Tag Archives: 5) Global Macro

Risk-off sentiment continues to build as the coronavirus spreads Fed easing expectations continue to intensify; February inflation readings for the US will be reported this week The ECB meets Thursday and markets are split; the stronger euro is doing the eurozone economy no favors The UK has a heavy data release schedule Wednesday; UK government also releases its budget that day Japan has a fairly heavy data week; the yen continues to benefit from risk-off sentiment...

Either the science is wrong and the complacent will be proven correct, or the science is correct and the complacent will be wrong. The present disconnect between the science of Covid-19 and the status quo’s complacency is truly crazy-making, as we face a binary situation: either the science is correct and all the complacent are wrong, or the science is false and all the complacent are correct that the virus is no big deal and nothing to fret about. Complacency is...

Super Tuesday has come and gone. Bloomberg has suspended his campaign after an extremely poor showing, and Warren is expected to follow suit soon. Here is our updated take on the likely Democratic candidate. RECENT DEVELOPMENTS Biden exceeded expectations on Super Tuesday. He won Alabama, Arkansas, Massachusetts, Minnesota, North Carolina, Oklahoma, Tennessee, Texas, and Virginia and leads in Maine. Sander won Colorado, Utah, and Vermont and leads in California. As...

Once confidence and certainty are lost, the willingness to expand debt and leverage collapses. Even though the first-order effects of the Covid-19 pandemic are still impossible to predict, it’s already possible to ask: did the pandemic pop all the global financial bubbles? The reason we can ask this question is the entire bull mania of the 21st century has been based on a permanently high rate of expansion of leverage and debt. The lesson of the 2008-09 Global...

The dollar has softened as Fed easing expectations have picked up Late Friday, Chair Powell issued an unscheduled statement saying the Fed is monitoring the virus and will act as appropriate This is a big data week for the US; the Fed releases its Beige Book report Wednesday Super Tuesday comes this week; Bank of Canada meets Wednesday Final eurozone and UK February PMI readings will be reported this week Reserve Bank of Australia meets Tuesday; BOJ Governor Kuroda...

Force cannot restore legitimacy, trust or confidence, nor can it magically erase the consequences of a still-unfolding national trauma. The Chinese authorities threatening to punish workers who refuse to return to work are getting a lesson in the limits of force in an unprecedented national trauma: a bayonet in the back will not restore the legitimacy and confidence that have been lost. There are two enormous blind spots in conventional media coverage of the...

Disregard these second-order effects at your own peril. A great many systems that are assumed to be robust are actually fragile. Exhibit #1 is the global financial system, of course, but Exhibit #2 may well be the healthcare system globally and in the U.S. Observers have noted that the number of available beds in U.S. hospitals is modest compared to the potential demands of a pandemic, and others have wondered who will pay the astronomical bills that will be...

The virus news stream continues to deteriorate Lower US yields and growing concerns about the spread of the coronavirus in the US are taking a toll on the greenback OPEC officials are trying to work out another supply cut; The outlook for Turkey is going from bad to worse Simply put, there is nothing the Fed can do to address the economic impact of supply chain disruptions and social distancing Japan reported mostly weaker data overnight; China reports official...

The greater the excesses, speculative euphoria and moral hazard, the greater the reversal. A very convenient conviction is rising in the panicked financial netherworld that the Federal Reserve and its fellow dark lords will “save the market” from COVID-19 collapse. They won’t. I already explained why in The Fed Has Created a Monster Bubble It Can No Longer Control (February 16, 2020) but it bears repeating. Contrary to naive expectations, the Fed’s primary job isn’t...

Below is a non-exhaustive list of medium- and long-term implications from the Covid-19. We discuss the yuan, China’s competitiveness, its position in the global production chains, the impact on the Phase One trade deal, and rising financial stability risks. Globally, the virus will bring about a new wave of fiscal spending and revive the discussions about the limits of monetary policy. Lastly, we are concerned that the virus may provide further momentum for the...