Category Archive: 5) Global Macro

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Inflation Hysteria #2 (Slack-edotes)

2020-12-13

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2020-12-13

Macroeconomic slack is such an easy, intuitive concept that only Economists and central bankers (same thing) could possibly mess it up. But mess it up they have. Spending years talking about a labor shortage, and getting the financial media to report this as fact, those at the Federal Reserve, in particular, pointed to this as proof QE and ZIRP had fulfilled the monetary policy mandates – both of them.

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Inflation Hysteria #2 (WTI)

2020-12-12

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2020-12-12

Sticking with our recent theme, a big part of what Inflation Hysteria #1 (2017-18) also had going for it was loosened restrictions for US oil producers. Seriously.

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Dollar Rally Running Out of Steam Ahead of ECB Decision

2020-12-10

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2020-12-10

Stimulus talks drag on; US November CPI will be today’s data highlight; US Treasury wraps up a big week of auctions today with $24 bln of 30-year bonds on offer. The November budget statement will hold some interest; weekly jobless claims will be closely watched;

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Inflation Hysteria #2 (Nominal UST)

2020-12-09

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2020-12-09

UST Yield Curve, 2017-2018
What had given Inflation Hysteria #1 its real punch had been the benchmark 10-year Treasury note. Throughout 2017, despite the unemployment rate in the US, globally synchronized growth being declared around the world (and being declared as some momentously significant development), and whatever other tiny factors acceding to the narrative, longer-term Treasury rates just weren’t buying it.

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Jittery Markets Keep the Dollar Afloat (For Now)

2020-12-09

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2020-12-09

Performance vs. Dollar, 2020
US fiscal negotiations are taking longer than expected; US Treasury auctions $56 bln of 3-year notes; we believe the Fed is watching the yield curve closely; Brazil reports November IPCA inflation; Chile kept rates on hold at 0.50% and tweaked its asset purchase program.

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Polar Opposite Sides of Consumer Credit End Up in the Same Place: Jobs

2020-12-08

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2020-12-08

CPS Household Survey, 2003-2020
If anything is going to be charged off, it might be student loans. All the rage nowadays, the government, approximately half of it, is busily working out how it “should” be done and by just how much. A matter of economic stimulus, loan cancellation proponents are correct that students have burdened themselves with unprofitable college “education” investments.

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Take Advantage of These COVID Estate Planning Opportunities by the End of 2020

2020-12-07

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2020-12-07

May you live in interesting times. Although that sounds like an ancient blessing, it’s believed to be a Chinese curse casting instability and uncertainty on the person who hears it. Blessing or curse, it’s a great description of the year we’ve just come through, and in spite of all the turmoil, there are some things you can do before the end of 2020 to take advantage of all the madness.

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Some Thoughts on a Potential US Government Shutdown

2020-12-06

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2020-12-06

The US Congress has returned from recess with a lot on its plate.  Priority must be given to passing an omnibus spending bill that prevents a government shutdown after December 11. The next round of fiscal stimulus has taken on greater urgency and may be attached to the wider spending bill.

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Don’t Really Need ‘Em, Few More Nails Anyway

2020-12-06

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2020-12-06

Pro forma CES Private Payrolls, 2020-2021
The ISM’s Non-manufacturing PMI continued to decelerate from its high registered all the way back in July 2020. In that month, the headline index reached 58.1, the best since early 2019, and for many signaling that everything was coming up “V.”

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Dollar Stabilizes but Weakness to Resume

2020-12-05

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2020-12-05

Performance vs. Dollar, 2020
There are new efforts to pass another round of stimulus sooner rather than later; we warn against getting too optimistic; US bond yields rose in anticipation of stimulus; Fed Chair Powell and Treasury Secretary Mnuchin gave somewhat conflicting outlooks for the US.

