Category Archive: 5) Global Macro

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US Export/Import: ‘Something’ Is Still Out There

2017-09-13

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2017-09-13

US Real Personal Income, Jan 2010 - Jul 2017
In January 2016, just as the wave of “global turmoil” was cresting on domestic as well as foreign shores, retired Federal Reserve Chairman Ben Bernanke was giving a series of lectures for the IMF. His topic wasn’t really the so-called taper tantrum of 2013 but it really was. Even ideologically blinded economists like Bernanke could see how one might have followed the other; the roots of 2016 in 2013.

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The Insanity of Pushing Inflation Higher When Wages Can’t Rise

2017-09-12

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2017-09-12

A tale of two countries 1962-2017
In an economy in which wages for 95% of households are stagnant for structural reasons, pushing inflation higher is destabilizing. The official policy goal of the Federal Reserve and other central banks is to generate 3% inflation annually. Put another way: the central banks want to lower the purchasing power of their currencies by 33% every decade. In other words, those with fixed incomes that don't keep pace with inflation will have lost a third...

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Bi-Weekly Economic Review: Waiting For Irma

2017-09-11

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2017-09-11

This update will be a bit shorter than usual. I’m in Miami awaiting Hurricane Irma. As of now, it looks like the eye of the storm will make landfall near Key West and continue west of us with the Naples/Ft. Myers area at risk. Or at least that’s the way it looks right now. I’ve done a lot of these storms though – I lost a house in Andrew in ’92 – and you never know what these things will do. We are secure in a house that survived Andrew with barely...

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Emerging Markets: Preview for the Week Ahead

2017-09-11

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2017-09-11

EM FX ended the week on a mixed note, but still capped off a strong week overall. US data this week could challenge the market’s dovish take on the Fed. For now, though, the global liquidity outlook still seems to favor further gains in EM.

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Global PMI Roundup; August 2017

2017-09-10

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2017-09-10

Stanbic Bank Kenya PMI, Jan 2014 - 2017
The first few days of any calendar month are now flooded with PMI data. Mostly due to Markit’s ongoing and increasing partnerships, we now have access to economic or business sentiment from and for almost anywhere in the world. It isn’t clear, however, if that is a good or useful development. For example, we can see quite plainly that there is a whole bunch of trouble brewing in Kenya. The Stanbic Bank/Markit Kenya PMI fell to a record low 42.0 in...

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Why We’re Doomed: Stagnant Wages

2017-09-10

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2017-09-10

Diverging Income Trajectories 1947 - 2014
The point is the present system cannot endure. Despite all the happy talk about "recovery" and higher growth, wages have gone nowhere since 2000--and for the bottom 20% of workers, they've gone nowhere since the 1970s. Gross domestic product (GDP) has risen smartly since 2000, but the share of GDP going to wages and salaries has plummeted: this is simply an extension of a 47-year downtrend.

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Emerging Markets: What has Changed

2017-09-09

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2017-09-09

South Korea completed installation of the THAAD missile shield. Indonesia is considering issuing its first global IDR-denominated sovereign bonds. Taiwan is undergoing a cabinet shuffle. Brazil has seen some positive political developments. Brazil’s central bank signaled that the easing cycle is nearing an end and that the pace of easing will slow. Chile’s central bank boosted its growth forecasts.

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Now Capex?

2017-09-09

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2017-09-09

Total Construction Spending, Jan 1994 - 2017
Of all the high frequency data the Personal Savings Rate is probably the least reliable. It is subject to both regular and benchmark revisions that can change the estimates drastically one way or the other. One step up from that statistic is the figures for Construction Spending. The initial monthly estimates don’t survive very long, and lately they have been quite weak in the first run only to be revised sharply higher over subsequent months.

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Toward The Housing Bubble, Or Great Depression?

2017-09-08

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2017-09-08

US Personal Savings Rate, Jan 2000 - 2017
During the middle 2000’s, one more curious economic extreme presented itself in an otherwise ocean of extremes. Though economists were still thinking about the Great “Moderation”, the trend for the Personal Savings Rate was anything but moderate, indicated a distinct lack of modesty on the part of consumers. In early 2006, the Bureau of Economic Analysis calculated that the rate had been negative for all of 2005. It was the first time in seventy...

