Dan McCarthy comments on the significance of Supreme Court Justice Antonin Scalia’s passing on Saturday:
Scalia was the embodiment of conservative opposition to the liberal jurisprudence of the ’60s and ’70s, and that opposition was the glue that held the conservative movement together over the last 40 years, as the end of the Cold War and the waning electoral power of welfare liberalism attenuated other sources of unity.
Reader, I drank it. And I did so in the company of a distinguished Catholic philosopher. It wasn’t pretty good. The conversation was much better.
At dinner earlier Friday night in Charlottesville, there was some conversation about Donald Trump. I didn’t check everybody’s party registration card, but I’m fairly certain that everyone around the table was conservative, and there was a great deal of concern about Donald Trump. I floated the idea that C.P. Cavafy’s poem “Waiting For the Barbarians” may explain Trump. Here’s the poem:
With China celebrating the Lunar New Year and offline until next weekend, and with the US in the usual post-payrolls macro newsflow lull, the markets will have more than enough time to stew in the latest source of contagion fears, namely Europe, the same Europe which until recently was fixed but is broken all over again. The highlight of the week will be Janet Yellen's semi-annual testimony to Congress where she is expected to confirm she is trapped: either push the market even lower by sounding hawkish, or admit the US is on the verge of a recession and admit policy error.
The biggest event of the weekend, if not the month, was China's FX reserve outflow update, which at $100BN was slightly better than the $120BN expected (it pushed China's reserves to the lowest in nearly 4 years) but it was in the "no man's land" between the BofA best case scenario ($37.5BN), and the GS worst case ($197BN).
According to Morgan Stanley's European equity strategist, Graham Secker, we may have just hit peak bearishness. However, does that mean that a rebound in risk sentiment is imminent, or is this just the beginning of a multi-decade mean reversion, one that will seek to unwind years of central bank intervention, and push risk assets to their ex-central bank prop fair values?
We don't the answer just yet, although it seems unlikely that after one humiliating episode in recent months for the ECB, Fed and BOJ, each, they will simply pack up and go.