Pointing the Way

In the last 24-hours, critics of central banks have two different pieces of fodder to vent their complaints.

The art market and bond market both are moving in different directions, the former shows signs of a top or the aftermath of a top.

Last night, an art auction saw old records smashed for a painting and a sculpture.

Pablo Picasso’s ‘Women of Algiers’ fetched $160.0 million ($179.0 million with commission) and Alberto Giacometti’s ‘Pointing Man’ fetched $141.3 million.

Many argue central bank money printing has landed in the pockets of billionaires and they need to spread it around. Consequently, artwork cracking the $100-million barrier has become more commonplace.

$100 Million Artwork

• Picasso, Women of Algiers - $160.0m (2015)
• Alberto Giacometti, Pointing Man - $141.3m (2015)
• Francis Bacon, Three Studies of Lucian Freud - $142.0m (2013)
• Edvard Munch, The Scream - $119.9m (2012)
• Picasso, Nude, Green Leaves, and Bust - $106.5m (2010)
• Alberto Giacometti, Walking Man I - $104.3m (2010)
• Picasso, Boy with a Pipe - $104.1m (2004)

Bond Yields

Global bond yields are taking their cue from Germany where ultra-low yields have given way to a powerful spike that is as quizzical as the fact that the rates were dirt cheap to begin with. In a normal world, low rates reflect low inflation and economic growth expectations. Recently, two-year notes in Germany changed hands at negative yields (you paid them to hold your money) signaling fear and anxiety for the continent.

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GERMANY

So, why does the rebound in yields spook everyone?

It’s happening too fast…much too fast. The 30-year German Bund (bond) yield spiked 53 basis points, sending the bund down more than 12% in the past two weeks. I’m not sure if the spike isn’t a reaction; it’s a very abnormal condition, more than the canary in the coal mine screaming for help. On the other hand, higher yields often point to an improving economy.

The news action is spooking our market, so brace for a sloppy start to the trading session with a fair amount of downside pressure.