This is What Behavioral Finance is All About

By Jared Dillian

I live for this.

Check out this poll I ran on Twitter:

Le Pen is about a 10-to-1 dog. But that doesn’t necessarily mean that thinking she is going to win is contrarian.

Chaser:

So the markets are pricing in a 10% (or less) chance of a Le Pen win, and yet everyone thinks she is going to win.

How the hell do you explain that?

Recency Bias

Late in the third quarter of the Super Bowl, the New England Patriots had an infinitesimal chance of winning. 99-to-1 against, at least. Would you have taken that bet? Probably not.

I think if you ran that simulation again the next day, people would have taken 4-to-1 odds on the Patriots winning.

This is what we call recency bias. Short-term memories are more powerful than long-term memories, so we tend to extrapolate what just happened out into the future.  In financial terms, if a crash just happened, people will then think that crashes happen all the time, and bid up the price of crash protection.

In terms of the French Election—right-wing populists rode to surprise victories with Brexit and Trump, so everyone thinks right-wing populists are going to ride to victory again, ignoring what seems to be overwhelming odds against that happening.

Continue reading This is What Behavioral Finance is All About

More Small Things

By Jeffrey Snider of Alhambra

On April 23, 2015, the US Treasury auctioned off $18 billion in inflation-indexed bonds maturing in April 2020. These 5-year TIPS stopped out at the lowest yield for that particular security class in almost a year before then. Coming as it did during the spring of 2015, it was met with the usual textbook applied commentary, where bond investors were supposedly pricing Janet Yellen’s “transitory” scenario. The oil and commodity crash of late 2014 was by convention nothing more than an aberration, and the auction results appeared to confirm as much.

The sharp bidding for inflation protection particularly without a similar move in the 5-year UST security (not TIPS) meant that inflation breakevens, a measure of market inflation expectations, jumped 10 bps after the auction. At 170 bps, the 5-year breakeven was about 65 bps off the low and at that moment more than half retracing the considerable pessimism that had been provoked by during the (initial) oil crash. Positivity was dominant again.

“The market likes TIPS,” said Edward Acton, a U.S. government-bond strategist in Stamford, Connecticut, for Royal Bank of Scotland’s RBS Securities unit, one of 22 primary dealers obligated to bid at U.S. auctions. “This disinflationary pressure has eased off, and we’re just waiting to see how strong and how quickly inflation pressures can surprise to the upside.”

That, of course, never happened. Inflation instead sunk much lower as did the global economy. Was it merely confirmation bias, that “everyone” simple saw what they wanted? The thing about auctions is that pricing is never strictly about fundamentals, in the case of TIPS meaning inflation expectations. Demand for TIPS (or any) OTR paper may be robust for reasons that have nothing to do with inflation or credit.

Almost exactly one year before, on April 17, 2014, the Treasury had auctioned, as it typically does, the previous year’s 5-year TIPS. The demand for that security (912828C99) was even further off the charts. The yield on the day before, admittedly in late stage OFR status, was -6 bps. The market was anticipating heavy demand, but the settled yield after the auction was -21.3 bps. That drop in TIPS yield coupled with a selloff in the 5-year UST left inflation breakevens for the 5-year maturity spiking higher by more than 22 bps in a single day.

The commentary produced that day was almost exactly the same as it would be one year after.

“The stats were off the charts,” said Stanley Sun, a New York-based strategist at Nomura Holdings Inc., a primary dealer, said in a telephone interview…
“Break-evens had been very depressed ever since the March FOMC meeting,” Sun said. “Given how beat up they were, with consumer price index surprising to the upside this week, and after the strong auction investors are starting to catch up to the fundamentals.”

And once again, convention got it all wrong. Fundamentals were weakening and it was the bond market that showed as much (long, long before economists would realize it). What was going on in TIPS? I wrote a week after that particular auction coming from the opposite perspective:

That is what makes the move in 5-year TIPS so very eccentric; the typical move in inflation breakevens coincident to such tightening bias is in the opposite direction. Normally I wouldn’t even comment on such a brief change over only several days as this all may turn out to be absolutely nothing, but since the 5-year is the most active place right now, and TIPS aren’t the most vibrant and noteworthy pieces of credit, it seems worth watching.

