Tag Archive: Markets

Retail Sales Conundrum

2017-07-20

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2017-07-20

U.S. Retail Sales All Weakness, Jun 2011 - 2017
Retail sales were thoroughly disappointing in June. Whereas other accounts such as imports or durable goods had at least delivered a split decision between adjusted and unadjusted versions, for retail sales both views of them were ugly. Seasonally-adjusted first, spending last month was down for the second straight time. Worse than that, estimated sales were just barely more than in January.

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US S&P 500 Index, Federal Funds Target, Manufacturing Payrolls, US Imports and US Banking Data: All Conundrums Matter

2017-07-19

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2017-07-19

Case Study: S&P 500 Index and Federal Funds Target
Since we are this week hypocritically obsessing over monetary policy, particularly the federal funds rate end of it, it’s as good a time as any to review the full history of 21st century “conundrum.” Janet Yellen’s Fed has run itself afoul of the bond market, just as Alan Greenspan’s Fed did in the middle 2000’s.

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Global Asset Allocation Update: Not Yet

2017-07-18

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2017-07-18

Moderate Allocation
There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. There are no changes to the portfolio this month. Growth and inflation expectations rose somewhat since last month’s update. The change is minor though and within the range of what we’ve seen in recent months.

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Bi-Weekly Economic Review: Attention Shoppers

2017-07-17

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2017-07-17

The majority of the economic reports over the last two weeks have been disappointing, less than the consensus expectations. The minor rebound in activity we’ve been tracking since last summer appears to have stalled. Retail sales continue to disappoint and inventory/sales ratios are once again rising – from already elevated levels.

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Wholesale: No Acceleration, No Liquidation

2017-07-16

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2017-07-16

Wholesale Sales and Inventory, NSA
In the same way as durable goods orders and US imports, wholesale sales in May 2017 were up somewhat unadjusted but down for the third straight month according the seasonally-adjusted series. As with those other two, the difference is one of timing. In other words, combining the two sets, seasonal and not, we are left to interpret a possible recent slowing in activity.

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China Imports and Exports: The Ghost Recovery

2017-07-16

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2017-07-16

China Trade Ghost Cities
To the naked eye, it represents progress. China has still an enormous rural population doing subsistence level farming. As the nation grows economically, such a way of life is an inherent drag, an anchor on aggregate efficiency Chinese officials would rather not put up with.

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Competing CPI,PPI, Industrial Production and Retail Sales: No Luck China, Either

2017-07-15

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2017-07-15

China Retail Sales and Industrial Production
Former IMF chief economist Ken Rogoff warned today on CNBC that he was concerned about China. Specifically, he worried that country might “export a recession” to the rest of Asia if not the rest of the world. I’m not sure if he has been paying attention or not, but the Chinese economy since 2012 has been doing just that to varying degrees often just shy of that level.

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US Federal Funds, Bond Market and WSJ Economic Survey: The Hidden State of Money

2017-07-13

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2017-07-13

US WSJ Economic Forecast Survey
Correctly interpreting the bond market is more than just how and when to invest your money in UST’s. Not that it isn’t useful in such a money management capacity, but interest rates starting at the risk-free tell us a lot about what is wholly unseen. There is simply no way to directly observe inside an economy what is taking place at all levels and in all transactions. We try to estimate as best we can in the aggregate, but the real economy works...

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Vehicle Sales, Consumer Price Index and Average Weekly Hours: More Than Minor Auto Potential

2017-07-11

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2017-07-11

US JD Power and LMC Automotive Vehicle Sales
According to Edmunds.com, in June 2017 the average length of a new vehicle loan has been stretched to a record 69.3 months. JD Power says that incentives last month were running at more than 10% of MSRP, the eleventh time over the past twelve months where manufacturers have so heavily discounted. And yet, the auto industry would have us believe that the problem is one of fleet sales rather than of consumers.

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US Imports, Exports and Trade Stalls, Too

2017-07-10

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2017-07-10

US Imports
US imports rose year-over-year for the seventh straight month, but like factory orders and other economic statistics there is a growing sense that the rebound will not go further. The total import of goods was up 9.3% in May 2017 as compared to May 2016, but growth rates have over the past five months remained constrained to around that same level. It continues to be about half the rate we should expect given the preceding contraction.

