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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

Lower Yields And (fewer) Bills

7 days ago

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

8 days ago

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

13 days ago

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

14 days ago

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

16 days ago

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!
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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Bond Reversal In Japan, But Pay Attention To It In Germany

19 days ago

Yield curve control, remember that one? For a little while earlier this year, the modestly reflationary selloff in bonds around the world was prematurely oversold as some historically significant beginning to a massive, conclusive regime change. Inflation had finally been achieved across multiple geographies, it was widely repeated, and this would create problems, purportedly, as these various places would have to grapple with higher interest rates.
The idea behind YCC is simple enough: according to conventional theory, rising interest costs are a hindrance to recoveries and economic growth, choking off inflation before it gets to become beneficial enough. According to the theory.
Therefore, a central bank which declares and then buys bonds as rates are going up

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ISM’s Nasty Little Surprise Isn’t Actually A Surprise

21 days ago

Completing the monthly cycle, the ISM released its estimates for non-manufacturing in the US during the month of June 2021. The headline index dropped nearly four points, more than expected. From 64.0 in May, at 60.1 while still quite high it’s the implication of being the lowest in four months which got so much attention.
Consistent with IHS Markit’s estimates as well as the ISM’s Manufacturing PMI released last week, there are growing (confirmed) concerns that early on in Q2 2021 that might have been the best we’re going to see. This possibility was raised that much more by the nasty little surprise contained within both sets of the ISM PMI’s, manufacturing and non-manufacturing alike.

U.S. ISM Non-Manufacturing PMI, Employment, Jan 2017 – May 2021 – Click

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Anyone Remember That Whole SLR Cliff?

26 days ago

Does anyone remember the SLR “cliff?” Of course you don’t, because in the end it didn’t seem to make any difference. For a few weeks, it was kind of ubiquitous if only in the sense that it was another one of those deep plumbing issues no one seems able to understand (forcing all the “experts” to run to Investopedia in order write something up about it). Whatever this thing was and was going to be, it sounded ridiculously earth-shattering.
And then, poof, it was gone.
Banks had made a major deal out of it because, well, they don’t like it. Thus, while the world’s attention was fixed in this area, why not try to beat it back by hyping its negative potential? It was absolutely true that the SLR in this case was going to make holding safe and liquid instruments more

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A Clear Balance of Global Inflation Factors

28 days ago

Back at the end of May, Germany’s statistical accounting agency (deStatis) added another one to the inflationary inferno raging across the mainstream media. According to its flash calculations, German consumer prices last month had increased by the fastest rate in 13 years. Even using the European “harmonized” methodology (Harmonized Index of Consumer Prices, or HICP), inflation had reached 2.4% year-over-year which was the highest since 2012.

Europe HICP and Germany HICP, Jan 2007 – May 2021 – Click to enlarge
These numbers, of course, pale in comparison to their American counterparts (most recently the PCE Deflator). That’s a big part of the problem. Despite big numbers in Europe, they are nowhere near as big as the US. Put another way: inflation figures

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Inflation Isn’t Just The Outlier, The Inflation In It Is, Too

28 days ago

Following the same recent pattern as the BLS and its CPI, the Bureau of Economic Analysis’s (BEA) PCE Deflator ran up hotter in May 2021 than its already high increase during April. The latter’s headline consumer basket rose 3.91% year-over-year, its fastest pace since August 2008. The core rate, which excludes food and energy prices, accelerated to 3.39% from 3.11%, the highest since the early nineties.
Having gone through this for two consecutive months, the sticker shock has easily worn off even if the base effects haven’t yet. Still, there’s more price pressures than mere calendar comps, though not enough of them to make a compelling case for actual inflation.

PCE Deflator Fed, Jan 2017 – June 2021 – Click to enlarge
So far, it’s all transitory price

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Sure Looks Like Supply Factors

June 23, 2021

[unable to retrieve full-text content]If it walks like a duck and quacks like a duck, then it must be inflationary overheating. Or not? As more time passes and the situation further evolves, the more these recent price deviations conform to the supply shock scenario rather than a truly robust economy showing no signs of slowing down.

