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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

European Data: Much More In Store For Number Four

8 days ago

It’s just Germany. It’s just industry. The excuses pile up as long as the downturn. Over across the Atlantic the situation has only now become truly serious. The European part of this globally synchronized downturn is already two years long and just recently is it becoming too much for the catcalls to ignore. Central bankers are trying their best to, obviously, but the numbers just aren’t stacking up their way.
We’ve seen all this before, repeatedly. Part of the denial is about the nature of these things. The eurodollar’s squeeze is, at its root and most clearly at its beginning, a disinflationary pressure on industry.

It is pernicious in its own methodology, but also because it allows the official narrative this space for what sounds like a plausible rebuff.

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US Sales and Production Remain Virus-Free, But Still Aren’t Headwind-Free

8 days ago

The lull in US consumer spending on goods has reached a fifth month. The annual comparisons aren’t good, yet they somewhat mask the more recent problems appearing in the figures. According to the Census Bureau, total retail sales in January rose 4.58% year-over-year (unadjusted). Not a good number, but better, seemingly, than early on in 2019 when the series was putting out 3s and 2s.
As has been the pattern in these things, global synchronized downturns, the middle part of last year sets up the annual numbers on the back end. Seasonally-adjusted, retail sales are on a losing streak that dates back to September – the very month when, we keep being told, everything started to get better (except the repo market).
Beginning with September 2019 and dating through

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You Shouldn’t Miss The Cupom

11 days ago

I actually wanted to focus on this yesterday but confirmation wasn’t forthcoming until today. So, it ended up being a broader note on the dollar which only included some mention of Brazil in passing. Still a worthwhile couple of minutes.
There were rumors that Banco (central) do Brasil was intervening or was going to intervene in its local currency markets, which may be an important signal. More of swaps that aren’t really currency swaps (which you can read about here). In lieu of reading the whole thing, here’s a brief summary:
The Banco’s “swaps”, then, act only on implied future dollar rates, increasing the cupom cambial (the onshore dollar rate implied by currency futures and spreads with dollar rates).
In other words, since the central bank “swap” reduces

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As the Data Comes In, 2019 Really Did End Badly

13 days ago

The coronavirus began during December, but in its early stages no one knew a thing about it. It wasn’t until January 1 that health authorities in China closed the Huanan Seafood Wholesale Market after initially determining some wild animals sold there might have been the source of a pneumonia-like outbreak. On January 5, the Wuhan Municipal Health Commission issued a statement saying it wasn’t SARS or MERS, and that the spreading disease would be probed.
In other words, you can’t blame December on the pandemic. COVID-19 is a 2020 thing.
We aren’t supposed to be concerned with the end of 2019 anyway according to the popular economic narrative.
This is the one, widely repeated, that says the global economy finished up last year the right way. In whole and in most

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Two Years And Now It’s Getting Serious

14 days ago

We knew German Industrial Production for December 2019 was going to be ugly given what deStatis had reported for factory orders yesterday. In all likelihood, Germany’s industrial economy ended last year sinking and maybe too quickly. What was actually reported, however, exceeded every pessimistic guess and expectation – by a lot.
IP absolutely plummeted in the final month of 2019. Compared to the prior December, the index was down an alarming 6.7%. Minus seven doesn’t sound too until look below and realize that Germany’s worst month during the 2012 recession had meant -2.8% for IP.

Europe Industrial Production, 2007-2019(see more posts on Eurozone Industrial Production, ) – Click to enlarge
December’s updated figure is comparable to November…2008.


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COT Black: German Factories, Oklahoma Tank Farms, And FRBNY

16 days ago

I wrote a few months ago that Germany’s factories have been the perfect example of the eurodollar squeeze. The disinflationary tendency that even central bankers can’t ignore once it shows up in the global economy as obvious headwinds. What made and still makes German industry noteworthy is the way it has unfolded and continues to unfold. The downtrend just won’t stop.
According to Germany’s deStatis, factory orders in December 2019 were down sharply yet again. And it doesn’t matter how you look at them, seasonally adjusted or otherwise, in parts or at the whole, no bottom.
In the adjusted series, orders set a new low to finish out last year.

