Category Archive: 5) Global Macro

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Dollar Firm as China’s Hong Kong Gambit Triggers Risk-Off Trading

2020-05-23

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2020-05-23

Legislation was introduced that allows Beijing to directly impose a national security law on Hong Kong; US-China tensions are still rising; the dollar is bid as risk-off sentiment takes hold. There are no US data reports or Fed speakers today; Canada reports March retail sales; Mexico reports mid-May CPI.

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No Flight To Recognize Shortage

2020-05-22

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2020-05-22

If there’s been one small measure of progress, and a needed one, it has been the mainstream finally pushing commentary into the right category. Back in ’08, during the worst of GFC1 you’d hear it all described as “flight to safety.” That, however, didn’t correctly connote the real nature of what was behind the global economy’s dramatic wreckage. Flight to safety, whether Treasuries or dollars, wasn’t it.

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Dollar Firm as US-China Tensions Flare

2020-05-22

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2020-05-22

The virus news stream is mixed; the dollar has stabilized; US-China tensions continue to ratchet up. We will get some more US economic data for May; weekly jobless claims are expected at 2.4 mln. Eurozone and UK reported firm preliminary May PMI readings; BOE officials continue to take a very dovish tone.

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Dollar Treads Water Ahead of FOMC Minutes

2020-05-21

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2020-05-21

The virus news stream is mixed; the dollar has stabilized a bit. FOMC minutes will be released; Canada reports April CPI and March wholesale trade sales; the news from Brazil keeps getting worse. Another group of EU nations will release their own plan in a rebuttal of France and Germany; UK reported April CPI data.

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So Much Bond Bull

2020-05-21

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2020-05-21

Federal Reserve: H.10 Foreign Exchange Rates, 2017-2020
Count me among the bond vigilantes. On the issue of supply I yield (pun intended) to no one. The US government is the brokest entity humanity has ever conceived – and that was before March 2020. There will be a time, if nothing is done, where this will matter a great deal.That time isn’t today nor is it tomorrow or anytime soon because it’s the demand side which is so confusing and misdirected.

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Consumer Spending Will Not Rebound–Here’s Why

2020-05-20

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2020-05-20

Share of total US income, 1980-2015
Any economy that concentrates its wealth and income in the top tier is a fragile economy. There are two structural reasons why consumer spending will not rebound, no matter how open the economy may be. Virtually everyone who glances at headlines knows the global economy is lurching into either a deep recession or a full-blown depression, depending on the definitions one is using. Everyone also knows the stock market has roared back as if nothing...

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Restricted Market Trading Comments

2020-05-19

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2020-05-19

Covid-19 related measures for restricted markets remain largely unchanged this week. Philippines, Bangladesh and Kuwait have extended their lockdown periods, while Kenya and Nigeria continue to face limited liquidity. Please see trading comments below

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There Was Never A Need To Translate ‘Weimar’ Into Japanese

2020-05-17

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2020-05-17

After years of futility, he was sure of the answer. The Bank of Japan had spent the better part of the roaring nineties fighting against itself as much as the bubble which had burst at the outset of the decade. Letting fiscal authorities rule the day, Japan’s central bank had largely sat back introducing what it said was stimulus in the form of lower and lower rates.No, stupid, declared Milton Friedman.

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The Collapse of Main Street and Local Tax Revenues Cannot Be Reversed

2020-05-16

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2020-05-16

The core problem is the U.S. economy has been fully financialized, and so costs are unaffordable. To understand the long-term consequences of the pandemic on Main Street and local tax revenues, we need to consider first and second order effects. The immediate consequences of lockdowns and changes in consumer behavior are first-order effects: closures of Main Street, job losses, massive Federal Reserve bailouts of the top 0.1%, loan programs for...

