Monthly macro monitor review of August 2020 with Bob Williams and Joe Calhoun.

If the recession was the first “shoe to drop”, what’s the second…or third? The shock of the self-inflicted COVID recession is behind us. What we’re all wondering now is what comes next? Will the economy recover to its previous state? Something better? Something worse? That will be determined by the second and third-order effects and they are already starting.

When I first got in this business oh so many years ago, my mentor told me that I shouldn’t waste my time worrying about the things everyone else was worrying about. As I’ve related in these missives before, he called those things “well worried”. His point was that once everyone was aware of something it was priced into the market and not worth your time.

Alhambra Investments CEO reviews economic charts from the past month and his opinion of what they mean.

Alhambra CEO discusses all the talk about the recent yield curve inversion and how he views it.

Alhambra CEO discusses the most important economic reports from the past month.

Why Eurodollars Might Be Key to the Market Sell-Off (Podcast). There’s a huge market out there that doesn’t get much attention: Eurodollars. These have nothing to do with the euro-dollar exchange rate. Instead, eurodollars are U.S. dollar-denominated deposits at foreign banks and overseas branches of American banks.

This has already been one of the longest economic expansions on record for the US and there is little in the data or markets to indicate that is about to come to an end. Current levels of the yield curve are comparable to late 2005 in the last cycle. It was almost two years later before we even had an inkling of a problem and even in the summer of 2008 – nearly three years later – there was still a robust debate about whether the US could avoid recession. The answer was, of course, no but we didn’t know that for sure until Lehman failed in September of 2008. 

Information and opinions about the economy and markets from Alhambra Investments CEO Joe Calhoun.

Interview with Joe Calhoun about BiWeekly Economic Review 01/06/2018.

There are a lot of reasons why interest rates may have risen recently. The federal government is expected to post a larger deficit this year – and in future years – due to the tax cuts. Further exacerbating those concerns is the ongoing shrinkage of the Fed’s balance sheet. Increased supply and potentially decreased demand is not a recipe for higher prices. In addition, there is some fear that the ongoing trade disputes may impact foreign demand for Treasuries.

Bi-Weekly Economic Review

Bob Williams and Joseph Y. Calhoun talks about Bi-Weekly Economic Review for April 01, 2018.

Bob Williams and Joseph Y. Calhoun talks about Bi-Weekly Economic Review for March 15, 2018.

Jeffrey Snider, head of global investment research at Alhambra Investments, says China is in fact not growing rapidly, which sounds disheartening for commodity investors. He reckons a crucial investment metric has weakened, pointing to slower economic expansion.