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Jeffrey P. Snider

Jeffrey 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 Snider

You Don’t Have To Take My Word For It About Eliminating QE

4 days ago

You don’t have to take my word for it. QE doesn’t work and it never has. That’s not just my assessment, pull out any chart of interest rates for wherever gets the misfortune of having been wasted with one of these LSAP’s. If none handy, then just read what officials and central bankers write about their own programs (or those of their close and affectionate counterparts).
After nearly a decade of Abenomics in Japan, the latest Japanese Prime Minister Fumio Kishida is publicly expressing his desire to move on from it. Run away at all speed. Of its purported three arrows, the Bank of Japan’s QQE was by far its biggest – in theory.

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So much “money printing”, even Paul Krugman had been impressed.
In practice, it always ends up with something different. Kishida is

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The Curve Is Missing Something Big

7 days ago

What would it look like if the Treasury market was forced into a cross between 2013 and 2018? I think it might be something like late 2021. Before getting to that, however, we have to get through the business of decoding the yield curve since Economics and the financial media have done such a thorough job of getting it entirely wrong (see: Greenspan below).
And before we can even do that, some recent housekeeping at the front of the curve where bill lives. Treasury bills have been in (our) spotlight the entirety of this particular calendar year for good and obvious reasons.
Debt ceiling, dealers, monetary drama around every bend; to put it briefly, there’s been a serious shortage of the best of the best of the best collateral (for repo as well as derivatives).

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Far Longer And Deeper Than Just The Past Few Months

8 days ago

Hurricane Ida swept up the Gulf of Mexico and slammed into the Louisiana coastline on August 29. The storm would continue to wreak havoc even as it weakened the further inland it traversed. By September 1 and 2, the system was still causing damage and disruption into the Northeast of the United States.
While absolutely tragic for those who suffered its blow, in economic terms this means that any weakness exhibited by whichever economic account during both August and September will be blamed on Ida’s loitering. Since it did so at the end of the one and the beginning of the other, the tropics can take the heat off cooling delta COVID case counting.

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According to the Federal Reserve, US Industrial Production declined by a large 1.3% in September 2021 from August –

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Inflating Chinese Trade

13 days ago

There was never really any answer given by the Chinese Communists for why their own export data diverged so much from other import estimates gathered by its largest trading partners. Ostensibly different sides of the same thing, it’s not like anyone asked Xi Jinping to weigh in; they report what numbers they have and consider them authoritative.
However, the United States’ Census Bureau’s tallies of China-made goods entering this country used to track very closely with China’s General Administration of Customs (GAC) trade data overall (for all regions). This made sense given how trade is closely tied together by eurodollar conditions worldwide.
If China’s exporting a lot more to the US, almost certainly they’re shipping practically the same everywhere else (the

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Perfect Time To Review What Is, And What Is Not, Inflation (and why it matters so much)

14 days ago

It is costing more to live and be, so naturally people are looking for who it is they need to blame. Maybe figure out some way to stop it. You know and feel for the basics since everyone’s perceptions begin with costs of just living. This is what makes the subject of inflation so difficult, even more so in the era of QE.
Money printing, duh.
By clarifying the situation – demonstrating over and over how there is no money printing therefore there can’t be inflation – we aren’t saying that prices aren’t rising. They obviously are. But by dispassionately analyzing the situation given its clear lack of any monetary basis, what we are doing is pointing out what instead must be responsible for driving costs of living higher.
And what that means for the future.

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If it

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The Great Eurodollar Famine: The Pendulum of Money Creation Combined With Intermediation

15 days ago

It was one of those signals which mattered more than the seemingly trivial details surrounding the affair. The name MF Global doesn’t mean very much these days, but for a time in late 2011 it came to represent outright fear. Some were even declaring it the next “Lehman.” While the “bank” did eventually fail, and the implications of it came to be systemic, those overly melodramatic descriptions actually served to downplay the event in public imagination.
The world didn’t outwardly fall apart when MF Global did, so it must not have been worth remembering.
Underneath those histrionics was hidden the last hurrah, of sorts, for what had been left of the pre-crisis monetary system. The first Global Financial Crisis (GFC1) wasn’t really subprime mortgages, rather those

