Jim Bianco is President of Chicago based Bianco Research LLC. His commentary and interviews regarding global economy and markets is always informative and his recent appearance on Bloomberg Television was no exception.
Video is available at the above link, but here are the “CliffsNotes”:
The beginning of the trading year is historically volatile.
Markets are facing three obstacles:
1) Yuan devaluation and Capital outflows from China
2) Earning outlook for yer over year is lower.
3) Fed still talking four rate hikes, which market implies is overly aggressive.
When asked about Forex volatility Jim mentioned that the transition in all markets from human to machine trading has increased the likelihood of flash crash events.
He further added comments about U.S. impact of Yuan devaluation. While the Chinese have plenty of reserves to withstand an outflow at the end of the day it means they are selling (or at least buying less) U.S. Treasuries and given the turmoil in the market he would have expected to see Ten Year Treasury yielding under 2% on a flight to safety move. While yield has come down it is not as low as he would have expected.