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Bitcoin, Sour Grapes and the Institutional Herd

2017-09-07

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2017-09-07

One Year Chart of Bitcoin, Oct 2016 - Jul 2017
The point is institutional ownership of bitcoin is in the very early stages. If I had a bitcoin for every time some pundit declared bitcoin is a bubble, I'd be a billionaire. There are three problems with opining that bitcoin and cryptocurrencies are bubblicious:

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2017 Is Two-Thirds Done And Still No Payroll Pickup

2017-09-07

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2017-09-07

Establishment Survey, Jan 2010 - Jul 2017
The payroll report for August 2017 thoroughly disappointed. The monthly change for the headline Establishment Survey was just +156k. The BLS also revised lower the headline estimate in each of the previous two months, estimating for July a gain of only +189k. The 6-month average, which matters more given the noisiness of the statistic, is just +160k or about the same as when the Federal Reserve contemplated starting a third round of QE back in 2012.

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Proving Q2 GDP The Anomaly, Incomes Yet Again Fail To Accelerate

2017-09-05

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2017-09-05

Real Personal Income excl. Transfer Receipts 2014 - 2017
One day after reporting a slightly better number for Q2 GDP, the BEA reports today that there is little reason to suspect it was anything more or lasting. The data for Personal Income and Spending shows that the dominant condition since 2012 remains in effect – “good” quarters, or whatever passes for one these days, are the anomaly. There still is no meaningful rebound in income.

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The Two Parts of Bubbles

2017-09-04

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2017-09-04

Profits & Valuations 1949-1999
What makes a stock bubble is really two parts. Most people might think those two parts are money and mania, but actually money supply plays no direct role. Perceptions about money do, even if mistaken as to what really takes place monetarily from time to time. In fact, for a bubble that would make sense; people are betting in stocks on one monetary view that isn’t real, and therefore prices don’t match what’s really going on.

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Why Wages Have Lost Ground in the 21st Century

2017-09-03

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2017-09-03

Ever-Widening Wage Gap, 1973 - 2015
One of the enduring mysteries for conventional economists is why wages aren't rising for the bottom 95% even as unemployment is low and hiring remains robust. According to classical economics, the limited supply of available workers combined with strong demand for workers should push wages higher.

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Emerging Markets: What has Changed

2017-09-02

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2017-09-02

India Prime Minister Modi has started a cabinet shuffle. Freeport McMorAn ceded control of the world’s second largest copper mine to the Indonesian government. Central Bank of Russia took over Bank Otkritie, once Russia’s largest private bank. Kenya’s top court nullified last month’s presidential election. Fitch cut Qatar’s rating by one notch to AA- with negative outlook.

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Moscow Rules (for ‘dollars’)

2017-09-02

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2017-09-02

China & 'Dollars', Jan 2005 - 2017
In Ian Fleming’s 1959 spy novel Goldfinger, he makes mention of the Moscow Rules. These were rules-of-thumb for clandestine agents working during the Cold War in the Soviet capital, a notoriously difficult assignment. Among the quips included in the catalog were, “everyone is potentially under opposition control” and “do not harass the opposition.” Fleming’s book added another, “Once is an accident. Twice is coincidence. Three times is an enemy...

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Deja Vu

2017-09-01

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2017-09-01

Central Bank Rate Decomposition
According to orthodox theory, if interest rates are falling because of term premiums then that equates to stimulus. Term premiums are what economists have invented so as to undertake Fisherian decomposition of interest rates (so that they can try to understand the bond market; as you might guess it doesn’t work any better). It is, they claim, the additional premium a bond investor demands so as to hold a security that much longer (more return to...

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Currency Risk That Isn’t About Exchange Values (Eurodollar University)

2017-08-31

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2017-08-31

Eurodollar University
This week the Bureau of Economic Analysis will release updated estimates for Q2 GDP as well as Personal Consumption Expenditures (PCE) and Personal Incomes for July. Accompanying those latter two accounts is the currently preferred inflation standard for the US economy. The PCE Deflator finally hit 2% and in two consecutive months, after revisions, earlier this year.

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Bi-Weekly Economic Review: Don’t Underestimate Gridlock

2017-08-30

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2017-08-30

Bi-weekly
The economic reports released since the last update were slightly more upbeat than the previous period. The economic surprises have largely been on the positive side but there were some major disappointments as well. The economy has been doing this for several years now, one part of the economy waxing while another wanes and the overall trajectory not much changed. Indeed, the broad Chicago Fed National Activity index probably says it all, coming...

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The 5 Steps to World Domination

2017-08-29

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2017-08-29

Wealth Pyramid 2015
You don't need an army to achieve World Domination; all you need is enough cheap credit to buy up everything that generates the highest value and/or income.

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