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For The Love Of Unemployment Rates

15 days ago

Here we are again. The labor force. The numbers from the BLS are simply staggering. During September 2021, the government believes it shrank for another month, down by 183,000 when compared to August. This means that the Labor Force Participation rate declined slightly to 61.6%, practically the same level in this key metric going back to June.
Last June.
These millions, yes, millions (see: below), are being excluded from the official labor force therefore unemployment rate because they admit to the government’s data collectors they haven’t looked for work at any time during the last four weeks.
The simplest, most intuitive reason to explain why is that those keeping themselves out of the labor force – like in 2017-18 – understand the macro situation in a way that

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Tapering Or Calibrating, The Lady’s Not Inflating

20 days ago

We’ve got one central bank over here in America which appears as if its members can’t wait to “taper”, bringing up both the topic and using that particular word as much as possible. Jay Powell’s Federal Reserve obviously intends to buoy confidence by projecting as much when it does cut back on the pace of its (irrelevant) QE6.
On the other side of the Atlantic, Europe’s central bank will be technically be doing the same thing likely at the same time. Except, Christine Lagarde said early last month on behalf of her ECB, “The lady isn’t tapering.” It was a cringeworthy reference to former UK Prime Minister Margaret Thatcher’s “the lady’s not for turning” which back in 1980 was all about radiating self-assurance in the latter’s agenda.
Make no mistake; Lagarde’s

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What’s The Real Downside To Some of These Key Commodities?

22 days ago

Last night, Autodata reported its first estimates for September auto sales in the US. According to its own as well as those compiled by the Bureau of Economic Analysis (the same government outfit which keeps track of GDP), vehicle sales have been sliding overall ever since April. For a couple months in the middle of Uncle Sam’s helicopter-fed frenzy, the number of vehicle units had surged to a high of more than 18 million (seasonally-adjusted annual rate) in both datasets.
It’s been all downhill ever since, the numbers dropping to just barely 13 million (again, both) during August. For September, though, Autodata’s newly released figure was an astoundingly low 9.66 million.
How low is that? COVID-level low; bottom of the Great “Recession” territory. Off the (my)

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Surprise: It Isn’t Consumers Keeping American Factories Busy

22 days ago

US factories are humming along, constrained only by supply issues which might occasionally limit production. That’s the story, anyway. There’s too much business because of them, manufacturers taking in only more orders by the day leaving them struggling to catch up.
But what kind of stuff is it that is being ordered from our nation’s factories?
Without thinking too much about it, you’d probably say that they’re ridiculously busy trying as best as possible to fill demand for consumer goods. After all, federal government helicopters delivered hundreds of billions right into consumer pockets and then right out the door to Amazon.com.
Except, no. According to the Census Bureau, it is not consumer goods which are making such massive waves in production. On the

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More About Less New Orders

25 days ago

The inventory saga, planetary in its reach. As you’ve heard, American demand for goods supercharged by the federal government’s helicopter combined with a much more limited capacity to rebound in the logistics of the goods economy left a nightmare for supply chains. As we’ve been writing lately, a highly unusual maybe unprecedented inventory cycle resulted (creating “inflation”).
The worse the shipping snafus, the more was ordered and piled into it – if for no other reason than to increase the odds of receiving something out of the supply mess particularly before the upcoming Christmas holiday almost everyone believes will be total gangbusters.
Believed?

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On the other hand, should it not go so smoothly on the demand side, then we’d expect to see softening

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An Economy Dividing By Inventory And Labor

27 days ago

Is it delta COVID? Or the widely reported labor shortage? Something has created a soft patch in the presumed indestructible US economy still hopped up on Uncle Sam’s deposits made earlier in the year. And yet, there’s a nagging feeling over how this time, like all previous times, just might be too good to be true, too.
To start with, the rebound from last year’s recession is decidedly, maybe even uniquely uneven. Not just explosive goods sector vs. moribund services, there’s also a divide between bigger businesses and small (what are left of them), and then finally, most importantly, truly vast differences the US goods sector from practically everywhere else in the world.

