Who Knows the Right Interest Rate, Report

By Keith Weiner

On January 6, we wrote the Surest Way to Overthrow Capitalism. We said:

“In a future article, we will expand on why these two statements are true principles: (1) there is no way a central planner could set the right rate, even if he knew and (2) only a free market can know the right rate.”

Today’s article is part one of that promised article.

Let’s consider how to know the right rate, first. It should not be controversial to say that if the government sets a price cap, say on a loaf of bread, that this harms bakers. So the bakers will seek every possible way out of it. First, they may try shrinking the loaf. But, gotcha! The government regulator anticipated that, and there is a heap of rules dictating the minimum size of a loaf, weight, length, width, depth, density, etc. Next, the bakery industry changes the name. They don’t sell loaves of bread any more, they call them bread cakes. And so on.

Continue reading Who Knows the Right Interest Rate, Report

Saturday Morning Cartoons

By Biiwii

Like me or hate me, I think what I think and in this business that is part of my product (unlike, say, an office worker toiling away as a good company man while holding a veritable Vesuvius of thoughts within).

I really like the addition of NFTRH’s Wild Card segment, because it allows me a massive range. Two weeks ago we broke down the Semiconductor sector. Last week we talked about the shift in Fed policy toward the decidedly dovish. This week for tomorrow’s NFTRH 537 this thing was burped up.

It’s not actionable to any kind of real analysis, so here it is for public consumption (or regurgitation for all I care).

Saturday Morning Cartoons

First off let me say that my market report is called Notes From the Rabbit Hole. I have a tattoo of Alice, the Queen and the Rabbit on my right forearm. The letter is so named because early in the Millennium I fell into a hole inhabited by some strange characters, including the now very public Chris Martenson, who was but one of several characters.

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Financial Center and Reserve Currency

By Bob Hoye

Click image for full PDF…

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Finally Some US Data, and it’s Payrolls?

By Jeffrey Snider

It’s been awhile since we’ve had any data on the US economy. With the federal government having been shut down, especially the Census Bureau, the figures have gone dark. The current short-term government reopening will lead to an eventual rush of estimates, perhaps a few series that will be updated two months at a time.

In lieu of all that, the dataset that breaks the silence is the payroll report. Hooray. When we last left it the US economy was booming big, at least according to the BLS headline. The release was a perfect smash, the Establishment Survey coming in at +312k and with flawless timing to help soothe rather dire market sentiment after a traumatic December.

The new data for January 2019, released today, includes the standard annual benchmark update. There wasn’t much change in either direction from the revisions, save December’s number. Just like that it’s gone, vanished. That extremely helpful +312k has been replaced by +222k instead.

Continue reading Finally Some US Data, and it’s Payrolls?

Gold Rewards Bulls in January as Fed’s Message Wounds Dollar

By Anthony B. Sanders

Gold Vol Remains Subdued

The Federal Reserve’s “maybe we will, maybe we won’t” regarding further shrinking of its balance sheet coupled with keeping its target rate at 2.50% was celebrated by equity investors … and gold investors (including SPDR Gold Shares).

goldspiders

(Bloomberg) — Gold is poised to close out January with a fourth straight monthly gain after the Federal Reserve signaled it’s done raising interest rates for a while, hurting the dollar, and as investors sought a haven against slowing growth and U.S.-China trade disputes.

Continue reading Gold Rewards Bulls in January as Fed’s Message Wounds Dollar

As Goes January…? Really?

By Tom McClellan

Annual Seasonal Pattern

The stock market’s relationship to its normal seasonality has gotten wacky lately.  October to December is supposed to be an up period for stock prices, and instead we saw a very sharp correction.  In recent years, January has typically seen a meaningful decline, but the stock market instead powered higher.  In fact, the DJIA’s 7.2% gain in January 2019 was the strongest January since 1989.

Continue reading As Goes January…? Really?

Top 5 Charts of the Week: Investor confidence, Global trade, Asian currencies, US labor market

By Callum Thomas

Here’s some of the standout economic and markets charts on my radar. I aim to pick a good mix of charts covering key global macro trends, and ones which highlight risks and opportunities across asset classes. Hope you enjoy!

1. Institutional Investor Confidence – Panic Mode: The January reading of the State Street investor confidence index for North America entered into panic-mode territory. This is the lowest reading on record. I will be covering this topic in more detail in my weekly report on Friday (quite a bit to talk about).

Continue reading Top 5 Charts of the Week: Investor confidence, Global trade, Asian currencies, US labor market

Everything You Wanted to Know About MMT (but were afraid to ask)

By Kevin Muir

If you read only one MacroTourist post all year, this is the one I want you to read. I think it’s that important.

Today’s topic is sure to incite some pretty strong reactions. There will be cries of “no! that’s just wrong!” from the hard-money advocates. The cynics will proclaim “that’s going to end in disaster” and the pessimists will shake their head in disbelief while muttering something about “the follies of the ivory tower academics” as they walk away.

For some of you, the topic of Modern Monetary Theory (MMT) will be old hat. For others, this will be a new term. For those who are not familiar, I suggest you take some time to learn about this new branch of economic thinking as it is coming to a screen near you.

Continue reading Everything You Wanted to Know About MMT (but were afraid to ask)

Papa Powell and the Narrative Fallacy

By Charlie Bilello

“My purpose is to make my narrative as truthful as possible.” -George Armstrong Custer

Nothing like a huge rally in a month’s time to make everyone stop talking about a recession.

Remember that December collapse?  Felt like so long ago given just how violent the upswing has been since.  The end of 2018 was dominated by prognosticators saying a recession was imminent, or already underway.  Strangely enough, no one seems to be saying any of that now.

What changed?  One thing and one thing only: price.  At the end of the day, always remember that price dictates emotions, emotions dictate narrative, and narrative results in poor decision making.  Now I know that nearly everyone sees the unleashing of dovishness from Fed Chair “Papa” Powell as the reason for equities closing out the month of January so strong.  But none of this should be a surprise whatsoever given just how severely flat the yield curve has gotten as the Fed has hiked short-term rates.  Nor should it be a surprise whatsoever when inflation expectations have been in a solid downtrend since the middle of last year, largely due to Oil prices faltering.

Continue reading Papa Powell and the Narrative Fallacy

Counter-Cyclical Winds Blow, Gold Miners Front and Center

By NFTRH

As the stock market cracked on October 10th we noted…

Looks Who’s Holding Firm Amid the Carnage; the Gold Miners

And sure enough the GDX bottoming pattern noted in that post (and before that in an NFTRH subscriber update) played out perfectly amid the stock market carnage going on all around it.

Was I trying to predict something? Of course not. I was just following general rules we’ve had in place through all of NFTRH’s 10-plus year history and privately for myself since early in the bull market that began in 2001. Very simply, the counter-cyclical winds must blow and the Macrocosm must come front and center for a constructive fundamental view of the gold stock sector. That first crack in the stock market was a good start.

With respect to the Gold vs. Stocks planet, the S&P 500 topped vs. gold right at our targeted resistance…

Continue reading Counter-Cyclical Winds Blow, Gold Miners Front and Center