Tag Archive: currencies

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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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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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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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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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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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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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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Oil Prices, CPI: Why Not Zero?

2017-08-13

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2017-08-13

Figuring Inflation 2004-2017
In the early throes of economic devastation in 1931, Sweden found itself particularly vulnerable to any number of destabilizing factors. The global economy had been hit by depression, and the Great Contraction was bearing down on the Swedish monetary system. The krona had always been linked to the British pound, so that when the Bank of England removed gold convertibility (left the gold standard) from its notes on September 19 that year the Swedish...

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Industrial Production: Irreführende Statistiken

2017-08-11

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2017-08-11

Germany Industrial Production, SA 1997-2017
Germany’s Federal Statistical Office (DeStatis) reported today disappointing figures for Industrial Production. The seasonally-adjusted series fell in June 2017 month-over-month for the first time this year, last declining in December 2016. The index had been on a tear, rising nearly 5% in the first five months of this year.

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Oil Prices: The Center Of The Inflation Debate

2017-08-10

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2017-08-10

Real GDP in the Eurodollar Era 1993-2017
The mainstream media is about to be presented with another (small) gift. In its quest to discredit populism, the condition of inflation has become paramount for largely the right reasons (accidents do happen). In the context of the macro economy of 2017, inflation isn’t really about consumer prices except as a broad gauge of hidden monetary conditions.

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China Exports, China Imports: Textbook

2017-08-09

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2017-08-09

China Exports 2013-2017
China’s export growth disappointed in July, only we don’t really know by how much. According to that country’s Customs Bureau, exports last month were 7.2% above (in US$ terms) exports in July 2016. That’s down from 11.3% growth in June, which as usual had been taken in the mainstream as evidence of “strong” or “robust” global demand.

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U.S. Treasuries: Not Really Wrong On Bonds

2017-08-06

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2017-08-06

U.S. Treasury Bond Futures
It is often said that the market for US Treasuries is the deepest and most liquid in the world. While that’s true, we have to be careful about what it is we are talking about. There is no single US Treasury market, and often differences can be striking. The most prominent example was, of course, October 15, 2014.

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Inflation Is Not About Consumer Prices

2017-08-04

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2017-08-04

Eurozone Gross Domestic Product, 1993 - 2017
I suspect President Trump has been told that markets don’t like radical changes. If there is one thing that any elected official is afraid of, it’s the internet flooded with reports of grave financial instability. We need only go back a year to find otherwise confident authorities suddenly reassessing their whole outlook.

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