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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

This Is A Big One (no, it’s not clickbait)

4 days ago

Stop me if you’ve heard this before: dollar up for reasons no one can explain; yield curve flattening dramatically resisting the BOND ROUT!!! everyone has said is inevitable; a very hawkish Fed increasingly certain about inflation risks; then, the eurodollar curve inverts which blasts Jay Powell’s dreamland in favor of the proper interpretation, deflation, of those first two.
Twenty-eighteen, right? Yes. And also today.
Quirky and kinky, it doesn’t seem like a lot, at least not at first. Just like three years ago, the inversion right now is but a basis point, inching toward one and a half at times intraday.
And this upside-down piece of the curve is halfway down the thing; but that’s also how it started back in 2018, too.
Before getting to what’s happening right

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The ‘Growth Scare’ Keeps Growing Out Of The Macro (Money) Illusion

10 days ago

When Japan’s Ministry of Trade, Economy, and Industry (METI) reported earlier in November that Japanese Industrial Production (IP) had plunged again during the month of September 2021, it was so easy to just dismiss the decline as a product of delta COVID. According to these figures, industrial output fell an unsightly 5.4%…from August 2021, meaning month-over-month not year-over-year. Altogether, IP in Japan is down just over 10% since June, nearly 11% since peaking all the way back in April (there’s that month again).
The pandemic-stymied Summer Olympics were late July and early August at delta’s apex, so another even bigger hit to Japan’s industry/export-heavy economy seems out of line with the direction.
Where it does match only too well is with another

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The Wile E. Powell Inflation: Are We Really Just Going To Ignore The Cliff?

November 6, 2021

Last year did not end on a sound note. The initial rebound after 2020’s recession was supposed to be a straight line, lifting upward for the other side of the infamous “V” shape. Such hopes had been dashed, though, and as the disappointing year wound toward its own end yet another big problem loomed. In December 2020, millions of Americans still out of work were going to lose government benefits.
The Department of Labor would later tally up the scale of this unemployment “cliff”: once funding dried up, 5.33 million eventually rolled off either of Pandemic Unemployment Assistance (PUA) or Pandemic Emergency Unemployment Claims (PUAC) in a bitter and painful twist to a fading recovery.

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The impact on “inflation” very evident.

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Quickly forgotten, however, washed

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What Does Taper Look Like From The Inside? Not At All What You’d Think

November 5, 2021

Why always round numbers? Monetary policy targets in the post-Volcker era are changed on even terms. Alan Greenspan had his quarter-point fed funds moves. Ben Bernanke faced with crisis would auction $25 billion via TAF. QE’s are done in even numbers, either total purchases or their monthly pace.
This is a messy and dynamic environment, in which the economy operates out of seeming randomness at times. Yet, here we have something that is “quantitatively” determined which always ends pleasingly in so many zeroes.
Why don’t more people question this?

Previewing The Taper Theater
The question on the minds of monetary policymakers in December 2013 was, again, round numbers.
Having first bucked expectations a few months before, when “everyone” said the FOMC would begin

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The Real Tantrum Should Be Over The Disturbing Lack of Celebration (higher yields)

November 2, 2021

Bring on the tantrum. Forget this prevaricating, we should want and expect interest rates to get on with normalizing. It’s been a long time, verging to the insanity of a decade and a half already that keeps trending more downward through time. What’s the holdup? You can’t blame COVID at the tail end for a woeful string which actually dates back farther than the last pandemic (H1N1).
Emil Kalinowski has it absolutely right; what happened in 2013 in the Treasury market was no tantrum. On the contrary, he quite correctly identified how it was a taper celebration. As the both of us have to constantly point out, that was a period, albeit very brief, when bonds and central bankers each saw the same thing at the same time.

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Maybe a slight pickup in growth therefore a

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Bill Issuance Has Absolutely Surged, So Why *Haven’t* Yields, Reflation, And Other Good Things?

November 2, 2021

Treasury Secretary Janet Yellen hasn’t just been busy hawking cash management bills, her department has also been filling back up with the usual stuff, too. Regular T-bills. Going back to October 14, at the same time the CMB’s have been revived, so, too, have the 4-week and 13-week (3-month).
Not the 8-week, though.
Of the first, it’s been a real tsunami at this tenor, too. Up to early August, Treasury had regularly (weekly) sold $40 billion in one-month paper. From then to the end of September, that schedule was pared back to just $10 billion weekly, a dramatic decline of what was available.
The first auction on October 14 got it back to $25 billion, then each of the last two at an incredible $60 billion!