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The FOMC Accidentally Exposes Itself (Reverse Repo-style)

June 18, 2021

Initially, the dots got all the attention. Though these things are beyond hopeless, the media needs them to write up its account of a more fruitful monetary policy outcome because markets continue to discount that entirely. Dots look like inflationary success if possibly even now more likely, whereas yields and especially bills have (re)taken a more skeptical approach pricing almost no chance for it.
Buried in the FOMC minutiae on Wednesday was an upward adjustment first to IOER and then the RRP (each by 5bps, bringing the former to 15 and the latter to 5). Supposedly, “abundant” reserves continue to be “printed”, becoming awfully more abundant still, leaving policymakers the task to make sure “too much money” doesn’t spoil their policy range.

UST Yield Curve,

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The Inflation Emotion(s)

June 10, 2021

Inflation is more than just any old touchy subject in an age overflowing with crude, visceral debates up and down the spectrum reaching into every corner of life. It is about life itself, and not just quality. When the prices of the goods (or services) you absolutely depend upon go up, your entire world becomes that much more difficult. For those at the “bottom”, that much more unbearable (hello Communism!)
The real issue in that situation isn’t that narrow slice of rising prices, it’s the lack of economic growth which once made it better than palatable we had long ago taken for granted long since disappeared without official acknowledgement.

The Real GDP Problem, Jan 1988 – 2021 – Click to enlarge
This isn’t the only emotional plea attached to the topic.

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Rechecking On Bill And His Newfound Followers

April 9, 2021

The benchmark 10-year US Treasury has obtained some bids. Not long ago the certain harbinger of bond rout doom, the long end maybe has joined the rest of the world in its global pause if somewhat later than it had begun elsewhere (including, importantly, its own TIPS real yield backyard). Even nearer-in inflation expectations have rounded off at their current top. Perhaps no more than a short-term rest before each rising again, then again with the rest of the world’s markets acting similarly it’s fair to ask which end is actually leading?


More importantly, if it’s the wrong end, why would that end be leading? Especially right now. As I wrote a few days ago, there doesn’t appear to be a single thing going wrong. Quite to the contrary, what’s good (in the

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Real Dollar ‘Privilege’ On Display (again)

April 8, 2021

Twenty-fifteen was an important yet completely misunderstood year. The Fed was going to have to become hawkish, according to its models, yet oil prices crashed and the dollar continued to rise. Both of those things were described as “transitory” by Janet Yellen, and that they were helpful or positive (rising dollar means cleanest dirty shirt!), but domestically American policymakers’ clear lack of conviction and courage about that rate hike regime showed otherwise.
It wouldn’t be until December 2015 that Yellen finally got on with it – and then promptly paused for an entire year (until December 2016) while explaining nothing about anything before or after.
The US economy did not fall into recession, which is one key source of confusion. For most of the public,

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Spending Here, Production There, and What Autos Have To Do With It

March 16, 2021

While the global inflation picture remains fixed at firmly normal (as in, disinflationary), US retail sales by contrast have been highly abnormal. You’d think given that, the consumer price part of the economic equation would, well, equate eventually price-wise. Consumers are spending, prices should be heading upward at a noticeable rate.
To begin with, consumer spending – as pictured by the Census Bureau – was obviously boosted during January by the previous infusion of Uncle Sam’s beneficence (he’s your “uncle” and he has the cash).
By how much, though? According to preliminary estimates released last month, for the month of January it must have been a lot. The latest update for February, which includes revisions to January, maybe it had been even more.

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Looking Past Gigantic Base Effects To China’s (Really) Struggling Economy

March 15, 2021

The Chinese were first to go down because they had been first to shut down, therefore one year further on they’ll be the first to skew all their economic results when being compared to it. These obvious base effects will, without further scrutiny, make analysis slightly more difficult. What we want to know is how the current data fits with the overall idea of recovery: is it on track, perhaps going better than thought, or falling short.
Another set of huge positives has the potential to be misleading (like the initial burst of estimates immediately following the trough had been).
China’s National Bureau of Statistics (NBS) reported late last night on the country’s Big Three economic accounts for the joint January-February period (the two months are combined

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JOLTS Revisions: Much Better Reopening, But Why Didn’t It Last?

March 12, 2021

According to newly revised BLS benchmarks, the labor market might have been a little bit worse than previously thought during the worst of last year’s contraction. Coming out of it, the initial rebound, at least, seems to have been substantially better – either due to government checks or, more likely, American businesses in the initial reopening phase eager to get back up and running on a paying basis again.
The JOLTS labor series annual revisions took about 300,000 off the estimated level of Job Openings (JO), one way to figure demand for labor, in each March and April 2020. Instead of a bottom just less than a 5 million pace, the government now thinks it was more like 4.63 million.