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Dollar Firm as Risk-off Sentiment Intensifies

2020-05-15

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2020-05-15

UK 2-Year Yields Turn Negative
Risk-off sentiment has intensified; as a result, the dollar is getting some more traction. Fed Chair Powell pushed back against the notion of negative rates in the US; US Treasury completed its quarterly refunding. Weekly jobless claims are expected at 2.5 mln vs. 3.169 mln last week; Mexico is expected to cut rates 50 bp to 5.5%

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The global economy doesn’t care about the ECB (nor any central bank)

2020-05-14

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2020-05-14

Europe Industrial Production, 1991-2020
The monetary mouse. After years of Mario Draghi claiming everything under the sun available with the help of QE and the like, Christine Lagarde came in to the job talking a much different approach. Suddenly, chastened, Europe’s central bank needed assistance. So much for “do whatever it takes.”They did it – and it didn’t take.Lagarde’s outreach was simply an act of admitting reality.

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Dollar Mixed as Markets Await Fresh Drivers

2020-05-14

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2020-05-14

The virus news stream is mixed; the dollar continues to consolidate; US-China tensions continue to rise. US Treasury wraps up its quarterly refunding; April budget statement is a harbinger of things to come; the next round of stimulus will be contentious. We got some dovish BOE comments yesterday; UK continues to play Brexit hardball; UK data was slightly better than expected but awful nonetheless.

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Different Type of Crisis, Some Old Concerns

2020-05-13

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2020-05-13

Over the past two months we have witnessed historic turmoil followed by unprecedented intervention by policy makers and central banks in supporting the capital markets (and more). In many ways the 2020 COVID-19 pandemic is very different from the 2008 global financial crisis, but for some, certain old concerns still linger. In the face of short selling bans and worries about market liquidity, we discuss below how best to navigate some of the common...

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A Big One For The Big “D”

2020-05-13

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2020-05-13

CPI less Food & Energy, 1983-2020
From a monetary policy perspective, smooth is what you are aiming for. What central bankers want in this age of expectations management is for a little bit of steady inflation. Why not zero? Because, they decided, policymakers need some margin of error. Since there is no money in monetary policy, it takes time for oblique “stimulus” signals to feed into the psychology of markets and the economy.

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The Way of the Tao Is Reversal

2020-05-12

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2020-05-12

As Jackson Browne put it: Don't think it won't happen just because it hasn't happened yet. We can summarize all that will unfold in the next few years in one line: The way of the Tao is reversal. This is the opening line of Chapter 40 of Lao Tzu's 5,000-character commentary on the Tao, The Tao Te Ching. There are many translations of this slim volume, and for a variety of reasons I favor the 1975 translation by my old professor at the University of...

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Restricted Market Trading Comments

2020-05-12

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2020-05-12

Covid-19 related measures for restricted markets remain largely unchanged from last week. Sri Lanka and India have extended their lockdown periods, while Kenya and Nigeria continue to face limited liquidity. Please see trading comments below.

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Surviving 2020 #3: Plans A, B and C

2020-05-10

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2020-05-10

Readers ask for specific recommendations for successfully navigating the post-credit/speculative-bubble era and I try to do so while explaining the impossibility of the task. As the bogus prosperity economy built on exponential growth of debt implodes, we all seek ways to protect ourselves, our families and our worldly assets. 

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Everyone Knows The Gov’t Wants A ‘Controlled’ Weimar

2020-05-09

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2020-05-09

There are two parts behind the inflation mongering. The first, noted yesterday, is the Fed’s balance sheet, particularly its supposedly monetary remainder called bank reserves. The central bank is busy doing something, a whole bunch of something, therefore how can it possibly turn out to be anything other than inflationary?The answer: the Federal Reserve is not a central bank, not really.

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Dollar Mixed as Doves Fly

2020-05-08

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2020-05-08

Measures of cross-market implied volatility have been stable for a few weeks now. Weekly jobless claims are expected at 3 mln; reports suggest House Democrats are pushing ahead with a possible vote next week on another relief package. Canada reports April Ivey PMI; Peru is expected to keep rates steady; Brazil COPOM delivered a dovish surprise last night.

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We All Know Who’s On First, But What’s On Second?

2020-05-08

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2020-05-08

It wasn’t entirely unexpected, though when it was announced it was still quite a lot to take in. On September 1, 2005, the Bureau of Economic Analysis (BEA) reported that the nation’s personal savings rate had turned negative during the month of July. The press release announcing the number, in trying to explain the result was reduced instead to a tautology, “The negative personal saving reflects personal outlays that exceed disposable personal...

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