Germany Factory Orders, SA 2014-2019 – Click to enlarge
At a time when we were assured Europe’s QE would contribute

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Don’t Forget (Business) Credit

21 days ago

Rolling over in credit stats, particularly business debt, is never a good thing for an economy. As noted yesterday, in Europe it’s not definite yet but sure is pronounced. The pattern is pretty clear even if we don’t ultimately know how it will play out from here. The process of reversing is at least already happening and so we are left to hope that there is some powerful enough positive force (a real force rather than imaginary, therefore disqualifying the ECB) to counteract the negative tendencies in order to set them straight before it becomes too late.

Europe Real GDP, 1995-2019 – Click to enlarge
The European economy is right now skirting that fine line, as far as GDP is concerned.

European Economy, 2004-2019 – Click to enlarge

Lending Europe,

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History Shows You Should Infer Nothing From Powell’s Pause

23 days ago

Jay Powell says that three’s not a crowd, at least not for his rate cuts, but four would be. As usual, central bankers like him always hedge and say that “should conditions warrant” the FOMC will be more than happy to indulge (the NYSE). But what he means in his heart of hearts is that there probably won’t be any need.
Three should do the trick nicely.
And a lot of people, from what I can tell, believe him if not simply because he’s already stopped. The last two FOMC meetings have now passed without an additional rate action. If the economy was still under threat, Jay would have done something about it.
The lack of further movement is comforting in its own way.
It’s part of the idea wherein the central bank’s default setting is thought to always remain on the

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Three Straight Quarters of 2 percent, And Yet Each One Very Different

24 days ago

Headline GDP growth during the fourth quarter of 2019 was 2.05849% (continuously compounded annual rate), slightly lower than the (revised) 2.08169% during Q3. For the year, the Bureau of Economic Analysis (BEA) puts total real output at $19.07 trillion, or annual growth of 2.33% and down from 2.93% in 2018. Last year was weaker than 2017, the second lowest out of the six since 2013.
And that’s where the good news ends.

Eurodollar Disruption, Peaks & Troughs, 2011-2019 – Click to enlarge

Case Study in Missing Growth, 1983-2018 – Click to enlarge

The Real GDP Problem, 1988-2018.
Underneath the headline, not all that far into the details is a growing mess. To begin with, the major contributor to Q4 “growth” was the unusually large decline in imports

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With No Second Half Rebound, Confirming The Squeeze

28 days ago

It’s a palpable impatience. Having learned absolutely nothing from the most recent German example, there’s this pervasive belief that if the economy hasn’t fallen apart by now it must be going the other way. The right way. Those are the only two options for mainstream analysis (which means it isn’t analysis).
You can see it in how everything is framed. When first presented with this “unexpected” globally synchronized downturn early on in 2019 (they ignored all the market warnings and data throughout 2018), it was dismissed as the product of “transitory” factors.

Germany ZEW Financial Market Survey, 2006-2019 – Click to enlarge
Once they dissipated it would be all clear. Anyone remember the constant projections for a second half rebound?
The second half has

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The Big And Small of Leading Japan

January 23, 2020

In the middle of 2018, Japan, they said, was riding so high. Gliding along on the tidal wave of globally synchronized growth, Haruhiko’s courage and more so patience had finally delivered the long-promised recovery. The Japanese economy had healed to a point that its central bank officials believed it time to wean the thing off decades of monetary “stimulus.” They even publicly speculated on just when QQE would be terminated.
At least that was the story, one which was widely accepted without question and broadcast that way. In June 2018, for example, the Washington Post was eager to tell us all about Japan’s successes.
No longer would the pitiful system stand in as the primary example of economic failure, replaced as “the rare cautionary tale that’s turned into a

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China Enters 2020 Still (Intent On) Managing Its Decline

January 21, 2020

Chinese Industrial Production accelerated further in December 2019, rising 6.9% year-over-year according to today’s estimates from China’s National Bureau of Statistics (NBS). That was a full percentage point above consensus. IP had bottomed out right in August at a record low 4.4%, and then, just as this wave of renewed optimism swept the world, it has rebounded alongside it.
Rather than suggest the global economy is picking up, or ended last year in a “good place”, when placed in context of the rest of China’s economic numbers we are left with the impression of an isolated instance.

