Tag Archive: Markets

What Did Everyone Think Was Going To Happen?

2020-06-06

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2020-06-06

Unemployment Insurance, Continued Claims, 2017-2020
Honestly, what did everyone think was going to happen? I know, I’ve seen the analyst estimates. They were talking like another six or seven perhaps eight million job losses on top of the twenty-plus already gone. Instead, the payroll report (Establishment Survey) blew everything away, coming in both at two and a half million but also sporting a plus sign.The Household Survey was even better, +3.8mm during May 2020. But, again, why wasn’t this...

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From QE to Eternity: The Backdoor Yield Caps

2020-06-04

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2020-06-04

Japan - JGB, 1986-2019
So, you’re convinced that low rates are powerful stimulus. You believe, like any good standing Economist, that reduced interest costs can only lead to more credit across-the-board. That with more credit will emerge more economic activity and, better, activity of the inflationary variety. A recovery, in other words. Ceteris paribus. What happens, however, if you also believe you’ve been responsible for bringing rates down all across the curve…and...

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Personal Income and Spending: The Other Side

2020-06-01

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2020-06-01

Personal Income & Spending, 2017-2020
The missing piece so far is consumers. We’ve gotten a glimpse at how businesses are taking in the shock, both shocks, actually, in that corporations are battening down the liquidity hatches at all possible speed and excess. Not a good sign, especially as it provides some insight into why jobless claims (as the only employment data we have for beyond March) have kept up at a 2mm pace.These are second order effects.

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Getting A Sense of the Economy’s Current Hole and How the Government’s Measures To Fill It (Don’t) Add Up

2020-05-29

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2020-05-29

GDP Pro Forma, 2010-2020
The numbers just don’t add up. Even if you treat this stuff on the most charitable of terms, dollar for dollar, way too much of the hole almost certainly remains unfilled. That’s the thing about “stimulus” talk; for one thing, people seem to be viewing it as some kind of addition without thinking it all the way through first.You have to begin by sizing up the gross economic deficit it is being haphazardly poured into – with an additional emphasis...

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So Much Dollar Bull

2020-05-27

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2020-05-27

TIC - US Banking Data, 2006-2020
According to the Federal Reserve’s calculations, the US dollar in Q1 pulled off its best quarter in more than twenty years – though it really didn’t need the full quarter to do it. The last time the Fed’s trade-weighed dollar index managed to appreciate farther than the 7.1% it had in the first three months of 2020, the year was 1997 during its final quarter when almost the whole of Asia was just about to get clobbered.In second place (now third)...

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No Flight To Recognize Shortage

2020-05-22

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2020-05-22

If there’s been one small measure of progress, and a needed one, it has been the mainstream finally pushing commentary into the right category. Back in ’08, during the worst of GFC1 you’d hear it all described as “flight to safety.” That, however, didn’t correctly connote the real nature of what was behind the global economy’s dramatic wreckage. Flight to safety, whether Treasuries or dollars, wasn’t it.

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So Much Bond Bull

2020-05-21

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2020-05-21

Federal Reserve: H.10 Foreign Exchange Rates, 2017-2020
Count me among the bond vigilantes. On the issue of supply I yield (pun intended) to no one. The US government is the brokest entity humanity has ever conceived – and that was before March 2020. There will be a time, if nothing is done, where this will matter a great deal.That time isn’t today nor is it tomorrow or anytime soon because it’s the demand side which is so confusing and misdirected.

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There Was Never A Need To Translate ‘Weimar’ Into Japanese

2020-05-17

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2020-05-17

After years of futility, he was sure of the answer. The Bank of Japan had spent the better part of the roaring nineties fighting against itself as much as the bubble which had burst at the outset of the decade. Letting fiscal authorities rule the day, Japan’s central bank had largely sat back introducing what it said was stimulus in the form of lower and lower rates.No, stupid, declared Milton Friedman.

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The global economy doesn’t care about the ECB (nor any central bank)

2020-05-14

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2020-05-14

Europe Industrial Production, 1991-2020
The monetary mouse. After years of Mario Draghi claiming everything under the sun available with the help of QE and the like, Christine Lagarde came in to the job talking a much different approach. Suddenly, chastened, Europe’s central bank needed assistance. So much for “do whatever it takes.”They did it – and it didn’t take.Lagarde’s outreach was simply an act of admitting reality.

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A Big One For The Big “D”

2020-05-13

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2020-05-13

CPI less Food & Energy, 1983-2020
From a monetary policy perspective, smooth is what you are aiming for. What central bankers want in this age of expectations management is for a little bit of steady inflation. Why not zero? Because, they decided, policymakers need some margin of error. Since there is no money in monetary policy, it takes time for oblique “stimulus” signals to feed into the psychology of markets and the economy.

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Everyone Knows The Gov’t Wants A ‘Controlled’ Weimar

2020-05-09

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2020-05-09

There are two parts behind the inflation mongering. The first, noted yesterday, is the Fed’s balance sheet, particularly its supposedly monetary remainder called bank reserves. The central bank is busy doing something, a whole bunch of something, therefore how can it possibly turn out to be anything other than inflationary?The answer: the Federal Reserve is not a central bank, not really.

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We All Know Who’s On First, But What’s On Second?

2020-05-08

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2020-05-08

It wasn’t entirely unexpected, though when it was announced it was still quite a lot to take in. On September 1, 2005, the Bureau of Economic Analysis (BEA) reported that the nation’s personal savings rate had turned negative during the month of July. The press release announcing the number, in trying to explain the result was reduced instead to a tautology, “The negative personal saving reflects personal outlays that exceed disposable personal...

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GDP + GFC = Fragile

2020-05-01

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2020-05-01

March 15 was when it all began to come down. Not the stock market; that had been in freefall already, beset by the rolling destruction of fire sale liquidations emanating out of the repo market (collateral side first). No matter what the Federal Reserve did or announced, there was no stopping the runaway devastation.

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COT Black: No Love For Super-Secret Models

2020-05-01

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2020-05-01

Federal Reserve: Liabilities & Capital, 1984-2019
As I’ve said, it is a threefold failure of statistical models. The first being those which showed the economy was in good to great shape at the start of this thing. Widely used and even more widely cited, thanks to Jay Powell and his 2019 rate cuts plus “repo” operations the calculations suggested the system was robust.

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The Puppet Show Is Powerful

2020-04-29

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2020-04-29

I never said it wasn’t powerful. What I continue to show is that it doesn’t work. Ben Bernanke kept his job because despite the carnage, in times of turmoil people are willing to give anyone a second chance. And if the turmoil never ends, so much the luckier – for him. 

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The Fallen Kings & The Bond Throne of Collateral

2020-04-24

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2020-04-24

UST Yield Curve, 2017-2020
There is no schadenfreude at times like these, no time to dance on anyone’s grave. Victory laps are a luxury that only central bankers take – always prematurely. The world already coming apart because of GFC1, what comes next with GFC2 and then whatever follows it? Another “bond king” has thrown in the towel.

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An International Puppet Show

2020-04-23

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2020-04-23

Federal Reserve: H.10 Foreign Exchange Rates, 2006-2020
It’s actually pretty easy to see why the IMF is in a hurry to secure more resources. I’m not talking about potential bailout candidates banging down the doors; that’s already happened. The fund itself is doing two contradictory things simultaneously: telling the world, repeatedly, that it has a highly encouraging $1 trillion in bailout capacity at the same time it goes begging to vastly increase that amount.

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The Greenspan Bell

2020-04-22

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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?

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The Global Engine Is Still Leaking

2020-04-16

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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.

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The Real Diseased Body

2020-04-12

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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.

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