First Impressions

Poor Performance Metrics
by Doug Ashburn, John Lothian News

Today marks “Day 2” of the post-press-conference skewering of Janet Yellen by press, analysts and other pontificators. In reading some of the comments (a few of them are featured below), one would think we experienced a 1929- or 2009-style stock market crash after she spoke Wednesday. Maybe I am looking at the wrong chart, but all I see is a brief pullback of less than one percent, followed by a two day rally that has approached all-time highs.

Maybe it is the product of a slow news day and of the need to create news even when there is none. It could be, however, that these individuals have yet to realize that the market reacts not to the news per se, but rather to expectations of others’ reaction to news events, and of the resulting initial price action. The S&P broke initially because of the expectation that others would send it down in short order. They were wrong.

To recap: in the press conference, Yellen responded to a question about timing and metrics by suggesting the Fed might consider a rate hike in as little as six months, and that a wider array of metrics will be used to determine the appropriate timing. The language, according to headlines, “spooked” “rattled” and “shocked” markets. Give me a break.

I say cut Yellen some slack. In a market that has come to place way too much emphasis on the utterance of a single word from the Fed, Yellen has the near impossible task of offering solid guidance without triggering unnecessary panic. Follow more closely the market fundamentals and real world events rather than dubious language from the Fed. Although, given certain events taking shape around the world, perhaps the market should be rattled, spooked and shocked.

Quote of the Day

“Janet is being highly disingenuous when she tells us there was no change to forward guidance. The markets saw through that veneer and reacted accordingly. Simply put – it was a poor performance!”

David Zervos, chief market strategist at Jefferies, quoted in the WSJ story “Grading Yellen: ‘It Was a Poor Performance”

Lead Stories

The Stress Test Results in One Chart
MoneyBeat – WSJ
In the stress tests, the Federal Reserve examined how the biggest U.S. banks would fare in various economic scenarios, an exercise required under the 2010 Dodd-Frank financial overhaul. Below are the Fed’s estimates for the minimum capital ratios the banks would see in the “severely adverse” economic scenario.

***DA: So is everything hunky-dory now, or is the stress test a garbage in/garbage out thing?

Your Very Own Black Swan Strategy
A Wealth of Common Sense
Following the 2007-09 financial crisis, many investors decided they needed insurance on their portfolio to protect against the possibility of another “black swan” event. It’s hard to believe that this was ever the case considering where the markets stand at the moment, but investors tend to have a very short memory.

***DA: Equity markets have gotten high enough to buy again. The problem with insurance, though, is it depends upon the solvency of the insurer when a claim is made.

JLN/MarketsWiki 2014 Annual Survey – Please Give us 30 Seconds of Your Time
John Lothian News
You still have time to fill out our quick demographic survey and get in the running for your choice of an iPad Mini or a pair of Bose Quiet Comfort Noise-Canceling Headphones. The cost is a mere 30 seconds of your time. Answers will be kept confidential.

***DA: Pleasepleasepleasepleaseplease fill it out. It’ll take 30 seconds.

China bears face investment challenge
Josh Noble in Hong Kong, Ralph Atkins and Delphine Strauss in London –
Like their furry namesakes, China bears are often sent into hibernation – whether by improving economic data, government stimulus measures, a rising currency, or bulging foreign exchange reserves. But as spring arrives, the bears are back out in force.

An accelerating taper
Business Standard
The United States Federal Reserve Board’s Federal Open Market Committee is clearly gaining confidence in the US economy’s performance. Its latest statement, issued on Wednesday, hints at an advancement of its schedule in relation to raising interest rates. This potentially presents both good news and bad news for global financial markets.

***DA: It’s all good news to me, as we will find out how much of the bull market was based on helium vs. actual fundamental strength.

Yellen’s words vs what you heard
Cardiff Garcia | FT Alphaville
The thresholds had a one-time gig, doing their job so well that they made themselves obsolete. How very New Economy of them. Well, sort of.