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There Have Actually Been Some Jobs Saved, Only In Place of Recovery

2020-12-04

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2020-12-04

IHS Markit US Manufacturing, 2012-2020
The ISM reported a small decline in its manufacturing PMI today. The index had moved up to 59.3 for the month of October 2020 in what had been its highest since September 2018. For November, the setback was nearly two points, bringing the headline down to an estimate of 57.5.

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Dollar Plumbs New Depths With No Relief In Sight

2020-12-03

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2020-12-03

Stimulus talks continue but the goalposts have indeed been moved; the good news is that a package before year-end is looking more likely; optimism regarding stimulus continues to buoy US yields. ISM services PMI is expected at 55.8 vs. 56.6 in October; weekly jobless claims data will be reported; Fed Beige Book report was suitably downbeat.

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Tesla Isn’t A Car Company

2020-12-03

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2020-12-03

We have the luxury, the honor, of speaking to a lot of individual investors here at Alhambra. Whether they are clients or future clients (optimism is my default condition), the most common view of stocks is that they are overvalued and a fall – a large fall – is inevitable. And there is no stock that embodies that view more than Elon Musk’s Tesla Incorporated. It was once known as Tesla Motors but Musk changed the name in early 2017. There may...

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2021 is Already Optimized for Failure

2020-12-01

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2020-12-01

One sure way to identify a system "optimized for failure" is if all the insiders are absolutely confident the system is "optimized for my success". I often discuss optimization here because it offers an insightful window into how systems become fragile and break down.

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Drivers for the Week Ahead

2020-11-30

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2020-11-30

Dollar weakness has resumed. This will be a very important data week for the US and the highlight will be November jobs data Friday; we will also get some important manufacturing readings for November; the Fed releases its Beige Book report for the December FOMC meeting Wednesday; Canada also has a busy week.

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Just Who Is, And Who Is Not, Selling T-Bills

2020-11-29

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2020-11-29

Are foreigners selling Treasury bills? If they are, this would seem to merit consideration for the reflation argument. After all, the paramount monetary deficiency exposed by March’s GFC2 (and the Fed’s blatant role in making it worse) was the dangerous degree of shortage over the best collateral.

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Treasury Auctions Are Anything But Sorry Because They’ve Never Been Sorry About Solly

2020-11-28

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2020-11-28

US TIC, 2010-2020
Twenty years ago, in November 2000, the Treasury Department changed one aspect of the way the government would sell its own debt. Auctions of these and other kinds of securities had been ongoing for decades, back to the twenties, and they had been transformed many times along the way. In the middle of the 1970’s Great Inflation, for example, Treasury gradually phased out all other means for issuing securities, by 1977 relying exclusively on...

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A Dimly Lit Thanksgiving

2020-11-27

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2020-11-27

Our overweening faith and confidence in our wealth and power make this a dimly lit Thanksgiving. A public expression of gratitude by victorious sports stars, lottery winners, etc. is now the convention in America: coaches, teammates, family and mentors (or agents) are recognized as an expression of the winners' humility and gratitude for everyone that contributed to the success.

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Dollar Weakness Resumes as Short-Covering Fades

2020-11-25

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2020-11-25

Cross-Market Implied Vol, 2020
Sentiment is being buoyed by two incrementally positive stories; cross-markets implied volatility measures continue to trend lower; dollar weakness has resumed. President-elect Biden will reportedly officially name his first cabinet picks today; Fed manufacturing surveys for November will continue to roll out; Brazil and Mexico both reports mid-November inflation readings.

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Dollar Weakness Resumes as Markets Start Another Week in Risk-On Mode

2020-11-25

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2020-11-25

Europe and UK PMIs, 2018-2020
Covid vaccine results from AstraZeneca and Oxford University brought another wave of optimism; dollar weakness has resumed; that said, we will refrain from making any longer-term calls for the demise of the dollar. Reports suggest President-elect Biden is pushing House Democrats to reduce the size of their fiscal package demands to unlock negotiations; Republicans have an interest in compromising.

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