Tag Archive: economy

The Greenspan Bell

2020-04-22

by

2020-04-22

Germany ZEW Financial Market Survey, 2006-2020
What set me off down the rabbit hole trying to chase modern money’s proliferation of products originally was the distinct lack of curiosity on the subject. This was the nineties, after all, where economic growth grew on trees. Reportedly. Why on Earth would anyone purposefully go looking for the tiniest cracks in the dam?

Read More »

The Global Engine Is Still Leaking

2020-04-16

by

2020-04-16

Federal Reserve: Liabilities & Capital, 1984-2019
An internal combustion engine that is leaking oil presents a difficult dilemma. In most cases, the leak itself is obscured if not completely hidden. You can only tell that there’s a problem because of secondary signs and observations.If you find dark stains underneath your car, for example, or if your engine smells of thick, bitter unpleasantness, you’d be wise to consider the possibility.

Read More »

The Real Diseased Body

2020-04-12

by

2020-04-12

CES: Civilian Labor Force Level, 2007-2020
Another day, another new Federal Reserve “bailout.” As these things go by, quickly, the details become less important. What is the central bank doing today? Does it really matter?For me, twice was enough. All the way back in 2010 I had expected other people to react as I did to QE2. If you have to do it twice, it doesn’t work.

Read More »

Fragile, Not Fortified

2020-04-09

by

2020-04-09

Credit Spreads, 2017-2020
On Sunday, Argentina’s government announced it was postponing payment on any domestically-issued debt instruments denominated in foreign currencies. That means dollars, just not Eurobonds. At least not yet. In response, ratings agencies such as Fitch declared the maneuver a distressed debt exchange.In other words, technically a default.

Read More »

It’s Hard To See Anything But Enormous Long-term Cost

2020-04-07

by

2020-04-07

The unemployment rate wins again. In a saner era, back when what was called economic growth was actually economic growth, this primary labor ratio did a commendable job accurately indicating the relative conditions in the labor market. You didn’t go looking for corroboration because it was all around; harmony in numbers for a far more peaceful and serene period.

Read More »

Banks Or (euro)Dollars? That Is The (only) Question

2020-04-03

by

2020-04-03

UST Yields & Money Alternates, 2007-2009
It used to be that at each quarter’s end the repo rate would rise often quite far. You may recall the end of 2018, following a wave of global liquidations and curve collapsing when the GC rate (UST) skyrocketed to 5.149%, nearly 300 bps above the RRP “floor.” Chalked up to nothing more than 2a7 or “too many” Treasuries, it was to be ignored as the Fed at that point was still forecasting inflation and rate hikes.

Read More »

China’s Back!

2020-04-01

by

2020-04-01

China PMI, 2005-2020
The Washington Post began this week by noting how the US economy seems to have lost its purported zip just when it needed that vitality the most. Never missing a chance to take a partisan swipe, of course, still there’s quite a lot of truth behind the charge. An actual economic boom produces cushion, enough of one that President Trump and his administration may have been counting on it when opting for full-blown shutdown.

Read More »

(No) Dollars And (No) Sense: Eighty Argentinas

2020-03-31

by

2020-03-31

India Official Reserve Assets, 2016-2020
India like many emerging market countries around the world holds an enormous stockpile of foreign exchange reserves. According to the latest weekly calculation published by the Reserve Bank of India (RBI), the country’s central bank, that total was a bit less than half a trillion. While it sounds impressive, when the month began the balance was much closer to that mark.

Read More »

It’s Not About Jobless Claims Today, It’s About What Will Hamper Job Growth In A Few Months

2020-03-29

by

2020-03-29

Two Labor Stories, 1995-2019
You’ve no doubt heard about the jobless claims number. At an incomprehensible 3.28 million Americans filing for unemployment for the first time, this level far exceeded the wildest expectations as the economic costs of the shutdown continue to come in far more like the worst case. And as bad as 3mm is, the real hidden number is likely much higher.

Read More »

No Further Comment Necessary At This Point

2020-03-28

by

2020-03-28

Primary Dealer Repo Fails (UST), 2017-2020
I would write something snarky about bank reserves, but why bother at this point? It’s already been said. If Jay Powell doesn’t mention collateral, no one else does even though it’s the whole ballgame right now. Note: FRBNY’s updated figures shown below are for last week.

