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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

Reality Beckons: Even Bigger Payroll Gains, Much Less Fuss Over Them

2 days ago

What a difference a month makes. The euphoria clearly fading even as the positive numbers grow bigger still. The era of gigantic pluses is only reaching its prime, which might seem a touch pessimistic given the context. In terms of employment and the labor market, reaction to the Current Employment Situation (CES) report seems to indicate widespread recognition of this situation.
And that means how there are actually two labor markets at the moment. Occupying the same geographic space but separated otherwise by every factor that’s meaningful. What’s driving the headline figures is only the first group, those workers who were let go if only because their place of employment was forced to close down for non-economic reasons.As the restrictions relax, this group

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What The PMIs Aren’t Really Saying, In China As Elsewhere

6 days ago

China’s PMI’s continue to impress despite the fact they continue to be wholly unimpressive. As with most economic numbers in today’s stock-focused obsessiveness, everything is judged solely by how much it “surprises.” Surprises who? Doesn’t matter; some faceless group of analysts and Economists whose short-term modeling has somehow become the very standard of performance.
According to one such group, China’s official manufacturing index, the one calculated and maintained by the government (via its National Bureau of Statistics), solidly “beat” expectations. The headline was thought to have declined from May’s 50.6 to somewhere around 50.2. Instead, the NBS reports it accelerated during June 2020 to 50.9 for a big upside surprise.
While the manufacturing PMI was

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Looking Ahead Through Japan

7 days ago

After the Diamond Princess cruise ship docked in Tokyo with tales seemingly spun from some sci-fi disaster movie, all eyes turned to Japan. Cruisers had boarded the vacation vessel in Yokohama on January 20 already knowing that there was something bad going on in China’s Wuhan. The big ship would head out anyway for a fourteen-day tour of Vietnam, Taiwan, and, yes, China.
Three days in, news reached the Diamond that the Communists had closed down the affected region. Worse, on February 2, the company operating the tour disclosed to the captain that one passenger who had disembarked in Hong Kong tested positive for this novel coronavirus.
The crew and passengers were told they had to immediately turn around and head back toward Tokyo.
What followed was a nightmare.

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Wait A Minute, What’s This Inversion?

9 days ago

Back in the middle of 2018, this kind of thing was at least straight forward and intuitive. If there was any confusion, it wasn’t related to the mechanics, rather most people just couldn’t handle the possibility this was real. Jay Powell said inflation, rate hikes, and accelerating growth. Absolutely hawkish across-the-board.
And yet, all the way back in the middle of June 2018 the eurodollar curve started to say, hold on a minute. That’s the part which caused so much apprehension since we are all taught, and the vast majority still, somehow, believe, central bankers are infallible.
A key money market, one of the most sophisticated and deep in world history, blatantly disagreeing with the scenario no one is supposed to challenge (don’t fight the Fed!)
It didn’t

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Not COVID-19, Watch For The Second Wave of GFC2

9 days ago

I guess in some ways it’s a race against the clock. What the optimists are really saying is the equivalent of the old eighties neo-Keynesian notion of filling in the troughs. That’s what government spending and monetary “stimulus” intend to accomplish, to limit the downside in a bid to buy time.
Time for what? The economy to heal on its own. Fill up the bathtub, so to speak, with artificial stimulus water (aggregate demand) until such time as the basin stops leaking and it’s that much of a shorter way to go for the water level to rise back to normal without the need for further assistance.
What happens in the trough is what can make the worst kinds of troughs; second and third order effects where instead the negative forces are amplified and the recession

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The Smallness of the Most Gigantic

17 days ago

These numbers do seem epic, don’t they? It’s hard to ignore when you have the greatest percentage increase in the history of a major economic account. Just writing that sentence it’s difficult to deny the power of those words. Which is precisely the point: we already know ahead of time how the biggest economic holes in history are going to produce the biggest positives coming out of them.
Whether that constitutes an actual recovery as opposed to the simplistic and more troubling rebound is the only question that ultimately matters. Here we are just as I said a week ago, a little further inside the window of the most fantastic figures ever.
Gigantic positive numbers like we’re going to see more and more don’t mean as much as you’ll be led to believe.
They only seem