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Three-month bills had been scaled back from $57

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GDP Red Flag

October 31, 2021

There were no surprises in today’s US GDP data. As expected, output sharply decelerated, modestly missing much-reduced expectations. The continuously compounded annual rate of change for Q3 2021 compared to Q2 was the tiniest bit less than 2% (1.99591%) given most recent expectations had been closer to 3%. It was only two months ago, mid-August, when the Blue Chip consensus pegged quarterly growth at better than 7%.
Such a fast drop-off immediately brings up delta COVID, or consumer inflation. However, since this is very much in line with, well, pretty much everything else that’s come across going back further, back to around April and May, the GDP estimates and underlying supporting data only add more to the “growth scare” already being priced in bond markets

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The Enormously Important Reasons To Revisit The Revisions Already Several Times Revisited

October 29, 2021

Extraordinary times call for extraordinary commitment. I never set out nor imagined that a quarter century after embarking on what I thought would be a career managing portfolios, researching markets, and picking investments, I’d instead have to spend a good amount of my time in the future taking apart how raw economic data is collected, tabulated, and then disseminated.
Yet here we are.
I’m not saying, nor have I ever alleged, the government is cheating, cooking the books by overinflating the stats. Rather, the entire economic system deviated back around August 2007 (what I spend most of my time on) rendering past assumptions embedded within data collection processes suspect; to put it kindly Quite simply, the way high frequency data is figured isn’t fully

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Short Run TIPS, LT Flat, Basically Awful Real(ity)

October 28, 2021

Over the past week and a half, Treasury has rolled out the CMB’s (cash management bills; like Treasury bills, special issues not otherwise part of the regular debt rotation) one after another: $60 billion 40-day on the 19th; $60 billion 27-day on the 20th; and $40 billion 48-day just yesterday. Treasury also snuck $60 billion of 39-day CMB’s into the market on the 14th to go along with the two scheduled 119-day CMB’s during this period.
That’s a quick $220 billion above and beyond what was expected before the October 13 announcement.
The effect of bill supply on bill yields and therefore collateral constraints so far is…not large.

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Nearly a quarter trillion of these “ad hoc” issues stuffed into barely two weeks, and yet while front rates have gone up, they’ve

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What *Seems* Inflation Now Is Something Else Entirely

October 27, 2021

This is yet another one of those crucial recent developments which should contribute much clarity about the economic situation, yet is exploited in other ways (political) adding only more to the general state of economic confusion. The shelves may be empty in a lot of places around the country, leaving anyone with the impression there just aren’t enough goods.
Shortage of goods, everyone’s thinking, by virtue of economics (small “e”) it will be another significant inflationary pressure. Maybe even the straw that breaks the post-70s camel’s back.
But is there actually a shortage of goods? Is that really what this supply shock is all about?
If there is one thing unambiguously in short supply, it’s actually physical structures and locations to warehouse goods.

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An Anti-Inflation Trio From Three Years Ago

October 26, 2021

Do the similarities outweigh the differences? We better hope not. There is a lot about 2021 that is shaping up in the same way as 2018 had (with a splash of 2013 thrown in for disgust). Guaranteed inflation, interest rates have nowhere to go but up, and a certified rocking recovery restoring worldwide potential. So said all in the media, opinions written for everyone in it by none other than central bank models.
It was going to be awesome.
Straight away, however, right from the very start of 2018 there were an increasing number (and intensity) of warning signs.
Flat curves were a big one – which then later inverted. In global economic data, crucial contradictions were purveyed by Japan and Germany.
In other words, taking cues from those three – Japanese and German

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

October 24, 2021

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

October 20, 2021

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

October 20, 2021

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

October 15, 2021

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)

October 13, 2021

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

October 13, 2021

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

October 12, 2021

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

October 7, 2021

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?

October 5, 2021

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

October 5, 2021

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

October 3, 2021

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

September 30, 2021

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

September 29, 2021

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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