Category Archive: 4.) Marc to Market

The Return of Moral Economy?

The concept of moral economy was first used by 18th-century thinkers trying to make sense of the rising capitalist values.  In feudal society, a "fair price" was preferred over a free price especially for the necessities of the day.   The reci...

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Great Graphic: Trade-Weighted Look at Major Currencies

When considering the impact of changing currency prices on an economy, trade-weighted measures are appropriate.  The Federal Reserve has cited the dollar's appreciation as a headwind on the economy and a depressant on prices. Given the moves in...

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Sovereignty and Brexit

As the European Union grew, the unanimity in decision-making increasingly gave way to qualified majority voting.  This development took away an important weapon the UK deployed to pursue its national interest.  It use often to frustrate the collectivist decision-making in Brussels and exert its will for a broad union that preserved national sovereignty. National sovereignty is …

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Thoughts about the Price Action

The US dollar has begun the week with a strong advance against sterling and the euro. Sterling's drop, the most in several years, is not a function of macroeconomic policy.  It is a function of Brexit and its endorsement by London Mayor Johnson....

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FX Daily, 02/22: Sterling is Pounded and Eurozone PMI Disappoints

Global equities are beginning the last week of February on a firm note.  The MSCI Asia Pacific Index rose 0.75%, with China's markets gaining more than 2%, leading the way. European shares have followed suit.  The Dow Jones Stoxx 600 is up 1.7%...

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Re-Emergence of Divergence Helps Stabilize Markets

The main driver of the investment climate is not so much the incremental economic data as the capital markets themselves. The market turmoil contributed to the tightening of financial conditions, which in turn heightened risks, which monetary of...

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Weekly Speculative Position: Dollar Bullish Speculators Still Hesitant

The CFTC Commitment of Traders reporting week ending February 16 was short due to the US holiday.  This may have contributed to the small adjustments to speculative positioning in the currency futures.  It also may reflect the lack of convictio...

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Investor: Heal Thyself

After a terrible first several weeks of the year, global capital markets stabilized in the past week.  Chinese markets re-opened after the extended Lunar New Year holiday and proved not to be disruptive.   Chinese equities did not decline to catch-up to the performance of global markets in its absence and instead gained 3% on … Continue...

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The World is not Ending (Yet), Panic To Subside

Investors have become unhinged. The increased volatility and dramatic market moves challenge even the most robust investment strategies. This sets off a chain reaction of money and risk management that further amplifies the price action, like an...

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Weekly Speculative Positions: Speculators Continue to Press

There are two broad developments in speculative positioning in the Commitment of Traders report in the week ending February 9.  First, the market turbulence saw speculators reduce exposure.  Of the 16 gross positions we track, 11 were reducing ...

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Daily FX, 02/13: Market Chaos Subsiding? Dollar Correction Over?

The outlook for the dollar in the week ahead is not about economic data or the FOMC and ECB minutes.  It is about the stability of the global capital markets.  Many are looking for an event or official action that will stop the rout that is of historic proportions to start the year.   We too … Continue reading...

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Don’t Forget the Golden Rule: He with the Gold Makes the Rules

In response to the global crisis, central banks have adopted unorthodox policies.  They expanded their balance sheets and broken the zero bound of interest rates.  Many investors have been critical of the central bank action on principle, but what has changed recently is that market developments have provided fodder for the ineffectiveness in practice. Asset …

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A Bit of a Pre-Weekend Reprieve in Europe, but Return of China on Monday is Worrisome

After another difficult Asian session that saw the Nikkei fell 4.8% (12.3% on the week), the capital markets against have stabilized in Europe.  Equity markets are mostly higher, with the Dow Jones Stoxx 600 up nearly 2% led by energy and financials. Oil prices are up a bit more than $1 a barrel though it … Continue...

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Seeing the Forest for the Trees

The conundrum that everyone is wrestling with is the euro and yen's strength given their negative interest rates and prospect for even lower interest rates.   The divergence of monetary policy, even if the Fed is on hold for the rest of this year and next, should be dollar-positive. We have tried making sense of what … Continue reading...

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Daily FX, 02/11: Stocks Crater, Yen Soars

The continued sell-off in global equities is the main driver of the capital markets.  It, along with the push lower in oil prices, are pushing core bond yields sharply lower. The US 10-year yield is nearing 160 bp having begun the year above 225 bp.    The 10-year gilt yield is at a new record low … Continue reading »

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Stealing Steel: A Microcosm of Macro-Forces

There are few industries that offer a picture glass window to see numerous macroeconomic forces as steel does.   Excess capacity, trade policy, and the yuan all intersect when looking at the steel industry.   Moreover, it also shed light on why the drop of energy and other commodity prices, such as iron ore, have not …

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Listen Carefully, She’s Yellen

After another soggy Asian session, European markets have begun on a firm note, and US shares are trading broadly higher in Europe as well.  Led by the beleaguered financial shares, and healthcare, the Dow Jones Stoxx 600 is up 2%.  Similarly, the peripheral bonds, including Portugal (though not Greece) are seeing a reprieve from the … Continue...

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Why Portugal is Important Even If You have No Direct Exposure

Portugal's 10-year bond yield has risen almost 120 bp this year.  It is one of the few eurozone members that still pay to borrow two-year money.   There are two set of drivers.  One set is country specific.  These may matter only to current or prospective investors.  The other set of considerations may have broader applicability.  …

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Great Graphic: Dollar May Be Less Important for Fed

Investors and policymakers continue to wrestle with the economic impact of the dollar's rise.  The Federal Reserve has argued that the dollar's appreciation acts as a headwind on exports and dampens imported inflation.  At the same time, despite the dollar's appreciation and the fall in oil prices, core inflation rose steadily last year. Core CPI …

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Europe Stabilizes After Asia Melts

After a meltdown in Asia, the global capital markets are stabilizing in Europe.   The US S&P managed to recoup about half of its losses before the close yesterday, but this gave not comfort to Japanese investors.  The yen's strength and ongo...

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