China Industrial Production, 1998-2019(see more posts on China Industrial Production, ) – Click to enlarge
Perhaps a sugar high as any number of firms rushed to overproduce

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Germany, Maybe Europe: No Signs Of The Bottom

January 19, 2020

For anyone thinking the global economy is turning around, it’s not the kind of thing you want to hear. Germany has been Ground Zero for this globally synchronized downturn. That’s where it began, meaning first showed up, all the way back at the start of 2018. Ever since, the German economy has been pulling Europe down into the economic abyss along with it, being ahead of the curve in signaling what was to come for the whole rest of the global economy.
The ECB, many complained, had panicked in Mario Draghi’s final act. Another QE that critics charged was unnecessary. Draghi, though, being stung by the “unexpected” decline warned that it shouldn’t be taken so lightly.
Protracted was the word he specifically used.
And it’s interesting the contradiction of sorts

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Inflation, But Only At The Morgue

January 18, 2020

Why is everyone so angry? How can socialism possibly be on such a rise, particularly among younger people around the world? Why are Americans suddenly dying off?
According to one study, two-thirds of millennials are convinced they are doing worse when compared to their parents’ generation. Sixty-two percent say they are living paycheck to paycheck, with no savings and no way to get any (though they also tend to “overspend” when compared to other age groups).
Worst of all, premature deaths.
For decades, the average lifespan would rise as if it was preordained, that technological progress especially in the United States would mean its citizens would live longer, healthier, and happier lives. Catching everyone off-guard, mortality rates began to rise first a little

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De-dollarization By Default Is Not What You Might Think

January 17, 2020

Last month, a group of central bank governors from across the South Pacific region gathered in Australia to move forward the idea of a KYC utility. If you haven’t heard of KYC, or know your customer, it is a growing legal requirement that is being, and has been, imposed on banks all over the world. Spurred by anti-money laundering efforts undertaken first by the European Union, more and more governments are forcing global banks to take part.
KYC is a particularly onerous demand. Essentially a compliance function, the costs are high given the huge administrative difficulties that often amount to repetitive manual tasks in the back office. Tracking customer accounts from all over the world is easier said than done.
Making that information transmittable from one

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Clarida Picks Up Some Data

January 16, 2020

I should know better than to make declarative all-or-none statements like this. I said there isn’t any data which comports with the idea of a global turnaround, this shakeup in sentiment which since early September has gone right from one extreme to the other. Recession fears predominated in summer only to be (rather easily) replaced by near euphoria (again).
Narrative yes, sentiment maybe, data nope. The vast majority of the economic accounts, anyway. There are a few which might suggest things are turning around.
Another one (not quite two) was added to the positive side of the divide late last night.
The Baltic Dry Index (BDI) has had a rough run of late. Shipping rates on the most important commodity routes, which the index measures, have been down sharply

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Very Rough Shape, And That’s With The Payroll Data We Have Now

January 15, 2020

The Bureau of Labor Statistics (BLS) has begun the process of updating its annual benchmarks. Actually, the process began last year and what’s happening now is that the government is releasing its findings to the public. Up first is the Household Survey, the less-watched, more volatile measure which comes at employment from the other direction. As the name implies, the BLS asks households who in them is working whereas the more closely scrutinized Establishment Survey queries establishments as to how many are on their payrolls.
The benchmark update for the Household Survey was negligible. There were only minor alterations to the data in both directions, leaving the series for its January 2020 benchmark in much the same place it was leaving off from the January

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Not Abating, Not By A Longshot

January 14, 2020

Since I advertised the release last week, here’s Mexico’s update to Industrial Production in November 2019. The level of production was estimated to have fallen by 1.8% from November 2018. It was up marginally on a seasonally-adjusted basis from its low in October.
That doesn’t sound like much, -1.8%, but apart from recent months this would’ve been the third worst result since 2009. Mexico has rarely experienced that kind of seemingly mild contraction. It signals how something has significantly changed since the middle of 2018.
Month-to-month changes aside, Mexican industry continues to paint a bleak picture of global activity.
Like Germany or Japan, Mexico’s economy especially its major manufacturing base (maquiladoras) is linked directly to exports and