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Fed Balance Sheet: Swap Me Update

19 days ago

Just a quick update to add a little more data and color to my last Friday’s swap line criticism so hopefully you can better see how there is intentional activity behind them. Since a few people have asked, I’ll break them out with a little more detail. While the volume of swaps outstanding at the Fed has, in total, remained relatively constant (suspiciously, if you ask me), the underlying tenor of them has not.
Meaning, there is purpose. It’s not like everyone panicked in March, signed up for longer swap trades, and are now letting them just roll off as everything has gone back to normal (as is alleged).

Fed Balance Sheet: Assets, 2007-2020 – Click to enlarge
Foreign central banks (remember, the overseas institution initiates the transaction likely on

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A Chinese Outbreak (of Li v. Xi, Round 2)

20 days ago

Here they are again, seemingly at odds over how to proceed. Reminiscent of prior battles over whether to revive the economy or just let it go where it will, it appears as if China is in for Xi vs. Li Round 2. Or is it all just clever politics?
Li Keqiang may be nominally the Chinese Premier but he’s a very distant second on every list of power players. Xi Jinping holds all the top spots, including a 2017-18 consolidation of power that left Xi rivaling only Mao in terms of dictatorial reach. It was traditionally the Premier’s job to look after economic and industrial affairs, stripped instead and place in the hands of more assured loyalists.
That is until recently; funny, the timing. As the Chinese economy has lurched into its first modern contraction, it’s as if

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This Thing Is Only Getting Started; Or, *All* The V’s Are Light On The Right

22 days ago

The Federal Reserve’s models really are the most optimistic of the bunch. With the policy meeting conducted today, no surprises as far as policies go, we now know what ferbus has to say about everything that’s happened this year. Skipping the usual March projections, what with the FOMC totally occupied at the time by a complete global monetary meltdown Jay Powell now says “we saw it coming”, the central bank staff released the calculations performed by its DSGE prodigy concurrent with today’s policy meeting.
According to these simulations, the US economy will contract by somewhere between 5.5% and 7.6% for all of 2020 and then rebound by hopefully 4.5% if not 6.0% in 2021. The median forecast, to make things simple, calls for -6.5% this year followed by +5.0% next

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Why The FOMC Just Embraced The Stock Bubble (and anything else remotely sounding inflationary)

23 days ago

The job, as Jay Powell currently sees it, means building up the S&P 500 as sky high as it can go. The FOMC used to pay lip service to valuations, but now everything is different. He’ll signal to all those fund managers by QE raising bank reserves, leading them on in what they all want to believe is “money printing” (that isn’t). This provides the financial services industry with the rationalization those working within it desperately want for them to do what they already want to anyway.
As Powell signals to portfolio managers managing the S&P on its upward trajectory, Economists believe stocks are then a signal to consumers and businesses.
Flying share prices, they think the public thinks, are the definitive indication for how the economy must be progressing.

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A Second Against Consumer Credit And Interest ‘Stimulus’

27 days ago

Credit card use entails a degree of risk appreciated at the most basic level. Americans had certainly become more comfortable with debt in all its forms over the many decades since the Great Depression, but the regular employment of revolving credit was perhaps the apex of this transformation. Does any commercial package on TV today not include one or more credit card offers? It certainly remains a staple of junk mail.
Leaning more and more on credit cards during the so-called good times only makes it more difficult during lean years. While regular folks are regularly chastised as to what from the outside appears to be fiscal imprudence, consumer behavior particularly around 2008 and after indicates the awareness of the risk.
According to the Federal Reserve’s

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Someone’s Giving Us The (Trade) Business

