Category Archive: 5) Global Macro

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Deja Vu

2017-09-01

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2017-09-01

Central Bank Rate Decomposition
According to orthodox theory, if interest rates are falling because of term premiums then that equates to stimulus. Term premiums are what economists have invented so as to undertake Fisherian decomposition of interest rates (so that they can try to understand the bond market; as you might guess it doesn’t work any better). It is, they claim, the additional premium a bond investor demands so as to hold a security that much longer (more return to...

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Currency Risk That Isn’t About Exchange Values (Eurodollar University)

2017-08-31

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2017-08-31

Eurodollar University
This week the Bureau of Economic Analysis will release updated estimates for Q2 GDP as well as Personal Consumption Expenditures (PCE) and Personal Incomes for July. Accompanying those latter two accounts is the currently preferred inflation standard for the US economy. The PCE Deflator finally hit 2% and in two consecutive months, after revisions, earlier this year.

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Bi-Weekly Economic Review: Don’t Underestimate Gridlock

2017-08-30

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2017-08-30

Bi-weekly
The economic reports released since the last update were slightly more upbeat than the previous period. The economic surprises have largely been on the positive side but there were some major disappointments as well. The economy has been doing this for several years now, one part of the economy waxing while another wanes and the overall trajectory not much changed. Indeed, the broad Chicago Fed National Activity index probably says it all, coming...

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Why is Mecca having an $80bn makeover? | The Economist

2017-08-30

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Saudi Arabia is investing billions of dollars remodeling Mecca, home of Islam’s holiest site—the Kaaba. Its plans include building the world’s largest hotel. The aim is to double Mecca’s capacity to host worshippers, to nearly seven million, by 2040. The redevelopment has destroyed scores of old shrines. Click here to subscribe to The Economist on …

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The 5 Steps to World Domination

2017-08-29

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2017-08-29

Wealth Pyramid 2015
You don't need an army to achieve World Domination; all you need is enough cheap credit to buy up everything that generates the highest value and/or income.

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Emerging Market: Preview of the Week Ahead

2017-08-28

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2017-08-28

EM FX ended last week on a strong note, buoyed by perceived dovishness from Yellen at the Jackson Hole symposium. However, US jobs data this Friday could test the market’s convictions. Within EM, data are likely to support our view that EM central banks can retain their largely dovish posture into 2018.

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Which is the most expensive city to live in as a foreigner? | The Economist

2017-08-28

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We asked people in Hong Kong which city they thought was the most expensive to live in as a foreigner. Click here to subscribe to The Economist on YouTube: http://econ.trib.al/rWl91R7 Daily Watch: mind-stretching short films throughout the working week. For more from Economist Films visit: http://films.economist.com/ Check out The Economist’s full video catalogue: http://econ.st/20IehQk Like …

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More Noise Than Signal

2017-08-27

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2017-08-27

US Real Gross Corporate, 1951 - 2017
A number of people have forwarded this Bloomberg article – Wall Street Banks Warn Downturn Is Coming – to me over the last couple of days. That fact alone is probably a good argument to ignore it but I can’t help but read articles like this if for no other reason than to know what the crowd is thinking.

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United States Durable Goods In July; Rinse, Repeat

2017-08-27

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2017-08-27

US Durable Goods Orders, Jul 1993 - 2017
The Census Bureau reported today updated estimates for Durable Goods in July 2017. Quite frankly, nothing has changed so minimal commentary is all that is required. The aircraft anomaly from last month faded, leaving total new orders of $229.2 billion (seasonally-adjusted). That is less than in May before the Boeing surge, and less even than estimated order volume in March 2017.

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Did the Economy Just Stumble Off a Cliff?

2017-08-26

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2017-08-26

Total Credit, 1990-2017
This is more intuitive than quantitative, but my gut feeling is that the economy just stumbled off a cliff. Neither the cliff edge nor the fatal misstep are visible yet; both remain in the shadows of the intangible foundation of the economy: trust, animal spirits, faith in authorities' management, etc.

