users with time-saving and relevant information on contacts. The startup’s formula includes analysis of explicit information users share on social networks, but also taps into user’s implicit behaviors surfaced through communication patterns.
“Our analytics engine helps us determine important information that you don’t explicitly provide, but that improves your productivity,” says Bonforte. “We can determine if someone is important to you, how important they are, and how they relate to others in your network. We take those analytics to serve you the right information on your contacts at the right time.”
The combination packs a one-two punch of information that really resonates with users, especially those willing to fork over $29.99 for premium features in Outlook and $9.99 for the convenience of Xobni on their BlackBerry.
Evolving for Enterprise Demand
Xobni was built with the professional Outlook user in mind. Bonforte admits that from the very beginning the startup saw a trend in enterprise adoption, but ran up against an unanticipated challenge — IT restrictions around user downloads.
“Before launching our enterprise product, we had over 15% of employees from a very large enterprise (hint: Redmond) using the product. And this wasn’t unusual. We have users in 85% of the Fortune 500,” he says. “But as we grew, we heard more and more that people were having issues getting Xobni on their machines because of IT restrictions.”
The company responded earlier this year by releasing a paid enterprise product designed to allow IT departments to deploy and manage Xobni for small businesses or global corporations with thousands of employees. As a result, Xobni now has hundreds of enterprises paying to license its software.
An E-mail Productivity Platform
What started as a simple tool to boost e-mail productivity has graduated to become a platform of its own. Xobni has raised a hefty $32 million from top notch investors making repeat investments to finance its transformation. Funds have been allocated to deploy the enterprise product and build the cloud-based backend that has enabled the startup to move into the mobile space.
“Additionally, we’ve developed a new platform recently that ports Google Gadgets to Outlook. This is a real win for developers who are looking to get into Outlook without the pain,” explains Bonforte.
Xobni has also teamed up with Huddle, makers of collaborative workspaces, to integrate the product inside Outlook. Xobni provides fast access and powerful search around Huddle activity and documents.
It’s these gadgets and Xobni additions that help make Outlook more of a productivity dashboard than e-mail client for users.
But even with all of the product enhancements and new offerings, Xobni’s just now starting to become a money-making business. “We’re in the millions, but not yet tens of millions in revenue,” reports Bonforte. The pressure is now on the startup to prove its business potential and attract more paying enterprise clientele.
Images courtesy of
Sponsored by Microsoft BizSpark
BizSpark is a startup program that gives you three-year access to the latest Microsoft development tools, as well as connecting you to a nationwide network of investors and incubators. There are no upfront costs, so if your business is privately owned, less than three years old, and generates less than U.S. $1 million in annual revenue, you can sign up today.
For more Tech coverage:
eric seiger
The Morning Line: There's <b>News</b> Beyond Zenyatta - NYTimes.com
Friday's horse racing roundup, including a look at the day's Breeders' Cup races.
Facebook Wins Another <b>News</b> Feed Patent
When Facebook originally filed for the patent in the fall of 2006, it was just a month before the company launched its news feed. It argued at the time that as more and more users joined the social network, the amount of information it ...
The good-<b>news</b>/bad-<b>news</b> employment report | Analysis & Opinion |
The mathematics of the monthly payroll report don't always make sense, since it's actually two reports: the household report, covering employment and unemployment status, and the establishment report, showing the number of people being ...
eric seiger
eric seiger
eric seiger
The Morning Line: There's <b>News</b> Beyond Zenyatta - NYTimes.com
Friday's horse racing roundup, including a look at the day's Breeders' Cup races.
Facebook Wins Another <b>News</b> Feed Patent
When Facebook originally filed for the patent in the fall of 2006, it was just a month before the company launched its news feed. It argued at the time that as more and more users joined the social network, the amount of information it ...
