Tag Archives: FED

Britain OUT of the European Union

The day today is historic. The British people voted for a BREXIT! The pound plummeted and Prime minister David Cameron resigns. The British people backed “Brexit” and leave by 52%.

What a day!

The pound plummeted 7 percent  on its worst day on record. Thats nearly twice as much as the big drop on 1992s Black Wednesday when the currency dropped 4,1 percent.

 

brex

 

But what`s wrong with a weaker pound? A lower pound will help the British exporters which means exporters will be more competitive and sell more not only to european countries but to the rest of the world.

On the other side, prices can start to increase and it will be more expensive for the British people, and that will be a challenge for BOE`s inflation target.

Britain is still in Europe and will always be, but Brexit means they are out of the European Union system. That`s something different.

Prime Minister David Cameron will step down in October, and what the new Prime Minister must do is to negotiate with EU and other european countries and cooperate in EEA (European Free Trade Assosiation).

They are still a country in Europe but what they want is their own sovereignty and more control over their own currency.

Just take a look at Greece. After joining EU they have been in a very difficult situation, and they can’t print their own currency because of the Euro, so only that is making it difficult for them.

This is still early on stage one but you can already see that the pound have turned up again, and that`s how it will be. The turmoil will continue.

I think that BOE have a lot of things to do right now. They will do everything they can to keep the market in balance. This will also spread to the FED and ECB.

For all I know BOE have already added liquidity to the markets and Draghi and ECB will probably follow.

June 23 will be our independence day, Farage said.

JUNE 23, 2016, WILL NEVER BE FORGOTTEN!

 

BRIT

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

 

 

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The goal to end “too big to fail” and protect the American taxpayer by ending bailouts is only a goal

It was a great day for banks on Wednesday, while all the big banks were up, leading the financial sector as the big winner. Up +2,27%. All the banks on my screen is in green, and the most active bank shares are JPMorgan Chase & Co, Bank of America, Citigroup Inc and Wells Fargo & Co.

JPMorgan Chase & Co reported a quarterly profit that topped low market expectations. The drop in profit was the first in five quarters, but investors was focusing on the positives and pushed the bank stocks up. Not only JPMorgan Chase & Co, but also its competitors.

Banking regulators like Federal Reserve and the Federal Deposit Insurance Corporation gave a failing grade to five big banks on Wednesday, on their plans for a bankruptcy giving them until October 1 to make amends or risk sanctions.

 

bailout

 

According to Reuters, this could end with braking up the banks, and it underscore how the debate about banks being «too big to fail» continues to rage in Washington. This is the first time regulators have issued joint determinations flunking banks` plans, commonly called «living wills».

If the banks do not correct serious «deticiencies» in their plans by October, they could face stricter regulations, like higher capital requirements or limits on business activities.

The requirement for a living will was part of the Dodd-Frank Wall Street reform legislation passed in the wake of the 2007-2009 financial crisis, when the U.S government spent billions of dollars on bailouts to keep big banks from failing and wrecking the U.S economy.

The plans they have are separate from the Fed`s stress tests, where banks demonstrate stability by showing how they would withstand economic shocks in hypothetical scenarios.

«The FDIC and Federal Reserve are committed to carrying out the statutory mandate that systemically important financial institutions demonstrate a clear path to an orderly failure under bankruptcy at no cost to taxpayers,» FDIC Chairman Martin Gruenberg said in a statement.

«Today`s action is a significant step toward achieving that goal.»

Thomas Hoenig said the plans show that no firm is «capable of being resolved in an orderly fashion through bankruptcy.»

«The goal to end «too big to fail» and protect the American taxpayer by ending bailouts remains just that: only a goal.»

The biggest banks doesn`t have any plans for themselves if a new financial crisis are turning into panic and chaos, which means, if the panic hit the market today, the government need to prop up the banks called «too big to fail» if they want to avoid financial chaos.

Democratic president candidate Hillary Clinton said regulators need to break big banks apart if they don`t fix their living will problems over time. Bernie Sanders, said on Twitter that many banks have only gotten bigger since they were bailed out during the financial crisis.

One of them is obviously not Citigroup. They have cut more than 26% of its assets since its peak in 2007. Citiygroup was the largest U.S bank but is now ranked number 4 (ranked by assets).

The regulators continue to assess plans for four foreign banks labeled «systemically important» and that is Barclays PLC, Credit Suisse Group, Deutsche Bank AG, DBKGN.DE, and UBS Group AG. Citigroup`s living will did pass, but regulators noted it had «shortcomings.»

I will look for Citigroup`s report on Friday.

 

sam

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Very important week

Next week will be exiting. The earnings season is at the end and investors focus now will be on a flood of data coming in. It all starts on monday March 14 were the Bank of Japan will announce its policies.

