Category Archive: 5) Global Macro

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Negative News from Europe Helps Dollar Build on Gains

2020-05-07

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2020-05-07

UK has been confirmed to have the highest death toll in Europe the dollar is getting more traction. Reports suggest Congress is resisting President Trump’s call for a payroll tax cut; ADP private sector jobs data is expected to come in at -21 mln. Brazil is expected to cut rates 50 bp; Fitch cut its outlook on Brazil to negative; Chile is expected to keep rates steady.

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Where the Rubber Meets the Road

2020-05-07

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2020-05-07

Longtime correspondent Paul B. suggested I re-publish three essays that have renewed relevance. This is the second essay, from July 2008. Thank you, Paul, for the suggestion. I received this timely inquiry from astute reader Paul B.: I'm interested in # 1, while you seem to take into account 300 million people in your writings--would you comment on rubber-meets-the-road impacts and proactive actions we can take to help shield ourselves (and our...

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Restricted Market Trading Comments

2020-05-06

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2020-05-06

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.

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The Art of Survival, Taoism and the Warring States

2020-05-06

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2020-05-06

Longtime correspondent Paul B. suggested I re-publish three essays that have renewed relevance. This is the first essay, from June 2008. Thank you, Paul, for the suggestion. I'm not trying to be difficult, but I can't help cutting against the grain on topics like surviving the coming bad times when my experience runs counter to the standard received wisdom.

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Why Assets Will Crash

2020-05-04

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2020-05-04

US Population
This is how it happens that boats that were once worth tens of thousands of dollars are set adrift by owners who can no longer afford to pay slip fees. The increasing concentration of the ownership of wealth/assets in the top 10% has an under-appreciated consequence: when only the top 10% can afford to buy assets, that unleashes an almost karmic payback for the narrowing of ownership, a.k.a. soaring wealth and income inequality: assets crash.

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Dollar Remains Under Pressure as Europe Unveils Some Plans to Reopen

2020-05-03

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2020-05-03

Global equity markets continue to trend higher; the dollar remains under pressure. The two-day FOMC meeting ends today; the first look at Q1 US GDP comes out. France and Spain laid out plans to reopen; the UK will rely on a contact tracing plan to limit the viral spread.

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Some Thoughts on Recent Foreign Exchange Intervention

2020-05-02

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2020-05-02

Dollar's YTD Performance, 2020
Dollar softness this week will take some pressure off of the foreign currencies but it’s too early to sound the all clear.  This piece focuses on how  central banks around the world may be intervening to influence their currencies.  Most of the world, particularly EM, is grappling with supporting weak currencies but a select few are dealing with stronger currencies. This is a very opaque process and so we are simply making our best guesses.

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GDP + GFC = Fragile

2020-05-01

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2020-05-01

March 15 was when it all began to come down. Not the stock market; that had been in freefall already, beset by the rolling destruction of fire sale liquidations emanating out of the repo market (collateral side first). No matter what the Federal Reserve did or announced, there was no stopping the runaway devastation.

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COT Black: No Love For Super-Secret Models

2020-05-01

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2020-05-01

Federal Reserve: Liabilities & Capital, 1984-2019
As I’ve said, it is a threefold failure of statistical models. The first being those which showed the economy was in good to great shape at the start of this thing. Widely used and even more widely cited, thanks to Jay Powell and his 2019 rate cuts plus “repo” operations the calculations suggested the system was robust.

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Restricted Market Trading Comments

2020-04-30

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2020-04-30

By Dara O’Sullivan, Derrick Leonard, and Ilan Solot. As the week commences, a few markets such as Sri Lanka and Philippines are extending their lockdown periods while others such as Nigeria and Kenya continue to experience USD liquidity issues. Please see comments below.

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With Superfluous Demand in Free-Fall, What’s the Upside of Re-Opening a Small Business?

2020-04-29

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2020-04-29

Since superfluous demand was the core driver of most consumer spending, and that demand is in free-fall, what's the upside of re-opening? The mainstream view assumes everyone will be gripped by an absolutely rabid desire to return to their pre-pandemic frenzy of borrowing and spending and consuming, the more the better. 

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The Puppet Show Is Powerful

2020-04-29

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2020-04-29

I never said it wasn’t powerful. What I continue to show is that it doesn’t work. Ben Bernanke kept his job because despite the carnage, in times of turmoil people are willing to give anyone a second chance. And if the turmoil never ends, so much the luckier – for him. 

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Dollar Remains Under Pressure as Risk-on Sentiment Persists

2020-04-28

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2020-04-28

The death toll from the virus continues to trend lower in Europe and the US; the dollar remains under some pressure. The Fed announced an expansion of its Municipal Liquidity Facility (MLF); regional Fed manufacturing surveys for April continue to roll out; other data will be reported.

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The Crash Has Only Just Begun

2020-04-28

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2020-04-28

Everything, including a rational, connected-to-reality, effective financial system, is on back-order and unlikely to ship any time soon. While the stock market euphorically front-runs the Fed and a V-shaped recovery, the reality is the crash has only just begun.

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Drivers for the Week Ahead

2020-04-27

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2020-04-27

The FOMC meets Wednesday; first look at Q1 US GDP comes out Wednesday; weekly jobless claims Thursday are expected at 3.5 mln vs. 4.427 mln last week. Italy dodged a bullet last Friday; ECB meets Thursday; eurozone reports Q1 GDP and April CPI data ahead of the ECB decision; Sweden’s Riksbank meets Tuesday.

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Thoughts on the Potential Market Impact of US Downgrades

2020-04-26

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2020-04-26

Our sovereign rating model suggests the US will lose its AAA/Aaa rating.  With fiscal stimulus efforts continuing with this latest $484 bln package, the case for downgrades just keep getting stronger but the timing is unclear.  How might markets react?  We look back to 2011 for some clues.

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Dollar Steady as Global Economy Falls Off a Cliff

2020-04-25

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2020-04-25

Mexico Bond and CDS, 2020
The virus news stream is negative today; the dollar is trying to build on its recent gains. Weekly jobless claims are expected at 4.5 mln vs. 5.245 mln last week; regional Fed manufacturing surveys for April continue to roll out. ECB confirmed reports that it will accept sub-investment grade debt as collateral; EU leaders will hold a video conference today.

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The Fallen Kings & The Bond Throne of Collateral

2020-04-24

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2020-04-24

UST Yield Curve, 2017-2020
There is no schadenfreude at times like these, no time to dance on anyone’s grave. Victory laps are a luxury that only central bankers take – always prematurely. The world already coming apart because of GFC1, what comes next with GFC2 and then whatever follows it? Another “bond king” has thrown in the towel.

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EM Sovereign Rating Model For Q2 2020

2020-04-24

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2020-04-24

Emerging Markets Q2 2020
The major ratings agencies are punishing Emerging Markets (EM) credits much more than their DM counterparts.  Our own sovereign ratings model suggests that there is still more pain to come. We have produced this interim ratings model to assist investors in assessing relative sovereign risk across the major EMs. 

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An International Puppet Show

2020-04-23

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2020-04-23

Federal Reserve: H.10 Foreign Exchange Rates, 2006-2020
It’s actually pretty easy to see why the IMF is in a hurry to secure more resources. I’m not talking about potential bailout candidates banging down the doors; that’s already happened. The fund itself is doing two contradictory things simultaneously: telling the world, repeatedly, that it has a highly encouraging $1 trillion in bailout capacity at the same time it goes begging to vastly increase that amount.

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