Tag Archive: newsletter

Fed Balance Sheet: Swap Me Update

2020-06-18

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2020-06-18

Fed Balance Sheet: Assets, 2007-2020
Just a quick update to add a little more data and color to my last Friday’s swap line criticism so hopefully you can better see how there is intentional activity behind them. Since a few people have asked, I’ll break them out with a little more detail. While the volume of swaps outstanding at the Fed has, in total, remained relatively constant (suspiciously, if you ask me), the underlying tenor of them has not.Meaning, there is purpose.

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Keynesians on the Cause of, and Cure for, Depressions

2020-06-18

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2020-06-18

[This article is part of the Understanding Money Mechanics series, by Robert P. Murphy. The series will be published as a book in late 2020.] In chapter 8 we presented Ludwig von Mises’s explanation of how bank credit expansion causes the boom-bust cycle, what is now known as Austrian business cycle theory. However, the reigning view today in both academia and the popular media is the Keynesian explanation, derived from John Maynard Keynes’s famous...

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FX Daily, June 17: Correction Phase does not Appear Over

2020-06-17

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2020-06-17

Overview:  Investors have not yet completely shaken off the angst that saw equities slide last week.  All equity markets in the Asia Pacific region, but Japan, edged higher today, including China, India, and South Korea, where political/military tensions are elevated.  Europe followed suit, and the Dow Jones Stoxx 600 is firm near yesterday's highs. It has entered but not yet filled the gap created by the sharply lower opening on June 11.

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SoftBank invests in Credit Suisse funds financing technology bets

2020-06-17

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2020-06-17

SoftBank has quietly poured more than $500m into Credit Suisse investment funds that in turn made big bets on the debt of struggling start-ups backed by the Japanese technology conglomerate’s Vision Fund. SoftBank made the investment into the Swiss bank’s $7.5bn range of supply-chain finance funds, said three people familiar with the matter.

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Growing Dollar Demand, Silver Weirdness, Market Report, 15 June

2020-06-17

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2020-06-17

Silver Basis and Co-basis and the Dollar Price, November 2019-February 2020
The Federal Reserve has become more aggressive again, after several years of acting docile. As you can see on this chart of the Fed’s balance sheet, it has very rapidly expanded from a baseline from (prior to) 2015 through 2018, of about $4.4 trillion. After which, it had attempted to taper, getting down to $3.8 trillion last summer. Then it was obliged to reverse itself well before responding to the COVID lockdown. Since then, its balance sheet...

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Inequality is Overstated—and Overrated

2020-06-17

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2020-06-17

Whining and complaining about inequality is a growth industry. Thomas Piketty’s book (or perhaps a large virtue-signaling paperweight), about how the rich are getting richer, achieved bestseller status and is now a movie. Understanding the flaws in the wealth inequality argument is increasingly important, because the communist wing of the Democratic Party is now openly advocating a wealth tax.

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A Chinese Outbreak (of Li v. Xi, Round 2)

2020-06-17

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2020-06-17

China Industrial Production, 1999-2020
Here they are again, seemingly at odds over how to proceed. Reminiscent of prior battles over whether to revive the economy or just let it go where it will, it appears as if China is in for Xi vs. Li Round 2. Or is it all just clever politics? Li Keqiang may be nominally the Chinese Premier but he’s a very distant second on every list of power players. Xi Jinping holds all the top spots, including a 2017-18 consolidation of power that left Xi...

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Fintech firm Achiko hits Cayman-related compliance problems

2020-06-16

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2020-06-16

Cayman Islands fintech company Achiko has run into “compliance issues” just months after listing on the Swiss stock exchange. The firm has called a meeting of shareholders this week to approve a plan to create a Swiss company and re-list the shares from this entity.

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FX Daily, June 16: Correction Scenario Tested

2020-06-16

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2020-06-16

Overview: Shortly after the US stock market opened sharply lower, the Federal Reserve announced that it's Main Street facility was up and running. US stocks never looked back. After the S&P 500 recouped its full decline, the Fed announced it would begin buying corporate bonds. Up until now, it had been buying representative ETFs. Stocks rallied further on the news before pulling back into the close. The rally in risk assets carried into Asia.

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Supplementary accommodation: 0.7 percent increase in overnight stays in 2019, but decrease in demand for holiday homes

2020-06-16

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2020-06-16

Monthly share of overnight stays in the hotel and para-hotel sectors in 2019
15.06.2020 - In 2019, supplementary accommodation posted a total of 16.7 million overnight stays, i.e. an increase of 0.7% compared with 2018. With 11.4 million units, Swiss visitors represented more than two-thirds of demand (68.6%), i.e. a rise of 2.4%. Foreign visitors registered a 2.8% decrease with 5.2 million units. With 4.4 million overnight stays (-3.8%), European visitors accounted for the majority of stays by foreign guests.

