Tag Archive: Federal Reserve/Monetary Policy

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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Chart of the Week: The Dreaded Full Frown

2019-01-01

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2019-01-01

Eurodollar Futures Curve 2019-2024
I’m going to break my personal convention and use the bulk of the colors in the eurodollar futures spectrum, not just the single EDM’s (June) contained within each. The current front month is January 2019, and its quoted price as I write this is 97.2475. The EDH (March) 2019 contract trades at 97.29 currently and it will drop off the board on March 18.

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Wasting the Middle: Obsessing Over Exits

2018-12-28

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2018-12-28

NYMEX WTI Futures 2016-2018
What was the difference between Bear Stearns and Lehman Brothers? Well, for one thing Lehman’s failure wasn’t a singular event. In the heady days of September 2008, authorities working for any number of initialism agencies were busy trying to put out fires seemingly everywhere. Lehman had to compete with an AIG as well as a Wachovia, already preceded by a Fannie and a Freddie.

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Just In Time For The Circus

2018-12-26

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2018-12-26

Eurozone Markit Composite PMI and GDP, Jul 2012 - Nov 2018
Just in time to follow closely upon yesterday’s European circus, IHS Markit piles on with more of the same forward-looking indications looking forward the wrong way. Mario Draghi says the ECB is ending QE, good for him. The central bank will do this despite balanced risks rebalancing in a different place. The more bad news and numbers stack up the more “they” say it’s nothing just transitory roughness.

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Xi Jinping’s Pretty Consistent Message

2018-12-24

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2018-12-24

China Industry Drives its Consumers, May 2011 - Nov 2018
It seems many were disappointed by the speech delivered by Xi Jinping. China’s supreme leader spoke at the Great Hall of the People in Beijing today on the 40th anniversary of his country’s first embrace of economic reform. Commentators had been expecting Xi to use the occasion to recommit to liberalization, further opening China to free market forces.

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Powell: Still Strong; Markets: AYFKM

2018-12-21

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2018-12-21

Global Systematically Important Banks 2017-2018
The official statement that accompanies each every FOMC policy action is by nature bland and sterile. Still, despite the sparseness of printed words those that are included can say a lot. Here’s its essence for what just wrapped up in December 2018: The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions,...

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Industrial Fading

2018-12-19

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2018-12-19

Federal Reserve Empire State Manu. Index 2001-2018
It is time to start paying attention to PMI’s again, some of them. There are those like the ISM’s Manufacturing Index which remains off in a world of its own. The version of the goods economy suggested by this one index is very different than almost every other. It skyrocketed in late summer last year way out of line (highest in more than a decade) with any other economic account.

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