Tag Archive: Markets

US Trade Skews

US trade statistics dramatically improved in January 2017, though questions remain as to interpreting by how much. On the export side, US exports of goods rose 8.7% year-over-year (NSA). While that was the highest growth rate since 2012, there is part symmetry to account for some of it.

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China And Reserves, A Straightforward Process Unnecessarily Made Into A Riddle

The fact that China reported a small increase in official “reserves” for February 2017 is one of the least surprising results in all of finance. The gamma of those reserves is as predictable as the ticking clock of CNY, in no small part because what is behind the changes in those balances are the gears that lie behind face of the forex timepiece.

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Do Record Eurodollar Balances Matter? Not Even Slightly

The BIS in its quarterly review published yesterday included a reference to the eurodollar market (thanks to M. Daya for pointing it out). The central bank to central banks, as the outfit is often called, is one of the few official institutions that have taken a more objective position with regard to the global money system. Of the very few who can identify eurodollars, or have even heard of them, the BIS while not fully on board is at least open...

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Manufacturing Back To 2014

The ISM Manufacturing PMI registered 57.7 in February 2017, the highest value since August 2014 (revised). It was just slightly less than that peak in the 2014 “reflation” cycle. Given these comparisons, economic narratives have been spun further than even the past few years where “strong” was anything but.

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Bi-Weekly Economic Review

Economic Reports Scorecard. The economic data released since my last update has been fairly positive but future growth and inflation expectations, as measured by our market indicators, have waned considerably. There is now a distinct divergence between the current data, stocks and bonds. Bond yields, both real and nominal, have fallen recently even as stocks continue their relentless march higher.

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Economic Dissonance, Too

Germany is notoriously fickle when it comes to money, speaking as much of discipline in economy or industry as central banking. If ever there is disagreement about monetary arrangements, surely the Germans are behind it. Since ECB policy only ever attains the one direction, so-called accommodation, there never seems to be harmony.

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True Cognitive Dissonance

There is gold in Asia, at least gold of the intellectual variety for anyone who wishes to see it. The Chinese offer us perhaps the purest view of monetary conditions globally, where RMB money markets are by design tied directly to “dollar” behavior. It is, in my view, enormously helpful to obsess over China’s monetary system so as to be able to infer a great deal about the global monetary system deep down beyond the “event horizon.”

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Real Disposable Income: Headwinds of the Negative

The PCE Deflator for January 2017 rose just 1.89% year-over-year. It was the 57th consecutive month less than the 2% mandate (given by the Fed itself when in early 2012 it made the 2% target for this metric its official definition of price stability).

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Some Notes On GDP Past And Present

The second estimate for GDP was so similar to the first as to be in all likelihood statistically insignificant. The preliminary estimate for real GDP was given as $16,804.8 billion. The updated figure is now $16,804.1 billion. In nominal terms there was more variation, where the preliminary estimate of $18,860.8 billion is now replaced by one for $18,855.5 billion.

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Durable Goods Groundhog

If the economy is repeating the after-effects of the latest “dollar” events, and it does seem more and more to be that case, then analysis starts with identifying a range for where it might be in the repetition. New orders for durable goods (ex transportation) rose 4.3% year-over-year in January 2017 (NSA, only 2.4% SA), the highest growth rate since September 2014 (though not meaningfully faster than the 3.9% rate in November 2016).

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It Was ‘Dollars’ All Along

Ross Perot famously declared the “giant sucking sound” in the 1992 Presidential campaign. The debate over NAFTA did not end with George H. W. Bush’s defeat, as it simmered in one form or another for much of the 1990’s. Curiously, however, it seemed almost perfectly absent during the 2000’s, the very decade in which Perot’s prophecy came true. Americans didn’t notice because there was a bubble afoot.

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Not Recession, Systemic Rupture – Again

For the very few in the mainstream of economics who venture further back in history than October 1929, they typically still don’t go much last April 1925. And when they do, it is only to further bash the gold standard for its presumed role in creating the conditions for 1929. The Brits under guidance of Winston Churchill made a grave mistake, one from which gold advocates could never recover given what followed.

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The Market Is Not The Economy, But Earnings Are (Closer)

My colleague Joe Calhoun likes to remind me that markets and fundamentals only sound like they should be related, an observation that is a correct one on so many different levels. Stock prices, in general, and GDP growth may seem to warrant some kind of expected correlation, but it has proven quite tenuous at times especially in a 21st century sense.

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The Stinking Politics of It All

It is largely irrelevant, but still the political theater is fascinating. As is now standard operating procedure, whatever comes out of the Trump administration immediately is conferred as the standard for awful. This is not my own determination, mind you, but that of the mainstream, whatever that is these days. And so it is with the first set of budget figures that include very robust growth projections, a point of contention and an obvious one...

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No Acceleration In Industry, Either

Industrial Production in the United States was flat in January 2017, following in December the first positive growth rate in over a year. The monthly estimates for IP are often subject to greater revisions than in other data series, so the figures for the latest month might change in the months ahead. Still, even with that in mind, there is no acceleration indicated for US industry.

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Their Gap Is Closed, Ours Still Needs To Be

There are actually two parts to examining the orthodox treatment of the output gap. The first is the review, looking backward to trace how we got to this state. The second is looking forward trying to figure what it means to be here. One final rearward assessment is required so as to frame how we view what comes next. As I suggested earlier this week, the so-called output gap started at the trough of the Great “Recession” at around 10% of the CBO’s...

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Why Aren’t Oil Prices $50 Ahead?

Right now there are two conventional propositions behind the “reflation” trade, and in many ways both are highly related if not fully intertwined. The first is that interest rates have nowhere to go but up. The Fed is raising rates again and seems more confident in doing more this year than it wanted to last year. With nominal rates already rising in the last half of 2016, and with more (surveyed) optimism than even 2014, it may at times seem the...

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U.S. CPI after the energy push

The Consumer Price Index for January 2017 rose 2.5%, pulled upward by its energy component which thanks to oil prices now being comparing to the absolutely lows last year saw that part of the index rise 11.1% year-over-year. Given that oil prices bottomed out on February 11, 2016, this is the last month where oil prices and thus energy inflation will be at its most extreme (except, of course, should WTI actually rise between now and the end of...

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Bi-Weekly Economic Review

The economic data since my last update has improved somewhat. It isn’t across the board and it isn’t huge but it must be acknowledged. As usual though there are positives and negatives, just with a slight emphasis on positive right now. Interestingly, the bond market has not responded to these slightly more positive readings with nominal and real yields almost exactly where they were in the last update 3 weeks ago. In other words, there’s no reason...

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Real Wages Really Inconsistent

Real average weekly earnings for the private sector fell 0.6% year-over-year in January. It was the first contraction since December 2013 and the sharpest since October 2012. The reason for it is very simple; nominal wages remain stubbornly stagnant but now a rising CPI subtracts even more from them.

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