Tag Archives: 5) Global Macro

Bond yields have tumbled this morning, bringing the 10-year US Treasury rate within sight of its record low level. The catalyst appears to have been the ISM’s Manufacturing PMI. Falling below 50, this widely followed economic indicator continues its rapid unwinding. Back in November 2018, at just about 59 the overall index had still been close to its multi-decade high. Over the next nine months through the latest update for August 2019, it has shed almost 10 points....

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...

The US economy is starting to show cracks from the ongoing trade war. While we do not want to make too much from one data point, we acknowledge that headwinds are building whilst US recession risks are rising. RECENT DEVELOPMENTS US ISM manufacturing PMI fell to 49.1 vs. 51.3 expected. This is the first sub-50 reading since August 2016 and the lowest since January 2016. The employment component fell to 47.4 from 51.7 in July, while new orders fell to 47.2 from 50.8...

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...

We remain dollar bulls; this is an important data week for the US Final August eurozone manufacturing PMIs will be reported Monday; UK reports August PMIs this week RBA meets Tuesday and is expected to keep rates steady at 1.0%; BOC meets Wednesday and is expected to keep rates steady at 1.75% Swedish Riksbank meets Thursday and is expected to keep rates steady at -0.25%; in EM, the central banks of Chile and Russia meet Market sentiment rallied last week on a lot of...

What happens when these monstrous speculative bubbles pop? Let’s start by stipulating that if I’d taken a gummit job right out of college, I could have retired 19 years ago. Instead, I’ve been self-employed for most of the 49 years I’ve been working, and I’m still grinding it out at 65. By the standards of the FIRE movement (financial independence, retire early), I’ve blown it. The basic idea of FIRE is to live frugally and save up a hefty nestegg to fund an early...

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....

The Everything Bubble has topped out, and trying to push it higher for the next 14 months is a sure way to increase the damage next year. One of the more reliable truisms is that Americans vote their pocketbook: if their wallets are being thinned (by recession, stock market declines, high inflation/stagnant wages, etc.), they throw the incumbent out, even if they loved him the previous year when their wallets were getting fatter. (Think Bush I, who maintained high...

This is a companion piece to last week’s Monthly Macro report found here. The Treasury market continues to price in lower nominal and real growth. The stress, the urgency, I see in some of these markets is certainly concerning and consistent with what we have seen in the past at the onset of recession. The move in Treasuries is by some measures, as extreme as the fall of 2008 when we were in a full blown panic. That to me, is evidence that this move is overly...

Having destroyed discipline, central banks have no way out of the corner they’ve painted us into. It was such a wonderful fantasy: just give a handful of bankers, financiers and corporations trillions of dollars at near-zero rates of interest, and this flood of credit and cash into the apex of the wealth-power pyramid would magically generate a new round of investments in productivity-improving infrastructure and equipment, which would trickle down to the masses in...