Category Archive: 5) Global Macro

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Emerging Market: Preview of the Week Ahead

2017-08-28

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2017-08-28

EM FX ended last week on a strong note, buoyed by perceived dovishness from Yellen at the Jackson Hole symposium. However, US jobs data this Friday could test the market’s convictions. Within EM, data are likely to support our view that EM central banks can retain their largely dovish posture into 2018.

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More Noise Than Signal

2017-08-27

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2017-08-27

US Real Gross Corporate, 1951 - 2017
A number of people have forwarded this Bloomberg article – Wall Street Banks Warn Downturn Is Coming – to me over the last couple of days. That fact alone is probably a good argument to ignore it but I can’t help but read articles like this if for no other reason than to know what the crowd is thinking.

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United States Durable Goods In July; Rinse, Repeat

2017-08-27

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2017-08-27

US Durable Goods Orders, Jul 1993 - 2017
The Census Bureau reported today updated estimates for Durable Goods in July 2017. Quite frankly, nothing has changed so minimal commentary is all that is required. The aircraft anomaly from last month faded, leaving total new orders of $229.2 billion (seasonally-adjusted). That is less than in May before the Boeing surge, and less even than estimated order volume in March 2017.

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Did the Economy Just Stumble Off a Cliff?

2017-08-26

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2017-08-26

Total Credit, 1990-2017
This is more intuitive than quantitative, but my gut feeling is that the economy just stumbled off a cliff. Neither the cliff edge nor the fatal misstep are visible yet; both remain in the shadows of the intangible foundation of the economy: trust, animal spirits, faith in authorities' management, etc.

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We Need a Social Revolution

2017-08-25

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2017-08-25

Corporate Profits After Tax
In the conventional view, there are two kinds of revolutions: political and technological. Political revolutions may be peaceful or violent, and technological revolutions may transform civilizations gradually or rather abruptly—for example, revolutionary advances in the technology of warfare.

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Questions

2017-08-24

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2017-08-24

US Corporate Profits / Gross Domestic Product, 1950 - 2017
Why are profit margins persistently high? With decent earnings this quarter, corporate profits as a % of GDP will approach (maybe exceed) 10% again. That is abnormally high compared to the period 1960 to 2000. Margins actually started to rise in the mid-80s but really accelerated after 2000 and outside of the 2008 crisis have remained high. Why?

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United States: The Fed Tries To Tighten By Rates, But The System Instead Tightens By Repo

2017-08-23

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2017-08-23

U.S. Treasury CMT Yields, Jan 2017-Aug 2017
The Fed voted for the first federal funds increase in almost a decade on December 15, 2015. It was the official end of ZIRP, and though taking so many additional years to happen, to many it marked the start of recovery. The yield on the 2-year Treasury Note was 98 bps that day.

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United States: Lack Of Industrial Momentum Is (For Now) Big Auto Problems

2017-08-22

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2017-08-22

US Industrial Production, Jan 2006 - Jul 2017
Industrial Production disappointed in the US last month, dragged down by auto production. Despite the return of an oil sector tailwind, IP was up just 2.2% year-over-year in July 2017 according to Federal Reserve statistics. It marks the fourth consecutive month stuck around 2% growth. The lack of further acceleration is unusual in the historical context, especially following an extended period of contraction.

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Global Asset Allocation Update: No Upside To Credit

2017-08-21

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2017-08-21

Moderate Allocation
There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. There are other changes to the portfolio though so please read on. As I write this the stock market is in the process of taking a dive (well if 1.4% is a “dive”) and one can’t help but wonder if the long awaited and anticipated correction is finally at hand.

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Why We’re Doomed: Our Economy’s Toxic Inequality

2017-08-20

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2017-08-20

Fruit of Financialization
Why are we doomed? Those consuming over-amped "news" feeds may be tempted to answer the culture wars, nuclear war with North Korea or the Trump Presidency. The one guaranteed source of doom is our broken financial system, which is visible in this chart of income inequality from the New York Times: Our Broken Economy, in One Simple Chart.

