Tag Archives: 5.) Alhambra Investments

Finally, finally the global bond market stopped going in a straight line. I write often how nothing ever does, but for almost three-quarters of a year the guts of the financial system seemed highly motivated to prove me wrong. Yields plummeted and eurodollar futures prices soared. It is only over the past few weeks that rates have backed up in what has been the first real selloff since last year. Is this a meaningful change?   It may seem that way in certain places....

The thing about R* is mostly that it doesn’t really make much sense when you stop and think about it; which you aren’t meant to do. It is a reaction to unanticipated reality, a world that has turned out very differently than it “should” have. Central bankers are our best and brightest, allegedly, they certainly feel that way about themselves, yet the evidence is clearly lacking. When Ben Bernanke wrote for the Washington Post in November 2010 announcing somehow the...

If Mario Draghi wanted to wow them, this wasn’t it. Maybe he couldn’t, handcuffed already by what seems to have been significant dissent in the ranks. And not just the Germans this time. Widespread dissatisfaction with what is now an idea whose time may have finally arrived. There really isn’t anything to this QE business. But we already knew that. American officials knew it in June 2003 when the FOMC got together to savage the Bank of Japan for their lack of...

The last time was bad, no getting around it. From the end of 2014 until the first months of 2016, the Chinese economy was in a perilous state. Dramatic weakness had emerged which had seemed impossible to reconcile with conventions about the country. Committed to growth over everything, and I mean everything, China was the one country the world thought it could count on for being immune to the widespread economic sickness. That’s why in early 2016 authorities...

For every action there is a reaction. Not only is that Sir Isaac Newton’s third law, it’s also a statement about human nature. Unlike physics where causes and effects are near simultaneous, there is a time component to how we interact. In official capacities, even more so. Bureaucratic inertia means a lot more than just resistance to change, it also means, at times and in certain capacities, all sorts of biases. When the bureaucracy predicts one set of circumstance,...

Give stimulus a chance, that’s the theme being set up for this week. After relentless buying across global bond markets distorting curves, upsetting politicians and the public alike, central bankers have responded en masse. There were more rate cuts around the world in August than there had been at any point since 2009. And there’s more to come. As Bloomberg reported late last week: Over the next 12 months, interest-rate swap markets have priced in around 58 more...

Federal Reserve policymakers appear to have grown more confident in their more optimistic assessment of the domestic situation. Since cutting the benchmark federal funds range by 25 bps on July 31, in speeches and in other ways Chairman Jay Powell and his group have taken on a more “hawkish” tilt. This isn’t all the way back to last year’s rate hikes, still a pronounced difference from a few months ago. The common forecast relies entirely on the subjective...

Copper prices behave more deliberately than perhaps prices in other commodity markets. Like gold, it is still set by a mix of economic (meaning physical) and financial (meaning collateral and financing). Unlike gold, there doesn’t seem to be any rush to get to wherever the commodity market is going. Over the last several years, it has been more long periods of sideways. That’s what makes any potential breakout noteworthy. Dr. Copper’s place in the hierarchy is...

It isn’t inflation which is driving gold higher, at least not the current levels of inflation. According to the latest update from the Bureau of Economic Analysis, the Federal Reserve’s preferred inflation calculation, the PCE Deflator, continues to significantly undershoot. Monetary policy explicitly calls for that rate to be consistent around 2%, an outcome policymakers keep saying they expect but one that never happens. For the month of July 2019, the index...

Revisions to second quarter GDP were exceedingly small. The BEA reduced the estimate by a little less than $800 million out of nearly $20 trillion (seasonally-adjusted annual rate). The growth rate therefore declined from 2.03502% (continuously compounded annual rate) to 2.01824%. The release also gave us the first look at second quarter corporate profits. Like the headline GDP revisions, there wasn’t really much to them. At least not when viewed in isolation....