A bit of excitement, yesterday…
A protester yesterday disrupted the ECB address that Draghi was in the middle of giving to throw at him, glitter and a very confusing message (if the alleged transcript thrown at him is accurate). I am sure that has to be the closest a protester has come to any ECB chief, especially inside their own building. To Super Mario’s credit, he calmly delivered the remainder of his address as the young lady was encouraged to leave.
But, what was he talking about before being upstaged? Draghi was actually fairly upbeat about the Eurozone economy commenting that it is benefiting ‘from a convergence of low oil prices, improved government policy and the bank’s newest stimulus programme’. So, he is indicating that the stimulus programme is already beginning to work and in his own words ‘proceeding smoothly’.
One of the key questions posed to his administration, has been the availability of the quality of debt that would suit their purposes, at the level they are intending to buy. But, Draghi commented that there was no sign of that, saying ‘scarcity in the bond market is really premature…..we really don’t see such a phenomenon’.
The Pound yesterday, actually appreciated against both the USD and EUR currencies, despite the early and cautious optimism from the ECB. Today on the wires, we have a variety of Australian figures (which have been announced as I write). The Australian jobs figures have just come out as very good figures for them – a reduction in unemployment and nearly double the expected number of added jobs. We also have some house building data and employment data from the States today as well as a number of Federal Reserve members speaking.
Final reflection for the day (from an interview with billionaire hedge fund super star Stanley Druckenmiller):
(On signs of excesses due to over-easy monetary policy) So, let’s look at the current earnings of corporate America. Last year they earned $1.1 trillion; 1.4 trillion in depreciation. Now, that’s about $2.5 trillion in operating cash flow. They spent 1.7 trillion on business and capital equipment and another 700 billion on dividends. So, virtually all of their operating cash flow has gone to business spending and dividends, which is okay. I’m onboard with that.
“But then they increase their debt 600 billion. How did that happen if they didn’t have negative cash flow? Because they went out and bought $567 billion worth of stock back with debt, by issuing debt. So, what’s happening is their book value is staying virtually the same, but their debt is going like this. (motions upward)”.