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United States: Still No Up

2017-08-19

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2017-08-19

U.S. Retail Sales, Jun 2011-2017
The Asian flu of the late 1990’s might have been more accurately described as the Asian dollar flu. It was the first major global test of the mature eurodollar system, and it was a severe disruption in the global economy. It doesn’t register as much here in the United States because of the dot-com bubble and the popular imagination about Alan Greenspan’s monetary stewardship in general.

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L’impact de la délocalisation de la production sur la balance commerciale US.

2017-08-18

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2017-08-18

Industry Week Power of using Made in USA in marketing
Dans la série sur la balance des paiements et les zooms sur les balances commerciales, voici l’évolution de la balance commerciale américaine. Nous voyons clairement qu’elle était neutralisée à 0 durant l’ère où les devises du monde devaient être arrimées, selon les Accords de Bretton Woods, au dollar qui lui-même était partiellement couvert par l’or.

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Data Dependent: Interest Rates Have Nowhere To Go

2017-08-18

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2017-08-18

US Employment Cost Index, Jan 2001 - Aug 2017
In October 2015, Federal Reserve Vice Chairman Bill Dudley admitted that the US economy might be slowing. In the typically understated fashion befitting the usual clownshow, he merely was acknowledging what was by then pretty obvious to anyone outside the economics profession.

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U.S. Export/Import: Losing Economic Trade

2017-08-17

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2017-08-17

US Exports, Jun 1989-2017
The oil effect continued to recede in late spring for more than just WTI prices or inflation rates. US trade on both sides, inbound and outbound, while still positive has stalled since the winter.

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China: Losing Economic ‘Reflation’

2017-08-16

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2017-08-16

China Fixed Asset Investment Jul 2012-2017
If “reflation” was born last year in Japan, and I think it was, it was surely given its most tangible dimensions in China. The idea that the Bank of Japan was going to do something magnificent was perhaps always a longshot, but enough given the times for people to hope (sentiment) they might try (helicopter). The Chinese, however, have been relatively more pragmatic. Authorities began 2016 with an actual rather than imagined “stimulus” injection...

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Are We Already in Recession?

2017-08-16

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2017-08-16

U.S. Employment Change, 1970 - 2016
How shocked would you be if it was announced that the U.S. had just entered a recession, that is, a period in which gross domestic product (GDP) declines (when adjusted for inflation) for two or more quarters? Would you really be surprised to discover that the eight-year long "recovery," the weakest on record, had finally rolled over into recession?

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Bi-Weekly Economic Review: Ignore The Idiot

2017-08-15

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2017-08-15

Of the economic releases of the past two weeks the one that got the most attention was the employment report. That report is seen by many market analysts as one of the most important and of course the Fed puts a lot of emphasis on it so the press spends an inordinate amount of time dissecting it.

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“Under Any Analysis, It’s Insanity”: What War With North Korea Could Look Like

2017-08-14

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2017-08-14

Kim Jong-Un and Donald Trump
Now that the possibility of a war between the US and North Korea seems just one harshly worded tweet away, and the window of opportunity for a diplomatic solution, as well as for the US stopping Kim Jong-Un from obtaining a nuclear-armed ICBM closing fast, analysts have started to analyze President Trump’s military options, what a war between the US and North Korea would look like, and what the global economic consequences would be.

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La mondialisation de l’esclavage permet la croissance des entreprises. Dossier.

2017-08-13

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2017-08-13

Un Indien travaillant dans une fabrique de briques à l’extérieur de Calcutta, le 7 mai 2017. DIBYANGSHU SARKAR / AFP Nous avons parlé ces derniers temps d’excédents et de déficits de balances commerciales. Pourtant aucune rubrique de cette comptabilité de l' »intégration » d’un Etat dans le monde globalisé ne pénalise celui-ci en matière d’abus de travailleurs, voire d’esclavagisme. Pire, les abus sont en croissance. Il faut dire que l’affaire est...

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What the Mainstream Doesn’t Get about Bitcoin

2017-08-13

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2017-08-13

One-year chart of Bitcoin
The real demand for bitcoin will not be known until a global financial crisis guts confidence in central banks and politicized capital controls. I've been writing about cryptocurrencies and bitcoin for many years. For example: Could Bitcoin Become a Global Reserve Currency? (November 7, 2013) I am an interested observer, not an expert. As an observer, it seems to me that the mainstream--media, financial punditry, etc.--as a generality don't really...

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