Martin North – Page 118 – Digital Finance Analytics (DFA) Blog

Is The RBA Doomed?

The RBA is beset with issues, paying money to the banks due to the Term Funding Facility, negative equity on its balance sheet, and a more rigorous review than they wanted, which given their recent failures (no cash rate rise until 2024) is warranted.

Does it retain any credibility?

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Today’s post is brought to you by Ribbon Property Consultants.

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Stormy Weather Kills The Wealth Effect!

This week, The U.S. Federal Reserve announced an interest rate hike of 75 basis points, its largest increase since 1994, the Swiss National Bank unexpectedly lifted rates by 50 basis points on Thursday, while the Bank of England on the same day raised its interest rates by 25 basis points, hiking for its fifth consecutive meeting. The main outlier is the Bank of Japan, which stuck with its strategy of pinning 10-year yields near zero at its policy meeting earlier Friday. However, this has done little to ease worries that inflation and rate hikes are going to curb economic growth for years to come.

And It was one of the most dramatic weeks in the short history of the cryptocurrency market, bookended by the type of announcements investors fear the most from a counterparty: We’re sorry, but we just can’t return your money right now. It all started late Sunday, when a sort of crypto shadow bank called Celsius Network suspended withdrawals from depositors who had been enticed by sky-high interest rates that, in retrospect, were likely too good to be true. By the end of the week, on the other side of the world in Hong Kong, the digital-asset lender Babel Finance also froze withdrawals.

Just as Bear Stearns’s hedge funds were among the first to reveal problems from the subprime mortgage crisis, the “cockroach theory” springs to mind: If you see one of those nasty bugs scurrying across the floor, chances are there are plenty more hiding behind the fridge or under the sink. Wealth destruction is now a thing.

[Content]

0.00 Start
0.15 Introduction
2:10 Federal Reserve Inflation Battle
3:30 GDP Forecast Down
7:25 US Markets
10:00 European Markets
11:20 Asia Pacific Markets
11:40 Japan Bond Crisis
13:05 Australian Markets
18:00 Crypto Winter
23:30 Crypto Traders Turn On Each Other
29:05 Conclusion and Close

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The “R” Word Is Back In Vogue!

The trauma in the markets are centered on recession talk, as central banks push rates higher. But do they know what they are doing, or will they simply continue until something breaks?

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Imminent Crisis Approaching by the Hour

In the past 3 days since our last IOTP episode, events in the market are moving extremely quite rapidly. Especially in the bond market, bond yields have been increasing 0.3% to 0.5% per day which was threatening the global debt bubble.

In the past few days, we saw liquidity risks events manifesting and rising credit risks which has spooked many investors. This occurred in both the developed and developing world – such as Turkey which was this week credit default swap rates reach a 19 year high. Much of these moves were in anticipation of the US Federal Reserve’s FOMC which happened in the past 8 hours. In response to rising inflation and inflation expectations data, the FOMC increased interest rates by 0.75% the largest one meeting increase since 1994.

The FOMC has also foreshadowed that interest rates will rise by another 0.5% to 0.75% in July 2022 and that its QT program will continue as previously announced. Today’s actions of the US Federal Reserve and their expected actions going forward are likely to continue to raise credit and liquidity risks both within the USA as well as globally.

If continued unabated – the liquidity or credit crisis will eventuate very quickly.

Go to the Walk The World Universe at https://walktheworld.com.au/

Crunch Time Cometh…

The Dow jumped Wednesday, led by growth stocks including tech as Treasury yields slipped after the Federal Reserve delivered its biggest rate since 1994.

The Federal Reserve raised interest rates by 75 basis points — the biggest increase since 1994 — and Chair Jerome Powell signaled another big move next month, intensifying a fight to contain rampant inflation.
Slammed by critics for not anticipating the fastest price gains in four decades and then for being too slow to respond, Powell and colleagues on Wednesday intensified their effort to cool prices by lifting the target range for the federal funds rate to 1.5% to 1.75%. He admitted that the recent upside inflation had forced the central bank’s hand into tightening monetary policy by more than expected.

In the press conference that followed, Powell said there was a need to “front load” rate hikes, signaling the aggressive hikes now may not be followed up in the future with similarly aggressive hikes.

Federal Reserve Chair Jerome Powell says either a 50 basis-point or 75 basis-point rate hike seems most likely at the next meeting of the central bank’s Federal Open Market Committee. He speaks at a news conference following the Fed’s decision to raise rates by 75 basis points, the biggest increase since 1994.

He said another 75 basis-point hike, or a 50 basis-point move, was likely at the next meeting of policy makers. They forecast interest rates would rise even further this year, to 3.4% by December and 3.8% by the end of 2023.

That was a big upgrade from the 1.9% and 2.8% that they penciled in for their March projections.

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

The RBA Says Rates Are Going To Rise Further…

Reserve Bank of Australia governor Philip Lowe appeared on the ABC’s 7.30 television program last night. I cannot recall the last time an RBA Governor did this – which to me signifies the importance of the event at this critical and uncertain time.

Overnight again the US markets mostly slid, ahead of the Federal Reserve rate decision tomorrow. Views that a 75 basis point hike was on the table have been growing after Friday’s higher-than-expected consumer price index (CPI) data for May.

Governor Lowe said inflation will peak at a “very high” 7 per cent later this year, and ease back next year. Dr Lowe said it was “reasonable” to expect the cash rate to eventually reach 2.5 per cent, in line with the midpoint of the inflation target, but he admitted it was “unclear” how high rates would go and how quickly.

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

The Buy Now Pay Later Conundrum!

APRA has released updated guidelines on how banks should count Buy Now Pay Later and HECS debt when assessing mortgage repayments. Weirdly banks seem to not have been doing this routinely.

https://www.apra.gov.au/proposed-revisions-to-credit-risk-management-framework-for-authorised-deposit-taking-institutions

We discuss the implication as the share price of BNPL stocks go down the gurgler.

Go to the Walk The World Universe at https://walktheworld.com.au/