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We Need a Social Revolution

2017-08-25

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2017-08-25

Corporate Profits After Tax
In the conventional view, there are two kinds of revolutions: political and technological. Political revolutions may be peaceful or violent, and technological revolutions may transform civilizations gradually or rather abruptly—for example, revolutionary advances in the technology of warfare.

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Amber Heard: Why being called a “bitch” in Hollywood isn’t all bad | The Economist

2017-08-25

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Amber Heard is one of Hollywood’s brightest stars. Ahead of Women’s Equality Day she talks about the dark secret of gender bias in Tinsel Town Click here to subscribe to The Economist on YouTube: http://econ.trib.al/rWl91R7 Amber Heard is an actress with credits including “Magic Mike XXL”, “The Danish Girl” and “Justice League”. She is also …

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Questions

2017-08-24

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2017-08-24

US Corporate Profits / Gross Domestic Product, 1950 - 2017
Why are profit margins persistently high? With decent earnings this quarter, corporate profits as a % of GDP will approach (maybe exceed) 10% again. That is abnormally high compared to the period 1960 to 2000. Margins actually started to rise in the mid-80s but really accelerated after 2000 and outside of the 2008 crisis have remained high. Why?

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United States: The Fed Tries To Tighten By Rates, But The System Instead Tightens By Repo

2017-08-23

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2017-08-23

U.S. Treasury CMT Yields, Jan 2017-Aug 2017
The Fed voted for the first federal funds increase in almost a decade on December 15, 2015. It was the official end of ZIRP, and though taking so many additional years to happen, to many it marked the start of recovery. The yield on the 2-year Treasury Note was 98 bps that day.

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London: An Insiders Guide | The Economist

2017-08-23

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Throw away the tourist guide and hear about London’s best experiences from those who know the city best: its locals Click here to subscribe to The Economist on YouTube: http://econ.trib.al/rWl91R7 Daily Watch: mind-stretching short films throughout the working week. For more from Economist Films visit: http://films.economist.com/ Check out The Economist’s full video catalogue: http://econ.st/20IehQk Like …

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United States: Lack Of Industrial Momentum Is (For Now) Big Auto Problems

2017-08-22

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2017-08-22

US Industrial Production, Jan 2006 - Jul 2017
Industrial Production disappointed in the US last month, dragged down by auto production. Despite the return of an oil sector tailwind, IP was up just 2.2% year-over-year in July 2017 according to Federal Reserve statistics. It marks the fourth consecutive month stuck around 2% growth. The lack of further acceleration is unusual in the historical context, especially following an extended period of contraction.

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Bangladesh: a country where blogging can get you killed | The Economist

2017-08-22

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Secular writers and bloggers are being hacked to death in the streets of Bangladesh for sharing their views online. But the government seems to tolerate the violence. WARNING: UPSETTING CONTENT Click here to subscribe to The Economist on YouTube: http://econ.trib.al/rWl91R7 Daily Watch: mind-stretching short films throughout the working week. For more from Economist Films visit: …

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Global Asset Allocation Update: No Upside To Credit

2017-08-21

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2017-08-21

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 other changes to the portfolio though so please read on. As I write this the stock market is in the process of taking a dive (well if 1.4% is a “dive”) and one can’t help but wonder if the long awaited and anticipated correction is finally at hand.

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Why We’re Doomed: Our Economy’s Toxic Inequality

2017-08-20

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2017-08-20

Fruit of Financialization
Why are we doomed? Those consuming over-amped "news" feeds may be tempted to answer the culture wars, nuclear war with North Korea or the Trump Presidency. The one guaranteed source of doom is our broken financial system, which is visible in this chart of income inequality from the New York Times: Our Broken Economy, in One Simple Chart.

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United States: Still No Up

2017-08-19

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2017-08-19

U.S. Retail Sales, Jun 2011-2017
The Asian flu of the late 1990’s might have been more accurately described as the Asian dollar flu. It was the first major global test of the mature eurodollar system, and it was a severe disruption in the global economy. It doesn’t register as much here in the United States because of the dot-com bubble and the popular imagination about Alan Greenspan’s monetary stewardship in general.

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