Category Archive: 5.) Alhambra Investments

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China: Losing Economic ‘Reflation’

2017-08-16

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2017-08-16

China Fixed Asset Investment Jul 2012-2017
If “reflation” was born last year in Japan, and I think it was, it was surely given its most tangible dimensions in China. The idea that the Bank of Japan was going to do something magnificent was perhaps always a longshot, but enough given the times for people to hope (sentiment) they might try (helicopter). The Chinese, however, have been relatively more pragmatic. Authorities began 2016 with an actual rather than imagined “stimulus” injection...

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Bi-Weekly Economic Review: Ignore The Idiot

2017-08-15

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2017-08-15

Of the economic releases of the past two weeks the one that got the most attention was the employment report. That report is seen by many market analysts as one of the most important and of course the Fed puts a lot of emphasis on it so the press spends an inordinate amount of time dissecting it.

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Oil Prices, CPI: Why Not Zero?

2017-08-13

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2017-08-13

Figuring Inflation 2004-2017
In the early throes of economic devastation in 1931, Sweden found itself particularly vulnerable to any number of destabilizing factors. The global economy had been hit by depression, and the Great Contraction was bearing down on the Swedish monetary system. The krona had always been linked to the British pound, so that when the Bank of England removed gold convertibility (left the gold standard) from its notes on September 19 that year the Swedish...

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Real GDP: The Staggering Costs

2017-08-12

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2017-08-12

How do we measure what has been lost over the last ten years? There is no single way to calculate it, let alone a correct solution. There are so many sides to an economy that choosing one risks overstating that facet at the expense of another. It’s somewhat of an impossible task already given the staggering dimensions.

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Industrial Production: Irreführende Statistiken

2017-08-11

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2017-08-11

Germany Industrial Production, SA 1997-2017
Germany’s Federal Statistical Office (DeStatis) reported today disappointing figures for Industrial Production. The seasonally-adjusted series fell in June 2017 month-over-month for the first time this year, last declining in December 2016. The index had been on a tear, rising nearly 5% in the first five months of this year.

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SNB Balance Sheet, Markets and Economy: As Good As It Gets?

2017-08-10

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2017-08-10

Markets and Economy 1972 - 2017
Late 2014/early 2015 will perhaps be the closest to a real recovery from the Great “Recession” we shall see in this cycle.  Q1 2015 marked the peak year over year growth rate of GDP in this recovery at 3.76%. That rate compares quite unfavorably with even the feeble post dot com crash recovery high of 4.41% in Q1 2004.

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Oil Prices: The Center Of The Inflation Debate

2017-08-10

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2017-08-10

Real GDP in the Eurodollar Era 1993-2017
The mainstream media is about to be presented with another (small) gift. In its quest to discredit populism, the condition of inflation has become paramount for largely the right reasons (accidents do happen). In the context of the macro economy of 2017, inflation isn’t really about consumer prices except as a broad gauge of hidden monetary conditions.

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China Exports, China Imports: Textbook

2017-08-09

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2017-08-09

China Exports 2013-2017
China’s export growth disappointed in July, only we don’t really know by how much. According to that country’s Customs Bureau, exports last month were 7.2% above (in US$ terms) exports in July 2016. That’s down from 11.3% growth in June, which as usual had been taken in the mainstream as evidence of “strong” or “robust” global demand.

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U.S. Treasuries: Not Really Wrong On Bonds

2017-08-06

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2017-08-06

U.S. Treasury Bond Futures
It is often said that the market for US Treasuries is the deepest and most liquid in the world. While that’s true, we have to be careful about what it is we are talking about. There is no single US Treasury market, and often differences can be striking. The most prominent example was, of course, October 15, 2014.

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Inflation Is Not About Consumer Prices

2017-08-04

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2017-08-04

Eurozone Gross Domestic Product, 1993 - 2017
I suspect President Trump has been told that markets don’t like radical changes. If there is one thing that any elected official is afraid of, it’s the internet flooded with reports of grave financial instability. We need only go back a year to find otherwise confident authorities suddenly reassessing their whole outlook.