28 days ago

The NBER has made its formal declaration. Surprising no one, as usual this group of mainstream academic Economists wishes to tell us what we already know. At least this time their determination of recession is noticeably closer to the beginning of the actual event. The Great “Recession”, you might recall, wasn’t even classified as an “official” contraction until December 2008 – a full year after the NBER figured the thing had begun.
Rather than becoming much better at spotting changes in the business cycle, whatever we all end up calling this one there’s no debating that something big happened in March 2020.
If there remains any uncertainty, it pertains as to whether that was the actual start or if perhaps the thing had been underway before then. GFC2 is

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ECB Doubles Its QE; Or, The More Central Banks Do The Worse You Know It Will Be

June 7, 2020

A perpetual motion machine is impossible, but what about a perpetual inflation machine? This is supposed to be the printing press and central banks are, they like to say, putting it to good and heavy use. But never the inflation by which to confirm it.
So round and round we go. The printing press necessary to bring about consumer price acceleration, only the lack of consumer price acceleration dictates the need for more of the printing press. It never ends.
If you have to use “stimulus” forever, can it be stimulus?
In a lot of ways, circumstances haven’t changed in Europe – only the size of the hole has. For the last two and a half years the European economy has been pointed in the same direction, down not up. Recall Mario Draghi in January 2018, just as Euro$

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What Did Everyone Think Was Going To Happen?

June 6, 2020

Honestly, what did everyone think was going to happen? I know, I’ve seen the analyst estimates. They were talking like another six or seven perhaps eight million job losses on top of the twenty-plus already gone. Instead, the payroll report (Establishment Survey) blew everything away, coming in both at two and a half million but also sporting a plus sign.
The Household Survey was even better, +3.8mm during May 2020.
But, again, why wasn’t this expected? All this payroll report confirms is what we already knew – the economy is being reopened. Quite naturally it will lead to millions of Americans heading back to work.
You deprive tens of millions of the opportunity to leave their house and attend to their jobs, once allowed they’re going to flood back in.
Now, as

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From QE to Eternity: The Backdoor Yield Caps

June 3, 2020

So, you’re convinced that low rates are powerful stimulus. You believe, like any good standing Economist, that reduced interest costs can only lead to more credit across-the-board. That with more credit will emerge more economic activity and, better, activity of the inflationary variety. A recovery, in other words.
Ceteris paribus.
What happens, however, if you also believe you’ve been responsible for bringing rates down all across the curve…and then no recovery. Just as the textbook said, lower yields as far as the eye can see. And yet, zip.
Any normal, rational person requiring nothing more than common sense would see this situation and realize the faulty premise; and the stark implications therefore needed to rectify the matter (that Economics might need to

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Personal Income and Spending: The Other Side

June 1, 2020

The missing piece so far is consumers. We’ve gotten a glimpse at how businesses are taking in the shock, both shocks, actually, in that corporations are battening down the liquidity hatches at all possible speed and excess. Not a good sign, especially as it provides some insight into why jobless claims (as the only employment data we have for beyond March) have kept up at a 2mm pace.
These are second order effects. In terms of consumer spending, it’s, as always, spend versus save. Are consumers going to change their behavior, too? If the propensity to spend was one level before March, will it be at a lesser rate once the non-economic dislocation passes by? If so, that will cause and amplify further not-short run economic damage.
That’s how exogenous shocks like

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Getting A Sense of the Economy’s Current Hole and How the Government’s Measures To Fill It (Don’t) Add Up

May 29, 2020

The numbers just don’t add up. Even if you treat this stuff on the most charitable of terms, dollar for dollar, way too much of the hole almost certainly remains unfilled. That’s the thing about “stimulus” talk; for one thing, people seem to be viewing it as some kind of addition without thinking it all the way through first.
You have to begin by sizing up the gross economic deficit it is being haphazardly poured into – with an additional emphasis on “haphazardly.”
Everyone forgets the last time when the government tried this, impressing markets and the media with its huge numbers, that after it was over its proponents complained how it wasn’t big enough.
Paul Krugman most of all (seriously, in November 2009, long afterward, he wrote Obama’s plan was awesome