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Global Headwinds and Disinflationary Pressures

January 11, 2020

I’m going to go back to Mexico for the third day in a row. First it was imports (meaning Mexico’s exports) then automobile manufacturing and now Industrial Production. I’ll probably come back to this tomorrow when INEGI updates that last number for November 2019.
For now, through October will do just fine, especially in light of where automobile production is headed (ICYMI, off the bottom of the charts).
Mexico is, as I’ve been writing this week, the presumed winner of trade wars.
You might be astounded by just how much the country and its economy is benefiting from companies leaving China. The Trump administration may not have equalized wage rates between Asia and the US, but it appears the tariffs are making it much harder to employ Chinese workers over

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The Real Trade Dilemma

January 9, 2020

When I write that there are no winners around the world, what I mean is more comprehensive than just the trade wars. On that one narrow account, of course there are winners and losers. The Chinese are big losers, as the Census Bureau numbers plainly show (as well as China’s own). But even the winners of the trade wars find themselves wondering where all the spoils are.
They may be winners because of it but somehow they all still end up in the losing column.
Late in 2018, in response to the Trump Administration imposing large tariffs on certain Chinese-made goods, GoPro announced that it was going to shift a large amount of its production out of China.
That was, after all, the whole point; if cheap labor and unfair trade practices had stolen manufacturing jobs

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More Trends That Ended 2019 The Wrong Way

January 8, 2020

Auto sales in 2019 ended on a skid. Still, the year as a whole wasn’t nearly as bad as many had feared. Last year got off on the wrong foot in the aftermath of 2018’s landmine, with auto sales like consumer spending down pretty sharply to begin it. Spending did rebound in mid-year if only somewhat, enough, though, to add a little more to the worst-is-behind-us narrative which finished off 2019.
That’s the version that is being described, Jay Powell’s underlying labor market strength supporting everything to bring it all back from the brink.
What seems to be happening, however, is the sharper slowdown may have been pushed into 2020 instead.
A question of timing perhaps more than depth. Looking at it from the perspective of the auto industry, it isn’t following

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Manufacturing Clears Up Bond Yields

January 7, 2020

Yesterday, IHS Markit reported that the manufacturing turnaround its data has been suggesting stalled. After its flash manufacturing PMI had fallen below 50 several times during last summer (only to be revised to slightly above 50 every time the complete survey results were tabulated), beginning in September 2019 the index staged a rebound jumping first to 51.1 in that month.
Subsequent months of data had continued the trend. By November, the PMI registered 52.6 and solidly on the upswing. The trend was expected to continue in December, but both the flash and now the full reading have stuck at 52.4.
One month obviously doesn’t make any kind of trend, nor by itself indicate anything conclusive.

Federal Reserve Regional Manu. PMI, 2016-2019 – Click to

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2019: The Year of Repo

January 4, 2020

The year 2019 should be remembered as the year of repo. In finance, what happened in September was the most memorable occurrence of the last few years. Rate cuts were a strong contender, the first in over a decade, as was overseas turmoil. Both of those, however, stemmed from the same thing behind repo, a reminder that September’s repo rumble simply punctuated.
To be frank, every year should be the year of repo. But by and large nobody cares because no one can see it. They don’t have an immediate reason shoved in their faces for why that would be the case. For the first time since 2008, last year they were given that justification.

And all its attention was squandered – twice – on the wrong part of it.
Milton Friedman was exactly right. Because central banks

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A Sour End To The 2010’s Doesn’t Have To Spoil The Entire 2020’s

January 1, 2020

It has been perhaps the most astonishing divergence in the first two decades of 21st century history. In late 2017, Western economic officials (mostly central bankers) were taking their victory laps. They took great pains to tell the world it was due to their profound wisdom, deep courage, and, most of all, determined patience, that they had been able to see their policies through to the light of day (no thanks to voters around the world).
This set up the third decade of this century for a return to normalcy in sharp contrast to the deep struggles throughout its second. Before he was nominated as President Trump’s pick to replace Janet Yellen as the Federal Reserve’s Chairman, FOMC Governor Jerome “Jay” Powell summed up globally synchronized growth as only he

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Everything Comes Down To Which Way The Dollar Is Leaning

