Category Archive: 5) Global Macro

Dollar Under Modest Pressure as Europe Returns from Holiday

The tug of war between extending vs. softening lockdowns continues. The dollar remains under modest pressure but we think it will eventually recover; Bernie Sanders has endorsed Joe Biden. Europe reopens from holiday today but the news stream remains light; South Africa surprised with an emergency 100 bp rate cut.

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There’s No Going Back, We Can Only Go Forward

What I see is a global collapse of intangible capital that is invisible to most people. It's only natural that the conventional expectation is a return to the pre-pandemic world is just a matter of time. Whether it's three months or six months or 18 months, "the good old days" will return just as if we turned back the clock.

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Buy The Tumor, Sell the News

The fictitious valuation of the stock market will eventually re-connect with reality in a violent decline. No, buy the tumor, sell the news (tm) is not a typo: the stock market is a lethal tumor in our economy and society. 

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The Real Diseased Body

Another day, another new Federal Reserve “bailout.” As these things go by, quickly, the details become less important. What is the central bank doing today? Does it really matter?For me, twice was enough. All the way back in 2010 I had expected other people to react as I did to QE2. If you have to do it twice, it doesn’t work.

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The World Has Changed More Than We Know

Put another way: eras end. While the mainstream media understandably focuses on the here and now of the pandemic, some commentators are looking at the long-term consequences. Here is a small sampling: While each of these essays offers a different perspective, let's focus on the last two: Ugo Bardi's essay on Hyperspecialization and the technological responses described in the MIT Technology Review essay.

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Lessons from Singapore?

Singapore has been hailed for its quick response to the coronavirus that limited initial infections, but the outlook is shifting.  Despite their early success, they will have to revert to a lockdown.  Can Singapore’s experience offer any lessons for European and the US policymakers?

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Dollar Firm as Europe Fails to Deliver

The dollar is stabilizing; reports suggest the White House is developing a plan to reopen the US economy sooner rather than later. Both Hong Kong and Singapore just tightened restrictions on gathering and movement. FOMC minutes for the March 15 decision will be released today.

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Fragile, Not Fortified

On Sunday, Argentina’s government announced it was postponing payment on any domestically-issued debt instruments denominated in foreign currencies. That means dollars, just not Eurobonds. At least not yet. In response, ratings agencies such as Fitch declared the maneuver a distressed debt exchange.In other words, technically a default.

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Restricted Market Trading Comments

With many markets still under lockdown and some going out on Easter holidays this week, we continue to see amended trading hours. The most notable change has been in India with a reduction in trading hours, while in Nigeria we saw a small amount of liquidity being released by the Central Bank of Nigeria (CBN). Below are our updates for the week.

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It’s Hard To See Anything But Enormous Long-term Cost

The unemployment rate wins again. In a saner era, back when what was called economic growth was actually economic growth, this primary labor ratio did a commendable job accurately indicating the relative conditions in the labor market. You didn’t go looking for corroboration because it was all around; harmony in numbers for a far more peaceful and serene period.

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Dollar Mixed, Equities Higher as Virus News Stream Improves

It was a relatively good weekend in virus-related news; measures of implied volatility continue to trend lower. The dollar is trying to build on its recent gains; investors continue to try and gauge just how bad the US economy will get hit. The outlook for oil prices remains highly uncertain and volatile.

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If Lockdown Is a Needless Over-Reaction, Then Why Did China Lockdown Half its Economy?

Recall that the initial deaths and related costs are only the first-order effects; policy makers have to consider the second-order effects. Everyone who reckons that the lockdown is needless and more destructive than the pandemic that triggered it has to answer this question: then why did China lockdown half its economy?

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EM Preview for the Week Ahead

EM may get a little support from a potential OPEC+ deal to limit oil.  Even if a deal is struck, the impact is likely to be fleeting as the global growth outlook remains terrible.  We remain negative on EM for the time being.

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When Bulls Are Over-Anxious to Catch the Rocketship Higher, This Isn’t the Bottom

Everyone with any position in today's market will be able to say they lived through a real Bear Market. In the echo chamber of a Bull Market, there's always a reason to get bullish: the consumer is spending, housing is strong, the Fed has our back, multiples are expanding, earnings are higher, stock buybacks will push valuations up, and so on, in an essentially endless parade of self-referential reasons to buy, buy, buy and ride the rocketship...

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Banks Or (euro)Dollars? That Is The (only) Question

It used to be that at each quarter’s end the repo rate would rise often quite far. You may recall the end of 2018, following a wave of global liquidations and curve collapsing when the GC rate (UST) skyrocketed to 5.149%, nearly 300 bps above the RRP “floor.” Chalked up to nothing more than 2a7 or “too many” Treasuries, it was to be ignored as the Fed at that point was still forecasting inflation and rate hikes.

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Dollar Bid as Market Sentiment Worsens

The virus news stream out of Europe has improved a bit. The US is already taking about the next relief bill; the Fed continues to roll out measures to address dollar funding issues. ADP and ISM manufacturing PMI are the US data highlights. Regulators across Europe are asking banks to stop paying dividends; eurozone and UK reported final manufacturing PMIs.

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The Wonderful Insanity of Globalization

So here's an April Fools congrats to globalization's many fools. The tradition here at Of Two Minds is to make use of April Fool's Day for a bit of parody or satire, but I'm breaking with tradition and presenting something that is all too real but borders on parody: the wonderful insanity of globalization.

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China’s Back!

The Washington Post began this week by noting how the US economy seems to have lost its purported zip just when it needed that vitality the most. Never missing a chance to take a partisan swipe, of course, still there’s quite a lot of truth behind the charge. An actual economic boom produces cushion, enough of one that President Trump and his administration may have been counting on it when opting for full-blown shutdown.

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(No) Dollars And (No) Sense: Eighty Argentinas

India like many emerging market countries around the world holds an enormous stockpile of foreign exchange reserves. According to the latest weekly calculation published by the Reserve Bank of India (RBI), the country’s central bank, that total was a bit less than half a trillion. While it sounds impressive, when the month began the balance was much closer to that mark.

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The New (Forced) Frugality

There are only two ways to survive a decline in income and net worth: slash expenses or default on debt. In post-World War II America, the cultural zeitgeist viewed frugality as a choice: permanent economic growth and federal anti-poverty programs steadily reduced the number of people in deep economic hardship (i.e. forced frugality) and raised the living standards of those in hardship to the point that the majority of households could choose to be...

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