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Alexandra Scaggs

Alexandra Scaggs

Alexandra Scaggs is a markets reporter for the Wall Street Journal in New York. She writes about the U.S. stock market and investment trends. She also covers the business of markets research, writing on the calls, personalities and moves of high-profile analysts and strategists. Ms. Scaggs graduated from Washington & Lee University with a degree in business journalism.

Articles by Alexandra Scaggs

Machismo boom looks a bit weak these days, doesn’t it?

3 days ago

America, we need to talk.We’re almost three months into 2017. You’re supposed to be well on your way towards reclaiming your former economic glory as a capital-intensive, iron-working, ship-breaking, coal-mining machismo paradise. The standouts in the stock market’s post-election rally should have made that clear.But the Trump trade has been looking a bit, err, flaccid lately. Today, for example, it’s actually pulling down the broader market: The domestically focused small-cap Russell 2000 index was down more than 2 per cent at pixel, with smaller steel companies suffering the worst losses. Not exactly jacked up.It sometimes feels silly to try to communicate with ghosts in the equity-market machine, but it seems notable that the rally in sectors with brawn higher capital spending has lost

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Snap AV: ‘Forgotten Man’ hasn’t moved the needle for US spending data

7 days ago

A closer look at consumer data shows what Americans already kind of knew: Older, middle-class households in the heartland were the ones that got a lot more confident after President Trump’s election.For households aged 55 and older, consumer confidence climbed 25 points between October and February, according to Michelle Meyer of Bank of America Merrill Lynch. The increase for 35-55 year olds was smaller, at 9.2 points. Confidence dropped 7.8 points for Americans younger than 35.Broken down by region, it’s pretty clear that confidence rose most in areas with higher concentration of Trump-voting states:But Meyer and her team found a muddled relationship between confidence and spending by region — they said that neither job growth nor credit-card use were particularly well correlated with

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Thoughts on a government land grab

8 days ago

A Texas family that owns land on the Mexican border has received a “Declaration of Taking” from the federal government, according to a Texas Observer story published this week.It essentially gives the family a chance to accept compensation for the government’s seizure of about an acre of borderland.It’s very possible that’s for a Trumpian wall. The president’s budget blueprint requests “$2.6 billion in high-priority tactical infrastructure and border security technology, including funding to plan, design, and construct a physical wall along the southern border,” and Politico reports another $1.5bn will be requested in a supplemental spending bill.The implied commitment to a physical wall is a step in the direction of a literal implementation of the promise that folks like Peter Thiel said

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Markets live special: Janet Yellen presser edition

9 days ago

6:23 pm

CG6:23pmHello!

MCK6:23pmHowdy

AS6:24pmHey everyone, welcome to the dovish rate hike ML

6:23 pm

CG6:24pmRabble, show yourselves if you’re there

CG6:24pmSay hello

Boncoeur
Hello from England.

MCK6:24pmHere is the statement https://www.federa…tary/20170315a.htm

6:24 pm

MCK6:24pmAnd here are the latest projections https://www.federa…ojtabl20170315.pdf

Brazzo
Hello from Brazil

AS6:25pmHi Boncoeur

AS6:25pmSo Kashkari with the dovish dissent!

6:24 pm

CG6:25pmOkay, so a few changes to the statement, besides the obvious raising of rates into the 3/4 to 1 percent corridor

CG6:25pmBoncouer, brazzo, hello!

Ken J

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Lie-bor? More like Li-BORE, am I right?

10 days ago

A financial crisis followed by a rate-rigging scandal can really take the life out of a market. (And some of its usefulness as an indicator, too.)At one point, the benchmark rate for unsecured short-term loans between banks — known as the London Interbank Offering Rate, or Libor — was basically made up, as the now-infamous Tom Hayes tried to manipulate it in ways that would make his desk’s trades more profitable.And now, well… it’s still kind of made up! Just not in any way that seems particularly exciting or prosecution-worthy. Instead, it’s based on market data that could be “stale,” says Deutsche Bank in a note this week. With our emphasis:…only around one-third of USD Libor submissions at the 3M tenor are based on actual transactions, and the figures for the 6M and 1Y tenors are even

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Congress to the Treasury Department: “Dance!”

