Tag Archives: Featured

There is a populist idea of money printing. The idea is that banks can just print what they want, enriching themselves in a massive fraud. But, does it really work this way? Let’s start with a simple case, which is clearly not money printing. We will build a series of examples by adding one element at a time, working our way up to banks, and the central bank. Then we can examine this idea of printing. Henry Homeowner finds the perfect house, goes to a bank and gets a mortgage. He is...

During this holiday period, participation is light and order-driven activity can push prices more than usual.  Investors should not let the noise and gyrations obscure the bigger picture.   We continue to place the divergence of monetary policy at the center of our narrative.     Barring a significant negative surprise from the labor market, we expect the Fed to hike rates again, with March as the most likely timeframe.  We are cognizant that the recent US data has disappointed, and that...

Australia, New Zealand, UK markets closed for Boxing Day.   After rallying last week, oil prices are off 2%, base and precious metals lower. European core and peripheral bond markets are highs, with yields slipping mostly 2-3 bp. No end to the political uncertainty in Spain, but Spanish 10-year bonds are matching regional performance.  Equities have a heavier bias.  Asian shares were mixed.  The Nikkei rose 0.6% while the Shanghai Composite fell 2.6%.  Reports suggest that the...

The prices of the metals rose a bit this quiet, holiday week. Merry Christmas! Speaking of Christmas, Keith’s brother who is an amateur woodworker of growing skill, gave him this present on Friday. Regular readers may recognize the design as our logo. Each “M” is made of a single piece of wood. They are stained or painted in the correct colors. The minute hand is silver and the hour hand is gold (paint, alas!) It now occupies a prominent place in the office. It is worth taking this time...

The US dollar traded heavily in the holiday-shortened week.  It slipped against all the major currencies.  The recovery in commodity prices, the new stimulus Chinese officials suggested, and the relatively high yields conspired to help lift the dollar-bloc currencies.  Them and the Swedish krona fared best.  Sterling, the Swiss franc, and Japanese yen managed to eke out small gains.   The economic calendar is light in the week ahead, and participation will be as well.  Nevertheless, it...

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The thinness of the order-driven capital markets is making price action that seems more inexplicable than usual.  The US dollar is mixed. It has recouped all the ground it lows against the euro yesterday, as the single currency briefly dipped below $1.09 in the North American morning.  It was unable to build on yesterday's gains that had carried it up to almost $1.0950.   Despite some fraying, the $1.08-$1.10 trading range still seems intact.   Sterling which had been sold to eight-month...

1.  China's Central Economic Work Conference is responsible for setting the annual GDP target. Although it was not formally announced, President Xi previously indicated that the goal for the economy to expand by around 6.5% a year through 2020.  More telling than the GDP target is the intentions expressed in the new slogan:  flexible monetary policy, forceful fiscal policy.  For Chinese officials, these are not ends in themselves but means to another end.  In this case, the goal is to...

Soggy Dollars There’s this article, saying rising rates are good for gold. It repeats two old errors: gold goes up, and things that cause it (e.g. a collapsing paper currency) are “good”. We have recently been emphasizing that interest does not correlate well with the price of gold. If you want to speculate on the gold price, rising rates may not be a good trading signal. Pure Gold Please forgive us once, the sin of linking an article by our own Keith Weiner. Keith argues that Yellen is...

On Wednesday Dec 16, Federal Reserve Chair Janet Yellen announced that the Fed was raising the federal funds rate by 25 basis points. Let’s get one thing out of the way. This is not a move towards free markets. Whether the Fed sets interest lower, or whether it sets interest higher, we still have central planning. We still have price fixing of interest rates. Interest rates may be set too low. However, forcing interest up is no cure. We need to eliminate central planning, and move to a free...