Tag Archive: Federal Reserve/Monetary Policy

US Manufacturing Questions

2019-02-06

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2019-02-06

Durable Goods New Orders, NSA 1993-2018
The US economic data begins to trickle in slowly. Today, the reopened Census Bureau reports on orders and shipments to and from US factories dating back to last November. New orders for durable goods rose just 4.5% year-over-year in that month, while shipments gained 4.7%. The 6-month average for new orders was in November pulled down to just 6.6%, the lowest since September 2017 (hurricanes).

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Fear Or Reflation Gold?

2019-02-04

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2019-02-04

Dollar Correlations 2016-2019
Gold is on fire, but why is it on fire? When the precious metals’ price falls, Stage 2, we have a pretty good idea what that means (collateral). But when it goes the other way, reflation or fear of deflation? Stage 1 or Stage 3? If it is Stage 1 reflation based on something like the Fed’s turnaround, then we would expect to find US$ markets trading in exactly the same way.

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Bond Curves Right All Along, But It Won’t Matter (Yet)

2019-02-03

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2019-02-03

Real GDP in the Eurodollar Era 1993-2017
Men have long dreamed of optimal outcomes. There has to be a better way, a person will say every generation. Freedom is far too messy and unpredictable. Everybody hates the fat tails, unless and until they realize it is outlier outcomes that actually mark progress. The idea was born in the eighties that Economics had become sufficiently advanced that the business cycle was no longer a valid assumption.

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It’s Not That There Might Be One, It’s That There Might Be Another One

2019-02-01

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2019-02-01

Lending Europe 1998-2018
It was a tense exchange. When even politicians can sense that there’s trouble brewing, there really is trouble brewing. Typically the last to figure these things out, if parliamentarians are up in arms it already isn’t good, to put it mildly. Well, not quite the last to know, there are always central bankers faithfully pulling up the rear of recognizing disappointing reality.

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Monthly Macro Monitor – January 2019

2019-01-27

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2019-01-27

Economic Growth & Investment
A Return To Normalcy. In the first two years after a newly elected President takes office he enacts a major tax cut that primarily benefits the wealthy and significantly raises tariffs on imports. His foreign policy is erratic but generally pulls the country back from foreign commitments. He also works to reduce immigration and roll back regulations enacted by his predecessor.

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China’s Eurodollar Story Reaches Its Final Chapters

2019-01-25

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2019-01-25

PBOC Balance Sheet, Nov 2007 - 2018
Imagine yourself as a rural Chinese farmer. Even the term “farmer” makes it sound better than it really is. This is a life out of the 19th century, subsistence at best the daily struggle just to survive. Flourishing is a dream.

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Hall of Mirrors, Where’d The Labor Shortage Go?

2019-01-20

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2019-01-20

Federal Reserve Beige Book 2010-2019
Today was supposed to see the release of the Census Bureau’s retail trade report, a key data set pertaining to the (alarming) state of American consumers, therefore workers by extension (income). With the federal government in partial shutdown, those numbers will be delayed until further notice. In their place we will have to manage with something like the Federal Reserves’ Beige Book.

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That’s A Big Minus

2019-01-19

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2019-01-19

Europe Industrial Production 2013-2018
Goods require money to finance both their production as well as their movements. They need oil and energy for the same reasons. If oil and money markets were drastically awful for a few months before December, and then purely chaotic during December, Mario Draghi of all people should’ve been paying attention.

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Spreading Sour Not Soar

2019-01-18

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2019-01-18

Sweden / Japan
We are starting to get a better sense of what happened to turn everything so drastically in December. Not that we hadn’t suspected while it was all taking place, but more and more in January the economic data for the last couple months of 2018 backs up the market action. These were no speculators looking to break Jay Powell, probing for weakness in Mario Draghi’s resolve.

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Insight Japan

2019-01-16

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2019-01-16

Japan CPI Food, Jan 2013 - 2019
As I wrote yesterday, “In the West, consumer prices overall are pushed around by oil. In the East, by food.” In neither case is inflation buoyed by “money printing.” Central banks both West and East are doing things, of course, but none of them amount to increasing the effective supply of money. Failure of inflation, more so economy, the predictable cost.