10 days ago

Once again, the Treasury Department finds itself tap dancing to avoid getting shot in the foot by Congress. And if you think the Federal Reserve is going to tighten this week (who doesn’t?), this little routine might not be fully reflected in short-term funding rates.The gun in the scenario above is the debt limit, of course. Remember that arbitrary statutory ceiling on the absolute amount of US Treasuries outstanding? You know, the relic of the Second Liberty Loan Act of 1917 that puts the United States at risk of a technical default and, somehow, is still a law today? Yes, that one, which was introduced in its modern form almost 80 years ago, according to Kenneth Garbade, analyst at the New York Fed and go-to Treasury market historian.(Really, the uninitiated should have a look at the

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Snap AV: A soothsayer bids you beware…

15 days ago

Yes, Ides of March references have been made many, many times. But when the Fed’s expected to raise rates on the same day the suspension of the US debt ceiling is lifted, and that day is March 15, what else is a blogger supposed to do?In any event, the soothsayer in question today is one who’s permanently pessimistic, so take with the usual grain of salt. Albert Edwards of Societe Generale warns about the market implications from an accelerated pace of Federal Reserve hikes:Accelerated Fed rate hikes will cause tremors in the Treasury bond markets, forcing rates up, most especially in the 2 year – just like 1994. But as yet another central bank-inspired global recession unfolds, I believe US 10y bond yields will ultimately converge with Japanese and European yields well below zero – in

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Snap AV: Falling knife looks a bit less sharp these days

18 days ago

Goldman Sachs’ David Kostin points out that US energy stocks have underperformed crude-oil prices and the S&P 500 over the past few months:Although the performance of Energy stocks relative to the broad S&P 500 typically tracks the price of crude oil, the equity sector and the commodity have recently reached their widest divergence in more than five years. Since early December, while the S&P 500 has rallied by 8% and WTI has climbed by 2%, the S&P 500 Energy sector has declined by 3% (Exhibit 4).It’s one area where both mutual funds and hedge funds were overweight coming into the year, the strategist writes in his weekly note. It’s certainly looking more attractive, if this handy valuation chart is to be believed:They say you shouldn’t try to catch a falling knife, but what if the falling

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Snap AV: Fed to raise rates in “relatively near future,” whatever that means

24 days ago

From Bill Dudley, president of the New York Fed (and a voting FOMC member) in an interview with CNN:Richard Quest: What does fairly soon mean in the context of the minutes?Dudley: I think it means what it says. It doesn’t say it’s a week, a month, a couple months. Fairly soon means in the relatively near future……I think the case for monetary policy tightening has become a lot more compelling.Quest: And that’s obviously fairly soon, which implies sooner rather than later?Dudley: I think that’s fair.Make of that what you will!If you’re curious about what the futures market is making of it, it’s now assigning a 74 per cent chance of a rate hike next month, according to Bloomberg. (On Friday it was assigning a 40 per cent chance.)¯_(ツ)_/¯Related links:The Fed Whisperer — Bloomberg Gadfly

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Snap AV: Globalisation and income inequality, corporate edition

25 days ago

Apparently companies are experiencing rising income inequality.And like individual income inequality, the picture changes depending on whether you’re analysing it on a national or global scale, according to Andrew Lapthorne from Societe Generale.In the US, it seems pretty clear that there’s a growing gap between haves — in this case, the five public companies with the highest sales for each sector — and have-nots:But it’s not quite as straightforward as a few greedy companies hogging all the profitability for themselves.The picture gets clearer when you take into account the significant number of companies that have gone public in China, Asia and elsewhere, as Lapthorne and his team point out:The new competition poses a challenge for multinational companies based in developed countries,

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Why be president when you could be pope?

28 days ago

Forgive us, Facebook. For we were asleep, and now we are woke.There has been lots of talk about the political aims supposedly signaled by Mark Zuckerberg’s 5700-word manifesto published last week. But rather than a manual for national governance, the post reads like an announcement of supranational ambition:This is a time when many of us around the world are reflecting on how we can have the most positive impact. I am reminded of my favorite saying about technology: “We always overestimate what we can do in two years, and we underestimate what we can do in ten years.” We may not have the power to create the world we want immediately, but we can all start working on the long term today. In times like these, the most important thing we at Facebook can do is develop the social infrastructure

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Snap AV: Rising number of auto-loan defaults “not a macro problem”

February 21, 2017

Torsten Slok from Deutsche Bank takes a look at rising default rates on subprime auto loans, and makes the case that it’s not necessarily a broad economic problem.First, he points out that delinquency rates aren’t rising for those with higher credit scores — though that’s pretty much always the case for those borrowers (that’s why they have high credit scores).And while there are more subprime auto loans out there, subprime origination isn’t rising as quickly as origination for higher-rated borrowers, he says:So he says investors shouldn’t panic — unless they own a ton of subprime auto asset-backed securities, that is:Finally, it is important to remember that total household net worth currently stands at $90 trillion, and in that perspective, total outstanding subprime auto loans at less

