Tag Archives: newsletter

I had the privilege of talking with Scarlet Fu and Joe Weisenthal on Bloomberg TV. They gave me an opportunity to discuss my big picture view of the dollar and the Obama dollar rally. While the Reagan dollar rally was driven by the policy mix, and the Clinton dollar rally was driven by the tech bubble, the Obama dollar rally is being driven by monetary policy divergence. Divergence itself has a bit of a history. The first phase was about what other countries were doing, namely easing...

The US dollar is narrowly mixed. The euro and yen remain within yesterday's ranges, while sterling continues to trade heavily. The stabilization of oil prices has not lifted the Canadian dollar, while the other Antipodean currencies turn higher. Emerging market currencies are mostly lower, though the South African rand is slightly firmer. The Russian ruble's decline has been extended into the fourth sessions and brings its loss this month to 8.5%, the worst performing emerging market...

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...

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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...

1.  The election in Spain did not lift the uncertainty but re-redoubled it.  Given the outcome, it is difficult envision a majority government.  Purely looking at the numbers, a coalition between the Popular Party and the Socialists is simplest solution.  It is like Pasok and the New Democracy in Greece and the Christian and Social Democrats in Germany. While such grand coalitions maybe political expedient, it sends a powerful signal that there is not a significant difference between the...