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Rate of Change

2019-01-13

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2019-01-13

Labor Curves
We’ve got to change our ornithological nomenclature. Hawks become doves because they are chickens underneath. Doves became hawks for reasons they don’t really understand. A fingers-crossed policy isn’t a robust one, so there really was no reason to expect the economy to be that way.

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2019 Outlook

2019-01-12

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2019-01-12

A discussion of the outlook for 2019 in the markets and the economy by Alhambra CEO Joe Calhoun and the Head of Alhambra Global Investment Research Jeff Snider.

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…And Get Bigger

2019-01-11

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2019-01-11

Germany Industrial Production, Jan 2007 - 2019
Just as there is gradation for positive numbers, there is color to negative ones, too. On the plus side, consistently small increments marked by the infrequent jump is never to be associated with a healthy economy let alone one that is booming. A truly booming economy is one in which the small positive numbers are rare. The recovery phase preceding the boom takes that to an extreme.

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You Know It’s Coming

2019-01-10

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2019-01-10

Benchmark 10-year UST 2013-2016
After a horrible December and a rough start to the year, as if manna from Heaven the clouds parted and everything seemed good again. Not 2019 this was early February 2015. If there was a birth date for Janet Yellen’s “transitory” canard it surely came within this window. It didn’t matter that currencies had crashed and oil, too, or that central banks had been drawn into the fray in very unexpected ways.

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If You’ve Lost The ISM…

2019-01-09

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2019-01-09

US ISM Manufacturing PMI and Markit Composite PMI, Jan 2013 - 2019
These transition periods are often just this sort of whirlwind. One day the economy looks awful, the next impervious to any downside. Today, it has been the latter with the BLS providing the warm comfort of headline payrolls. For now, it won’t matter how hollow.

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Living In The Present

2019-01-08

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2019-01-08

10-Year US Treasury Yield 2016-2018
It’s that time of year again, time to cast the runes, consult the iChing, shake the Magic Eight Ball and read the tea leaves. What will happen in 2019? Will it be as bad as 2018 when positive returns were hard to come by, as rare as affordable health care or Miami Dolphin playoff games? Will China’s economy succumb to the pressure of US tariffs and make a deal?

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More Unmixed Signals

2019-01-06

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2019-01-06

China PMI 2010-2018
China’s National Bureau of Statistics (NBS) reports that the country’s official manufacturing PMI in December 2018 dropped below 50 for the first time since the summer of 2016. Many if not most associate a number in the 40’s with contraction. While that may or not be the case, what’s more important is the quite well-established direction.

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Mispriced Delusion

2019-01-05

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2019-01-05

Money Markets Equivalents 2009-2018
Recency bias is one thing. Back in late 2006/early 2007 when the eurodollar futures curve inverted, for example, it was a textbook case of mass delusion. All the schoolbooks and Economics classes had said that it couldn’t happen; not that it wasn’t likely, it wasn’t even a possibility. A full-scale financial meltdown was at the time literally inconceivable in orthodox thinking.

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Nothing To See Here, It’s Just Everything

2019-01-04

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2019-01-04

NYMEX WTI Futures 2016-2018
The politics of oil are complicated, to say the least. There’s any number of important players, from OPEC to North American shale to sanctions. Relating to that last one, the US government has sought to impose serious restrictions upon the Iranian regime. Choking off a major piece of that country’s revenue, and source for dollars, has been a stated US goal.

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Insane Repo Reminds Us

2019-01-04

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2019-01-04

Money Markets Equivalents 2009-2018
It was only near the quarter end, that’s what made it so unnerving. We may have become used to these calendar bottlenecks over the years, but they still remind us what they are. Late October 2012 was a little different, though. On October 29, the GC repo rate for UST collateral (DTCC) surged to 52.6 bps. The money market floor, so to speak, was zero at the time and IOER (the joke) 25 bps. We also have to keep in mind the circumstances of that...

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