What was truly unusual about that auction was who it was that did all the buying. The largest proportion was awarded to Indirect Bidders, a class of auction participants noteworthy for including foreign central banks (and other private banks acting on their behalf), far more than at any other auction for 5-year TIPS (to that point). They took nearly 60% of the allotment, compared to an average of 40% over the prior 10 years.

There was, however, no spill over into other areas of inflation trading and expectations. The 10-year TIPS and 10-year breakevens moved a little on April 17, 2014, but remained steadfast in the sideways action that had developed going all the way back to July 2013. That was an important clue, for a rise in the 5-year breakeven without one in the 10-year meant, fundamentally, the market was actually pricing increasing risk.

Continue reading More Small Things

Liquidity Supernova and the Big Ugly Flaw

By Doug Noland

Credit Bubble Bulletin: Liquidity Supernova and the Big Ugly Flaw

April 21 – Reuters (Vikram Subhedar): “The $1 trillion of financial assets that central banks in Europe and Japan have bought so far this year is the best explanation for the gains seen in global stocks and bonds despite lingering political risks, Bank of America Merrill Lynch said on Friday. If the current pace of central bank buying, dubbed the ‘liquidity supernova’ by BAML, continues through the year, 2017 would record their largest financial asset purchases in a decade…”

From the report authored by BofA Merrill’s chief investment strategist Michael Hartnett: “The $1 trillion flow that conquers all… One flow that matters… $1 trillion of financial assets that central banks (European Central Banks & Bank of Japan) have bought year-to-date (= $3.6tn annualized = largest CB buying in past 10 years); ongoing Liquidity Supernova best explanation why global stocks & bonds both annualizing double-digit gains YTD despite Trump, Le Pen, China, macro.”

A strong case can be made that Q1 2017 experienced the most egregious monetary stimulus yet. No financial or economic crisis – and none for years now. Consumer inflation trends have turned upward on a global basis. Stock prices worldwide have surged higher, with U.S. and other indices running to record highs. At the same time, global bond yields remained just off historic lows. Home prices in many key global markets have spiked upward. Meanwhile, central bank balance sheets expanded at a $3.6 TN annualized pace (from BofA) over the past four months.

With U.S. bond yields reversing lower of late, there’s been a fixation on weaker-than-expected Q1 U.S. GDP. Meanwhile, recent data have been stronger-than-expected in China, Europe and Japan. EM has been buoyed by strong financial inflows and a resulting loosening of financial conditions. Thus far, Fed baby-step normalization efforts have been overpowered by the “liquidity supernova”.

April 21 – Reuters (Balazs Koranyi): “Global growth and trade appear to be picking up strength but risks for the euro zone economy remain tilted to the downside, so ‘very substantial’ accommodation is still necessary, European Central Bank President Mario Draghi said on Friday. In a statement largely reflecting the bank’s March policy statement, Draghi said that while the risk of deflation has largely disappeared, underlying inflation has shown no convincing upward trend.”

April 20 – Reuters (Leika Kihara): “Japan has benefitted from global tailwinds that boosted exports and factory output, [Bank of Japan Governor Haruhiko] Kuroda said, describing its economy as ‘expanding steadily as a trend’ – a more upbeat view than last month. But he offered a bleaker view on Japan’s inflation, saying it lacked momentum with no clear sign yet it was shifting up. ‘That’s why the BOJ will continue its ultra-easy monetary policy to achieve its 2% inflation target at the earliest date possible,’ he said.”

Continue reading Liquidity Supernova and the Big Ugly Flaw

Money in America

By Jeffrey Snider of Alhambra

In 1830, France was once more swept up in revolution, only this time at the end of it was installed one king to replace another. Louis-Phillipe became, in fact, France’s last king as a result of that July Revolution. The country was trying to make sense of its imperial past with the growing democratic sentiments of the 19th century. Despite being one of the richest men in all Europe and aligned with the Bourbons, he was Duke of Orleans and married to a Neapolitan princess, the reign of Louis-Phillipe I was supposed to be a milder form of dominion, the so-called citizen king or bourgeois monarch.

Caught up in the upheaval of 1830 were many who had been aligned with the deposed Charles X. Because the citizen king was viewed as a usurper throughout much of France, his time on the throne tended to be more repressive, particularly toward those who had at least been in the Charles court and government. Among them was a Versailles lawyer named Gustave de Beaumont, who, sensing that the political winds had shifted despite the grand upheaval toward (outwardly, at least) more liberal sentiments, gained permission to get out of the country.

