Tag Archive: currencies

Second Wave Global Trade

Unlike some sentiment indicators, the ISM Non-manufacturing, in particular, actual trade in goods continued to contract in May 2020. Both exports and imports fell further, though the rate of descent has improved. In fact, that’s all the other, more subdued PMI’s like Markit’s have been suggesting.

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Monthly Market Monitor – July 2020

Most Long-Term Trends Have Not Changed. A lot has changed over the last 4 months since the COVID virus started to impact the global economy. Asia was infected first with China at ground zero. Their economy succumbed first with a large part of the country shut down to a degree that can only be accomplished in an authoritarian regime.

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Gratuitously Impatient (For a) Rebound

Jay Powell’s 2018 case for his economic “boom”, the one which was presumably behind his hawkish aggression, rested largely upon the unemployment rate alone. A curiously thin roster for a period of purported economic acceleration, one of the few sets joining that particular headline statistic in its optimism resides in the lower tiers of all statistics.

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Reality Beckons: Even Bigger Payroll Gains, Much Less Fuss Over Them

What a difference a month makes. The euphoria clearly fading even as the positive numbers grow bigger still. The era of gigantic pluses is only reaching its prime, which might seem a touch pessimistic given the context. In terms of employment and the labor market, reaction to the Current Employment Situation (CES) report seems to indicate widespread recognition of this situation. And that means how there are actually two labor markets at the moment.

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What The PMIs Aren’t Really Saying, In China As Elsewhere

China’s PMI’s continue to impress despite the fact they continue to be wholly unimpressive. As with most economic numbers in today’s stock-focused obsessiveness, everything is judged solely by how much it “surprises.” Surprises who? Doesn’t matter; some faceless group of analysts and Economists whose short-term modeling has somehow become the very standard of performance.

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Looking Ahead Through Japan

After the Diamond Princess cruise ship docked in Tokyo with tales seemingly spun from some sci-fi disaster movie, all eyes turned to Japan. Cruisers had boarded the vacation vessel in Yokohama on January 20 already knowing that there was something bad going on in China’s Wuhan. The big ship would head out anyway for a fourteen-day tour of Vietnam, Taiwan, and, yes, China.

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Wait A Minute, What’s This Inversion?

Back in the middle of 2018, this kind of thing was at least straight forward and intuitive. If there was any confusion, it wasn’t related to the mechanics, rather most people just couldn’t handle the possibility this was real. Jay Powell said inflation, rate hikes, and accelerating growth. Absolutely hawkish across-the-board.And yet, all the way back in the middle of June 2018 the eurodollar curve started to say, hold on a minute.

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Not COVID-19, Watch For The Second Wave of GFC2

I guess in some ways it’s a race against the clock. What the optimists are really saying is the equivalent of the old eighties neo-Keynesian notion of filling in the troughs. That’s what government spending and monetary “stimulus” intend to accomplish, to limit the downside in a bid to buy time. Time for what? The economy to heal on its own.

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The Smallness of the Most Gigantic

These numbers do seem epic, don’t they? It’s hard to ignore when you have the greatest percentage increase in the history of a major economic account. Just writing that sentence it’s difficult to deny the power of those words. Which is precisely the point: we already know ahead of time how the biggest economic holes in history are going to produce the biggest positives coming out of them.

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Monthly Macro Monitor – June 2020

The stock market has recovered most of its losses from the March COVID-19 induced sell-off and the enthusiasm with which stocks are being bought – and sold but mostly bought – could lead one to believe that the crisis is over, that the economy has completely or nearly completely recovered. Unfortunately, other markets do not support that notion nor does the available economic data.

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Fed Balance Sheet: Swap Me Update

Just a quick update to add a little more data and color to my last Friday’s swap line criticism so hopefully you can better see how there is intentional activity behind them. Since a few people have asked, I’ll break them out with a little more detail. While the volume of swaps outstanding at the Fed has, in total, remained relatively constant (suspiciously, if you ask me), the underlying tenor of them has not.Meaning, there is purpose.

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A Chinese Outbreak (of Li v. Xi, Round 2)

Here they are again, seemingly at odds over how to proceed. Reminiscent of prior battles over whether to revive the economy or just let it go where it will, it appears as if China is in for Xi vs. Li Round 2. Or is it all just clever politics? Li Keqiang may be nominally the Chinese Premier but he’s a very distant second on every list of power players. Xi Jinping holds all the top spots, including a 2017-18 consolidation of power that left Xi...

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This Thing Is Only Getting Started; Or, *All* The V’s Are Light On The Right

The Federal Reserve’s models really are the most optimistic of the bunch. With the policy meeting conducted today, no surprises as far as policies go, we now know what ferbus has to say about everything that’s happened this year. Skipping the usual March projections, what with the FOMC totally occupied at the time by a complete global monetary meltdown Jay Powell now says “we saw it coming”, the central bank staff released the calculations...

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Why The FOMC Just Embraced The Stock Bubble (and anything else remotely sounding inflationary)

The job, as Jay Powell currently sees it, means building up the S&P 500 as sky high as it can go. The FOMC used to pay lip service to valuations, but now everything is different. He’ll signal to all those fund managers by QE raising bank reserves, leading them on in what they all want to believe is “money printing” (that isn’t).

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We Have Reached The Silly Phase of the Bull Market

Have we entered a new bull market? Was the 35% pullback in the S&P 500 in March the fastest bear market in history? Or is this just a continuation of the bull market that started in 2009, interrupted by a rather large correction? Bull markets and bear markets are about behavior, about the human emotions of fear and greed. While we got a brief bout of fear in March, greed has since overwhelmed all sense, common and otherwise.

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A Second Against Consumer Credit And Interest ‘Stimulus’

Credit card use entails a degree of risk appreciated at the most basic level. Americans had certainly become more comfortable with debt in all its forms over the many decades since the Great Depression, but the regular employment of revolving credit was perhaps the apex of this transformation. Does any commercial package on TV today not include one or more credit card offers? It certainly remains a staple of junk mail.

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Someone’s Giving Us The (Trade) Business

The NBER has made its formal declaration. Surprising no one, as usual this group of mainstream academic Economists wishes to tell us what we already know. At least this time their determination of recession is noticeably closer to the beginning of the actual event. The Great “Recession”, you might recall, wasn’t even classified as an “official” contraction until December 2008 – a full year after the NBER figured the thing had begun.

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ECB Doubles Its QE; Or, The More Central Banks Do The Worse You Know It Will Be

A perpetual motion machine is impossible, but what about a perpetual inflation machine? This is supposed to be the printing press and central banks are, they like to say, putting it to good and heavy use. But never the inflation by which to confirm it. So round and round we go. The printing press necessary to bring about consumer price acceleration, only the lack of consumer price acceleration dictates the need for more of the printing press.

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From QE to Eternity: The Backdoor Yield Caps

So, you’re convinced that low rates are powerful stimulus. You believe, like any good standing Economist, that reduced interest costs can only lead to more credit across-the-board. That with more credit will emerge more economic activity and, better, activity of the inflationary variety. A recovery, in other words. Ceteris paribus. What happens, however, if you also believe you’ve been responsible for bringing rates down all across the curve…and...

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Personal Income and Spending: The Other Side

The missing piece so far is consumers. We’ve gotten a glimpse at how businesses are taking in the shock, both shocks, actually, in that corporations are battening down the liquidity hatches at all possible speed and excess. Not a good sign, especially as it provides some insight into why jobless claims (as the only employment data we have for beyond March) have kept up at a 2mm pace.These are second order effects.

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