Tag Archive: inflation

Global Asset Allocation Update

2018-05-17

The risk budget changes this month as I add back the 5% cash raised in late October. For the moderate risk investor, the allocation to bonds is still 50% while the risk side now rises to 50% as well. I raised the cash back in late October due to the extreme overbought nature of the stock market and frankly it was a mistake. Stocks went from overbought to more overbought and I missed the rally to all time highs in January.

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All The World’s A (Imagined) Labor Shortage

2018-05-16

by Jeffrey P. Snider

2018-05-16

Last year’s infatuation with globally synchronized growth was at least understandable. From a certain, narrow point of view, Europe’s economy had accelerated. So, too, it seemed later in the year for the US economy. The Bank of Japan was actually talking about ending QQE with inflation in sight, and the PBOC was purportedly tightening as China’s economy appeared to many ready for its rebound.

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What China’s Trade Conditions Say About The Right Side Of ‘L’

2018-05-12

by Jeffrey P. Snider

2018-05-12

Chinese exports rose 12.9% year-over-year in April 2018. Imports were up 20.9%. As always, both numbers sound impressive but they are far short of rates consistent with a growing global economy. China’s participation in global growth, synchronized or not, is a must. The lack of acceleration on the export side tells us a lot about what to expect on the import side.

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What Really Happened In Europe

2018-05-10

by Jeffrey P. Snider

2018-05-10

Europe Real Gross Domestic Product, Jan 1995 - May 2018

The primary example of globally synchronized growth has been Europe. Nowhere has more hope been attached to shifting fortunes. The Continent, buoyed by the persistence of central bankers like Mario Draghi, has not just accelerated it is actually booming. Or so they say.

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Bi-Weekly Economic Review: Oil, Interest Rates & Economic Growth

2018-05-09

by Joseph Y. Calhoun

2018-05-09

The yield on the 10 year Treasury note briefly surpassed the supposedly important 3% barrier and then….nothing. So, maybe, contrary to all the commentary that placed such importance on that level, it was just another line on a chart and the bond bear market fear mongering told us a lot about the commentators and not a lot about the market or the economy.

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Transitory’s Japanese Cousin

2018-05-01

by Jeffrey P. Snider

2018-05-01

Thomas Hoenig was President of the Federal Reserve’s Kansas City branch for two decades. He left that post in 2011 to become Vice Chairman of the FDIC. Before that, Mr. Hoenig as a voting member of the FOMC in 2010 cast the lone dissenting vote in each of the eight policy meetings that year (meaning he was against QE2, too). This makes him, apparently, the hawk of all hawks.

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Bi-Weekly Economic Review: Interest Rates Make Their Move

2018-04-27

by Joseph Y. Calhoun

2018-04-27

How quickly things change in these markets. In the report two weeks ago, the markets reflected a pretty obvious slowing in the global economy. In the course of two weeks, what seemed obvious has been quickly reversed. The 10-year yield moved up a quick 20 basis points in just a week, a rise in nominal growth expectations that was mostly about inflation fears.

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Why The Last One Still Matters (IP Revisions)

2018-04-26

by Jeffrey P. Snider

2018-04-26

US Industrial Production, Jan 2006 - 2018

Beginning with its very first issue in May 1915, the Federal Reserve’s Bulletin was the place to find a growing body of statistics on US economic performance. Four years later, monthly data was being put together on the physical volumes of trade. From these, in 1922, the precursor to what we know today as Industrial Production was formed. The index and its components have changed considerably over its near century of operative history.

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The Retail Sales Shortage

2018-04-22

by Jeffrey P. Snider

2018-04-22

Retail sales rose (seasonally adjusted) in March 2018 for the first time in four months. Related to last year’s big hurricanes and the distortions they produced, retail sales had surged in the three months following their immediate aftermath and now appear to be mean reverting toward what looks like the same weak pre-storm baseline. Exactly how far (or fast) won’t be known until subsequent months.

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Bi-Weekly Economic Review: Investing Is Not A Game of Perfect

2018-04-11

by Joseph Y. Calhoun

2018-04-11

The market volatility this year has been blamed on a lot of factors. The initial selloff was blamed on a hotter than expected wage number in the January employment report that supposedly sparked concerns about inflation – although a similar number this month wasn’t mentioned as a cause of last Friday’s selling. The unwinding of the short volatility trade exacerbated the situation and voila, 12% came off the market in a matter of days.