JOLTS – Job Openings, SA 2017-2021 – Click to enlarge
In terms of Hires

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What Gold Says About UST Auctions

March 11, 2021

The “too many” Treasury argument which ignited early in 2018 never made a whole lot of sense. It first showed up, believe it or not, in 2016. The idea in both cases was fiscal debt; Uncle Sam’s deficit monster displayed a voracious appetite never in danger of slowing down even though – Economists and central bankers claimed – it would’ve been wise to heed looming inflationary pressures to cut back first. Combined, fiscal and monetary policy was, they said, eventually going to let loose on consumer prices.
Hogwash. Here’s what I wrote the first time back in March 2016:
The story has problems on both ends; to start with, why are dealers supposedly buying up UST inventory that they will only get stuck with? That has never been a money dealing function, as if there

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Deja Vu: Treasury Shorts Meet Treasury Shortages

March 10, 2021

Investors like to short bonds, even Treasuries, as much as they might stocks and their ilk. It should be no surprise that profit-maximizing speculators will seek the best risk-adjusted returns wherever and whenever they might perceive them. If one, or a whole bunch, has to first “borrow” a security the one doesn’t own in order to sell something at a high price betting the price to go down, you can likewise bet there’s someone out there in the financial landscape more than willing to let you borrow that security – for a fee.
Leverage all around.
When it comes to the intersection of bonds and securities lending, money dealers may not have quite the inventory themselves but they certainly have access to any kind of instrument you could want to borrow from those who

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There’s Two Sides To Synchronize

March 3, 2021

The offside of “synchronized” is pretty obvious when you consider all possibilities. In economic terms, synchronized growth would mean if the bulk of the economy starts moving forward, we’d expect the rest to follow with only a slight lag. That’s the upside of harmonized systems, the period everyone hopes and cheers for.
What happens, however, when it’s the leaders rather than laggards who begin to shift toward the other way?
It’s a question the global economy has confronted four times over the past thirteen years. Each time, at least during the introductory inflection phase, rather than being clear it becomes a muddied mess of disbelief. The word “decoupling” enters the discussion as if “synchronized” applies only in the one direction.
On September 4, 2018,

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Three Things About Today’s UST Sell-off, Beginning With Fedwire

February 28, 2021

Three relatively quick observations surrounding today’s UST selloff.
1. The intensity. Reflation is the underlying short run basis, but there is ample reason to suspect quite a bit more than that alone given the unexpected interruption in Fedwire yesterday.
At 12:43pm EST, most of FRBNY’s electronic services experienced an as-yet unexplained problem which interrupted service, including that of Fedwire. To this point, the New York branch has only confirmed the disruption – lasting several hours – took place, which has been blamed on an unspecified “operational error.”
Reports indicate that settlement deadlines were extended into the evening, which can, and has in the past, led to short-term disturbances in interbank venues and conditions. Crypto exchanges, in

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Nine Percent of GDP Fiscal, Ha! Try Forty

February 25, 2021

Fear of the ultra-inflationary aspects of fiscal overdrive. This is the current message, but according to what basis? Bigger is better, therefore if the last one didn’t work then the much larger next one absolutely will. So long as you forget there was a last one and when that prior version had been announced it was also given the same benefit of the doubt.
Most people don’t like looking to Japan mainly because it is too depressing; unless one is an Economist who just doesn’t want admit such theoretical failures of the scale that would up-end the entire discipline. Whatever the underlying reason, each prefers instead to come up with rationalizations for why when every Western country does the exact same things the Japanese have already tried the results will

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For The Dollar, Not How Much But How Long Therefore How Familiar

February 24, 2021

Brazil’s stock market was rocked yesterday by politics. The country’s “populist” President, Jair Bolsonaro, said he was going to name an army general who had served with Bolsomito (a nickname given to him by supporters) during that country’s prior military dictatorship as CEO of state-owned oil giant Petróleo Brasileiro SA. Gen. Joaquim Silva e Luna is being installed, allegedly, to facilitate more direct control of the company by the federal government.
With the economy still gripped by the latest recession, and oil prices rising worldwide as supplies continue to be squeezed, Brazilians have been caught in the vise between fuel prices and unemployment – pure misery for a nation still reeling from Euro$ #3’s (2014-16) crushing impacts.
A depression for years

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What Might Be In *Another* Market-based Yield Curve Twist?

