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Jeffrey P. Snider

Jeffrey P. Snider

Jeffrey P. Snider is the head of Global Investment Research of Alhambra Investment Partners (AIP). Jeffrey was 12 years at Atlantic Capital Management where he anticipated the financial crisis with critical research. His company is a global investment adviser, hence potential Swiss clients should not hesitate to contact AIP

Articles by Jeffrey P. Snider

No Flight To Recognize Shortage

3 days ago

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.
Back in March, while “it” was very obvious, even the New York Times put it the right way for once.
The first part, anyway.
The extraordinary actions of the Federal Reserve on Monday morning can be boiled down to two sentences: There is a rapidly developing shortage of dollars across the economy. And the Fed will do anything it needs to, on any scale imaginable,

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So Much Bond Bull

5 days ago

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. Realizing this is true does not cancel your vigilantism.
For two years now we’ve heard about how there are “too many” Treasuries. All the way back in December 2017 the federal government passed tax “reform” which was supposed to have been a different sort of stimulus than the all the same “stimulus” that the previous administration had also passed.
The only thing both

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

8 days ago

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. Lower rates don’t mean stimulus they mean monetary policy has been tight leaving the economy stripped and starved of this vital necessity. He had declared this a fallacy back in the sixties only to see it proven by the opposite direction (the Great Inflation was punctuated by skyrocketing interest rates, contrary to popular perception).
On April 30, 1998, the

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Miracles Aren’t Shovel-Ready

11 days ago

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. Having forecast an undercurrent of worldwide inflationary breakout (how “globally synchronized growth” does seem like ancient history), the two years leading up to 2020 weren’t supposed to have been this way.
Draghi ended 2018 by ending his QE ignoring how growth had turned around, only to turnaround himself in 2019, like Jay Powell did on US policy rates, to restart it all over

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A Big One For The Big “D”

13 days ago

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.
Thus, a little steady inflation as insurance against the real evil.
In that sense, the core CPI is perhaps best suited to judge policy success on its own terms. Set aside the oft-emotional objections to the subject, the BLS’s core measure of inflation strips out food and energy prices because history has proved those are moved around often in temporary bursts one way or

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

16 days ago

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. What it “prints” are, as Emil Kalinowski likes to call them, the equivalent of laundromat tokens (I wonder if they’re even that useful).
Even Jay Powell knows this, but he’s absolutely thrilled that so many people believe otherwise.

When grasped by the dark specter of deflation, what better way (according to an Economist) to get out of it than to make people think you’re

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

17 days ago

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 income.”
Why had it become this way? What were the implications, if any? Beyond the scope of the BEA’s mandate, the government could merely recite the progressions behind it:
Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or

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GDP + GFC = Fragile

24 days ago

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.
It wasn’t until the middle of March that the first major shutdown orders began to appear – on Twitter feeds – and these weren’t the total lockdowns we’re stuck with now, either.

.
In Massachusetts, Governor Charlie Baker closed schools and started to prohibit gatherings of more than 25 people. In Ohio, Governor Mike DeWine somehow closed bars and restaurants. NYC’s mayor limited food service to take-out only.
The full shelter-in-place or

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COT Black: No Love For Super-Secret Models

25 days ago

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.
Because of this set of numbers, officials here as well as elsewhere around the world chose the most extreme form of pandemic mitigations, trusting that the strong economy wouldn’t just immediately buckle.
And they were pushed in this direction by absolutely dire estimates for how COVID-19 was going to ravage large swaths of the globe.
It hasn’t happened yet and increasingly looks like it never will.

Federal Reserve: Liabilities & Capital,

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The Puppet Show Is Powerful

26 days ago

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. 