Beaumont would travel to the United States ostensibly to study in grand and comprehensive detail its penal system. He set out in April 1831 taking with him a young 25-year old friend, a former magistrate who had similarly found himself of disfavor under the bourgeois monarch. The two landed in Rhode Island and traveled all over the country doing quite a bit more investigation than strictly prison life in the United States. It was, in fact, an examination of this country’s political soul.

The pair returned to France in 1832 to the stark contrast of what must have been near constant unsettled dynamics, from political to economic life (though in those days there was no difference between politics and economics). Beaumont was largely responsible for the authoring the official work derived from their journey, On the Penitentiary System in the United States and Its Application In France. His partner, Alexis de Tocqueville, was more interested in America as an ideal, completing in 1835 the first part of what would be one of the most influential books of the whole 19th century, Democracy In America.

Because of the age in which they landed, there was at the time really no single America. It was still a collection of states but grouped in binary arrangement by the economic ends of its politics. There was the slavery South of agriculture and plantations set against the industrial North with its factories. These two vastly different systems collided at several points, but most especially along the Ohio River. It struck de Tocqueville as one of the most rigorous juxtapositions in all of his journeys:

On the north bank of the Ohio, everything is activity, industry; labor is honored; there are no slaves. Pass to the south bank and the scene changes so suddenly that you think yourself on the other side of the world; the enterprising spirit is gone.

He further described Kentucky as a place where “society has gone to sleep…it is nature that seems active and alive, whereas man is idle.” The South had accumulated a vast wealth, to be sure, but it was of a static sort that was more in keeping with the 18th century than the modernizing world of the 19th.

The economic issue, as always, is labor. The difference North to South in those terms was not really plantation versus factory, but specialization versus sameness. Capitalism is what sets the creative minds of industry free by allowing people to do what they do best. Slavery, quite obviously, by treating most as interchangeable blunt instruments is forever limited in its capacities.

Continue reading Money in America

It Will Restart All Over Again in the Small Things

By Jeffry Snider of Alhambra

Six months ago back in October, IBM reported what seemed to be encouraging results. Though revenues at the company were down for the eighteenth consecutive quarter, they were so by the slimmest of margins, just -0.3%. For Big Blue, that had been the best revenue comparison since the first quarter of 2012 back when global recovery was the most plausible. The positive momentum was attributed to the company’s shift toward the new growth model, cloud, SAAS, and other next step technologies in lieu of IBM’s traditional hardware products.

Fortune reported at the time:

Some analysts expressed optimism that the company’s 44% gain in cloud revenue shows that IBM CEO Ginni Rometty’s plans to focus on higher-growth businesses are working. At Fortune’s Most Powerful Women Summit, Rometty emphasized IBM’s commitment to Watson and related technologies, saying that while “some companies are high-growth,” IBM is “high-value.”

One such analyst from Zacks Investment Research was more blunt:

This suggests that IBM is finally turning around its fortunes as new strategic business lines like cloud computing, big data and mobile security are growing in double digits.

By this point after going on so long, it is clear that a lot of interest in the company’s circumstances is pure morbid curiosity, the sort of macabre entertainment you might get from watching a train wreck in ultra-slow motion. But that isn’t the whole story, there is a bellwether in there still and it tracks pretty closely at least the direction of the global economy if not always its intensity (though I believe even by that parameter IBM’s results aren’t that far off).

The worst quarter in terms of revenue was Q3 2015 and the storm of “global turmoil” that in (statistical) hindsight was a surefire downturn both in the US and almost everywhere else. Throughout last year, IBM’s revenue like the economy as a whole improved, which is to say that it stopped getting worse. Like “reflation”, it was merely extrapolated that lower negative growth rates and even some positive ones meant the malaise was done and the world turned over (positive, for once). The “rate hikes” at the end of 2016 and toward the start of 2017 confirmed, for the mainstream, this had to be the case.

For IBM, at least, it hasn’t turned out that way. Rather than turning positive in Q4 2016 in the straight line extrapolation of improvement, the company reported declining revenue again and at a slightly faster rate. The quarterly figure of -1.4% wasn’t a huge decline by any means, but it was certainly the wrong direction against expectations. The latest quarterly results released yesterday only furthered the opposite case that much more. Revenues that were thought verging on breakout are now half a year with none to be found; actual revenue was just $18.2 billion in Q1 2017, down 2.8% year-over-year and the lowest for Big Blue in a good long time.

