Let’s say all is well with the markets. Then why are hedge funds closing funds and the corporate bond market is almost frozen solid due to lack of liquidity?
Why are German 5-yr bunds trading at negative yield? Why is the US 3 month at 0% yield?
And the largest question, why is bulge bracket inter-bank lending volume at a 10-year low?
Do Wall Street banks not trust each other? Because each one knows the piles of smoldering sh-t sitting on the balance sheets.
JPMorgan and Bank of America have already reported quarterly earnings by Wednesday and it’s not that good.
Both have reduced head count in the tens of thousands during 2015 and plan to continue to do so. And trading revenues have collapsed as the banks exit many markets due to upcoming regulations.
S there are many warning signs out in the wild showing that market strain and complexity are tugging at the cape of Janet Yellen.
Sure the Fed would like to be at a Fed funds rate of 0.5% right now — if for no other reason than to lower it when any of these problems mentioned above become bigger — but it’s no and it can’t raise.
This is the reason we see contradictory statements coming from the Fed every day. This governor wants to raise now and then another saying Spring of ’16 at the earliest.
It’s strange but then again it’s October, the scariest month for the market.