Anyone who promises it’s all under control. 
A combined 58% of respondents said they had a “great deal” or “fair amount” of confidence that Fed Chairman Jerome Powell would do or recommend the right thing for the economy, according to an April 1-14 survey by Gallup…The Fed has responded to the crisis with gusto, unveiling nine emergency programs aimed at stabilizing financial markets and providing relief directly to some companies, as well as state and local governments. Powell pledged in

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The Fallen Kings & The Bond Throne of Collateral

April 23, 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. Franklin Templeton’s candidate for the title has been Michael Hasenstab, and like all the other Kings he’d been betting that interest rates would have nowhere to go but up. Bill Gross, Jeffrey Gundlach, and Jamie Dimon, Hasenstab, too, they all enthusiastically climbed aboard globally synchronized growth expecting the journey would lead to recovery, normalcy, and, yes, the BOND ROUT!!!!
Now?
Filings this week showed that the Templeton Global Bond Fund’s

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An International Puppet Show

April 23, 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.
Very reassuring.
The IMF is becoming like the Federal Reserve. Before GFC1, it had a quarter of the resources available to it that it claims now. In 2009, all lines of expansion were pursued including an increase in quotas.

Federal Reserve: H.10 Foreign Exchange Rates, 2006-2020 – Click to enlarge
These efforts were only beginning.
So what I mean is,

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The Greenspan Bell

April 22, 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?
My very first day on the job, as an intern my first boss told me to prepare myself. I was embarking on a career in the most absurd industry humanity had ever conceived. It didn’t take me very long to see that he was right.
What made it absurd, and makes it still today along with everything it touches, is that same lack of interest in the basics behind all the “miracles.” Adam Smith said the capitalist economy’s invisible hand was a magical wonder

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The Global Engine Is Still Leaking

April 15, 2020

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. There’s also the potential for the engine to overheat and maybe even visible smoke from oil burning as it leaks onto hot parts under the hood.
There’s also the dashboard oil pressure warning.
ut what if you have been taught to ignore it?
The longer this goes on the worse it can become – to the point your car’s engine might seize up and cease to function. Severe even

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The Real Diseased Body

April 12, 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. And if Ben Bernanke grew so concerned he felt a second dose was required…
Put another way, if a central bank keeps doing “bigger” things, that isn’t a basis for optimism because it calls for a starkly sobering re-assessment of a situation that just so happens to be causing central bankers to panic.

Monetary policies since August 2007 aren’t a fix, but a warning. The more they have to do, the worse it is likely going to be.
Today,

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It’s Hard To See Anything But Enormous Long-term Cost

April 7, 2020

The unemployment rate wins again. In a saner era, back when what was called economic growth was actually economic growth, this primary labor ratio did a commendable job accurately indicating the relative conditions in the labor market. You didn’t go looking for corroboration because it was all around; harmony in numbers for a far more peaceful and serene period.
Ever since the Great “Recession”, however, the unemployment rate has really struggled. Nearly the entire way during this supposedly record-length labor market win streak the measure was entirely alone in its optimism. Even the Establishment Survey took (more than) a few breaks along the way (including since mid-2018).
It didn’t start out like this; the unemployment rate behaved itself during the first

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Banks Or (euro)Dollars? That Is The (only) Question

April 3, 2020

It used to be that at each quarter’s end the repo rate would rise often quite far. You may recall the end of 2018, following a wave of global liquidations and curve collapsing when the GC rate (UST) skyrocketed to 5.149%, nearly 300 bps above the RRP “floor.” Chalked up to nothing more than 2a7 or “too many” Treasuries, it was to be ignored as the Fed at that point was still forecasting inflation and rate hikes.
Total financial resilience otherwise.
Yesterday was, of course, another quarter-end. Rather than surge, however, DTCC reported that the GC repo rate (UST) was practically zero. Zilch.
According to their calculations, the weighted average interest rate for all of the repo transactions which took place within its purview on the final day of Q1 2020, a

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China’s Back!

April 1, 2020

The Washington Post began this week by noting how the US economy seems to have lost its purported zip just when it needed that vitality the most. Never missing a chance to take a partisan swipe, of course, still there’s quite a lot of truth behind the charge. An actual economic boom produces cushion, enough of one that President Trump and his administration may have been counting on it when opting for full-blown shutdown.