Many will be quick to dismiss these results yet again as just IBM being IBM; the standard for 21st century tech dinosaurs being left behind by the next new age. As with most things, there is truth to the indictment. But, again, the revenue history for this particularly company is uncomfortably close to matching the shifting trajectory of the global economy which by 2007 standards at least would have been wholly unsurprising. Their products are sold all over the world and as true capex are quite sensitive to macro changes whether idiosyncratic to whatever country, monetary conditions, or the global economy that follows the money.

If you think IBM means nothing more than its own success or failure, obviously none of this will matter. On the other hand, if there remains even the slightest relationship to the marginal macro environment, the past six months have to be concerning in a way that doesn’t bode well for “reflation” and everything thereafter. We already know (too) well that nothing has really changed, but so far outside of the auto sector while there isn’t exactly growth taking place there isn’t further contraction, either. Unless something somewhere actually does change in a meaningful way (not very likely) we are just patiently waiting for the next downward “cycle.” And it will start small so that it can be characterized afterward as “unexpected.”

America’s Gilded Age 2: On the Rocks

By Danielle DiMartino Booth

America's Gilded Age 2, Danielle DiMartino Booth, Money Strong, Fed Up

Some movies beg to be one and done

No sequel. No Part II. No Redux. 1981’s smash hit Arthur is a classic example of what happens when well is not left alone. There was never going to be a way to replicate the hilarity born of sublime scripting and delivery to say nothing of the perfectly unconventional combination of casting and direction. Upon reflection, the only question is what sort of prig it takes to award the movie anything but five full stars – Amazon has it as 4.5 stars. (We’ll leave that one for another day, but you know who you are and you clearly need to get out more.)

Who, after all, could fault Dudley Moore’s best moments portraying Arthur Bach, cinema’s most darling drunk? A smattering of the film’s snippets:

When Susan, his fiancé by way of an arranged-marriage, suggested that, “A real woman could stop you from drinking,” Arthur rebutted that, “It’d have to be a real BIG woman.”

Or his description of his day job: “I race cars, play tennis and fondle women. BUT! I have weekends off and I am my own boss.”

Then, of course, there’s the farcical exchange between Arthur and his proper aunt and uncle when he’s caught out with a spandex-clad prostitute. Endeavoring to render his “date” passable, he claims she’s a princess from a speck of a country: “It’s terribly small, a tiny little country. Rhode Island could beat the crap out of it in a war. THAT’s how small it is.”

One beat later when it (re)dawns on him that his arm candy is actually said prostitute? Well, that’s the best of the best: “You’re a hooker? Jesus, I forgot! I just thought I was doing GREAT with you!”

Continue reading America’s Gilded Age 2: On the Rocks

Now You Tell Us

By Jeffrey Snider of Alhambra

As we move further into 2017, economic statistics will be subject to their annual benchmark revisions. High frequency data such as any accounts published on or about a single month is estimated using incomplete data. It’s just the nature of the process. Over time, more comprehensive survey results as well as upgrades to statistical processes make it necessary for these kinds of revisions.

There is, obviously, great value in having even incomplete data estimates published in as close to real time as can be possible right now. Most of the time there aren’t major revisions to a data set because by and large growth is to some degree predictable. That is the essence of trend-cycle subjectivity, as government statisticians in the past had been able to more easily determine the trajectory for whatever economic data and use it to further construct the trend-line for measured monthly variation.

The problem, equally obvious, is for any period where the assumed trend becomes obsolete. In the past, that had typically meant recession, for any statistical series always has difficulty with inflection due to the basic premise of using the recent past to try to measure the near future. Such a short-term discrepancy was something we could all live with, because if whatever piece of information didn’t exactly tell us when the inflection was reached we would anyway soon enough be able to easily infer it by common sense at least.

This “recovery” period was at first modeled by trend-cycle analysis as a recovery. That was evident across a range of statistics but to the most visible extreme with Industrial Production. The Fed’s subjective assumptions about the state of US industry produced self-reinforcing guidance about that agency’s forward assumptions of the state of the economy (IP was growing steadily, therefore QE must be working). The data issue, then, is revealed where recovery, at least one consistent with past recoveries, doesn’t occur. If that was to be the case, then even the most robust statistics like IP with its almost 100 years of data would encounter serious and significant problems accurately depicting what was really going on – meaning that the data series reflected more subjectivity than actual results.