Taking account of the first two of those, recent polling data from Alignable came up with

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Revisiting The Last Overhang

28 days ago

One reason why I still believe the US most likely would have entered a recession at some point in 2020 even without COVID wasn’t just the yield curve inversion that popped up several months before then. In August of 2019, the small part of the Treasury curve most people pay attention to (2s10s) did send out that dreaded signal, suggesting already to expect contraction in the intermediate term ahead of then.
But there was more to it than that, much moving in the same way, the same idea and general fear being picked up in real economic data, too, consistent with those upside down calendar spreads (other parts of the yield curve had inverted months before).

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There had been serious weakness around the rest of the world (Euro$ #4) which was only catching up to the

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All Eyes On Inventory

September 24, 2021

You’ve heard of the virtuous circle in the economy. Risk taking leads to spending/investment/hiring, which then leads to more spending/investment/hiring. Recovery, in other words.
In the old days of the 20th century, quite a lot of the circle was rounded out by the inventory cycle. Both recession and recovery would depend upon how much additional product floated up and down the supply chain. Deflation, too.
On the contraction side, demand might fall off a bit for whatever reason(s), retailers getting stuck with a small inventory overhang. If they think it more than temporary, or don’t have the internal cash to finance it, the retail level scales back pushing inventory to wholesalers who then cut orders from producers.
Serious enough, producers begin to cut back

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August Retail Sales Surprise To The Upside, Because They Were Down?

September 17, 2021

According to the movie The Princess Bride, the worst classic blunder anyone can make is to get involved in a land war in Asia. No kidding. The second is something about Sicilians and death. There is also, I’ve come to learn, an unspoken third which cautions against chasing down and then trying to break down seasonal adjustments in economic data.
Some things are best left just as they are published.

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The Census Bureau today released its estimates for retail sales. Most pay attention only to the seasonally-adjusted version which was surprisingly positive for August 2021 (if after an unusually large downward revision to July). It was widely expected sales would continue to fade, another monthly move downward nonetheless as the last Uncle Sam helicopter likewise

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August Retail Sales Surprise To The Upside, Because They Were Down?

September 17, 2021

According to the movie The Princess Bride, the worst classic blunder anyone can make is to get involved in a land war in Asia. No kidding. The second is something about Sicilians and death. There is also, I’ve come to learn, an unspoken third which cautions against chasing down and then trying to break down seasonal adjustments in economic data.
Some things are best left just as they are published.

.
The Census Bureau today released its estimates for retail sales. Most pay attention only to the seasonally-adjusted version which was surprisingly positive for August 2021 (if after an unusually large downward revision to July). It was widely expected sales would continue to fade, another monthly move downward nonetheless as the last Uncle Sam helicopter likewise

Read More »

What’s Real Behind Commodities

September 7, 2021

Inflation is sustained monetary debasement – money printing, if you prefer – that wrecks consumer prices. It is the other of the evil monetary diseases, the one which is far more visible therefore visceral to the consumers pounded by spiraling costs of bare living. Yet, it is the lesser evil by comparison to deflation which insidiously destroys the labor market from the inside out.
You see inflation around you; anyone can only tell deflation by hopefully noticing and appreciating what must instead be absent (a poignant reminder for US Labor Day).
People with the means don’t sit idly by for either affliction.As to the former, inflation, as noted here investments and activity will flow from the financial to the real. Commodities do particularly well and in that

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Taper *Without* Tantrum

August 17, 2021

Whomever actually coined the term “taper”, using it in the context of Federal Reserve QE for the first time, it wasn’t actually Ben Bernanke. On May 22, 2013, the central bank’s Chairman sat in front of Congressman Kevin Brady and used the phrase “step down in our pace of purchases.” No good, at least from the perspective of a media-driven need for a snappy one-word summary.
Taper. Then the tantrum.
Except, no, it wasn’t sulking rage over the prospects for fewer bond purchases so much as positive excitement paced by the slightly better potential for a real recovery.

