Financial Center and Reserve Currency

By Bob Hoye

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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 That extremely helpful +312k has been replaced by +222k instead.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?

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)

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

Once a Caver, Always a Caver

By Kevin Muir

Remember the Powell of last year? You know, the one that tried to convince us that there “could be no macroeconomic stability without financial stability?” And this Powell was not concerned about financial stability in terms of making sure the stock market never went down, but rather just the opposite. On June 20th, 2018 Powell brought to our attention that;

Continue reading Once a Caver, Always a Caver

Random Predictions for 2019

By Steve Saville

1) Early last year we predicted that the US stock market would experience greater-than-average volatility over the year ahead. This obviously happened, as there were more 2%+ single-day moves in the SPX during 2018 than in an average year.

We expect the same for this year, that is, we expect price volatility to remain elevated. The reason is that the two most likely scenarios involve abnormally-high price volatility. One of these scenarios is that a cyclical bear market began last October, and bear markets are characterised by periods of substantial weakness followed by rapid rebounds. The other scenario is that a very long-in-the-tooth cyclical bull market is about to embark on its final fling to the upside.

Continue reading Random Predictions for 2019

Fed Doves Take Flight…

By NFTRH

A ‘wild card’ segment has been added to NFTRH reports because I wanted the freedom to go out of bounds in any direction, beyond our usual areas of disciplined coverage. Last week it was a look at the Semiconductor sector.

This week it is Fed policy with a side trip down memory lane, trying once again to illustrate why today is not at all like the ZIRP era and why the post-2015 re-connect between the Fed Funds rate and the stock market does not bode well for stocks, assuming the Fed really is going soft.

Excerpted from tomorrow’s edition of Notes From the Rabbit Hole, which will also include loads of actionable analysis along with the more theoretical stuff below…

Fed Doves Take Flight (But We Are Not in Kansas Anymore)

Wise guys trading Fed Funds futures see no more rate hikes in 2019, and a few even imagine a rate cut before year-end. Here are the projections for the next 3 meetings, showing an overwhelming view that the Fed will hold the current 225-250 target rate. Graphics: CME Group

Continue reading Fed Doves Take Flight…

The Light and the Dark

By Jeffrey Snider

A year ago, central bankers were over the moon. From those in the US to those in Europe, with Japanese officials in between, they really thought they had it. There wasn’t much basis for the belief, mind you, merely the fact that positive numbers were registering in all those places at the same time. Like some old Three Stooges movie, Moe (Powell), Larry (Draghi), and Curly (Kuroda) clunked their heads together and thought it had to mean something.

As 2019 dawns, nope, it really was meaningless nothing. Leading the way toward the wrong direction is Larry with Curly not far behind. Moe’s turn is fast approaching; he is currently paused to figure out whose face he might slap in order to shift the blame.

Curly always was the more flamboyant of the three. His track record for slapstick continues to be unmatched.

Continue reading The Light and the Dark

The Downside of Balancing US-China Trade

By Michael Ashton

The rumor today is that China is going to resolve the trade standoff by agreeing to balance its trade with the US by buying a trillion dollars of goods and services over the next four years. The Administration, so the rumor goes, is holding out for two years since that will look better for the election. They should agree to four, because otherwise they’re going to have to explain why it’s not working.

I ascribe approximately a 10% chance that the trade balance with China will be at zero in four years. (I’m adjusting for overconfidence bias, since I think the real probability is approximately zero.) But if it does happen, it is very bad for our financial markets. Here’s why.

Continue reading The Downside of Balancing US-China Trade

Semiconductor Sector (NFTRH 535 Excerpt)

By NFTRH

As in January of 2013 (ahead of an economic up cycle) and Q4 2017-Q1 2018 (ahead of an economic ripple that began in 2018) the Semiconductor sector and in particular its Semi Equipment sub-sector are front and center in forming our analysis about coming events. Excerpted from the January 20th edition of Notes From the Rabbit Hole, NFTRH 535

Semiconductor Sector – Watch the Early Bird in 2019

This one is special for me. I started my work life many moons ago as a participant with the Semi sector [circa 1983-1993], painfully learning first hand how violent the cyclical turns can be. Dialing ahead a couple decades, in January of 2013 NFTRH began a narrative that saw the then up-turning Semi Equipment bookings (this data is unfortunately no longer published) lead the sector, general manufacturing and eventually the whole raft of components that make up the economy into a cyclical up-turn.

Continue reading Semiconductor Sector (NFTRH 535 Excerpt)

China’s Central Bank Now Has World’s Largest Balance Sheet…

By Anthony B. Sanders

…As $1.1 TRILLION Is Injected Into Markets Via Repos (Curves Kinked)

China’s central bank, the People’s Bank Of China, now has the world’s largest balance sheet topping even the European Central Bank (ECB). Only The Federal Reserve is shrinking its balance sheet … for now.

pbocv

The PBOC has injected almost $1.1 trillion in the market over the past two days.

Continue reading China’s Central Bank Now Has World’s Largest Balance Sheet…

This Isn’t the First ‘Fed Pause’

By Jeffrey Snider

And we come full circle back again. It’s not what they say, it’s what they do. Kansas City Fed CEO Esther George was at least consistent, unlike all the other voting FOMC members. Throughout 2015 and 2016, the rest of them would say the economy was strong but then vote the other way, no “rate hike.” December 2015 was the lone exception (and perfectly fitting).

President George, on the other hand, was almost irredeemably optimistic about the economy and voted that way, too. While the majority held steady, Esther was the one who would dissent against the then Fed Pause. The few times she didn’t was in early 2016 when the US economy approached recession conditions.

You knew it was serious when the hawkest of hawks stopped walking how she talked. In March 2015, George had said:

Continue reading This Isn’t the First ‘Fed Pause’