February 23, 2021

With the UST yield curve currently undergoing its own market-based twist, it’s worth investigating a couple potential reasons for it. On the one hand, the long end, clear cut reflation: markets are not, as is commonly told right now, pricing 1979 Great Inflation #2, rather how the next few years may not be as bad (deflationary) as once thought a few months ago.
On the other hand, over at the short end, yields are dropping toward zero again. This steepening isn’t quite the “good” version.
Supply issues are coming to T-bills, as we know, but anything else?

Pro forma CES Private Payrolls, 2020-2021 – Click to enlarge
There’s been demand for these instruments which predates Janet Yellen resurfacing at the Treasury Department to unleash TGA drains and debt

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Eurodollar University’s Making Sense; Episode 46; Part 3: Bill’s Reading On Reflation, And Other Charted Potpourri

February 21, 2021

46.3 On the Economic Road to NothingGoodVilleRecent, low consumer price inflation readings combined with falling US Treasury Bill yields are cautionary sign posts that say this reflationary path may not be the road to recovery but a deflationary cul-de-sac.
[Emil’s Summary] Having studied monetary policy for several years it was only natural that your podcaster spent considerable time contemplating the essential elements of fiction. Some experts say there are five components to it; others put the tally at six, even eight! But at the core it has always been the three elements: plot, setting and character.  
Plot was perfected, in the Western tradition at least, in the late 16th century by Shakespeare with the 5-act dramatic structure. Setting, given short-shrift

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Two Seemingly Opposite Ends Of The Inflation Debate Come Together

February 19, 2021

It’s worth taking a look at a couple of extremes, and the putting each into wider context of inflation/deflation. As you no doubt surmise, only one is receiving much mainstream attention. The other continues to be overshadowed by…anything else.
To begin with, the US Bureau of Labor Statistics reported today that US import prices were up on annual basis for the first time in some time. Rising in January 2021 by 0.9% year-over-year, this was actually the fastest increase in almost three and a half years; another one of these “highest in years” comparisons.
Not only that, just looking at the index especially clear acceleration the past two months (December and January), it does seem to be indicative of all that price overheating everyone’s been talking about.

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Uncle Sam Was Back Having Consumers’ Backs

February 17, 2021

American consumers were back in action in January 2021. The “unemployment cliff” along with the slowdown and contraction in the labor market during the last quarter of 2020 had left retail sales falling backward with employment. Seasonally-adjusted, total retail spending had declined for three straight months to end last year.
The latest updated estimates from the Census Bureau, released today, show that December’s drawback, in particular, was much larger than previously figured – small wonder given just how many unemployed Americans ended up falling off that “cliff.” Revised downward by an unusually large -$3.4 billion, it really had been the weakest holiday season since 2009’s.
Uncle Sam, however, came riding to the rescue at the end of last year.
Fixing (at

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The Endangered Inflationary Species: Gazelles

February 11, 2021

Nevada is, by all accounts and accountants, in rough shape. Very rough shape. An economy overly dependent upon a single industry, tourism, in this case, is a disaster waiting to happen should anything happen to that industry. Pandemic restrictions, for instance.
Nevadans cannot afford the government spending they “have” without a gaming industry attracting visitors at full throttle. Desperate, the state’s governor Steve Sisolak announced last week that officials would explore setting up highly innovative, and what will be very controversial, “innovation zones” within their borders to specifically attract other types of businesses; the pandemic panic seems likely to stick around for a while.
The controversy stems not from the general idea of incentivizing

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Permanent Jobs And Permanent Job Losses

February 9, 2021

Even the feds haven’t been able to keep up. Without the government having taken over student loans in the wake of 2008-09’s Great “Recession”, there’d have been almost no additional consumer credit extended during the decade since. It’s one more facet to the recovery-less recovery; like Japan, a dominant even overbearing government influence that doesn’t stimulate anything but its own proportionally larger footprint.
Given all that, the “need” for maintaining its footprint during the current recession is that much more paramount. With an employment crisis far worse than twelve years ago, any channel for raw aid, even student loans and stipends for those unfortunate college graduates staring into this even deeper labor market abyss, is an absolute necessity.

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