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For the first time since maybe 2010, in May 2013, the bond market got onto the same page as to what Bernanke was telling Brady:
CHAIRMAN BERNANKE. If we see continued improvement and we have

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CPI’s At Fives Yet Treasury Auctions

August 12, 2021

A momentous day, for sure, but one lost in what would turn out to be a seemingly endless sea of them. October 8, 2008, right in the thick of the world’s first global financial crisis (how could it have been global, surely not subprime mortgages?) the Federal Reserve took center stage; or tried to. Having bungled Lehman, botched AIG, and then surrendered to Treasury which then screwed up TARP, the world’s entire financial edifice was burning down while US policymakers (they aren’t central bankers) debated just how certain they were IOER would put what they concluded was a badly needed floor under a federal funds market afflicted by a sudden overabundance of reserves.
No, I am not making this up; worst crisis since 1929 and the Fed’s people were thinking a whole

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A Real Example Of Price Imbalance

August 11, 2021

It’s not just the trade data from individual countries. Take the WTO’s estimates which are derived from exports and imports going into or out of nearly all of them. These figures show that for all that recovery glory being printed up out of Uncle Sam’s checkbook, the American West Coast might be the only place where we can find anything resembling Warren Buffett’s red-hot claim.
That’s a problem, and much bigger one that may otherwise appear especially given current prices.
In terms of estimated trade volume, the actual tonnage of goods being transited across oceans, destination one of the world’s vast port complexes, the latest numbers seem quite good; if only in the same way as all recent statistics have.
Base effects showing up when comparing to the previous

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The Two Big Anniversaries of August: The Lost Decade (plus) Of The ‘Fiat’ Half Century

August 10, 2021

As my esteemed podcast co-host Emil Kalinowski has already mentioned (recurrently), we have, this year, two major anniversaries during these dog days of summer circled on our calendar. Today is, obviously, August 9 and for anyone the slightest familiar with the eurodollar story, that date is seared into their consciousness for as long as it will take to rebuild from the ashes created by the monetary fire lit that day.
It has been, sadly, fourteen long years and only incremental signs of progress are visible toward more completely understanding what happened on August 9, 2007, why what followed did follow, as well as how it came to be this way in the first place.

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Getting through those is required first before ever tackling what next to do to fix this mess.
In

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Sophistry Dressed (as) Reallocation

August 4, 2021

Stop me if you’ve heard this before:
About US$275 billion (about SDR 193 billion) of the new allocation will go to emerging markets and developing countries, including low-income countries.
This from the IMF’s July 30, 2021, statement gleefully announcing its governing body(ies) has(d) agreed to a general allocation of $650 billion in SDR’s, biggest in history, according to existing quotas. The purpose: “to boost existing liquidity.”
This really does sounds very familiar:
The equivalent of nearly US$100 billion of the general allocation will go to emerging markets and developing countries, of which low-income countries will receive over US$18 billion.
The latter taken from the IMF’s August 13, 2009, statement giddily announcing its governing body(ies) has(d)

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Golden Collateral Checking

July 27, 2021

Searching for clues or even small collateral indications, you can’t leave out the gold market. We’ve been on the lookout for scarcity primarily via the T-bill market, and that’s a good place to start, yet looking back to last March the relationship between bills and bullion was uniquely strong. It’s therefore a persuasive pattern if or when it turns up again.
To recap the main push of last year’s acute dollar shortage:
Over the past several dreadful weeks of liquidations the pattern has largely repeated.
During the early morning hours, before regular trading opens, yesterday’s repo transactions are unwound. Under normal and even less-than-ideal conditions these are just rolled over.
Not any more. Collateral calls mean in some cases using gold as a last resort

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Eurodollar University’s Making Sense; Episode 89, Part 2: Let’s Crack China’s RRR Code

July 24, 2021

[unable to retrieve full-text content]89.2 China Warns World of (Next?) Dollar Disorder. The People’s Bank of China lowers its bank Required Reserve Ratio to get money into a slowing economy. A lowered RRR means that there aren’t enough (euro)dollars flowing into China. Why? Because there aren’t enough (euro)dollars in the world. A lower RRR is a warning for the whole world.

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Do Rising ‘Global’ Growth Concerns Include An Already *Slowing* US Economy?