The good-<b>news</b>/bad-<b>news</b> employment report | Analysis & Opinion |
The mathematics of the monthly payroll report don't always make sense, since it's actually two reports: the household report, covering employment and unemployment status, and the establishment report, showing the number of people being ...
eric seiger
From Nic Lenoir of ICAP
Yesterday was yet another sad day for capitalism and the United States. Rewind the clocks a little bit. When the Fed started moving rates towards 0% some observers criticized the policy warning of a repeat of earlier in the decade when low rates fueled the housing bubble. The fed's response at the time: it is not the level of rate that is dangerous, it is when expectations build that they will stay low for an extended period of times which leads to excessively low volatility and credit spreads. What was that again??? Yesterday's statement and the monetary largesse it announced were crafted ONLY to best suit the expectations that had been built in the market. The Federal Reserve has engaged in a positive feedback loop process where it builds up expectations via speeches and leaks and then delivers them to the markets in order to smooth out volatility and encourage excessive lending that can only lead to excessive compression of credit spreads. In fact before this round of QE the Fed asked bank executives what they deemed an acceptable amount of money to best achieve their goal which we discuss below. I don't think anybody really thought banks would encourage the Fed to deliver less liquidity than expected given that just like in every other sewer, you need water to keep the crap floating. In that aim, I suppose yesterday's delivery was an astounding success: most people expected $500Bn to $1Tr so the Fed delivered $600Bn, and since that could have been a slight disappointment, they quickly added that interest re-investment would amount to another $250 to $300Bn which is closer to the upper range, but not so much as to upset too much the inflation hawks. More and more, the Fed is wishy washy trying to kill volatility and ramp the market up quietly, not too fast and avoiding pullbacks. Talk up the economy when people are worried, talk it down when it's good to justify further printing, and most all keep printing... I congratulate the Fed. Not because I agree one bit with their policies, but because they plan and executed their plan to perfection to smoothly achieve their goal. That certainly required a lot of clever orchestrating. Sadly the same great minds planning all this are incapable of understanding the most obvious flaws in the policies they are implementing. Dogma is dangerous because it replaces rational thinking, and in this case the Keynesian theory being implemented is almost a religion for Fed officials who have lost any form of critical thinking ability.
Someone actually pointed out recently [ZH: see here "Niall Ferguson Explains Why Keynesian Policies Are Dooming The World Economy To Round After Round Of Asset Bubbles"] that Keynes himself understood that his theory worked mostly in a "closed economic system". With politicians having pushed free trade for the past 40 years it is hardly the case for the US economy. In fact our economy has pretty much never been more open. No amount of money will solve the structural imbalances, and in my opinion propping up asset prices on a very fragile underlying economic tissue is the best way to inflate a bubble which when it bursts will make 2008 look like a fun afternoon at the pony ranch. Sadly the goal seems hardly to improve the economy here, but rather prop up prices. The Fed chairman makes it clear in his op-ed in the Washington post today:
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372.html?sid=ST2010110305743
Alan Greenspan did get a little heat for admitting that higher stocks is the best way to drive economic growth, though in my opinion not nearly enough, but he was retired when he said it. That is in my opinion the one mistake made by Bernanke in the implementation of his evil plan. Coming out and making that unnecessary statement will draw political backlash from all those who criticize his policies precisely for their very direct consequence: boosting asset prices while having little impact on the economy. Doctor Bernanke goes to extrapolate that higher stock prices will lead to second hand spending... so as I said the other day high-end hair salons will offer free manicures while you get your hair done so you can drop a nice $20 tip to your hand-massage therapist on your way out. Meanwhile the next sign of trouble in the economy all those jobs disappear and we will revert to the structural unemployment rate which keeps getting higher by the minute. Amusingly the Fed Chairman does mention that the Fed alone cannot control the economy. I can't wait for the tea-party fanatics to put a bounty on him slapshot-style.
More technically, the one surprise in the announcement yesterday was the fact the average maturity of the purchases will be between 5 and 6 years. A lot of observers including myself had come to expect more buying in the long end. The Fed removed the 35% limit of ownership it can have of any given Treasury issue, which in theory opens the door for them to buy longer dated bonds since they are the one in more limited supply and that the Fed owns a solid share already. However it does not seem they will make that much use of this additional freedom they gave themselves. I felt that was a bit of a curveball, and as a result the 10s30s curve has gone vertical. The bear conditional flatteners we had recommended and that were in the money quite a bit last week are now under-water, but if you did not take profit, you will probably end up flat since both puts will likely expire out of the money and no premium was paid to enter the trade (that was one of the major drivers behind our rational for the trade).