December 21, 2019

Is the global economy on the mend as everyone at least here in America is now assuming? For anyone else to attempt to answer that question, they might first have to figure out what went wrong in the first place. Most have simply assumed, and continue to assume, it has been fallout from the “trade wars.”
That is a demonstrably false guess, one easily dispelled by the facts. A trade war produces winners from its losers. But we cannot find a single one. There have only been losers.
The most obvious culprit, therefore, is rather the dollar.
It goes up and everything else goes down. From trade volumes and economy to interest rates and even the stock market on several occasions. A rising dollar is good for no one. Even academic Economists (in certain places) have

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Latest European Sentiment Echoes Draghi’s Last Take On Global Economic Risks

December 19, 2019

While sentiment has been at best mixed about the direction of the US economy the past few months, the European economy cannot even manage that much. Its most vocal proponent couldn’t come up with much good to say about it – while he was on his way out the door. At his final press conference as ECB President on October 24, Mario Draghi had to acknowledge (sort of) how he is leaving quite the mess for Christine Lagarde.
Incoming data since the meeting in September confirm our previous assessment of a protracted weakness in euro area growth dynamics, the persistence of prominent downside risks and muted inflation pressures.
Everyone else has forgotten, but recall what the same guy was saying and not all that long ago.
Less than a year ago, in December 2018, while

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China Data: Something New, or Just The Latest Scheduled Acceleration?

December 18, 2019

The Chinese government was serious about imposing pollution controls on its vast stock of automobiles. The largest market in the world for cars and trucks, the net result of China’s “miracle” years of eurodollar-financed modernization, for the Chinese people living in its huge cities the non-economic costs are, unlike the air, immediately clear each and every day. A new set of relatively strict pollution controls was added in the second half of this year.
As is usual in these cases, manufacturers and retailers rushed to sell as much old inventory as possible before the regulations took effect. Price discounting was rumored to be massive in some places.
Everyone knew that car sales would jump as a result.
What China’s National Bureau of Statistics (NBS) reported

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A Repo Deluge…of Necessary Data

December 17, 2019

Just in time for more discussions about repo, the Federal Reserve delivers. Not in terms of the repo market, mind you, despite what you hear bandied about in the financial media the Fed doesn’t actually go there. Its repo operations are more RINO’s – repo in name only.
No, what the US central bank actually contributes is more helpful data. Since our goal is to use that data to produce the best possible, most accurate interpretation of the facts, the depth and details contained within the exhaustive Z1 series, the Financial Accounts of the United States, are, like TIC, invaluable.
To get to repo, though, we’ve got to start in credit.
The Z1 table for Depository Institutions (L110) breaks down the US banking system’s collective balance sheet. From it, we can get

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If The Best Case For Consumer Christmas Is That It Started Off In The Wrong Month…

December 17, 2019

Gone are the days when Black Friday dominated the retail calendar. While it used to be a somewhat fun way to kick off the holiday shopping season, it had morphed into something else entirely in later years. Scenes of angry shoppers smashing each other over the few big deals stores would truly offer, internet clips of crying children watching in horror as their parents transformed their local Walmart into Thunderdome.
Two shoppers enter, one shopper leaves…with the goodies.
Economists if they weren’t too busy trying to figure out why central bank bond buying doesn’t affect bond prices all that much might call this an increasing price sensitivity among American consumers.
It’s as if something big happened over the last decade or so to turn what used to be

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Lagarde Channels Past Self As To Japan Going Global

December 14, 2019

As France’s Finance Minister, Christine Lagarde objected strenuously to Ben Bernanke’s second act. Hinted at in August 2010, QE2 was finally unleashed in November to global condemnation. Where “trade wars” fill media pages today, “currency wars” did back then. The Americans were undertaking beggar-thy-neighbor policies to unfairly weaken the dollar.
The neighbor everyone though most likely to be sponged off of was Europe. The day after the Fed’s second launch, Lagarde loudly complained, “the euro bears the brunt of the move.”
The euro is clearly the variable of adjustment.
On the one hand, the dollar is going down with a monetary policy designed to that effect; on the other hand, the Chinese yuan is not floating freely, which means another currency has to

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