It seems that Morgan Stanley Chairman/CEO James Gorman was duped by an e-mail hacker. So in measure for measure the Morgan Stanley chief tried to dupe the world with his op-ed in the Financial Times on Wednesday. In an opinion piece titled, “The Last Thing Banks need Is Yet More Rules.” Gorman said in response to the idea of a reinstatement of Glass-Steagall:

“More than  80 years ago, the U.S. enacted the Glass-Steagall legislation that separated traditional commercial banking from investment banking. Over the ensuing seven decades, as global trade and finance expanded,the divide between commercial and investment banking broke down. Recognising that global companies needed full-service banks, the U.S. embraced a system adopted by most other countries, including Germany, Japan, Canada, the U.K. and Australia. Ending Glass-Steagall [the law was repealed in 1999] had nothing to do with the financial crisis, and there is no reason to return to it.”

Gorman makes the regular Wall Street straw man argument and with it again tries to dupe the nation. Glass-Steagall’s repeal had a great deal to do with the financial crisis because, as usual, the Wall Street CEOs fail to state that on June 16, 1933 Glass-Steagall was enacted along with the inception of FDIC bank insurance. The fraud perpetrated by the sycophants of the wealthy is that they always forget to include the significance of FDIC. Mr. Gorman, I agree with you that Glass-Steagall should not be brought back but then I would not allow banks over a certain size to have access to FDIC insurance. As the mega-banks ramp up risk around the globe they expect the U.S. taxpayers and depositors to intermediate the risk by receiving none of the rewards. No Glass-Steagall, no FDIC. Like you sir, I am tired of being DUPED.

***The Swiss National Bank announced no change in policy. Thursday, the SNB (as expected) kept its deposit rate at -0.75%. The statement said:

“The SNB will remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration. The negative interest rate and the SNB’s willingness to intervene in the FX market is intended to make Swiss franc investments less attractive, thereby easing pressure on the currency. The Swiss franc is still significantly overvalued.”

This is a direct quote from the country’s central bank. Any sane person would assume that the Swiss franc would have tumbled on such a statement but the franc actually gained against the euro and yen even as it fell against the dollar. I offer yet again: WHO IS BUYING THE SWISS FRANC IN CONTRAVENTION OF THE ACTIONS OF A CENTRAL BANK DETERMINED TO WEAKEN ITS STORE OF VALUE?

Before,  I have offered up the suggestion that because the SNB is acting like a hedge fund with a printing press, I think that the Swiss franc is the penultimate CRYPTO CURRENCY. In the realm of massive financial dislocations the Swiss franc is KING. In an interview with Bloomberg’s Matt Miller, SNB President Thomas Jordan proudly proclaimed that the Swiss franc is “significantly overvalued” and that he has a “willingness to intervene much further based on a SNB cost-benefit analysis.” As Keynes reminds us. markets can remain irrational far longer then we can remain solvent. Hey,Secretary Mnuchin, IS THIS CURRENCY MANIPULATION?

***The Bank of England also left its interest policy unchanged, but in a slap at BOE Governor Marc Carney, the Monetary Policy Committee vote was 5-3 with the dissenters wanting to raise rates with the recent inflation data running higher than the target. In August 2016 I wrote that Governor Carney made a huge mistake by cutting interest rates and increasing its QE program and thus its balance sheet. The British pound had already depreciated 15% and the BOE needed to let the depreciation work its way through the financial system.

But Carney misread on the Brexit vote caused him to PANIC and he slashed rates. Now, between the weak pound and monetary stimulus inflation the British economy has performed beyond expectations and Carney cannot admit to his error. Pressure is building on Carney and once British politics calm it may mean the end of his reign. The British 10-year gilts rose NINE basis points in response to the BOE policy decision. But the market read the 5-3 vote as bullish in a sense that the BOE will be pressured to raise rates. I have no current view on the British pound as there are too many cross currents in play.

***Yesterday, I talked about the German DAX being a better relative value than the SPOOS or any other U.S. equities. The FED is raising rates and the ECB is intent on keeping QE going in an effort to build its balance sheet. Today the DAX closed down 1 percent as global markets reacted to the Fed’s enhanced tightening position. A rate increase and an announced Quantitative Tightening beginning whenever the FOMC deems it appropriate based on its interpretation of its dual mandate. I bought the relative spread today, entering a low risk level of 12633.5 on a continuation chart. The DAX made all-time highs this week and in mirroring my post about the NASDAQ 100 I will be very concerned if the DAX were to close below last week’s low and put in a similar reversal week.

The weekly close will be critical not only for German and European equities but for all the developed equity markets. I am trying to educate readers as to how I pursue a trade and search for low-risk entry points. The option volatility does not yet measure it but the present action seems to point into increased volatility as we enter the summer doldrums and traditionally thin markets.

***We have been monitoring the investors 2/10 yield curve but I note that the more speculative 5/30 curve flattened to the lowest level in three years at a spread of 102.16 (h/t Karl). This is something else I will be monitoring to measure a broad base of yield curves.