Category Archive: 5) Global Macro

Updated Democratic Primary Timeline

Super Tuesday has come and gone. Bloomberg has suspended his campaign after an extremely poor showing, and Warren is expected to follow suit soon. Here is our updated take on the likely Democratic candidate.

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A Day For Rate Cuts

Well, that wasn’t he had in mind. The whole point of a rate cut, any rate cut let alone an emergency fifty, is to signal especially the stock market that the Fed is in the business of…something. The public has been led, by and large, to assume that something good happens when the Fed Chair shows up on TV.

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Did Covid-19 Just Pop All the Global Financial Bubbles?

Once confidence and certainty are lost, the willingness to expand debt and leverage collapses. Even though the first-order effects of the Covid-19 pandemic are still impossible to predict, it's already possible to ask: did the pandemic pop all the global financial bubbles? The reason we can ask this question is the entire bull mania of the 21st century has been based on a permanently high rate of expansion of leverage and debt.

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Drivers for the Week Ahead

The dollar has softened as Fed easing expectations have picked up. Late Friday, Chair Powell issued an unscheduled statement saying the Fed is monitoring the virus and will act as appropriate. This is a big data week for the US; the Fed releases its Beige Book report Wednesday. Super Tuesday comes this week; Bank of Canada meets Wednesday.

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The Limits of Force: A Bayonet in the Back Will Not Restore China’s Economy

Force cannot restore legitimacy, trust or confidence, nor can it magically erase the consequences of a still-unfolding national trauma. The Chinese authorities threatening to punish workers who refuse to return to work are getting a lesson in the limits of force in an unprecedented national trauma: a bayonet in the back will not restore the legitimacy and confidence that have been lost.

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Could the Covid-19 Pandemic Collapse the U.S. Healthcare System?

Disregard these second-order effects at your own peril. A great many systems that are assumed to be robust are actually fragile. Exhibit #1 is the global financial system, of course, but Exhibit #2 may well be the healthcare system globally and in the U.S.

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Dollar Mixed as Coronavirus News Stream Deteriorates

The virus news stream continues to deteriorate. Lower US yields and growing concerns about the spread of the coronavirus in the US are taking a toll on the greenback. OPEC officials are trying to work out another supply cut; The outlook for Turkey is going from bad to worse. Simply put, there is nothing the Fed can do to address the economic impact of supply chain disruptions and social distancing.

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No, The Fed Will Not “Save the Market”–Here’s Why

The greater the excesses, speculative euphoria and moral hazard, the greater the reversal. A very convenient conviction is rising in the panicked financial netherworld that the Federal Reserve and its fellow dark lords will "save the market" from COVID-19 collapse. They won't. I already explained why in The Fed Has Created a Monster Bubble It Can No Longer Control (February 16, 2020) but it bears repeating.

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Economy: Curved Again

Earlier today, Mexico’s Instituto Nacional de Estadística y Geografía (INEGI) confirmed the country’s economy is in recession. Updating its estimate for Q4 GDP, year-over-year output declined by 0.5% rather than -0.3% as first thought. On a quarterly basis, GDP was down for the second consecutive quarter which mainstream convention treats as a technical recession.

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Schaetze To That

When Mario Draghi sat down for his scheduled press conference on April 4, 2012, it was a key moment and he knew it. The ECB had finished up the second of its “massive” LTRO auctions only weeks before. Draghi was still relatively new to the job, having taken over for Jean-Claude Trichet the prior November amidst substantial turmoil.

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Seven Big-Picture Considerations for Covid-19

Below is a non-exhaustive list of medium- and long-term implications from the Covid-19. We discuss the yuan, China’s competitiveness, its position in the global production chains, the impact on the Phase One trade deal, and rising financial stability risks. Globally, the virus will bring about a new wave of fiscal spending and revive the discussions about the limits of monetary policy.

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Was It A Midpoint And Did We Already Pass Through It?

We certainly don’t have a crystal ball at the ready, and we can’t predict the future. The best we might hope is to entertain reasonable probabilities for it oftentimes derived from how we see the past. Which is just what statistics and econometrics attempt. Except, wherein they go wrong we don’t have to make their mistakes.

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When Will We Admit Covid-19 Is Unstoppable and Global Depression Is Inevitable?

Given the exquisite precariousness of the global financial system and economy, hopes for a brief and mild downturn are wildly unrealistic. If we asked a panel of epidemiologists to imagine a virus optimized for rapid spread globally and high lethality, they'd likely include these characteristics: 1. Highly contagious, with an R0 of 3 or higher.

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EM Preview for the Week Ahead

The still-growing impact of the coronavirus should keep EM and risk sentiment under pressure this week.  The weekend G20 meeting in Saudi Arabia acknowledged the risks to the global economy and said participants agreed on a “menu of policy options.” However, the G20 offered little specific in terms of a coordinated policy response.

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Time Again For Triple Digit Dollar

Being a member of the institutional “elite” means never having to say you’re sorry; or even admit that you have no idea what you are doing. For Christine Lagarde, Mario Draghi’s retirement from the European Central Bank could not have come at a more opportune moment. Fresh off the Argentina debacle, she failed herself upward to an even better gig.

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Covid-19: Global Retrenchment Will Obliterate Sales, Profits and Yes, Big Tech

If you think global demand will rebound as global debt and confidence implode, you better not be making consequential decisions based on Euphorestra-addled magical thinking. Even before the Covid-19 pandemic, the global economy was slowing for two reasons: 1) everybody who can afford it already has it and 2) overcapacity. One word captures the end-of-the-cycle stagnation: saturation.

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DM Equity Allocation Model For Q1 2020

Developed equity markets remain near the highs despite mounting concerns about the impact of the coronavirus. MSCI World made a new all-time high last week near 2435 and is up 2.5% YTD. Our 1-rated grouping (outperformers) for Q1 2020 consists of Ireland, Israel, New Zealand, Spain, and Switzerland.

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Dollar Firm as Risk-Off Sentiment Picks Up Again

Negative news on the coronavirus has kept risk appetite subdued across the board; the dollar rally continues. During the North American session, we will get some more clues to the state of the US economy; FOMC minutes were largely as expected. UK January retail sales came in firm; ECB releases the account of its January 23 meeting.

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The World Is Awash in Oil, False Assurances, Magical Thinking and Complacency as Global Demand Careens Toward a Cliff

This collapse of price will manifest in all sorts of markets that are based on debt-funded purchases of desires rather than a warily prudent priority on needs. Since markets are supposed to discover the price of excesses and scarcities, it's a mystery why everything that is in oversupply is still grossly overpriced as global demand slides off a cliff: oil, semiconductors, Uber rides, AirBNB listings and many other risk-on / global growth stories...

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European Data: Much More In Store For Number Four

It’s just Germany. It’s just industry. The excuses pile up as long as the downturn. Over across the Atlantic the situation has only now become truly serious. The European part of this globally synchronized downturn is already two years long and just recently is it becoming too much for the catcalls to ignore. Central bankers are trying their best to, obviously, but the numbers just aren’t stacking up their way.

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