The coronavirus recession is exposing how the economy was not strong as it seemed https://t.co/ZEtH0vUJ2M
— The Washington Post (@washingtonpost) March 29, 2020

Instead, more and more it looks as if everything just crumbled like a sand castle exposed in the rain. And it’s not as if there weren’t warning signs; underneath the glowing

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(No) Dollars And (No) Sense: Eighty Argentinas

March 31, 2020

India like many emerging market countries around the world holds an enormous stockpile of foreign exchange reserves. According to the latest weekly calculation published by the Reserve Bank of India (RBI), the country’s central bank, that total was a bit less than half a trillion. While it sounds impressive, when the month began the balance was much closer to that mark.
Over the last several crisis-filled weeks, officials in India have been fighting against a “sudden” and shocking plummet in the rupee. The other side of that is, of course, the rising dollar which, contrary to convention, is an indication of severe global monetary strain.

India Official Reserve Assets, 2016-2020 – Click to enlarge
QE’s matter less in the offshore shadows than they do in

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No Further Comment Necessary At This Point

March 28, 2020

I would write something snarky about bank reserves, but why bother at this point? It’s already been said. If Jay Powell doesn’t mention collateral, no one else does even though it’s the whole ballgame right now. Note: FRBNY’s updated figures shown below are for last week.

Primary Dealer Repo Fails (UST), 2017-2020 – Click to enlarge

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Is GFC2 Over?
Is it over? That’s the question everyone is asking about both major crises, the answer is more obvious for only the one. As it pertains to the pandemic, no, it is not. Still the early stages. The other crisis, the global dollar run? Not looking like it, either.

Fails Swarms Are Just One Part
There it was sticking

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Three Short Run Factors Don’t Make A Long Run Difference

March 25, 2020

There are three things the markets have going for them right now, and none of them have anything to do with the Federal Reserve. More and more conditions resemble the early thirties in that respect, meaning no respect for monetary powers. This isn’t to say we are repeating the Great Depression, only that the paths available to the system to use in order to climb out of this mess have similarly narrowed.
That’s what’s ultimately going to matter the most, not what comes next but what comes after what’s next. This is why it is paramount to pay close attention to longer term indications (and stocks are not among this group).
Those three positive factors begin with the intense buying interest in stocks including short covering.

US Treasury Curve, 2018-2020 –

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Stagnation Never Looked So Good: A Peak Ahead

March 20, 2020

Forward-looking data is starting to trickle in. Germany has been a main area of interest for us right from the beginning, and by beginning I mean Euro$ #4 rather than just COVID-19. What has happened to the German economy has ended up happening everywhere else, a true bellwether especially manufacturing and industry.
The latest sentiment figures from ZEW as well as IFO are sobering. Taking the former first, it had been quite buoyant last year on the false promises, I believe, of last year’s ECB QE introduction. The sentiment index had jumped positive though frustratingly in the same way it had falsely or prematurely done so in the past.

Germany ZEW Financial Market Survey, 2006-2020 – Click to enlarge
Survey respondents seem to love their “stimulus” even

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Is GFC2 Over?

March 18, 2020

Is it over? That’s the question everyone is asking about both major crises, the answer is more obvious for only the one. As it pertains to the pandemic, no, it is not. Still the early stages. The other crisis, the global dollar run? Not looking like it, either.
Stocks rebounded because of “major helicopter stimulus” or because that’s just what stocks do during times like these. Some of the biggest up days have followed, and are often found in between, the greatest down days.
But while shares were bought on Wall Street, other key markets were bought, too.
Starting with T-bills. The 4-week bill’s equivalent absolutely tumbled today, down to just 12 bps by the close of trading (and under 10 bps in the afterhours session). Still the big demand for collateral, the

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What Happens When Central Banks Buy Stocks (ETFs)? Well, We Already Know

March 13, 2020

Can we please dispense with all notions that monetary policy works? Specifically balance sheet expansion via any scale asset purchase programs. Nowhere has that been more apparent than Japan. Go back and reread all the promised benefits from BoJ’s Big Bang QQE that were confidently written in 2013. The biggest bazooka ever conceived has fallen short in every conceivable way.
Starting with the fact QQE remains ongoing approaching its seventh birthday. Over here in the real world, if you have to keep doing it there’s no way you can claim it was effective. Well, you can claim such a thing but normally you’d be laughed out of respectable society.
One part of QQE was the extra “Q”, the idea that the Japanese central bank wouldn’t be limited by either quantities or

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(Almost) Everything Sold Off Today

March 12, 2020

The eurodollar curve’s latest twist exposes what’s behind the long end. To recap: big down day in stocks which, for the first time in a while, wasn’t accompanied by massive buying in longer maturity UST’s. Instead, these were sold, too. Rumors of parity funds liquidating were all over the place, which is consistent with this curve behavior.
Let’s start with eurodollar futures; the curve had absolutely collapsed up to Monday. It was remarkable even though not unexpected. We haven’t seen this kind of behavior since 2009 (I’m not making any comparisons, just noting the abnormality).

