Tag Archives: 5) Global Macro

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Rather suddenly, the state issued fiat currency bolivar lost 99% of its purchasing power. Gresham’s law holds that “bad money drives out good money,” meaning that given a choice of currencies (broadly speaking, “money” that serves as a store of value and a means of exchange), people use depreciating “bad” to buy goods and services and hoard “good” money that is appreciating or holding its value. As this dynamic plays...

Is the rate hiking cycle almost done? Not the question on everyone’s minds right now so a good time to ask it, I think. A couple of items caught my attention recently that made me at least think about the possibility.  There has been for some time now a large short position held by speculators in the futures market for Treasuries. Speculators have been making large and consistent bets that Treasury prices would fall....

The risk budget is unchanged this month. For the moderate risk investor the allocation to bonds and risk assets is evenly split. There are changes this month within the asset classes. How far are we from the end of this cycle? When will the next recession arrive and more importantly when will stocks and other markets start to anticipate a slowdown? These are critical questions for investors and ones that can’t be...

US Industrial Production dipped in May 2018. It was the first monthly drop since January. Year-over-year, IP was up just 3.5% from May 2017, down from 3.6% in each of prior three months. The reason for the soft spot was that American industry is being pulled in different directions by the two most important sectors: crude oil and autos. In the middle is the middling performance of manufacturing especially for consumer...

Stock Markets EM FX was mixed on Friday but capped off a largely losing week. MYR, CLP, and CNY were the best performers over the last week, while ARS, TRY, and ZAR were the worst. We expect EM FX to continue weakening, but note that with very few fundamental drivers this week, we may see some consolidation near-term. Stock Markets Emerging Markets, June 13 - Click to enlarge Singapore Singapore reports May...

Summary US-China trade tensions are rising. Pakistan devalued the rupee for a third time since December. Bulgaria will seek to join the eurozone banking union and ERM-2 simultaneously. The National Bank of Hungary appears to have tilted more hawkish. Newly elected Egyptian President El-Sisi shuffled his cabinet. Argentina has a new central bank chief after Federico Sturzenegger resigned. Chile central bank signaled...

The bubbles in assets are supported by the invisible bubble in greed, euphoria and credulity. Well, folks, here we go again: we have a double-bubble economy in housing and stocks, and a third difficult-to-chart bubble in greed, euphoria and credulity. Feast your eyes on Housing Bubble #2, a.k.a. the Echo Bubble: S&P/Case-Shiller 2000-2018 - Click to enlarge Here’s the S&P 500 stock index (SPX): no bubble...

US consumers continue to recover from their debt splurge at the end of last year. Combined with still weaker income growth, the Federal Reserve estimates that aggregate revolving credit balances grew only marginally for the fourth straight month in April 2018. To put it in perspective, the total for revolving credit (seasonally adjusted) is up a mere $2.2 billion for all four months of this year combined, compared to...

The People’s Bank of China won’t update its balance sheet numbers for May until later this month. Last month, as expected, the Chinese central bank allowed bank reserves to contract for the first time in nearly two years. It is, I believe, all part of the reprioritization of monetary policy goals toward CNY. How well it works in practice remains to be seen. Authorities are not simply contracting one important form of...