Bank of Japan Gov. Haruhiko Kuroda is in a special situation. Just like ECBs Mario Draghi, he talked about his «bazooka» and said he wanted to do whatever it takes to get Japans economy back on track to a stable growth.

debt

The answer so far is negative interest rate, and they started charging commercial banks 0,1% interest on some reserves last month. That lowered the borrowing cost, but on the other hand, it made some confusion about the effects on Japan`s savers.

Haruhiko Kuroda has been called to parliament for questioning many times and more than any other central bank chief during the same period. Japanese 10-year Government Bonds traded at -0,20% for the first time in history and dropped farther into negative territory.

Negative rate is also seen in Sweden, Denmark and Switzerland. Sweden`s goal is to raise the inflation. The goal in Denmark and Switzerland is to prevent the currency to raise too much.

Negative rates can be the new normal because none of them turn this situation into a strong economic growth. So, What about America?

All eyes will be on Federal Reserve Chair Janet Yellen and the Federal Open Market Committee (FOMC). The FOMC meeting will kick off on Tuesday 15, and the Fed`s interest rate decision is the highlight on Wednesday 16, with the 2 p.m ET announcement followed by a 2,30 press conference with Fed Chair Janet Yellen.

According to Wall Street Journal`s Jon Hilsenrath who is the mouthpiece of the Fed, the central bank will hold off raising rates this month, but will leave the door open for a hike in April or June this year.

U.S Consumer prices went up 1,4% YoY in January of 2016, and the inflation rate accelerated for the fourth straight month which is very impressive. CPI for February 2016 is scheduled to be released on Wednesday 16.

The European Central Bank (ECB) followed BOJ, and increased QE by 20 billion euros per month on thursday. Not only that. They also lowered interest rates, which is an unexpectedly strong move. The ECB increased its monthly bond buying from 60 to 80 billion euros and drove commercial deposit rates from -0,30% to -0,40% and cut a main refinance rate from 0,05% to 0,00%.

As you may know, many people are very angry. Not only in Europe, but also in America. The middle class is wiped out and businessman Donald Trump knows that. He doesn`t like what he see and want to do something about it; Make America great again.

The battle for the White House continues, and next week`s Ohio and Florida primaries would give Donald Trump the knockout blow necessary to capture the GOP nomination. Anti-Trump groups are spending millions of dollar on TV ads to attack him. Is that enough to stop him? If not, it will be a short way left to the White House.

Very important week.

 

sbnews

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Will the Fed raise rates on Thursday?

Do you belive the Fed will hike on Thursday?

If so, you are among economists and strategists that belive so, but traders are betting strongly against it, and that alone is enough to wait at least one month before liftoff, according to Morgan Stanley.

CME FedWatch tool says the probability is at just 21 percent, and Morgan Stanley said its readings on trading show a 30 percent probability that «overstated the chance» of a rate rise.

Lessons learned in 1994 that reverberated into 1999 and 2004 will prelude a rate hike until the futures market prices one in. In 1999 and 2004, the central bank waited for market expectations to exceed 50 percent before moving, learning a lesson from 1994 when it tightened.

CNBC said there is one good reason the Federal Reserve won`t vote to raise interest rates, and that`s History. So, what is all this about?

percentage

Rates have been near zero since the recession, and the Fed have delayed its first-rate hike since 2006. But why is the interest rate so low? See it like this; The lower the rates, the more problems it is in the economy.

When the economy is strong and everything is okay, interest rates are hiked in order to curb inflation, but when we face tough times, the Fed will cut rates to encourage lending and inject money into the economy.

Investors can predict what the Fed (or other central banks) will do by looking at economic indicators such as;

Retail Sales: Consumer spending
The Consumer Price Index (CPI): Inflation, and
Non-farm Payrolls: Employment levels

If these indicators improve and the economy is doing well, rates will be raised, but if the improvement is small, it will be maintained. Drops in these indicators can mean a rate cut in order to encourage borrowing.

Other indicators to foreshadow changes in the economy is building permits, average weekly hours, new orders and the spread between 10-year Treasuries and the Federal Funds Rate, which is published every month by The Conference Board.

Raising rates will have an impact on the markets. Raising interest rates will cause the dollar to appreciate over the Euro, which means the pair EUR/USD will decline, which is good for the U.S dollar.

If Chairwoman Janet Yellen sends out a dowish signal on Thursday, it may help to boost stocks and undermine the dollar. Investors will pay less attention to gold and allocate more of their capital into equities.

A hawkish message, including a rate increase, may help unpin the dollar and undermine stocks and gold. So, the upside will be limited for gold in both scenarios, unless we see a massive selloff in equities and the dollar.

Changes in monetary policy will ultimately cause currency exchange rates to change, and paying close attention to the news and analyzing the actions of the Fed (in this case) is vital for forex traders.

The interest rates impact currencies because the greater the rate of return, the greater the interest accrued on currency invested and the higher the profit. So how can you profit on it? The strategy is very simple, but also very risky. You can simply borrow currencies with a lower interest rate in order to buy currencies that have a higher interest rate, and this strategy is known as carry trade.