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So Much Dollar Bull

May 27, 2020

According to the Federal Reserve’s calculations, the US dollar in Q1 pulled off its best quarter in more than twenty years – though it really didn’t need the full quarter to do it. The last time the Fed’s trade-weighed dollar index managed to appreciate farther than the 7.1% it had in the first three months of 2020, the year was 1997 during its final quarter when almost the whole of Asia was just about to get clobbered.
In second place (now third) for the dollar’s best, Q4 2008.
You might be getting the sense that when the dollar goes up only bad things happen, the dollar’s best when the world is pushed to its worst.
It doesn’t quite fit with all this “strong” dollar nonsense that some still take seriously.
Lorie Logan, FRBNY Executive VP and current System Open

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No Flight To Recognize Shortage

May 22, 2020

If there’s been one small measure of progress, and a needed one, it has been the mainstream finally pushing commentary into the right category. Back in ’08, during the worst of GFC1 you’d hear it all described as “flight to safety.” That, however, didn’t correctly connote the real nature of what was behind the global economy’s dramatic wreckage. Flight to safety, whether Treasuries or dollars, wasn’t it.
Back in March, while “it” was very obvious, even the New York Times put it the right way for once.
The first part, anyway.
The extraordinary actions of the Federal Reserve on Monday morning can be boiled down to two sentences: There is a rapidly developing shortage of dollars across the economy. And the Fed will do anything it needs to, on any scale imaginable,

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So Much Bond Bull

May 20, 2020

Count me among the bond vigilantes. On the issue of supply I yield (pun intended) to no one. The US government is the brokest entity humanity has ever conceived – and that was before March 2020. There will be a time, if nothing is done, where this will matter a great deal.
That time isn’t today nor is it tomorrow or anytime soon because it’s the demand side which is so confusing and misdirected. Realizing this is true does not cancel your vigilantism.
For two years now we’ve heard about how there are “too many” Treasuries. All the way back in December 2017 the federal government passed tax “reform” which was supposed to have been a different sort of stimulus than the all the same “stimulus” that the previous administration had also passed.
The only thing both

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

May 17, 2020

After years of futility, he was sure of the answer. The Bank of Japan had spent the better part of the roaring nineties fighting against itself as much as the bubble which had burst at the outset of the decade. Letting fiscal authorities rule the day, Japan’s central bank had largely sat back introducing what it said was stimulus in the form of lower and lower rates.
No, stupid, declared Milton Friedman. Lower rates don’t mean stimulus they mean monetary policy has been tight leaving the economy stripped and starved of this vital necessity. He had declared this a fallacy back in the sixties only to see it proven by the opposite direction (the Great Inflation was punctuated by skyrocketing interest rates, contrary to popular perception).
On April 30, 1998, the

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Miracles Aren’t Shovel-Ready

May 14, 2020

The monetary mouse. After years of Mario Draghi claiming everything under the sun available with the help of QE and the like, Christine Lagarde came in to the job talking a much different approach. Suddenly, chastened, Europe’s central bank needed assistance. So much for “do whatever it takes.”
They did it – and it didn’t take.
Lagarde’s outreach was simply an act of admitting reality. Having forecast an undercurrent of worldwide inflationary breakout (how “globally synchronized growth” does seem like ancient history), the two years leading up to 2020 weren’t supposed to have been this way.
Draghi ended 2018 by ending his QE ignoring how growth had turned around, only to turnaround himself in 2019, like Jay Powell did on US policy rates, to restart it all over

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A Big One For The Big “D”

May 12, 2020

From a monetary policy perspective, smooth is what you are aiming for. What central bankers want in this age of expectations management is for a little bit of steady inflation. Why not zero? Because, they decided, policymakers need some margin of error. Since there is no money in monetary policy, it takes time for oblique “stimulus” signals to feed into the psychology of markets and the economy.
Thus, a little steady inflation as insurance against the real evil.
In that sense, the core CPI is perhaps best suited to judge policy success on its own terms. Set aside the oft-emotional objections to the subject, the BLS’s core measure of inflation strips out food and energy prices because history has proved those are moved around often in temporary bursts one way or

