Submitted by David Stockman via Contra Corner blog,
The world financial system is booby-trapped with unprecedented anomalies, deformations and contradictions. It’s not remotely stable or safe at any speed, and most certainly not at the rate at which today’s robo-machines and fast money traders pivot, whirl, reverse and retrace.
Authored by Michael Shuman, originally posted at BloombergView.com,
Call me old fashioned, but I still think prices matter. I vividly recall the first time I studied those simple supply-and-demand graphs as a college freshman, and today, far too many years later, their basic logic remains undeniable. When prices are right, money flows to the most productive endeavors and economies work efficiently. When prices are wrong, crazy things eventually happen, with potentially dire consequences.
Those algos who scrambled to paint yesterday's closing tape with that last second VIX slam sending the S&P back over 2,000, forgot one thing - the same thing that China also ignored - central bankers can not print trade, something we have repeated since 2011.
While Asian stocks continued their longest rally since August overnight, led higher for the third consecutive day on the back of Japan (+1.3%), Australia (+1.2%) and China (+0.4%) strength, European stocks have as of this moment halted their longest rally since October (Stoxx -0.1%) and U.S. index futures are little changed.
Two days after Japanese yields plummeted on January 29, when the BOJ unexpectedly stunned the world by announcing negative interest rates, the Japanese government sold 10 Year Bonds at what was then a near record low yield of 0.078% in an auction which carried a 0.3% coupon. Since then things have only gotten more... deflationary, and as can be seen on the chart below, as of this moment the 10Y JGB is yielding a record-0.055%