Read More »

Three Short Run Factors Don’t Make A Long Run Difference

2020-03-25

by

2020-03-25

US Treasury Curve, 2018-2020
There are three things the markets have going for them right now, and none of them have anything to do with the Federal Reserve. More and more conditions resemble the early thirties in that respect, meaning no respect for monetary powers. This isn’t to say we are repeating the Great Depression, only that the paths available to the system to use in order to climb out of this mess have similarly narrowed.

Read More »

Conference Call Replay

2020-03-24

by

2020-03-24

Here is the link for the replay of the conference call I hosted earlier today.  I shared two ways in which this crisis is different from what we have seen in the last generation.  Unlike the Great Financial Crisis, the tech bubble, and the S&L Crisis, the current crisis did not begin in the financial sector, but the real economy.   

Read More »

Regime Change

2020-03-24

by

2020-03-24

Stocks took another beating last week as the scope of the coronavirus shutdown started to sink in. The S&P 500 was down 15% last week with most of that coming on Monday after the Fed’s emergency rate cuts. Our accounts performed much better than that, but were still down on the week as corporate and municipal bonds continued to get marked down.

Read More »

Stagnation Never Looked So Good: A Peak Ahead

2020-03-21

by

2020-03-21

Germany ZEW Financial Market Survey, 2006-2020
Forward-looking data is starting to trickle in. Germany has been a main area of interest for us right from the beginning, and by beginning I mean Euro$ #4 rather than just COVID-19. What has happened to the German economy has ended up happening everywhere else, a true bellwether especially manufacturing and industry.

Read More »

Is GFC2 Over?

2020-03-18

by

2020-03-18

TED Spread, 2018-2020
Is it over? That’s the question everyone is asking about both major crises, the answer is more obvious for only the one. As it pertains to the pandemic, no, it is not. Still the early stages. The other crisis, the global dollar run? Not looking like it, either.

Read More »

What Happens When Central Banks Buy Stocks (ETFs)? Well, We Already Know

2020-03-13

by

2020-03-13

Japan Machine Tool Orders, 2010-2020
Can we please dispense with all notions that monetary policy works? Specifically balance sheet expansion via any scale asset purchase programs. Nowhere has that been more apparent than Japan. Go back and reread all the promised benefits from BoJ’s Big Bang QQE that were confidently written in 2013. The biggest bazooka ever conceived has fallen short in every conceivable way.

Read More »

(Almost) Everything Sold Off Today

2020-03-12

by

2020-03-12

Eurodollar Futures Curve, 2018-2024
The eurodollar curve’s latest twist exposes what’s behind the long end. To recap: big down day in stocks which, for the first time in a while, wasn’t accompanied by massive buying in longer maturity UST’s. Instead, these were sold, too. Rumors of parity funds liquidating were all over the place, which is consistent with this curve behavior.

Read More »

Low Rates As Chaos, Not ‘Stimulus’

2020-03-11

by

2020-03-11

UST Yield & Money Alternates, 2007-2009
Basic recession economics says that when you end up with too much of some commodity, too much inventory that you can’t otherwise sell, you have to cut the price in order to move it. Discounting is a feature of those times. What about a monetary panic? This might sound weird, but same thing.

Read More »

Is this the Beginning of a Recession?

2020-03-10

by

2020-03-10

As I sit here Monday evening with the Dow having closed down 2000 points and the 10-year Treasury yield around 0.5%, the title of this update seems utterly ridiculous. With the new coronavirus still spreading and a collapse in oil prices threatening the entire shale oil industry, recession is now the expected outcome. Most observers seem to question only the potential length and depth of the coming downturn.

Read More »

Like Repo, The Labor Lie

2020-03-08

by

2020-03-08

Federal Reserve Beige Book, 2010-2020
The Federal Reserve has been trying to propagate two big lies about the economy. Actually, it’s three but the third is really a combination of the first two. To start with, monetary authorities have been claiming that growing liquidity problems were the result of either “too many” Treasuries (haven’t heard that one in a while) or the combination of otherwise benign technical factors.

Read More »