So what does QE 2.0 means for financial markets? Well short term it's simple: higher stock prices, lower volatility, lower USD, and higher commodity prices, while bonds keep going up (hard to sell for now if you have an $850Bn buyer in the open and positionning had been trimmed). Swap spreads in the US are being paid aggressively today as Libor is floored but Treasury yields keep dwindling. The only viable strategy is to trade around the government's flows at this point. That is all there is left. Front-run P.O.M.O. and collect pennies while you can. All that will last until something perturbs this unsustainable dynamic. That can happen next week, or next spring... most likely it will happen when there is no one left long volatility and the market will implode as the first "sell market" order of more than 500 mini S&P futures leads to a flash crash that will slam all the circuit breakers out there. Here is the list of the most likely culprits that will end our monetary teenage dream:
1) Trade wars and protectionism as the rest of the world throws the towel and cannot accept anymore liquidity from the Fed flooding their markets. This is a trend that we have long warned about and is in its infancy but could rather rapidly gather steam
2) Europe accidentally withdraws a bit more liquidity than they should have from their system and it leads to some failures which forces the market to acknowledge what is currently happening out in the open without being priced in at all: bankrupt governments, sovereign spreads making new highs, riots in the streets... Note that it would not take much for it so snowball into a disaster. The ECB knows it and that's why they are buying PIIGS bonds while withdrawing liquidity (which is rather schizophrenic)
3) Inflation chokes the recovery. The Fed has pretty much committed to buying bonds until CPI hits 2% (or rather PCE which they prefer) or unemployment hits 6%. However CPI is useless and its definition has been changed and abused so much over the years that we can have flat readings when health care costs rise 9% a year, same for education costs, oil is up 100% YoY, and every other commodity is through the roof as well. So what is more likely is that we will run into an inflationary wall while the CPI is still showing a happy +0.6% reading YoY. Prices at the pump is something that will strike a public nerve and has always led to recessions. I have contended for a while that all that liquidity is going to find its way abroad and ramp up commodity prices more than anything. That will happen, guarantied, the only question is when does it become too much?
4) Domestic political backlash: I guess we will soon know what the recent tea-party candidates put in office are made of. Showdown between Bernanke and Paul anyone?
I left out the mortgage mess since at this point the market has decided to fully ignore this and you can count on Washington to push whatever law/accounting measure/magic spell required to make it disappear... at least on paper! The one thing that becomes obvious is that when the party ends, the next sell-off will most likely be a systemic rejection of the current policies in place, and it will be a lot more violent than people expect. Until then, expect volatility to trade very low while most markets have 2/3% intraday gyrations, setting up for the more and more inevitable 40% down day. Good job Ben, good job...
Good luck trading,
Nic
This post is made possible by Microsoft BizSpark as a new part of the Spark of Genius series that focuses on a new and innovative startup each day. Every Thursday, the program focuses on startups within the BizSpark program and what they’re doing to grow.
Xobni’s Outlook-enhancing social sidebar may seem like one of many tools on the market — think Rapportive, Liaise or Gist — aimed to improve inbox productivity, but the startup is maturing past the stage of simple utility and fast becoming a grown-up business.
Now nearing 6 million total downloads, Xobni’s product arsenal includes a free Outlook plugin, a paid premium version, an enterprise offering, Xobni Mobile for BlackBerry and Xobni One, a contact-centric product that connects
In an interview with
Personal and Social Relevance
Part of Xobni’s appeal is that the tool provides users with time-saving and relevant information on contacts. The startup’s formula includes analysis of explicit information users share on social networks, but also taps into user’s implicit behaviors surfaced through communication patterns.
“Our analytics engine helps us determine important information that you don’t explicitly provide, but that improves your productivity,” says Bonforte. “We can determine if someone is important to you, how important they are, and how they relate to others in your network. We take those analytics to serve you the right information on your contacts at the right time.”
The combination packs a one-two punch of information that really resonates with users, especially those willing to fork over $29.99 for premium features in Outlook and $9.99 for the convenience of Xobni on their BlackBerry.
Evolving for Enterprise Demand
Xobni was built with the professional Outlook user in mind. Bonforte admits that from the very beginning the startup saw a trend in enterprise adoption, but ran up against an unanticipated challenge — IT restrictions around user downloads.
