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Tag Archives: bonds

Collateral Shortage…From *A* Fed Perspective

It’s never just one thing or another. Take, for example, collateral scarcity. By itself, it’s already a problem but it may not be enough to bring the whole system to reverse. A good illustration would be 2017. Throughout that whole year, T-bill rates (4-week, in particular) kept indicating this very shortfall, especially the repeated instances when equivalent bill yields would go below the RRP “floor” and often stay there for prolonged periods. There was, as I wrote...

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Synchronized Manufacturing, Hopefully Not Mao

This is one of those cases when Inigo Montoya, the lovable if fictional rapscallion from the movie The Princess Bride, would pop into the scene to devastatingly deliver his now famous rebuke. Last week, China’s one-man Dear Leader said that the country was going to start up its own version of Build Back Better. Immediately cheered by the entire Western media, every single news story contained the same phrase. “All out.” Cue Mr. Montoya’s wry witticism. . Did...

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What Really ‘Raises’ The Rising ‘Dollar’

It’s one of those things which everyone just accepts because everyone says it must be true. If the US$ is rising, what else other than the Federal Reserve. In particular, the Fed has to be raising rates in relation to other central banks; interest rate differentials. A relatively more “hawkish” US policy therefore the wind in the sails of a “strong” dollar exchange regime. How else would we explain, for example, the euro’s absolute plunge since around May last year?...

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Weekly Market Pulse: Welcome Back To The Old Normal

Stagflation. It’s a word that strikes fear in the hearts of investors, one that evokes memories – for some of us – of bell bottoms, disco, and Jimmy Carter’s American malaise. The combination of weak growth and high inflation is the worst of all worlds, one that required a transformational leader and a cigar-chomping central banker to defeat the last time it came around. Or at least that’s how it’s remembered. Whether the cigar-chomping central banker was really...

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Is It Recession?

According to today’s advance estimate for first quarter 2022 US real GDP, the third highest (inflation-adjusted) inventory build on record subtracted nearly a point off the quarter-over-quarter annual rate. Yes, you read that right; deducted from growth, as in lowered it. This might seem counterintuitive since by GDP accounting inventory adds to output. It only does so, however, via its own rate of change; the second derivative for specifically the difference....

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Historic Inventory Continued In March, But Is It All Price Illusion, Too?

The Census Bureau today released its advanced estimates for March trade. These include, among other accounts like imports and exports, preliminary results reported by retailers and wholesalers. That means, for our purposes, inventories. Oh my, was there ever more inventory. It was, apparently, widely expected that following an avalanche of goods building up over the previous five months the situation might calm down a touch. Analysts had figured wholesale...

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Expect the Unexpected from the Fed

It has been a rough week in most markets with both equities and bonds declining sharply. Tech stocks have been pummeled with many ‘big names’ plunging more than 50% (from their 52-week high). Some of the bigger names include Zoom Video -75%, PayPal -73%, Netflix -72%, Meta Platforms (Facebook), -53%. . The equity market decline is coupled with announced layoffs. Robinhood, the popular online trading platform, announced a 9% reduction in full-time staff this week for...

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Euro$ #5 in Goods

Last Friday, S&P Global (the merged successor to IHS Markit) reported that its PMI for German manufacturing fell to 54.1. It hadn’t been that low for more than a year and a half. Worse than that, the index for New Orders dropped below 50 for the first time since the middle of 2020. The excuses are plentiful, as there’s COVID, supply problems, Russia, a drop in demand. Wait, what was that last one? The S&P Global Flash Germany Manufacturing PMI fell to 54.1...

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CNY’s Drop Wasn’t ‘Devaluation’ in ’15 nor ’18, and It Isn’t ‘Devaluation’ Now

For one thing, that whole Bretton Woods 3 thing is really off to an interesting start. And by interesting, I mean predictably backward. According to its loud and leading proponent, China’s yuan was supposed to be ascending while the dollar sank, its first step toward what many still claim will end up in some biblical-like abyss. Instead, CNY is doing the plummeting and at a speed reminiscent of August 2015. That month did not, obviously, lead to a vast rearrangement...

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The (less) Dollars Behind Xi’s Shanghai of Shanghai

What everyone is saying, because it’s convenient, is that China’s zero-COVID policies are going to harm the economy. No. Economic harm of the past is the reason for the zero-COVID policies. As I showed yesterday, the cracking down didn’t just show up around 2020, begun right out in the open years beforehand, born from the scattering ashes of globally synchronized growth. Xi Jinping saw how a very different post-2008 global economy without any recovery was going to...

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