Wednesday 4, May 2022

Wrap

Basically, the Fed bumped rates by 50bp, entirely as expected. The rumours on Twitter of a 75bp hike proved unfounded, but had the desired effect of causing the equity market to stage a relief rally, SPX up 2.36%.

Bonds were less impressed, with short and long rates unchanged. The same goes for commodities.

The dollar fell back a bit, EUR/USD going from 1.05 to 1.06.

Generally, the tone of the markets suggests that everyone is getting comfortable with current risk levels, and assumes that nothing too bad is going to come out of Ukraine now.

…

Image of the day

Yu Feian pic.twitter.com/ZMiZBFg35S

— Daniel Brami (@Daniel_Red_Eire) May 5, 2022

Tweet of the day

The cost of a kidney on the black market is around 46,000$. Theres approximately 8 billion people in the world each with 2 kidneys. From this we can imply the market capitalization of kidneys is 736,000,000,000,000$

— widmit 🍊 (@widmit) May 4, 2022

Contrarian opinion of the day

Ronald Coase asked why corporations exist. The employment contract is an odd one. You sign on for a job on the basis that you agree to just getting on with whatever your boss tells you to do. You have some general expectations about the range of possible things he might reasonably ask you to do, but the actual mix is not specified ahead of time. You both have some constrained options to terminate the contract.

Governments don’t do things like that. When a bill is passed, or a public procurement contract is let, it’s specified in excruciating detail, and anything that gets missed out costs the taxpayer (or, occasionally, the contractor) a shedload of money. Of course there are exceptions. You might be mates with a cabinet minister and be given a contract to supply a hundred million pounds worth of facemasks or surgical gowns with minimal paperwork. But this is by a long chalk the exception, not the rule, and the outcry that is generated when things go predictably wrong will make it even more exceptional in future.

But, generally, we all know that governments do things in the most insanely inefficient and costly way. I just think that the differences between the two approaches might have something to do with this. I have no idea about how to fix this, given that voters want government to do more because otherwise.