Category Archive: 5) Global Macro

Emerging Markets: What Changed

Indonesia will freeze prices for electricity, gasoline, and diesel fuel until next year. US President Trump and North Korean President Kim Jong Un will hold a summit meeting this spring. National Bank of Poland has tilted even more dovish. Moody’s downgraded Turkey a notch to Ba2 with a stable outlook. Saudi Arabian Energy Minister hinted that the Aramco IPO could be delayed until 2019. Tanzania finally obtained a sovereign rating after years of...

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The Death of Buy and Hold: We’re All Traders Now

The percentage of household assets invested in stocks fell from almost 40% in 1969 to a mere 13% in 1982, after thirteen years of grinding losses. The conventional wisdom of financial advisors--to save money and invest it in stocks and bonds "for the long haul"--a "buy and hold" strategy that has functioned as the default setting of financial planning for the past 60 years--may well be disastrously wrong for the next decade.

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China Going Boom

For a very long time, they tried it “our” way. It isn’t working out so well for them any longer, so in one sense you can’t blame them for seeking answers elsewhere. It was a good run while it lasted. The big problem is that what “it” was wasn’t ever our way. Not really. The Chinese for decades followed not a free market paradigm but an orthodox Economics one. This is no trivial difference, as the latter is far more easily accomplished in a place...

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Never Mind Volatility: Systemic Risk Is Rising

So who's holding the hot potato of systemic risk now? Everyone. One of the greatest con jobs of the past 9 years is the status quo's equivalence of risk and volatility: risk = volatility: so if volatility is low, then risk is low. Wrong: volatility once reflected specific short-term aspects of risk, but measures of volatility such as the VIX have been hijacked to generate the illusion that risk is low.

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China: February PMIs point to deceleration in industrial activity

China’s official manufacturing Purchasing Manager Index (PMI) for February, compiled by the National Bureau of Statistics of China and the China Federation of Logistics and Purchasing, came in at 50.3, down from 51.3 in January and 51.6 in December 2017. This is the lowest reading of this gauge since October 2016. The Markit PMI (also known as the Caixin PMI), however, edged up slightly to 51.6 in February from 51.5 in the previous month

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Emerging Markets: Week Ahead Preview

EM FX ended Friday on a mixed note, capping off a largely softer week.  Best performers last week for MYR and TWD while the worst were ZAR and ARS.  US stocks clawed back early losses and ended the week on a firmer note but we think further market turbulence is likely. 

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Data Distortions One Way Or Another

Back in October, we noted the likely coming of two important distortions in global economic data. The first was here at home in the form of Mother Nature. The other was over in China where Communist officials were gathering as they always do in their five-year intervals. That meant, potentially. In the US our economic data for a few months at least will be on shaky ground due to the lingering economic impacts of severe hurricanes.

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Durable and Capital Goods, Distortions Big And Small

New orders for durable goods, excluding transportation industries, rose 9.1% year-over-year (NSA) in January 2018. Shipments of the same were up 8.8%. These rates are in line with the acceleration that began in October 2017 coincident to the aftermath of hurricanes Harvey and Irma. In that way, they are somewhat misleading.

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Emerging Markets: What Changed

China plans to change its constitution to eliminate term limits for President Xi Jinping. Bank Indonesia Deputy Governor Perry Warjiyo was nominated by President Widodo to be the next Governor. Bank of Korea Governor Lee was reappointed by President Moon for a second term. Hungary ruling party candidate lost the mayoral vote in Hodmezovasarhely. S&P upgraded Russia to BBB- with stable outlook.

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Our Fragmented Labor Markets Defy Outdated Conventions

There are hundreds of extraordinarily diverse labor markets in the U.S. economy, and it takes a much more granulated approach to make any sense of this highly fragmented and dynamic marketplace. onventional economists/media pundits typically view the labor market as monolithic, i.e. as one unified market. The reality is the labor market is highly fragmented. Thus it's little wonder that conventional measures are giving mixed signals on employment,...

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Career Advice to 20-Somethings: Create Value as a Mobile Creative

Finding work that fits who you are is rarely easy, especially if you don't fit into the mainstream, and usually it requires a lot of compromises, hard work and dead-ends. But that’s the process. Establishing a satisfying career is difficult in today's economy, doubly so for those who find life within hierarchical institutions (corporate America and government) unrewarding, and triply so for those burdened with student loan debt and college...

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Bi-Weekly Economic Review: One Down, Three To Go

We pay particular attention to broad based indicators of growth. The Chicago Fed National Activity Index and the Conference Board’s Leading Economic Indicators are examples. We watch them because we are mostly interested in identifying inflection points in the broad economy and aren’t as interested in the details. Why? Because, while bear markets do happen outside of recession, it is rare and unpredictable.

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New Home Sales (Predictably) Fall Out of the Boom, Too

New home sales were down sharply again in January 2018. For the second straight month, the level of purchase activity fell substantially despite what are otherwise always described as robust or even booming economic conditions. Like the sales of existing homes, the sales of newly constructed units should be both moving upward as well as being significantly more than stuck at this low level.

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Emerging Markets: Week Ahead Preview

EM FX ended Friday on a mixed note and capped off a soft week overall. Best performers last week were ZAR, CLP, and PHP while the worst were TRY, ARS, and IDR. Fed Chief Powell’s testimony to Congress will likely draw market attention back to Fed policy.

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Venezuela’s New Cryptocurrency: Just Another Form of Control Fraud

The broke and broken country of Venezuela appears to be the first nation-state to issue a cryptocurrency token (the petro) as a means of escaping the financial black hole that's consuming its economy: Maduro Launches Oil-Backed Crypto "For The Welfare Of Venezuela".

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Emerging Markets: What Changed

China regulators have taken over Anbang Insurance. Group for at least one year. RBI minutes from this month’s meeting were more hawkish than expected. The RBI is reportedly reviewing its process for allowing local companies to issue debt overseas. Effective June 1, IDR-denominated debt becomes eligible for the Barclays Global Aggregate Index.Israeli Prime Minister Netanyahu is coming under increasing pressure.

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The End of (Artificial) Stability

The central banks'/states' power to maintain a permanent bull market in stocks and bonds is eroding. There is nothing natural about the stability of the past 9 years. The bullish trends in risk assets are artificial constructs of central bank/state policies. As these policies are reduced or lose their effectiveness, the era of artificial stability is coming to a close. The 9-year run of Bull-trend stability is ending as a result of a confluence of...

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US-China Trade War Escalates As Further Measures Are Taken

US-China Trade War Escalates As Further Measures Are Taken. Trade war between two superpowers continues to escalate. White House likely to impose steep tariffs on aluminium and steel imports on ‘national security grounds’. US may impose global tariff of at least 24% on imports of steel and 7.7% on aluminium. China “will certainly take necessary measures to protect our legitimate rights.”

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Our Approaching Winter of Discontent

The tragedy is so few act when the collapse is predictably inevitable, but not yet manifesting in daily life. That chill you feel in the financial weather presages an unprecedented--and for most people, unexpectedly severe--winter of discontent. Rather than sugarcoat what's coming, let's speak plainly for a change: none of the promises that have been made to you will be kept.

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Emerging Markets: Week Ahead Preview

EM FX ended on a mixed note Friday, but capped off a very strong week overall. Best performers over the past week were RUB, ZAR, and COP, while the worst were PHP, CNY, and TWD. There is not much happening this week that could disrupt the weak dollar narrative, and so EM FX should continue to rally.

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