Tag Archives: Markets

It is often said that the market for US Treasuries is the deepest and most liquid in the world. While that’s true, we have to be careful about what it is we are talking about. There is no single US Treasury market, and often differences can be striking. The most prominent example was, of course, October 15, 2014. In truth, the liquidity side of cash market UST’s has been diminished since around 2013. Largely as a...

I suspect President Trump has been told that markets don’t like radical changes. If there is one thing that any elected official is afraid of, it’s the internet flooded with reports of grave financial instability. We need only go back a year to find otherwise confident authorities suddenly reassessing their whole outlook. On the campaign trail, candidate Trump was very harsh on Janet Yellen. Now six months into his...

This economic cycle is one of the longest on record for the US, eight years and counting since the end of the last recession. It has also been, as almost everyone knows, a fairly weak expansion, one that has managed to disappoint both bull and bear. Growth has oscillated around a 2% rate for most of the expansion, falling at times perilously close to recession while at others rising tantalizingly close to escape...

Part of “reflation” was always going to be banks making more money in money. These days that is called FICC – Fixed Income, Currency, Commodities. There’s a bunch of activities included in that mix, but it’s mostly derivative trading books forming the backbone of math-as-money money. The better the revenue conditions in FICC, the more likely banks are going to want to do more of it, perhaps to the point of reversing...

There isn’t a day that goes by in 2017 where some study is released or anecdote is published purporting a sinister labor market development. There is a shortage of workers, we are told, often a very big one. The idea is simple enough; the media has been writing for years that the US economy was recovering, and they would very much like to either see one and be proven right (and that recent revived populism is...

The term “ghost city” is a loaded one, often deployed to skew toward a particular viewpoint. In the context of China’s economy, it has become shorthand for perhaps the largest asset bubble in human history. While that may ultimately be the case, in truth China’s ghost cities aren’t about the past but its future. There is a great deal that is misunderstood about the country’s path toward urbanization and modernity. A...

Completing a busy day of US economic data, Industrial Production was, like retail sales and inflation data, highly disappointing. Prior months were revised slightly lower, leaving IP year-over-year up just 2% in June 2017 (estimates for May were initially 2.2%). Revisions included, the annual growth rate has been stuck around 2% now for three months in a row, suggesting like those other accounts a pause or even...

Retail sales were thoroughly disappointing in June. Whereas other accounts such as imports or durable goods had at least delivered a split decision between adjusted and unadjusted versions, for retail sales both views of them were ugly. Seasonally-adjusted first, spending last month was down for the second straight time. Worse than that, estimated sales were just barely more than in January. The economy in 2017 is not...

Since we are this week hypocritically obsessing over monetary policy, particularly the federal funds rate end of it, it’s as good a time as any to review the full history of 21st century “conundrum.” Janet Yellen’s Fed has run itself afoul of the bond market, just as Alan Greenspan’s Fed did in the middle 2000’s. But that latter example wasn’t truly the first conundrum for monetary policy. There remain a great many...

There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. There are no changes to the portfolio this month. Growth and inflation expectations rose somewhat since last month’s update. The change is minor though and within the range of what we’ve seen in recent months. The most significant change from last month is the continued...