The shift in interest rate represent a monetary policy-based response as a result of economic indicators that assess the health of the economy. Most importantly; they possess the power to move the market immediately. So, how healthy is the U.S economy?

Nonfarm Payrolls is up: 215K
May, June Revisions: 14K
Unemployment Rate: 5,3%
Avg. Hourly Wages: 0,2%
Labor Force Participation: 62,6%
Consumer Price Index: -0,1%

A key measure of inflation dropped 0,1% last month for the first time since January due to sliding gasoline costs, and this is something for the FOMC (Federal Open Market Committee) on its policy meeting Wednesday and Thursday this week.

Central bank leaders have said they want to be confident inflation is heading toward their 2 percent target. Low inflation is a sign of economic weakness, and raising rates too soon risks harming the economic expansion.

IMF (International Monetary Fund) and the World Bank have asked the Fed to delay its first-rate hike since 2006.

The world`s financial watchdog is the BIS (the Bank of International Settlement) and are considered the «bank of central banks». BIS has warned that a Fed rate hike could have a huge effect on the global economy and particularly in emerging markets.

According to a BIS report, much of the global financial system remains anchored to U.S borrowing rates, and a rate hike at home tends to have an impact on higher rates in other economies. The enormous amount of debt in the emerging markets has the potential to move the markets even with a small rate hike.

Everybody knows that sooner or later, a rate hike might be necessary. No matter the results in the financial markets will be. Some belive the Fed will hold off on raising rates until December.

I really look forward to Janet Yellen`s speech on Thursday at 2 p.m. Washington time.

 

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. UA-63539824-1.

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Bank Stocks and Interest Rates

The IMF (International Monetary Fund) predicted the U.S economy would grow only 2,5% in 2015, and that`s down from their previous prediction at 3,1%. IMF urged the Fed (The Federal Reserve) to wait until first half of next year to start raising short-term interest rates.

The U.S central bank has kept its key benchmark rate at a record low near zero since December 2008, and the IMF said the Fed should wait for more signs of improvement. What they will look for is «greater signs of wage or price inflation».

IMF Managing Director Christine Lagarde said «The economy would be better off with a rate hike in early 2016», and Fed Chair Janet L. Yellen said she expects to begin raising rates by the end of the year, while some economist speculate that the Fed will start raising rates in September. They both know much better than me that deflation is more dangerous than inflation, and deflation is what they are fighting against and not inflation.

Many are bullish on bank stocks.

 

 

BKX Bank Stocks
The KBW Bank Index is up 0,86% right now. Trading at 77,96 which is up 0,66 points. That`s much better than the bottom at 18,62 on March 6, 2009, but down since the top at 118,06 on May 18, 2007.

Technically speaking, the index is breaking the resistance, and the bank stocks are increasing, while the precious metal is declining. Gold is still in a bearish territory and the price is still below $1,200 an ounce.

What`s going on? Higher rates is good for the banks because they can charge more for loans and earn more because of bigger profits on the spreads between loan rates and deposits. Buoyant outlook for the U.S economy in the second half of 2015, and the expected interest rate hikes blows up the banking index.

In the predictions for 2015 I talked about the interest rate to start to increase in 15 – 18 months, and that should be next year. I also talked about how it will start, and it is predicted to see that the rates will go up slowly.

Banks will benefit from a stronger economy and higher interest rates. The legendary investor Warren Buffett seems to see something in the banks earnings, which reflects more than their current stock valuations.

Warren Buffet and his company Berkshire Hathaway (BRK-A) has added much more to its holdings of Wells Fargo (WFC) and U.S Bancorp (USB), and the banks seems to have taken its reputation back since the financial scandals a few years ago.

Citibank is upgraded to buy by Goldman and the New York-based firm is showing progress in increasing earnings and returning capital to shareholders. Citibank is the only firm in the KBW index that is trading below tangible book value, but that will probably end soon.

Investors are keeping a close eye on bank stocks, especially money center banks, since the Fed has indicated a rise in the interest rate. Their key focus is Bank of America, because they will earn on the rise in interest rates.

If the rates increase 1% it is estimated that Bank of America will increase their earning by a whopping 20%.

Rising dollar means a strong economy, and stronger dollar and rising interest rates is bearish for gold, but the precious metal can go up in a rising interest rate environment, but only if an inflation problem is implied by the rise in yields.

To measure that, you can look at the spread between inflation protected U.S Treasury bonds (TIPS) and unprotected long-term bonds (TLT). The rise in yields (drop in T bonds) is due to rising concerns about inflation.

280,000 new jobs was added and that was better than expected (estimate of 226,000) in May, which created a steeper yield curve. Long-term interest rates increased more than short-term interest rates.

Rising bank stocks are signaling economic recovery.

Bank stocks are increasing because they earn money. If not, a flattering yield curve would squeeze bank net interest margins and profits, and investors would run from the banks.

IMF and the Fed said that they don`t know when to rise the interest rate. They will wait for the coming data and so should you.

 


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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. UA-63539824-1.

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