Velocity Drops Precipitously

The mysterious “velocity of money” is just GDP divided by the amount of money, in consistent units. The following is created by looking at GDP and M2 (in real dollars). Velocity takes a dive before (and early during) recessions. Maybe this time will be different.

Markets today …

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Muted start to day

After the fireworks last week, nothing seems to be stirring. Gilt yields are up a bit, the FTSE ($Z) is up 1.5% currently, with average volume. $ESTX50 too. Soybean futures are up. Precious metals seem to be down. Oil is down. The dollar is up …

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FAANG Stocks pumped by OTM Calls bought by Softbank!!

Background: sorry, it’s ZeroHedge again. Not reliable as a source, so caveat lector.

There is a constellation of things happening here:

• retail investors suddenly discovering they can buy calls as lottery tickets that pay out surprisingly often,
• FAANG stocks where …

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UK Leasehold

Another story about how developers are inserting unfair clauses in leasehold contracts. There are a lot of these. The government is consulting on the issue. The current situation is unacceptable, in my opinion. The relationship between Persimmon and the average first time buyer is very asymmetrical. At the …

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Inflation

John Plender argues that central bank action will make treasuries and gilts (so called “safe assets”) less safe, in that it will increase the correlation of their prices with those of corresponding equities. It’s not Plender’s finest work, but it shows how inflation fears are being reported …

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Real rates are dropping fast

I finally got around to creating a FRED chart which combines two series. I could probably do it better, but I’m pleased with the result. This is for the US, but global monetary conditions are usually closely correlated (proof?).

What is interesting is that …

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New Month, New Quarter

Well, August finished up as the best month for the stock market in decades. Why, I have no idea, except “Stocks only go up!” (for those whose memories don’t go back to March).

To start, things are quiet, except I noticed:

• long Treasury bond futures …

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Honk Kong not so fragrant real estate market

Central HK office space is getting cheaper. It’s hardly a surprise that this is happening, although maybe it is a surprise that it’s happening so late. I don’t follow this market, although I am vaguely aware that the HK …

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Inflation expectation out of line with nominal yields

This is from the Market Ear. It shows how the TIPs market has different expectations of future inflation than the Treasury bond/note market. My money would be on the breakevens being right, if I had any.

Wrap

Seems as though terrible …

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Margin Debt is picking up

This is bullish.

Also put-call ratio for NDX at all time low: very bullish.

Spending on services is faltering

Wolf Street points this out. This is bearish (but may not alter the direction of travel). “Services” is such a mis-mash category: I always used to …

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