July 23, 2021

[unable to retrieve full-text content]Global factors, meaning that the wave of significantly higher deflationary potential (therefore, diminishing inflationary chances which were never good to begin with) in global bond yields the past five months have seemingly focused on troubles brewing outside the US. Overseas turmoil, it was called back in 2015, leaving by default a picture of relative American strength and harmony.

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Lower Yields And (fewer) Bills

July 21, 2021

Back on February 23, Federal Reserve Chairman Jay Powell stopped by (in a virtual, Zoom sense) the Senate Banking Committee to testify as required by law. In the Q&A portion, he was asked the following by Montana’s Senator Steve Daines:
SENATOR DAINES. I just was looking at the T bill chart and noticing since the 1st of February, the one month rates have dropped in half from 0.06 to today 0.03, two months went from 0.07, to 0.02. We’re starting to get into that realm here of possibly negative rates, which we saw of course briefly a year ago, March.
Just want to get your thoughts on that. Is there any issues here of shortage collateral? What’s driving this as you’re watching some of these short-term rates approaching zero?
If your jaw has hit the floor, yes, a US

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Inching Closer To Another Warning, This One From Japan

July 20, 2021

Central bankers nearly everywhere have succumbed to recovery fever. This has been a common occurrence among their cohort ever since the earliest days of the crisis; the first one. Many of them, or their predecessors, since this standard of fantasyland has gone on for so long, had caught the malady as early as 2007 and 2008 when the world was only falling apart.
The disease is just that potent; delirium the chief symptom, especially among the virus’ central banker variant.
One need only review the ECB’s absurd performance beginning just weeks before Lehman in order to understand just how this sickness totally wrecks (already limited) official faculties.
On July 3, 2008 (July 2008!), Europe’s central bank raised its benchmark interest rate.
With other monetary

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And Now Three Huge PPIs Which Still Don’t Matter One Bit In Bond Market

July 15, 2021

And just like that, snap of the fingers, it’s gone. Without a “bad” Treasury auction, there was no stopping the bond market today from retracing all of yesterday’s (modest) selloff and then some. This despite the huge CPI estimates released before the prior session’s trading, and now PPI figures that are equally if not more obscene.
The BLS reports today that its main producer price index (PPI), the one for finished goods, was up 9.19% year-over-year in June 2021. That was a bit more than the 8.38% gain in May, but, and you don’t hear this much, still below the peak of 9.42% set back in April.
The hot inflation continues, sure, but it’s no longer accelerating in its widest set.

U.S. PPI Commodities Finished Goods Core YoY, Jan 2001 – Jan 2021 – Click to

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Third CPI In A Row, Yet All Eyes On That 30s Auction

July 14, 2021

Three in a row, huge CPI gains. According to the BLS, headline consumer price inflation surged 5.39% (unadjusted) year-over-year during June 2021. This was another month at the highest since July 2008 (the last transitory inflationary episode). The core CPI rate gained 4.47% last month over June last year, the biggest since November 1991.

U.S. Core CPI, Jan 1990 – Jan 2021(see more posts on U.S. Core CPI, ) – Click to enlarge
More impressive (or worrisome, depending upon your view) was that the monthly change for the core rate was up again at 88 bps, beating expectations and among the highest in decades itself. This follows a 74 bps m/m increase in May (from April) after the biggest, a 92 bps jump in April (from March). That’s a three-month change of 2.55%,

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RRP No Collateral Coincidences As Bills Quirk, Too

July 12, 2021

So much going on this week in the bond market, it actually overshadowed the ridiculous noise coming from the Fed’s reverse repo. Some maybe too many want to make a huge deal out of this RRP if only because the numbers associated with it have gotten so big. To end Q2 2021, financial counterparties “lent” just about $1 trillion to the Fed.
Holy cow! A trillion! There’s way too much money!
Eh.
The RRP, especially around its more informative margins, has little to do with too much money and almost everything to do with still too little collateral. The correlation with anti-reflation from bills to notes to bonds leaves little other interpretation. The latter matters so much more than the former, as proved so many times since Bear Stearns I couldn’t easily list them

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