***DA: Strapped some wheels and an engine to the goal posts. Makes them easier to move.

“SPDR Woman” Honored
Financial Advisor
Kathleen Moriarty, a securities attorney for Katten Muchin Rosenman, won the Lifetime Achievement Award at the Awards Wednesday. Nicknamed the “SPDR Woman” for her work on the world’s first ETF, SPY, the award reflects Moriarty’s 25 years of experience in the ETF industry, which includes writing the prospectus to the now-$160 billion SPDR S&P 500 ETF.

***DA: Congrats to our friendly neighborhood SPDR Woman.

Central Banks

K C Chakrabarty quits RBI three months before end of term
Business Standard
K C Chakrabarty has resigned as deputy governor of the Reserve Bank of India (RBI), three months before the end of his term. Chakrabarty, who is likely to join a global consultancy abroad and work in the area of risk-based supervision, will serve the central bank till the end of April.

Grading Yellen: ‘It Was a Poor Performance’
Steven Russolillo – MoneyBeat – WSJ
David Zervos, chief market strategist at Jefferies, gave newly minted Fed Chairwoman Janet Yellen a “C-” for her performance at Wednesday’s press conference.

Stocks Jump: What’s Everyone Yellen About?
Steven Russolillo – MoneyBeat – WSJ
Boy, it doesn’t take long for investors to “buy the dips” these days. Stocks are in rally mode once again on Thursday as the Dow Jones Industrial Average rallied by triple digits and erased all of Wednesday’s Fed-related declines.

***JM: No surprise at all, and it makes me wonder if that was a factor in Yellen’s decision to actually say something. Seriously, would the entire global economy go into a recessive tailspin simply because of the phrase “six months”? A knee-jerk reaction is just that; swing the hammer, get it over with.

Exclusive: Chatroom evidence questions BoE role in FX probe – sources
British regulators are examining evidence relating to a 2012 meeting of currency dealers and Bank of England officials which potentially challenges the central bank’s assertion it had not condoned sharing details of client orders.


WM/Reuters examines forex fix overhaul
Daniel Schäfer and Sam Fleming in London –
WM/Reuters plans to overhaul its foreign exchange fix, the pivotal financial benchmark at the centre of a global regulatory probe into allegations that traders are trying to manipulate the $5.3tn a day market.

A Crypto-Sting Operation to Find Crypto-Currency
MoneyBeat – WSJ
Plaintiffs who have sued defunct bitcoin exchange Mt. Gox have launched an elaborate plan to get some of their crypto-currency back after gaining court approval Thursday.

Indexes & Index Products

Japan Fund DXJ Wins ETF Of The Year
DXJ, the $11 billion currency-hedged equity ETF that insulated investors from the yen’s big slide against the dollar last year, was named the ETF of the Year at the first annual Awards held tonight in New York.

Stoxx Names Former Banker Andreetto Sales Head
Max Bowie – WatersTechnology
European index provider Stoxx has hired Matteo Andreetto as global head of sales, based in London, with responsibility for the strategic positioning of the vendor’s indexes, and for leading sales activities with sell-side and buy-side clients.

Bloomberg to Provide Subscribers with Markit’s PMI Indicators
Bloomberg announced today that it has entered into a distribution agreement to integrate Markit’s Purchasing Managers’ Index data into the Bloomberg Professional service. Markit’s PMI surveys are leading indicators of business and economic conditions and influence a wide range of global markets. Conducted in more than 30 nations, these surveys are viewed as the most timely and internationally comparable economic datasets.

An Interview With Founder And CEO Jim Wiandt
Jim Wiandt is an indexing aficionado. He and his extended staff of researchers and journalists at are on top of every wiggle in the industry. Over the years, Jim has created a small media empire and the go-to resource for all things index, index fund and exchange-traded fund (ETF) related.

***DA: If you have never heard of, perhaps you knew it by its former name, Index Universe.


No change in 80:20 rule for gold import: Chakrabarty
Business Standard
RBI Deputy Governor K C Chakrabarty today defended the decision to allow more banks to import gold, saying presence of more players will lead to lower cost and help the country’s external balances.

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