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Fed Chairman: “We’re Not Even Thinking About Thinking About Raising Rates”

2020-06-16

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2020-06-16

Market volatility has suddenly spiked in recent days came after the Federal Reserve vowed last Wednesday to keep its benchmark rate near zero through 2022. That’s an unusually long period for the Fed to be projecting rate policy. It reflects the fact that it will take many months and perhaps years for the tens of millions of jobs that were recently lost to return.

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US Money Supply – The Pandemic Moonshot

2020-06-16

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2020-06-16

Printing Until the Cows Come Home… It started out with Jay Powell planting a happy little money tree in 2019 to keep the repo market from suffering a terminal seizure. This essentially led to a restoration of the status quo ante “QT” (the mythical beast known as “quantitative tightening” that was briefly glimpsed in 2018/19). Thus the roach motel theory of QE was confirmed: once a central bank resorts to QE, a return to “standard monetary policy”...

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FX Daily, June 15: Unwind Continues

2020-06-15

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2020-06-15

Overview: The swing in the pendulum of market sentiment toward fear from greed began last week and has carried over into today's activity.  Global equities are getting mauled.  In the Asia Pacific region, no market was spared as the Nikkei's 3.5% drop, and South Korea's 4.7% fall led the way.  In Europe, the Dow Jones Stoxx  600 is recovering from a more than two percent early loss,  as it drops for the fifth time in the past six sessions.

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Swiss Producer and Import Price Index in May 2020: -4.5 percent YoY, -0.5 percent MoM

2020-06-15

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2020-06-15

Switzerland Producer Price Index (PPI) YoY, May 2020
15.06.2020 - The Producer and Import Price Index fell in May 2020 by 0.5% compared with the previous month, reaching 97.6 points (December 2015 = 100). This decline is due in particular to lower prices for pharmaceutical and chemical products as well as for petroleum products. Compared with May 2019, the price level of the whole range of domestic and imported products fell by 4.5%.

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100 Swiss watch brands risk extinction due to coronavirus, expert says

2020-06-15

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2020-06-15

The coronavirus crisis could eliminate up to 100 Swiss watch brands from the market, according to an expert interviewed by the German-language weekly NZZamSonntag. Production came to a standstill during the pandemic and the most important export markets collapsed. Whether tourists with purchasing power will return to Switzerland remains in question. The watch industry, notes the newspaper, has been “caught in the perfect storm”.

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Swiss parliament votes in favour of flight tax

2020-06-15

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2020-06-15

A majority of Switzerland’s parliament voted in favour of introducing a tax on flights departing from Switzerland. 132 voted in favour of the tax, with 65 against. The tax would range from CHF 30 to CHF 120 depending on the distance and class of travel, according to 20 Minutes.

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Is the Pandemic Over and a V-Shaped Recovery Baked In?

2020-06-15

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2020-06-15

So what do we know with any sort of certainty about the claim that "the pandemic is over"? Very little. Is the pandemic over in China, Europe, Japan and the U.S./Canada? Is the much-anticipated V-Shaped economic recovery already baked in, i.e. already gathering momentum? The consensus, as reflected by the stock market (soaring), the corporate media and governmental easings of restrictions seems to be "yes" to both questions.

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The Scandinavian Model Won’t Work in Chile

2020-06-15

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2020-06-15

Scandinavian welfare states continue to allure leftist onlookers across the world. The Nordic welfare model is marketed as a humane alternative to the cutthroat nature of Western capitalism. It received a massive boost when Vermont senator Bernie Sanders campaigned on emulating these countries in both of his presidential runs during 2016 and 2020.

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EM Preview for the Week Ahead

2020-06-15

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2020-06-15

EM and other risk assets stabilized to end the week after Thursday’s selloff, but remain vulnerable. The risks ahead are the same as before, which include a second wave of infections as well as a longer and shallower than expected recovery in global growth. The Fed’s message of low rates as far as the eye can see was balanced by Powell’s grim outlook for unemployment.

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Coronavirus: new cases stable with small rise in deaths in Switzerland

2020-06-14

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2020-06-14

In the seven days to 12 June 2020, the number of new SARS-CoV-2 infections recorded in Switzerland was 127. A similar number of new cases was recorded in the week before (108) and the week before that (121), according to Worldinfometer.com.

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