Category Archive: 5) Global Macro

China: FX reserves rise again

According to the Chinese State Administration of Foreign Exchange (SAFE), China’s FX reserves amounted to USD3.14 trillion at end - December 2017, up USD20.7 billion from the previous month. This marks the 11th consecutive monthly increase in Chinese FX reserves since February 2017.

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Nous sommes colonisés par le numérique des multinationales américaines

La révolution numérique est une réalité qui envahit tous les jours plus les sphères publiques et privées…. Qu’en est-il du commerce de détails? Les visuels ci-dessous nous montrent d’abord que certaines habitudes d’achats dans les commerces traditionnels sont maintenues.

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Retail Sales, Consumer Sentiment, And The Aftermath Of Hurricanes

Consumer confidence has been sky-high for some time now, with the major indices tracking various definitions of it at or just near highs not seen since the dot-com era. Economists place a lot of emphasis on confidence in all its forms, including that of consumers, and there is good reason for them to do so; or there was in the past.

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The Dea(r)th of Economic Momentum

For the fourth quarter as a whole, Chinese exports rose by just less than 10% year-over-year. That’s the highest quarterly rate in more than three years, up from 6.3% and 6.0% in Q2 2017 and Q3, respectively. That acceleration is, predictably, being celebrated as a meaningful leap in global economic fortunes. Instead, it highlights China’s grand predicament, one that country just cannot seem to escape.

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Bi-Weekly Economic Review: A Weak Dollar Stirs A Toxic Stew

We received several employment related reports in the first two weeks of the year. The rate of growth in employment has been slowing for some time – slowly – and these reports continue that trend. The JOLTS report showed a drop in job openings, hires and quits.

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Emerging Markets: Preview of the Week Ahead

EM FX continues to rally as the dollar remains on its back foot. With no obvious drivers this week that might help the dollar, we believe EM FX can extend the recent gains. Still, we continue to advise caution when investing in EM, as differentiation should again become evident as idiosyncratic risks remain in play.

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The Fascinating Psychology of Blowoff Tops

The psychology of blowoff tops in asset bubbles is fascinating: let's start with the first requirement of a move qualifying as a blowoff top, which is the vast majority of participants deny the move is a blowoff top.

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Inflation Correlations and China’s Brief, Disappointing Porcine Nightmare

Two years ago, China was gripped by what was described as an epic pig problem. For most Chinese people, pork is a main staple so rapidly rising pig prices could have presented a serious challenge to an economy already at that time besieged by massive negative forces. It was another headache officials in that country really didn’t need.

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Emerging Markets: What Changed

China State Administration of Foreign Exchange (SAFE) disputed press reports that it was slowing or halting purchases of US Treasury bonds. Korean officials warned that it will take stern steps to prevent one-sided currency moves. Bulgaria is talking “intensively” with the ECB and other EU representatives about entering the Exchange Rate Mechanism by mid-year.

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The Conspicuous Rush To Import

According to the Census Bureau, US companies have been importing foreign goods at a relentless pace. In estimates released last week, seasonally-adjusted US imports jumped to $204 billion in November 2017. That’s a record high finally surpassing the $200 billion mark for the first time, as well as the peaks for both 2014 and 2007.

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Yes, But at What Cost?

This is how our entire status quo maintains the illusion of normalcy: by avoiding a full accounting of the costs. The economy's going great--but at what cost? "Normalcy" has been restored, but at what cost? Profits are soaring, but at what cost? Our pain is being reduced--but at what cost? The status quo delights in celebrating gains, but the costs required to generate those gains are ignored for one simple reason: the costs exceed the gains by a...

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The Reluctant Labor Force Is Reluctant For A Reason (and it’s not booming growth)

In 2017, the BLS estimates that just 861k Americans were added to the official labor force, the denominator, of course, for the unemployment rate. That’s out of an increase of 1.4 million in the Civilian Non-Institutional Population, the overall prospective pool of workers. Both of those rises were about half the rate experienced in 2016.

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Emerging Market Preview: Week Ahead

EM FX was mostly firmer last week, but ended on a mixed note Friday. Best performers on the week for COP, MXN, and BRL while the worst were ARS, PHP, and CNY. We continue to warn investors against blindly buying into this broad-based EM rally, as we believe divergences will once again assert themselves in the coming weeks.

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The Great Risk of So Many Dinosaurs

The Treasury Borrowing Advisory Committee (TBAC) was established a long time ago in the maelstrom of World War II budgetary as well as wartime conflagration. That made sense. To fight all over the world, the government required creative help in figuring out how to sell an amount of bonds it hadn’t needed (in proportional terms) since the Civil War. A twenty-person committee made up of money dealer bank professionals and leaders was one of the few...

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Emerging Markets: What Changed

Tensions on the Korean peninsula appear to be easing. Relations between Pakistan and the US have worsened. The Philippine central bank is tilting more hawkish. The ANC may consider removing Zuma from the presidency at the January 10 meeting of its National Executive Committee. Turkish banker Atilla was convicted of helping Iran evade US financial sanctions.

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Why the Financial System Will Break: You Can’t “Normalize” Markets that Depend on Extreme Monetary Stimulus

Central banks are now trapped. In a nutshell, central banks are promising to "normalize" their monetary policy extremes in 2018. Nice, but there's a problem: you can't "normalize" markets that are now entirely dependent on extremes of monetary stimulus. Attempts to "normalize" will break the markets and the financial system. Let's start with the core dynamic of the global economy and nosebleed-valuation markets: credit.

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Global Asset Allocation Update

There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. The extreme overbought condition of the US stock market persists so I will continue to hold a modest amount of cash. There are some minor changes within the portfolios but the overall allocation is unchanged.

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Industrial production: The Chinese Appear To Be Rushed

While the Western world was off for Christmas and New Year’s, the Chinese appeared to have taken advantage of what was a pretty clear buildup of “dollars” in Hong Kong. Going back to early November, HKD had resumed its downward trend indicative of (strained) funding moving again in that direction (if it was more normal funding, HKD wouldn’t move let alone as much as it has). China’s currency, however, was curiously restrained during that...

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Bi-Weekly Economic Review: Housing Market Accelerates

The economy ended 2017 with current growth just slightly above trend. In general the reports of the last two weeks of the year were pretty good with housing a standout performer going into the new year. We are still trying to get past the impact – positive and negative – from the hurricanes a few months ago though so it is probably prudent to wait for more evidence before making any definitive pronouncements about the economy.

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The Hidden-in-Plain-Sight Mechanism of the Super-Wealthy: Money-Laundering 2.0

Financial and political power are two sides of one coin. We all know the rich are getting richer, and the super-rich are getting super-richer. This reality is illustrated in the chart of income gains, the vast majority of which have flowed to the top .01%--not the top 1%, or the top .1% -- to the very tippy top of the wealth-power pyramid.

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