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Selling Treasuries is still not a valid political threat

February 20, 2017

Remember those stories about foreign governments (the US’s biggest creditors, zOmG!) dumping Treasuries after the presidential election?Well, that didn’t actually happen.The first full month of the new Trumpian World Order seems to have prompted foreign governments to buy Treasury securities from the US, not sell them, according to Treasury International Capital data released last week. Foreign official accounts purchased a net $19bn of Treasuries from US residents in December, the most since June 2014, back before crude oil prices tumbled off a cliff. (Perhaps the oil-price stabilisation and the 30-year yield’s move to 3.2 per cent from 2.6 per cent had something to do with it.)In the chart below from Bespoke Investment Group, you can see (with a bit of effort) the 12-month rolling net

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This is nuts, when’s the tantrum?

February 17, 2017

Equities are near record highs, the VIX is low, and US real rates are still pretty close to their mid-November levels. Bank of America Merrill Lynch analysts are saying it’s too good to last:Tactical considerations aside, history offers a compelling reason to be cautious on duration after recent market moves. We look at the divergence between real rates and a combination of risk assets – equities, financial stocks, credit spreads and VIX, three months into and after the prior tantrum episodes. There is no doubt that low real rates help fuel risk assets higher, feeding this disconnect. But at some point, it becomes wide enough to trigger a real rate catch-up…So when would that happen? They point to a few catalysts before the end of this month: As we have repeatedly said, a string of strong

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Climate change, Keynesian stimulus and supervillainy

February 16, 2017

Hawaii Senator Brian Schatz asked Fed Chair Janet Yellen an interesting question on day one of her semi-annual testimony to Congress:I wanted to ask you about climate change. It is affecting our economy in a number of ways, such as prolonged droughts that reduce agricultural yields, coastal flooding, increased severity of storms and the unpredictability of weather forecasts on which many of our industries depend. In 2016 NOAA reported 15 separate $1bn climate events… And lest we think this is an aberration, it’s important to remember that the number and the cost of these events has doubled over the last decade, and has increased eightfold over the last 30 years.So climate events are taking a toll on our economy and they are expected to become more and more intense going forward. So my

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Snap AV: Funny how CEOs get all cheerful after they’re promised tax breaks

February 13, 2017

Usually, optimism around quarterly earnings comes from analysts. “Great quarter guys, thanks for the color,” etc.This time around, the upbeat comments are coming from management, which is somewhat of a departure from the typical company’s under-promise and over-deliver game. (Guidance made up of actual numbers hasn’t been much better than a typical 4Q reporting season, though). From Bank of America Merrill Lynch strategists:While managements‘ official outlooks may be nothing to write home about, commentary on earnings calls has been notably optimistic. A simple count of mentions of the word “better“ relative to mentions of “worse“ or“weaker“ on earnings calls is tracking its highest in over two years (Chart 6). And the word “optimistic“ has been used on a record 51% of the calls this

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Snap AV: Top Fed lawyer retiring this year

February 9, 2017

The secretive and influential lawyer who once quipped he was “born at the Federal Reserve” will retire this year:Scott G. Alvarez, General Counsel, will retire later this year after nearly 36 years of service to the Federal Reserve Board, including more than 12 years as head of the Legal Division. The Board will begin a search for his successor.Mr. Alvarez, who also serves as General Counsel of the Federal Open Market Committee, was a key participant in crafting the Federal Reserve’s response to the financial crisis and in implementing the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. He advises the Board on a wide variety of legal and related policy issues, including issues under the Federal Reserve Act and a host of banking laws, and has been a liaison in

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More Mnuchin and less Scaramucci, please

February 8, 2017

Here’s an interesting line from the Federal Reserve’s latest quarterly survey of senior loan officers:A modest net fraction of banks reported they expect to ease lending standards on C&I loans to large and middle-market firms, whereas a moderate net fraction of banks reported expecting to ease lending standards on C&I loans to small firms. One reason it’s notable is that Trump’s pick for Treasury Secretary, Steven Mnuchin, said he would make it a priority to encourage lending to small firms in his Congressional confirmation hearing last month:We’re losing the ability for small and medium-sized banks to make good loans to small and medium-sized businesses in the community, where they understand those credit risks better than anybody else. We all appreciate the engine of growth is with small

