Some folks “couldn’t agree more” with this morning’s missive from former FX trader Richard Breslow.
Breslow, as you’ll read below, was “appalled” that the fleeting risk-off bid apparent in the yen’s Monday night knee-jerk was nowhere to be found several hours later once the market had moved onto European econ data.
This is precisely what we said this morning when we cynically wrote the following in our overnight recap:
To be sure, in normal times “euro PMI data” wasn’t even exciting enough to “overcome” the Starbucks girl slipping you decaf because she was too lazy to brew a fresh pot of regular. So the fact that decent econ prints are now reason enough to look past a horrific terrorist attack says something about how this market sees what it wants to see.
This, Breslow writes, is indicative of “a system that rewards, time and again, through official reaction functions, utter callousness and obliviousness to events.”
Clearly we agree with Breslow.
But allow us a brief aside. Coming back to what we said at the outset, we think it’s pretty goddamn interesting that the same outlets which are the blog equivalent of ambulance-chasing attorneys decry the market’s callousness when it comes to horrific events. Because do you want to know what “callous” looks like? It looks like praying for a terrorist attack and plastering your front page with the bloodiest, most sensationalist headlines you can possibly cook up and then relishing in the fact that the faster the world burns, the more clicks you’re bound to get.
And now back to Breslow.
It’s always a tough decision when debating a subject with someone whether you speak to the issues that you think are the important ones or lower yourself to their level in the hopes of being heard. Few things are more discomfiting than listening to people talking at cross-purposes.
- So I’m going to do both. I thought the market reaction to the bombing in Manchester was appalling. And an indictment of a system that rewards, time and again, through official reaction functions, utter callousness and obliviousness to events. Everything may have become a buy-the-dip opportunity. But it shouldn’t be. It’s why nothing ever changes
- You would be very hard pressed to find the “early risk-off bid” in European markets, let alone U.K. ones, if you weren’t searching to find the evidence. Then it was off to PMIs and rehashing Lael Brainard’s comments. Let’s buy some stocks, it must be good for business. It’s quite the perversion that when bad things happen commentators who have otherwise rather dour views on the world start searching for all the good things out there
- If ever there was a time crying out for central banks to be less predictably in thrall to financial conditions, it’s now. The negative externalities, on countless fronts, have become too great. The same people looking for the good investing news in catastrophe are only too willing to cling to crisis rate pricing for the same reasons
- On the one hand, the global economy is said to be doing fine. Somewhere between building momentum and becoming healthy. Yet bank after bank has spent the last week lowering their rate forecasts. This has far more to do with belatedly getting onside with the latest twist in U.S. politics than a serious reevaluation of how far the mandates are from being met
- This time around, it hasn’t been the Fed that’s gotten it wrong, but the analysts who became mesmerized by asset price reaction to the election. Especially the S&P financial sector index
- Meanwhile, the German two-year bond just made a new year-to date high in yield today. And that after a poor Schatz auction that was supposed to be a no-brainer. Proving that there’s at least one market that chose to not ignore reality. In Europe, the discussion of negative externalities is getting seriously started, even if it’s been around for ever. Academics meeting real life. The campaign to name Mario Draghi’s successor is officially launched. And this with two years left to go on his tenure
- Look around you. It’s high time central bankers, politicians and, even, investors realized that there’s more to the world than the next few basis points