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Three Months Now of After-Harvey Retail Sales; or, The Boom Narrative Goes Boom

2018-03-17

by Jeffrey P. Snider

2018-03-17

If indeed this inflation hysteria has passed, its peak was surely late January. Even the stock market liquidations that showed up at that time were classified under that narrative. The economy was so good, it was bad; the Fed would be forced by rapid economic acceleration to speed themselves up before that acceleration got out of hand in uncontrolled consumer price gains. On February 1, the Atlanta Fed’s GDPNow tracking model was moved up to...

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Bi-Weekly Economic Review: The New Normal Continues

2018-03-14

by Joseph Y. Calhoun

2018-03-14

There has been a lot of talk about the economic impact of the recent tax reform. All of it, including the analyses that include lots of fancy math, amounts to nothing more than speculation, usually informed by little more than the political bias of the analyst. I am guilty of that too to some degree but I don’t let my personal political views dictate how I view the economy for purposes of investing.

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China Prices Include Lots of Base Effect, Still Undershoots

2018-03-13

by Jeffrey P. Snider

2018-03-13

By far, the easiest to answer for today’s inflation/boom trifecta is China’s CPI. At 2.9% in February 2018, that’s the closest it has come to the government’s definition of price stability (3%) since October 2013. That, in the mainstream, demands the description “hot” if not “sizzling” even though it still undershoots. The primary reason behind the seeming acceleration was a more intense move in food prices.

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China Going Boom

2018-03-08

by Jeffrey P. Snider

2018-03-08

China Gross Domestic Product, Apr 1993 - 2017

For a very long time, they tried it “our” way. It isn’t working out so well for them any longer, so in one sense you can’t blame them for seeking answers elsewhere. It was a good run while it lasted. The big problem is that what “it” was wasn’t ever our way. Not really. The Chinese for decades followed not a free market paradigm but an orthodox Economics one. This is no trivial difference, as the latter is far more easily accomplished in a place...

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Bi-Weekly Economic Review: One Down, Three To Go

2018-03-01

by Joseph Y. Calhoun

2018-03-01

We pay particular attention to broad based indicators of growth. The Chicago Fed National Activity Index and the Conference Board’s Leading Economic Indicators are examples. We watch them because we are mostly interested in identifying inflection points in the broad economy and aren’t as interested in the details. Why? Because, while bear markets do happen outside of recession, it is rare and unpredictable.

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China: Inflation? Not Even Reflation

2018-02-16

by Jeffrey P. Snider

2018-02-16

The conventional interpretation of “reflation” in the second half of 2016 was that it was simply the opening act, the first step in the long-awaiting global recovery. That is what reflation technically means as distinct from recovery; something falls off, and to get back on track first there has to be acceleration to make up that lost difference.

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Bi-Weekly Economic Review

2018-02-14

by Joseph Y. Calhoun

2018-02-14

Personal income for December was better than expected at up 0.4% on the month and 4.11% year over year. Wages and salaries were up 0.5%. Unfortunately, that rate of rise is not even up to the lower end of the range we’ve seen in past expansions when 5% income growth was a precursor to recession. Still, it is, sadly, about average for this expansion.

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Global Asset Allocation Update:

2018-02-09

by Joseph Y. Calhoun

2018-02-09

There is no change to the risk budget this month. For the moderate risk investor the allocation to bonds is 50%, risk assets 45% and cash 5%. Despite the selloff of the last week I don’t believe any portfolio action is warranted. While the overbought condition has largely been corrected now, the S&P 500 is far from the opposite condition, oversold. At the lows this morning, the S&P 500 was officially in correction territory, down 10% from the...

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US Imports: A Little Inflation For Yellen, A Little More Bastiat

2018-02-08

by Jeffrey P. Snider

2018-02-08

US imports rocketed higher once again in December, according to just-released estimates from the Census Bureau. Since August 2017, the US economy has been adding foreign goods at an impressive pace. Year-over-year (SA), imports are up just 10.4% (only 9% unadjusted) but 9.3% was in just those last four months. For most of 2017, imports were flat and even lower.

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The Historical Warnings of Money

2018-02-02

by Jeffrey P. Snider

2018-02-02

It’s interesting, to me anyway, that an image of the Roman goddess Juno remains to this day on the logo of the Bank of England. There are many stories about her role as it relates to money, but what cannot be denied is that the very word itself came to us from her temple. The Latin moneta was derived from the word monere, a verb meaning to warn. Moneta was Juno’s surname.

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