“Before launching our enterprise product, we had over 15% of employees from a very large enterprise (hint: Redmond) using the product. And this wasn’t unusual. We have users in 85% of the Fortune 500,” he says. “But as we grew, we heard more and more that people were having issues getting Xobni on their machines because of IT restrictions.”
The company responded earlier this year by releasing a paid enterprise product designed to allow IT departments to deploy and manage Xobni for small businesses or global corporations with thousands of employees. As a result, Xobni now has hundreds of enterprises paying to license its software.
An E-mail Productivity Platform
What started as a simple tool to boost e-mail productivity has graduated to become a platform of its own. Xobni has raised a hefty $32 million from top notch investors making repeat investments to finance its transformation. Funds have been allocated to deploy the enterprise product and build the cloud-based backend that has enabled the startup to move into the mobile space.
“Additionally, we’ve developed a new platform recently that ports Google Gadgets to Outlook. This is a real win for developers who are looking to get into Outlook without the pain,” explains Bonforte.
Xobni has also teamed up with Huddle, makers of collaborative workspaces, to integrate the product inside Outlook. Xobni provides fast access and powerful search around Huddle activity and documents.
It’s these gadgets and Xobni additions that help make Outlook more of a productivity dashboard than e-mail client for users.
But even with all of the product enhancements and new offerings, Xobni’s just now starting to become a money-making business. “We’re in the millions, but not yet tens of millions in revenue,” reports Bonforte. The pressure is now on the startup to prove its business potential and attract more paying enterprise clientele.
Images courtesy of
Sponsored by Microsoft BizSpark
BizSpark is a startup program that gives you three-year access to the latest Microsoft development tools, as well as connecting you to a nationwide network of investors and incubators. There are no upfront costs, so if your business is privately owned, less than three years old, and generates less than U.S. $1 million in annual revenue, you can sign up today.
For more Tech coverage:
eric seiger
eric seiger
The Morning Line: There's <b>News</b> Beyond Zenyatta - NYTimes.com
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The mathematics of the monthly payroll report don't always make sense, since it's actually two reports: the household report, covering employment and unemployment status, and the establishment report, showing the number of people being ...
eric seiger
eric seiger
The Morning Line: There's <b>News</b> Beyond Zenyatta - NYTimes.com
Friday's horse racing roundup, including a look at the day's Breeders' Cup races.
Facebook Wins Another <b>News</b> Feed Patent
When Facebook originally filed for the patent in the fall of 2006, it was just a month before the company launched its news feed. It argued at the time that as more and more users joined the social network, the amount of information it ...
The good-<b>news</b>/bad-<b>news</b> employment report | Analysis & Opinion |
The mathematics of the monthly payroll report don't always make sense, since it's actually two reports: the household report, covering employment and unemployment status, and the establishment report, showing the number of people being ...
eric seiger
The Morning Line: There's <b>News</b> Beyond Zenyatta - NYTimes.com
Friday's horse racing roundup, including a look at the day's Breeders' Cup races.
Facebook Wins Another <b>News</b> Feed Patent
When Facebook originally filed for the patent in the fall of 2006, it was just a month before the company launched its news feed. It argued at the time that as more and more users joined the social network, the amount of information it ...
The good-<b>news</b>/bad-<b>news</b> employment report | Analysis & Opinion |
The mathematics of the monthly payroll report don't always make sense, since it's actually two reports: the household report, covering employment and unemployment status, and the establishment report, showing the number of people being ...
eric seiger
The Morning Line: There's <b>News</b> Beyond Zenyatta - NYTimes.com
Friday's horse racing roundup, including a look at the day's Breeders' Cup races.
Facebook Wins Another <b>News</b> Feed Patent
When Facebook originally filed for the patent in the fall of 2006, it was just a month before the company launched its news feed. It argued at the time that as more and more users joined the social network, the amount of information it ...
The good-<b>news</b>/bad-<b>news</b> employment report | Analysis & Opinion |
The mathematics of the monthly payroll report don't always make sense, since it's actually two reports: the household report, covering employment and unemployment status, and the establishment report, showing the number of people being ...
eric seiger eric seiger
eric seiger
eric seiger
eric seiger
The Morning Line: There's <b>News</b> Beyond Zenyatta - NYTimes.com
Friday's horse racing roundup, including a look at the day's Breeders' Cup races.