Eurodollar Futures Curve, 2018-2024 – Click to enlarge
For those who don’t just blindly swallow Jay Powell’s message and cling still to the concept of the BOND ROUT!!!!, there’s

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Low Rates As Chaos, Not ‘Stimulus’

March 10, 2020

Basic recession economics says that when you end up with too much of some commodity, too much inventory that you can’t otherwise sell, you have to cut the price in order to move it. Discounting is a feature of those times. What about a monetary panic? This might sound weird, but same thing.
In other words, if you have too much cash (stay with me) and not enough takers, then the price you’ll accept to lend that cash must fall to accommodate the lack of demand.
How can that possibly be consistent with a bank panic, you ask?
An interest rate declining during a monetary crisis is the last thing you would expect – but only because Economics has done such a poor job of keeping up with the way the monetary world actually works.
It’s actually not that difficult to

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Like Repo, The Labor Lie

March 7, 2020

The Federal Reserve has been trying to propagate two big lies about the economy. Actually, it’s three but the third is really a combination of the first two. To start with, monetary authorities have been claiming that growing liquidity problems were the result of either “too many” Treasuries (haven’t heard that one in a while) or the combination of otherwise benign technical factors.
The other one has been about this epically tight labor market, which, Jay Powell points out, should keep the US economy on track whatever any minor fallout from the first problem or anything else in between.
Putting those two together you end up with a completed recovery and economic boom.
That’s the third lie. An awesome labor market which was given the space to materialize because

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Take Your Pick of PMI’s Today, But It’s Not Really An Either/Or

March 5, 2020

Take your pick, apparently. On the one hand, IHS Markit confirmed its flash estimate for the US economy during February. Late last month the group had reported a sobering guess for current conditions. According to its surveys of both manufacturers and service sector companies, the system stumbled badly last month, the composite PMI tumbling to 49.6 from 53.3 in January.
Today’s update to that flash estimate with more survey responses in hand validated the 49.6.

PMI’s & GDP, 2012-2020 – Click to enlarge

IHS Markit US Manufacturing, 2012-2020 – Click to enlarge
On the other hand, the ISM’s Non-manufacturing PMI surged ahead. According to this other outfit, the services part of the US economy is rebounding nicely from weakness last fall. Up to 57.3 for

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The Greenspan Moon Cult

March 5, 2020

Taking another look at what I wrote about repo and the latest developments yesterday, it may be worthwhile to spend some additional time on the “why” as it pertains to so much determined official blindness, an unshakeable devotion to otherwise easily explained lunar events.
The short version: monetary authorities as well as the “experts” describe almost perfectly risk averse behavior among the central money dealing system in outbreaks like September’s repo – but then bend over backward trying to come up with any other kind of explanation for it.
The problem must be some complicated stew of otherwise benign technical issues because there’s no possible way, they tell themselves, it can be anything else. Not with bank reserves abundantly over a trillion (now

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A Day For Rate Cuts

March 3, 2020

Well, that wasn’t he had in mind. The whole point of a rate cut, any rate cut let alone an emergency fifty, is to signal especially the stock market that the Fed is in the business of…something. The public has been led, by and large, to assume that something good happens when the Fed Chair shows up on TV.
If you ask anyone to be specific, however, they can’t really answer you beyond the primitive superstition of low rates being especially beneficial to borrowers. How do lower borrowing costs help when the borrower like the lender is seized up with fear? Don’t answer that because you aren’t supposed to ask the question.
The stock market seems to have finally managed one of those OH SH$# moments.
The first rule of central banking is to not make a bad situation

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