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The face of unemployment just got a new job

February 6, 2017

Chris Cooke has gone to just one job fair since graduation. He didn’t get a job, but he did get a nickname: Economic Downturn Man.You’ve probably seen the Reuters photo of him, which has appeared over and over (and over, and over, and over) since it was taken in 2012. A tall, blond young man waits in line, with a stack of resumes in one hand and an umbrella in the other. His suit is a bit too large — he says he had lost weight, and unemployment precluded the purchase of a new one.The expression on his face was the thousand-yard stare of the financial crisis.But these days, things are looking up for Economic Downturn Man, who is extremely upbeat and friendly in real life.* In fact, he just started a new job.When the photo was taken, Chris was 22. It had been five months since his graduation

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Snap AV: Yes, everyone’s getting a bit tired of politics

February 3, 2017

…but Wells Fargo’s US rates strategists say it’ll be a few more months until it’s OK to stop compulsively checking for presidential tweets:We advocate that investors position in the near term to profit from, or hedge against, yields that are turbulent but still confined within medium-sized ranges. We expect U.S. politics to remain red-hot, and therefore to keep volatility elevated, for another 2-3 months. At the same time, the Fed probably holds the key to major directional changes in yields. If the Fed avoids major policy shifts, then long rates probably will not undertake huge moves.Recent trading in Treasuries has been comparable to market moves around Brexit, write Michael Schumacher and Boris Rjavinski. But this time around, there have been more big single-day jumps in yields. (That

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Do you like this post or love this post?

February 1, 2017

Or, do you favour or oppose raising FT Alphaville writers’ pay until the equity market improves its ability to prevent flash crashes?A recent Rasmussen poll finds that 57 per cent of likely US voters approve of the executive order to temporarily ban refugees from seven Muslim-majority countries — yeah, we said it — from entering the US. A question about temporarily blocking visas had similar results.Paired with the predictable stories about Trump supporters’ responses, readers may start to think that US voters actually did want a malevolent executive order that could risk the safety of people who worked with the US government, among others.But the phrasing of the poll might explain some of this. (This is a big issue in social-science polling across all sides of the political spectrum — see

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Snap AV: There’s some kind of central bank thing today, right?

January 31, 2017

The FOMC starts its meeting today, and its policy statement is due out tomorrow. While Fed officials have been talking about the eventual unwinding of its more-than-$4tn balance sheet, Bank of America Merrill Lynch analysts don’t expect any action this week:Despite recent mention of the reinvestment policy in Fed communications, we do not think the Fed has pulled forward the timing of the end of reinvestments. In our view, a “reasonable rate” for ending reinvestments is 1.25-1.50%. We believe the benefits of delaying the end of reinvestments outweigh the costs – and we think the core of the FOMC agrees.But when it does happen, they say the implications for the market will depend in large part on the Treasury Department, not the Fed:Whenever the Fed starts their portfolio reduction, much of

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Choose your own American protectionist adventure, part 2

January 31, 2017

This post is a fictionalised thought experiment. YOU and YOU ALONE are in charge of what happens in this story. There are tradeoffs, choices, policies and consequences. YOU must use all of your big-league talents and much of your yuge intelligence. At any time, YOU can go back and make a different choice, alter the path of your story, and change its result. Your name is, um, Ronald Grump (sorry everyone), and you’re the president of an alternate-universe version of the United States.In this alt-world, you’ve promised to close your large negative current account (basically, your trade balance with the rest of the world). You look at the US’s trading partners. China’s your biggest, so you start sabre-rattling. Canada is closer, but, well, you like maple syrup.And then there’s Mexico. One of

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Choose your own American protectionist adventure, part 1

January 26, 2017

Is it legal to require pipeline companies to buy American steel and equipment, as the Trump Administration asked on Tuesday?The short answer: Probably not.The long answer: The enforcement of these measures depends on whether US trading partners are willing to raise a dispute with the World Trade Organisation, since plenty of apparent violations aren’t challenged. And if it is raised, it depends on how disputes gets resolved.Now, it might seem obvious to say that the structure of the pipeline proposal, due from the Commerce Department 180 days from Tuesday, will be of utmost importance. (Same goes for the final form of any border tax with Mexico, which we’ll tackle tomorrow.)If the Trump Administration proposes a mandate to buy US goods, it would be a sign the administration wants to flout