Facebook Wins Another <b>News</b> Feed Patent
When Facebook originally filed for the patent in the fall of 2006, it was just a month before the company launched its news feed. It argued at the time that as more and more users joined the social network, the amount of information it ...
The good-<b>news</b>/bad-<b>news</b> employment report | Analysis & Opinion |
The mathematics of the monthly payroll report don't always make sense, since it's actually two reports: the household report, covering employment and unemployment status, and the establishment report, showing the number of people being ...
big seminar 14
Making money from blogging is a dream that many people have. This objective is not at all unattainable even if you are someone with just basic writing skills. In fact, becoming a blogger doesn't necessarily mean you have to be a very good writer. It just requires a creative mind set, some consistency and the willingness to work hard. But even though blogging is something that just about anyone can do - not many people have managed to turn blogging into profit.
Most of the people who fail to earn any money from their blogs often fail because of two reasons. They may have had too high of an expectation of how quickly their reader base would grow, and how fast they would be able to start generating profit. When those expectations don't go according to plan, it often kills their motivation to continue blogging, and cause them to give up out of being disappointed.
Another thing that causes a lot of bloggers to windup crashing into the brick wall of frustration - is the lack of proper planning. The key to becoming a successful blogger is to set realistic goals and then patiently start working towards those goals.
In order to start generating earnings from your blog, you will need to drive enough traffic to the content of your site. The greater the amount of traffic you are able to direct, the more chance you will have of getting advertisers to pay you to promoting their ads on your blog. And of course, generating that much traffic is not an easy task - it requires hard work.
There are tons of other sites on the internet and a lot of new ones go up each day. So in order for your site to be found... it's not enough to just focus on the quantity, and the quality of your blog post. You have to use some of the time spent adding content to your site to promote it, so you can start getting the sort of traffic that will earn you money.
It is in fact very important that you consistently update your blog with fresh content. This will ensure you have posts that are frequently indexed into search engines, so your site can continuously receive a steady flow of search engine traffic. But you just have to balance between adding content and promoting your site.
Another great benefit you'll get from constantly updating your blog... it causes you to form a relationship with your readers. And believe you me, if you keep adding quality content to your blog, your readers will always keep coming back each time there is a fresh update to your site.
So if your aim is to start generating earnings from your blog, start by getting to work and do whatever is necessary to attract visitors to your site. Take different promotional steps such as joining blogging communities... get familiarized with other bloggers from those communities. This is so you can exchange links with other bloggers which will help to improve your site's ranking.
It doesn't matter how much internet marketing experience you may have, or how brilliant of an idea you might have for blogging - don't expect to start making money overnight! The process of acquiring the type of reader base that will turn into profit will take time, and requires patience.
So be realistic, don't expect anything significant until after a couple of months of hard work. And don't be deterred when things take a while to take off. Try to maintain your focus and stick to the task of improving and promoting your blog even during those dry spells. Set realistic short term goals and work towards fulfilling them. Eventually if you keep your focus on the goals you have set; your persistence will pay off and cause you to start making money from blogging.
eric seiger
The Morning Line: There's <b>News</b> Beyond Zenyatta - NYTimes.com
Friday's horse racing roundup, including a look at the day's Breeders' Cup races.
Facebook Wins Another <b>News</b> Feed Patent
When Facebook originally filed for the patent in the fall of 2006, it was just a month before the company launched its news feed. It argued at the time that as more and more users joined the social network, the amount of information it ...
The good-<b>news</b>/bad-<b>news</b> employment report | Analysis & Opinion |
The mathematics of the monthly payroll report don't always make sense, since it's actually two reports: the household report, covering employment and unemployment status, and the establishment report, showing the number of people being ...
eric seiger
The Morning Line: There's <b>News</b> Beyond Zenyatta - NYTimes.com
Friday's horse racing roundup, including a look at the day's Breeders' Cup races.
Facebook Wins Another <b>News</b> Feed Patent
When Facebook originally filed for the patent in the fall of 2006, it was just a month before the company launched its news feed. It argued at the time that as more and more users joined the social network, the amount of information it ...
The good-<b>news</b>/bad-<b>news</b> employment report | Analysis & Opinion |
The mathematics of the monthly payroll report don't always make sense, since it's actually two reports: the household report, covering employment and unemployment status, and the establishment report, showing the number of people being ...
eric seiger
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