The first half of 2015 displayed just these kinds of confusing signals. On the plus side, there was the unemployment rate that was rapidly falling. Under more normal conditions, such an outcome would never be challenged as anything but positive and comforting. In this era, however, the participation problem immediately questioned its veracity by the state of the ratio’s own denominator.

On the other side were financial markets (bonds/eurodollar futures) and prices (oil, especially) increasingly pessimistic just as the unemployment rate entered its steeper decline. That left all the other major economic accounts to try to settle the ledger one way or the other. Clearly, in the first few months of 2015 the US and global economy decelerated with the oil crash, leaving questions more about the implications of that condition. The view from the unemployment rate as well as other key BLS statistics was that it was a “transitory” aberration soon to be fixed.

In terms of industrial production, an important statistic not just because of its history but more so due to where weakness at that moment was manifesting in industry, particularly manufacturing, the seasonally-adjusted trend had picked up on that weakness dating back to the middle of the year before. But in the spring of 2015 IP had seemed to shake off those growing doldrums so that the idea of “transitory” seemed plausible – and all the excuses employed then to try to dismiss the possible downturn as some benign quirk.

From July 2015 and an article published by USA Today reporting the first estimate for June 2015 IP:

With rough start to 2015 in the rear view mirror, Wednesday’s uptick comes after months of malaise in the American industrial sector. Several major winter storms hit the Northeast, and falling oil prices in late 2014 led oil and gas producers to cut back on industrial supplies. A disparity between the dollar and foreign currencies like the euro made U.S. exports more expensive, presenting a challenge for multinational companies.
Despite challenges, the index is now 1.5% above its year-ago level.

That was one of the chief comforts provided by IP as well as others; though it was slowing it remained positive in terms of annual growth, meaning that (like early 2007) economists could continue to dismiss it so as to focus on the more pleasing labor stats.

After several benchmark revisions, however, including the latest set released today, IP for June 2015 now shows instead a 1.4% decline year-over-year. In fact, the new data set figures that the contraction in US industrial production began far earlier than first thought and was significantly deeper at its trough.

Continue reading Now You Tell Us

“Risk Off” Making Some Headway

By Doug Noland

Credit Bubble Bulletin: “Risk Off” Making Some Headway

Global “Risk Off” has been Making Some Headway. This week saw ten-year Treasury yields drop 15 bps to 2.23%, the low since the week following the election. German bund yields declined another four bps to a 2017 low 19 bps. The Crowded Trade hedging against higher rates is blowing apart. The Crowded yen short has similarly been blown to pieces, with the Japanese currency surging an additional 2.3% this week (increasing 2017 gains to an impressive 7.7%). Japan’s Nikkei equities index dropped 1.8% this week, with y-t-d losses rising to 4.1%.

Meanwhile, this week Gold surged 2.5%, Silver jumped 2.9% and Platinum gained 1.9%. In contrast to the safe haven precious metals, Copper dropped 2.8%, Aluminum fell 2.7% and nickel sank 4.2%.

European periphery spreads (to bunds) widened meaningfully. Italian spreads widened 14 to 213 bps, the widest since early-2014. Spanish spreads widened 13 to an eight-month high 152 bps. Portuguese spreads widened six bps and French spreads seven. Italy’s stocks fell 2.6%, with Italian banks down 5.9%. Spanish stocks lost 1.9%. European bank stocks dropped 2.6% this week.

A little air began to leak from the EM Bubble. Russian stocks were hammered 5.9% to an eight-month low, increasing 2017 losses to 14.2%. Brazilian stocks lost 2.5%. Chinese equities suffered moderate declines, while appearing increasingly vulnerable. For the most part, however, EM held its own. The weak dollar helped. EM equites (EEM) declined only 0.6% for the week, while EM bonds (EMB) gained 0.4%.