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Bi-Weekly Economic Review: Extending The Cycle

2017-08-01

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2017-08-01

This economic cycle is one of the longest on record for the US, eight years and counting since the end of the last recession. It has also been, as almost everyone knows, a fairly weak expansion, one that has managed to disappoint both bull and bear.

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U.S. Consumer Price Index, Oil Prices: Why It Will Continue, Again Continued

2017-07-26

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2017-07-26

Quarterly Report on Bank Derivatives, Jan 1998 - 2017
Part of “reflation” was always going to be banks making more money in money. These days that is called FICC – Fixed Income, Currency, Commodities. There’s a bunch of activities included in that mix, but it’s mostly derivative trading books forming the backbone of math-as-money money. The better the revenue conditions in FICC, the more likely banks are going to want to do more of it, perhaps to the point of reversing what is just one quarter shy of...

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Reports on a Quarterly Survey Conducted: Qualifying Shortage (Labor)

2017-07-23

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2017-07-23

US Nonfarm Payrolls Missing
There isn’t a day that goes by in 2017 where some study is released or anecdote is published purporting a sinister labor market development. There is a shortage of workers, we are told, often a very big one. The idea is simple enough; the media has been writing for years that the US economy was recovering, and they would very much like to either see one and be proven right (and that recent revived populism is illegitimate), or find an excuse why...

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China’s Economy Shorthand the Largest Asset Bubble in Human History

2017-07-22

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2017-07-22

China Industrial Production, June 1997 - Jun 2017
The term “ghost city” is a loaded one, often deployed to skew toward a particular viewpoint. In the context of China’s economy, it has become shorthand for perhaps the largest asset bubble in human history. While that may ultimately be the case, in truth China’s ghost cities aren’t about the past but its future.

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U.S. Industrial Production: Industrial Drag

2017-07-21

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2017-07-21

U.S. Industrial Production, YoY 2015 - 2017
Completing a busy day of US economic data, Industrial Production was, like retail sales and inflation data, highly disappointing. Prior months were revised slightly lower, leaving IP year-over-year up just 2% in June 2017 (estimates for May were initially 2.2%). Revisions included, the annual growth rate has been stuck around 2% now for three months in a row, suggesting like those other accounts a pause or even possible end to the mini-improvement...

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Retail Sales Conundrum

2017-07-20

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2017-07-20

U.S. Retail Sales All Weakness, Jun 2011 - 2017
Retail sales were thoroughly disappointing in June. Whereas other accounts such as imports or durable goods had at least delivered a split decision between adjusted and unadjusted versions, for retail sales both views of them were ugly. Seasonally-adjusted first, spending last month was down for the second straight time. Worse than that, estimated sales were just barely more than in January.

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US S&P 500 Index, Federal Funds Target, Manufacturing Payrolls, US Imports and US Banking Data: All Conundrums Matter

2017-07-19

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2017-07-19

Case Study: S&P 500 Index and Federal Funds Target
Since we are this week hypocritically obsessing over monetary policy, particularly the federal funds rate end of it, it’s as good a time as any to review the full history of 21st century “conundrum.” Janet Yellen’s Fed has run itself afoul of the bond market, just as Alan Greenspan’s Fed did in the middle 2000’s.

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Global Asset Allocation Update: Not Yet

2017-07-18

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2017-07-18

Moderate Allocation
There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. There are no changes to the portfolio this month. Growth and inflation expectations rose somewhat since last month’s update. The change is minor though and within the range of what we’ve seen in recent months.

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Bi-Weekly Economic Review: Attention Shoppers

2017-07-17

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2017-07-17

The majority of the economic reports over the last two weeks have been disappointing, less than the consensus expectations. The minor rebound in activity we’ve been tracking since last summer appears to have stalled. Retail sales continue to disappoint and inventory/sales ratios are once again rising – from already elevated levels.

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Wholesale: No Acceleration, No Liquidation

2017-07-16

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2017-07-16

Wholesale Sales and Inventory, NSA
In the same way as durable goods orders and US imports, wholesale sales in May 2017 were up somewhat unadjusted but down for the third straight month according the seasonally-adjusted series. As with those other two, the difference is one of timing. In other words, combining the two sets, seasonal and not, we are left to interpret a possible recent slowing in activity.

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