Category Archive: 5.) Alhambra Investments

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Industrial Symmetry

2017-03-19

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2017-03-19

Industrial Production YoY, Jun 1995 - Jan 2017
There has always been something like Newton’s third law observed in the business cycles of the US and other developed economies. In what is, or was, essentially symmetry, there had been until 2008 considerable correlation between the size, scope, and speed of any recovery and its antecedent downturn, or even slowdown. The relationship was so striking that it moved Milton Friedman to finally publish in 1993 his plucking model theory he had first...

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Retail Sales: Extra Day Likely, no Meaningful Difference

2017-03-19

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2017-03-19

Retail Sales, Jan 1993 - 2017
Retail sales comparisons were for February 2017 skewed by the extra day in February 2016. With the leap year February 29th a part of the base effect, the estimated growth rates (NSA) for this February are to some degree better than they appear. Seasonally-adjusted retail sales were in the latest estimates essentially flat when compared to the prior month (January). That leaves too much guesswork to draw any hard conclusions.

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Further Unanchoring Is Not Strictly About Inflation

2017-03-18

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2017-03-18

University of Michigan Surveys of Consumers Inflation Expectations, Jan 1990 - 2017
According to Alan Greenspan in a speech delivered at Stanford University in September 1997, monetary policy in the United States had been shed of M1 by late 1982. The Fed has never been explicit about exactly when, or even why, monetary policy changed dramatically in the 1980’s to a regime of pure interest rate targeting of the federal funds rate.

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Global Asset Allocation Update

2017-03-16

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2017-03-16

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. The Fed spent the last month forward guiding the market to the rate hike they implemented today. Interest rates, real and nominal, moved up in anticipation of a more aggressive Fed rate hiking cycle.

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China Starts 2017 With Chronic, Not Stable And Surely Not ‘Reflation’

2017-03-15

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2017-03-15

China Industrial Production 1999 - 2017
The first major economic data of 2017 from China was highly disappointing to expectations of either stability or hopes for actual acceleration. On all counts for the combined January-February period, the big three statistics missed: Industrial Production was 6.3%, Fixed Asset Investment 8.9%, and Retail Sales just 9.5%.

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Mugged By Reality; Many Still Yet To Be

2017-03-14

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2017-03-14

Friedman's Plucking Model
In August 2014, Federal Reserve Vice Chairman Stanley Fischer admitted to an audience in Sweden the possibility in some unusually candid terms that maybe they (economists, not Sweden) didn’t know what they were doing. His speech was lost in the times, those being the middle of that year where the Fed having already started to taper QE3 and 4 were becoming supremely confident that they would soon end them.

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Bi-Weekly Economic Review

2017-03-13

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2017-03-13

The Federal Reserve is widely expected to raise interest rates again at their meeting next week. They obviously view the recent cyclical upturn as being durable and the inflation data as pointing to the need for higher rates. Our market based indicators agree somewhat but nominal and real interest rates are still below their mid-December peaks so I don’t think a lot has changed.

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Do Record Debt And Loan Balances Matter? Not Even Slightly

2017-03-12

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2017-03-12

Z1 Total Debt Securities, 1980 - 2016
We live in a non-linear world that is almost always described in linear terms. Though Einstein supposedly said compound interest is the most powerful force in the universe, it rarely is appreciated for what the statement really means. And so the idea of record highs or even just positive numbers have been equated with positive outcomes, even though record highs and positive growth rates can be at times still associated with some of the worst. It...

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[ Jeffrey Snider ] Understanding the Global US Dollar Shortage

2017-03-12

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Erik Townsend welcomes Jeffrey Snider to MacroVoices. Erik and Jeff discuss: — Understanding the Eurodollar Money Market — Swap Spreads and Interbank . MacroVoices Presents: Jeffrey Snider – Understanding the Global US Dollar Shortage. Thanks for watching!!! Erik Townsend welcomes Jeffrey Snider to MacroVoices. Erik and Jeff discuss: — Understanding the Eurodollar Money Market — …

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Payrolls Still Slowing Into A Third Year

2017-03-11

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2017-03-11

Payrolls Est Survey, Jan 2010 - 2017
Today’s bland payroll report did little to suggest much of anything. All the various details were left pretty much where they were last month, and all the prior trends still standing. The headline Establishment Survey figure of 235k managed to bring the 6-month average up to 194k, almost exactly where it was in December but quite a bit less than November. In other words, despite what is mainly written as continued “strength” is still pointing down...