U.S. equities trade unimpressively. The VIX rose slightly above 16 Thursday to the highest level since the election. The banks (BKX) sank 3.2%, increasing 2017 losses to 4.1%. The broker/dealers also lost 3.2% (down 0.7% y-t-d). The Transports were hit 2.5% (down 1.9%). The broader market continues to struggle. The mid-caps dropped 1.5% (up 1.2%), and the small caps fell 1.4% (down 0.9%). Even the beloved tech sector has started to roll over. At the same time, high-yield and investment grade debt for the most part cling to “Risk On.”

A number of articles this week pronounced the death of the “reflation trade.” It’s worth noting that the GSCI Commodities index gained 2.2% this week, trading to a six-week high and back to positive y-t-d. Rising geopolitical tensions helped Crude rise to almost $54, before closing the week at $53.18. President Trump talked down the U.S. dollar, and I’ll add “careful what you wish for.” The dollar index declined 0.6% this week. Is it a coincidence that the President calls the dollar “too strong” only a few days after meeting with Chinese President Xi Jinping? China is no currency manipulator, not if it can rein in a psycho North Korean despot.

Continue reading “Risk Off” Making Some Headway

Serious Fun With Phillips

By Jeffrey Snider of Alhambra

At the end of February, FRBNY President Bill Dudley made what was a widely shared remark that “animal spirits had been unleashed.” Confidence of just this sort is exactly what monetary policy is after, using all kinds of tools by which to get people happy about the future. According to rational expectations theory, which guides every post-Great Inflation model, if people feel tomorrow will be better and are very confident about that feeling, then they will act today in anticipation. It’s not monetary policy without money so much as pop psychology.

The job of the Federal Reserve through this channel sounds really simple – provide these “animal spirits” with a credible, plausible basis by which to be sustained and amplified. From stocks to inflation expectations, the QE’s were supposed to instill this kind of foundation for full recovery.

Dudley’s comments six weeks ago, however, were not in relation to QE but rather the election. In that way, his remarks were almost damning of monetary policy because the world at the time looked a lot brighter for reasons that had little to do with him or the FOMC. But this was not the first time confidence and spirits had been unleashed, for the same could have been said, and was, about 2014 and early 2015 (which were attributed to the success of QE and its presumed positive boost in confidence).

Yet, ever since the Fed last “raised rates” in mid-March it’s as if the whole thing fell apart. From almost the moment the FOMC published its “hawkish” vote, risk aversion has been the dominant force once again. It is contrary to everything we are supposed to believe about monetary policy and what it means under these conditions. As Reuters wrote back on March 16, a good representation of convention “wisdom” about these things:

Continue reading Serious Fun With Phillips

‘Reflation’ Breakdown, This Time Without Interruption

By Jeffrey Snider of Alhambra

In the early trading on Friday, it looked as if “reflation” might break down entirely. The flurry of information seemed to be uniformly bad, from Syria to payrolls there wasn’t much for optimism to remain relevant. All of a sudden, however, it all reversed so that trading in the latter part of the day was as if related to an entirely differently world.

Such trading reversals are not unheard of, and usually they are a sign that a trend or established intermediate direction might be ready to go back the other way. Whether buying or selling, an intraday capitulation can be a signal of a temporary end.

Though that is how it worked out in the raw data streams of eurodollars, bond yields, and most especially the Japanese yen, there was something different about it all that to my view suggested not a meaningful intraday reversal but instead an artificial intrusion (subscription required).

Thus, if “reflation” breaks down more completely, it would be China that might experience the most in the backlash from it. Not to depart into the realm of conspiracy, but who might have had motive to intervene in “dollars” on Friday? It might have been the market all on its own deciding to toggle risk despite all the breakdowns being presented at that moment, or maybe it was the hint of “somebody” trying to keep alive at least the balance that has persisted since December because if nothing else volatility is everyone’s enemy (except bond bulls and eurodollar longs).

It turned out to be (so far) just a one-day reprieve, as yesterday trading slid back against “reflation” before today’s session put the exclamation point on it. Eurodollar futures are up across the board, including more contracts toward the front end. Most of the buying attention is still focused on 2019-2022, the very maturities that define best longer run expectations. Since mid-March, significant flattening all over again.

The latest curve, despite an additional “rate hike” in between, has submerged below the last flat point on February 8. The current price of the June 2020’s is today only slightly less than the intraday high on Friday, again suggesting the breakdown of “reflation” and therefore whatever little topside probability was included in it.

Continue reading ‘Reflation’ Breakdown, This Time Without Interruption