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

May 9, 2020

There are two parts behind the inflation mongering. The first, noted yesterday, is the Fed’s balance sheet, particularly its supposedly monetary remainder called bank reserves. The central bank is busy doing something, a whole bunch of something, therefore how can it possibly turn out to be anything other than inflationary?
The answer: the Federal Reserve is not a central bank, not really. What it “prints” are, as Emil Kalinowski likes to call them, the equivalent of laundromat tokens (I wonder if they’re even that useful).
Even Jay Powell knows this, but he’s absolutely thrilled that so many people believe otherwise.

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

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

May 8, 2020

It wasn’t entirely unexpected, though when it was announced it was still quite a lot to take in. On September 1, 2005, the Bureau of Economic Analysis (BEA) reported that the nation’s personal savings rate had turned negative during the month of July. The press release announcing the number, in trying to explain the result was reduced instead to a tautology, “The negative personal saving reflects personal outlays that exceed disposable personal income.”
Why had it become this way? What were the implications, if any? Beyond the scope of the BEA’s mandate, the government could merely recite the progressions behind it:
Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or

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GDP + GFC = Fragile

May 1, 2020

March 15 was when it all began to come down. Not the stock market; that had been in freefall already, beset by the rolling destruction of fire sale liquidations emanating out of the repo market (collateral side first). No matter what the Federal Reserve did or announced, there was no stopping the runaway devastation.
It wasn’t until the middle of March that the first major shutdown orders began to appear – on Twitter feeds – and these weren’t the total lockdowns we’re stuck with now, either.

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

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COT Black: No Love For Super-Secret Models

April 30, 2020

As I’ve said, it is a threefold failure of statistical models. The first being those which showed the economy was in good to great shape at the start of this thing. Widely used and even more widely cited, thanks to Jay Powell and his 2019 rate cuts plus “repo” operations the calculations suggested the system was robust.
Because of this set of numbers, officials here as well as elsewhere around the world chose the most extreme form of pandemic mitigations, trusting that the strong economy wouldn’t just immediately buckle.
And they were pushed in this direction by absolutely dire estimates for how COVID-19 was going to ravage large swaths of the globe.
It hasn’t happened yet and increasingly looks like it never will.

Federal Reserve: Liabilities & Capital,

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The Puppet Show Is Powerful

April 28, 2020

I never said it wasn’t powerful. What I continue to show is that it doesn’t work. Ben Bernanke kept his job because despite the carnage, in times of turmoil people are willing to give anyone a second chance. And if the turmoil never ends, so much the luckier – for him. 

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

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The Fallen Kings & The Bond Throne of Collateral

April 23, 2020

There is no schadenfreude at times like these, no time to dance on anyone’s grave. Victory laps are a luxury that only central bankers take – always prematurely. The world already coming apart because of GFC1, what comes next with GFC2 and then whatever follows it?
Another “bond king” has thrown in the towel. Franklin Templeton’s candidate for the title has been Michael Hasenstab, and like all the other Kings he’d been betting that interest rates would have nowhere to go but up. Bill Gross, Jeffrey Gundlach, and Jamie Dimon, Hasenstab, too, they all enthusiastically climbed aboard globally synchronized growth expecting the journey would lead to recovery, normalcy, and, yes, the BOND ROUT!!!!
Filings this week showed that the Templeton Global Bond Fund’s

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An International Puppet Show

April 23, 2020

It’s actually pretty easy to see why the IMF is in a hurry to secure more resources. I’m not talking about potential bailout candidates banging down the doors; that’s already happened. The fund itself is doing two contradictory things simultaneously: telling the world, repeatedly, that it has a highly encouraging $1 trillion in bailout capacity at the same time it goes begging to vastly increase that amount.
Very reassuring.
The IMF is becoming like the Federal Reserve. Before GFC1, it had a quarter of the resources available to it that it claims now. In 2009, all lines of expansion were pursued including an increase in quotas.

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

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