Month: August 2016
Federal Debt Held by Foreigners Vs. 10 Year Yield
Credit Risk: 2 Year Vs. LIBOR Vs. Fed Funds Rate
When both rates diverge from each other, we can say that this is a warning sign and leading indicator for credit risk. It also means there isn’t enough liquidity. This is reflected in the higher cost of borrowing from banks.
The Fed has cut rates since the financial crisis of 2008, but LIBOR doesn’t follow and is even rising now in 2016, especially since the end of QE3 in 2015. This same thing that happened in 2008 will happen in 2016-2017. LIBOR diverged from the Fed Funds Rate and the Federal Reserve will need to come in and initiate QE4 or negative interest rates to bring down the LIBOR rate and provide liquidity.
The Fed funds rate tends to move with the 2 year treasury as well.
Credit Risk: LIBOR Vs. Fed Funds Rate
When both rates diverge from each other, we can say that this is a warning sign and leading indicator for credit risk. It also means there isn’t enough liquidity. This is reflected in the higher cost of borrowing from banks.
The Fed has cut rates since the financial crisis of 2008, but LIBOR doesn’t follow and is even rising now in 2016, especially since the end of QE3 in 2015. This same thing that happened in 2008 will happen in 2016-2017. LIBOR diverged from the Fed Funds Rate and the Federal Reserve will need to come in and initiate QE4 or negative interest rates to bring down the LIBOR rate and provide liquidity.
U.S. Mint Sales Plunging
FRBNY gold repatriation accelerating in June 2016
Q2 2016 Gold Demand Subdued
So we turned from a 150 tonnes deficit to a surplus of 100 tonnes. The third quarter however should be more positive due to Brexit.
GDP Vs. Oil
As the blue line goes down, so does the red line. 2015-2016 has seen a drop in GDP growth, so oil will not be doing well going forward.
Note: this is also why gold and oil will not always go into the same direction. We can have a recession with oil going down, while gold will be a safe haven and go up in value (due to a higher misery/fear index). To bank on that outcome you could buy gold mining shares (lower oil production costs, higher gold revenue).