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The curious case of Constellation Health and Blackstone’s former top deal maker

January 26, 2017

Who knew that a spelling mistake would lead us down a path to accusations of self-dealing, a Sidney Lumet film, and a mental hospital?This is a rather convoluted story that begins back at the end of September, when Constellation Healthcare Technologies, Inc, an American supplier of medical billing systems quoted on the AIM market in London, announced the acquisition of something called VEGA Medial Professionals LLC.Medial Professionals?? Medical Professionals, surely. Except however you spelt it, VEGA Medical/Medial Professionals LLC didn’t seem to have a digital history, which seemed odd. Even if this was a relatively small deal, pre-acquisition Google gave us no results at all.So enquiries were made. Corporate financiers were phoned, PRs were pestered. And yes, “Sorry!”, there had indeed

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NYSE changes its mind about favouring dark liquidity

January 25, 2017

Remember how the New York Stock Exchange opposed IEX’s bid to become a full-fledged exchange because it gave preferential treatment to non-displayed orders?How times change. NYSE’s market for small and mid-cap companies announced today that it plans to adopt a structure similar to IEX’s, non-displayed orders and all. It’s also changing the exchange’s name from NYSE MKT, which evokes computer code, to NYSE American, which evokes pickup trucks and hearkens back to the name given to the exchange in the 1950s.As a refresher, IEX has a “speed bump” that slows down incoming orders by 350 microseconds, intended to slow down high-speed arbitrageurs. The trading platform’s application to become an exchange was controversial, in part because a certain high-profile writer made high-frequency trading

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This machismo boom calls for some pipes! — updated

January 24, 2017

No, not the kind of pipes that hold tobacco* and get used during thoughtful pauses in conversation among tweed-suited intellectuals. That’s for the liberals in their Ivory Towers.This administration is all about reviving the common man’s glory days of yesteryear. The president wants pipelines, and they will carry fossil fuels, and they might be will be made from American steel (and brawn), and they will be Great:I am very insistent that if we’re going to build pipelines in the United States, the pipes should be made in the United States… From now on, we’re going to start making pipeline[s] in the United States… We’re going to put a lot of steelworkers back to work…We will build our own pipes… like we used to, in the old days.—President Trump as he signed orders to advance the construction

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Contradictions on a US border tax

January 23, 2017

From last week’s confirmation hearing for President Trump’s Treasury nominee Steven Mnuchin:Mnuchin: He hasn’t suggested a border tax. What he suggested is that for certain companies that move jobs, that there may be repercussions to that. He has not suggested in any way an across-the-board 35 per cent border tax. If anything, quite the contrary…What he has referred to as a border tax — he has referred to a small number of companies that have moved their jobs or are moving their jobs, putting products back into United States and taxing them. He has in no way contemplated a braod 35 per cent border tax. That couldn’t be further from anything he would possibly consider.And here’s the chaser, from a WSJ story about the meeting between President Trump and business executives today:President

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Another reminder that dealers can spoof, too

January 20, 2017

Citigroup is paying $25m to settle charges it spoofed the Treasury futures market more than 2,500 times between July 2011 and December 2012.Spoofing, a type of market manipulation, can be tricky to prosecute because it involves questions of motivation. The 2010 Dodd-Frank Act, which made the practice illegal, defines it as “bidding or offering with the intent to cancel the bid or offer before execution.”Still, there have been some high-profile US spoofing prosecutions of independent traders and high-speed trading shops in recent months. Prosecutions of large banks/dealers have been rare in comparison (in the US, at least).Citigroup didn’t admit or deny the findings. The civil penalty, from the Commodity Futures Trading Commission, adds up to about $10,000 for each alleged incident (and is

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We will build a big, beautiful clearinghouse…

January 18, 2017

…and guess who’s going to pay for it?On Jan. 12, CME cleared a total notional MXN1tn, or $47bn on this side of the border fence soon-to-be wall, of Mexican peso interest-rate swaps. Banco de Mexico recognised CME Clearing as a foreign central counterparty on March 30 of last year, and by Q4 it was clearing an average MXN213bn ($10.8bn) per day. That quarter the peso fell 6.5 per cent against the dollar.How orderly! Heck, traders are making jokes about buying social-media outlets* instead of running around with their hair on fire! But this also seems like a pretty good example of that thing where market liquidity is most desirable when the market is not getting crushed. (See also: Sterling, Pound.)*Twitter’s market capitalisation is $12.03bn, or MXN259bn. Just saying.Related links:I will

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