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Global Manufacturing PMI’s, Inflation and CPI: Some Global Odd & Ends

2017-07-09

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2017-07-09

Monetary Logic
When it comes to central bank experimentation, Japan is always at the forefront. If something new is being done, Bank of Japan is where it happens. In May for the first time in human history, that central bank’s balance sheet passed the half quadrillion mark.

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U.S. Gross Domestic Products: Near Record Expansion (Really Reduction)

2017-07-07

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2017-07-07

US Real GDP
Real GDP in the US was revised up to 1.41% quarter-over-quarter (annual rate), still the fourth of the last six to be less than 1.5%. While economists and policymakers have taken to judging the economy by its downside, that is only because the extent of the global problem is revealed by complete absences of an upside. The occasional decent quarter doesn’t come close to making up for the more plentiful disappointing ones, let alone to still resolve...

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Pending Home Sales: Home Attitude Adjustments

2017-07-06

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2017-07-06

US Pending Home Sales
The National Association of Realtors (NAR) reported today that pending home sales declined for the third straight month. As with so many other accounts, it’s not really the downside that is relevant but how instead there has been little to no growth for quite some time now. The NAR’s index value, which is how the organization reports the level of pending sales, was 108.5 in May 2017. That’s up 42% from the low in 2010, but also slightly less than...

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Maybe Deep Dissatisfaction Has A Point

2017-07-05

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2017-07-05

Economic Baselines in the Eurodollar Era, January 1993 - January 2017
To complete a trifecta, maybe someone could interview Alan Greenspan about rational exuberance. The last of the latest Fed Chairmen, Janet Yellen, purports today that the next financial crisis will not be in “our lifetimes.” The issue, however, isn’t even crisis so much as credibility. Given that she and the rest of them had no idea about the last one until it was almost over, we might be forgiven for rejecting her thesis outright – and it having...

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Oil Prices and Manufacturing PMI: No Backing Sentiment

2017-07-04

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2017-07-04

Oil Prices
When the price of oil first collapsed at the end of 2014, it was characterized widely as a “supply glut.” It wasn’t something to be concerned about because it was believed attributable to success, and American success no less. Lower oil prices would be another benefit to consumers on top of the “best jobs market in decades.”

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Weird Obsessions

2017-07-04

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2017-07-04

US Banks Claims On Total Europe
People often ask why I care so much about China. In some ways the answer is obvious, meaning that China is the world’s second largest economy (the largest under certain methods of measurement). Therefore, marginal changes in the Chinese economy are important to understanding our own global situation.

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Bi-Weekly Economic Review: Draghi Moves Markets

2017-07-03

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2017-07-03

In my last update two weeks ago I commented on the continued weakness in the economic data. The economic surprises were overwhelmingly negative and our market based indicators confirmed that weakness. This week the surprises are not in the economic data but in the indicators. And surprising as well is the source of the outbreak of optimism in the bond market and the yield curve.

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Brazil’s Reasons

2017-07-02

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2017-07-02

Brazil Eurodollar University
Brazil is another one of those topics which doesn’t seem to merit much scrutiny apart from morbid curiosity. Like swap spreads or Japanese bank currency redistribution tendencies, it is sometimes hard to see the connection for US-based or just generically DM investors. Unless you set out to buy an emerging market ETF heavily weighted in the direction of South America, Brazil’s problems can seem a world away.

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Basic China Money Math Still Doesn’t Add Up To A Solution

2017-07-01

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2017-07-01

China Basic Money Math
There are four basic categories to the PBOC’s balance sheet, two each on the asset and liability sides of the ledger. The latter is the money side, composed mainly of actual, physical currency and the ledger balances of bank reserves. Opposing them is forex assets in possession of the central bank and everything else denominated in RMB.

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Fading Further and Further Back Toward 2016

2017-06-29

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2017-06-29

U.S. Disposable Personal Income
Earlier this month, the BEA estimated that Disposable Personal Income in the US was $14.4 trillion (SAAR) for April 2017. If the unemployment rate were truly 4.3% as the BLS says, there is no way DPI would be anywhere near to that low level. It would instead total closer to the pre-crisis baseline which in April would have been $19.0 trillion. Even if we factor retiring Baby Boomers in a realistic manner, say $18 trillion instead, what does the...

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