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Time, The Biggest Risk

2017-03-11

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2017-03-11

Oil WTI, May 2016 - February 2017
If there is still no current or present indication of rising economic fortunes, and there isn’t, then the “reflation” idea turns instead to what might be different this time as compared to the others. In 2013 and 2014, it was QE3 and particularly the intended effects (open ended and faster paced, a bigger commitment by the Fed to purportedly do whatever it took) upon expectations that supposedly set it apart from the failures of QE’s 1 and 2. This...

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No Paradox, Economy to Debt to Assets

2017-03-11

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2017-03-11

Household Net Worth, April 1951 - 2016
It is surely one of the primary reasons why many if not most people have so much trouble accepting the trouble the economy is in. With record high stock prices leading to record levels of household net worth, it seems utterly inconsistent to claim those facts against a US economic depression.

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Same Country, Different Worlds

2017-03-10

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2017-03-10

China CPI PPI, February 2007 - 2017
To my mind, “reflation” has always proceeded under false pretenses. This goes for more than just the latest version, as we witnessed the same incongruity in each of the prior three. The trend is grounded in mere hope more than rational analysis, largely because I think human nature demands it. We are conditioned to believe especially in the 21st century that the worst kinds of things are either unrealistic or apply to some far off location nowhere...

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US Trade Skews

2017-03-09

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2017-03-09

US Trade Export, NSA 1989-2016
US trade statistics dramatically improved in January 2017, though questions remain as to interpreting by how much. On the export side, US exports of goods rose 8.7% year-over-year (NSA). While that was the highest growth rate since 2012, there is part symmetry to account for some of it.

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China And Reserves, A Straightforward Process Unnecessarily Made Into A Riddle

2017-03-08

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2017-03-08

China Official Foreign Exchange 2015-2017
The fact that China reported a small increase in official “reserves” for February 2017 is one of the least surprising results in all of finance. The gamma of those reserves is as predictable as the ticking clock of CNY, in no small part because what is behind the changes in those balances are the gears that lie behind face of the forex timepiece.

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Do Record Eurodollar Balances Matter? Not Even Slightly

2017-03-07

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2017-03-07

Nonbanks TIC Other Outbound, Nov 1978 - 2016
The BIS in its quarterly review published yesterday included a reference to the eurodollar market (thanks to M. Daya for pointing it out). The central bank to central banks, as the outfit is often called, is one of the few official institutions that have taken a more objective position with regard to the global money system. Of the very few who can identify eurodollars, or have even heard of them, the BIS while not fully on board is at least open...

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Manufacturing Back To 2014

2017-03-07

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2017-03-07

Factory Orders for All Manufacturing Industies, SA 1992-2016
The ISM Manufacturing PMI registered 57.7 in February 2017, the highest value since August 2014 (revised). It was just slightly less than that peak in the 2014 “reflation” cycle. Given these comparisons, economic narratives have been spun further than even the past few years where “strong” was anything but.

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Bi-Weekly Economic Review

2017-03-05

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2017-03-05

Economic Reports Scorecard. The economic data released since my last update has been fairly positive but future growth and inflation expectations, as measured by our market indicators, have waned considerably. There is now a distinct divergence between the current data, stocks and bonds. Bond yields, both real and nominal, have fallen recently even as stocks continue their relentless march higher.

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Economic Dissonance, Too

2017-03-04

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2017-03-04

Germany Industrial Production, SA 1997-2016
Germany is notoriously fickle when it comes to money, speaking as much of discipline in economy or industry as central banking. If ever there is disagreement about monetary arrangements, surely the Germans are behind it. Since ECB policy only ever attains the one direction, so-called accommodation, there never seems to be harmony.

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True Cognitive Dissonance

2017-03-04

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2017-03-04

Inflation In Japan 2011-2016
There is gold in Asia, at least gold of the intellectual variety for anyone who wishes to see it. The Chinese offer us perhaps the purest view of monetary conditions globally, where RMB money markets are by design tied directly to “dollar” behavior. It is, in my view, enormously helpful to obsess over China’s monetary system so as to be able to infer a great deal about the global monetary system deep down beyond the “event horizon.”

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