By Elliott Wave International
A 9-year bull market fails to close the pension gap
Did you realize that many U.S. pension funds are in trouble even though stocks have been rising since 2009?
Even so, many retirees expect a comfortable retirement.
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Our March 2018 Elliott Wave Financial Forecast showed this chart and said:
Continue reading Dreaming of a “Comfortable Retirement” on a Public Pension?
By Jeffrey Snider
I’ve seen a lot of commentary lately describe conditions as if things are calmed down. There was a bit of growth scare, a little T-bill indigestion earlier in the year. The Chinese are somehow both stimulating their export sector by devaluing CNY, and also controlling the price of gold while they do it. The contradictory inflation/deflation signals have apparently just canceled each other out!
There are, in reality, cycles within cycles. In March 2015, for example, the “rising dollar” paused after its first phase devastated some currencies and commodities (primarily oil, that anyone cared to notice). The economic damage hadn’t yet become visible, so the “supply glut” talk seemed reinforced by a lack of things happening right then. Until that August and CNY, kicking off the second half, or cycle within a cycle, it may have seemed like a lot of smoke with no fire.
It was the same way in 2008, too. The panic period can be broken down into two parts, the first finishing up with Bear Stearns’ near demise. In between March 2008 and July 15, optimism bloomed in official and unofficial ways. Policymakers were careful but still spoke especially in private as if their skillful handling of things had warded off the worst cases. Maybe even the US would avoid a recession altogether.
Continue reading Deflationary Decade(s)
By Doug Noland
The renminbi traded at 6.8935 in early-Friday trading, with intensified selling pushing the Chinese currency to its lowest level (vs. the $) since May 26, 2017. The People’s Bank of China (PBOC) was compelled to support their currency, imposing a 20% reserve requirement on foreign-exchange forward contracts (raising the cost of shorting the renminbi). The PBOC previously adopted this measure back during 2015 tumult, before removing it this past September.
The re-imposition of currency trading reserve requirements indicates heightened concern in Beijing. Officials likely viewed modest devaluation as a constructive counter to U.S. trade pressures. In no way, however, do they want to face disorderly trading and the risk of a full-fledged currency crisis.
The renminbi rallied 1% on the PBOC move, ending slightly positive for the day (but down for the eighth straight week). Trading strongly prior to the PBOC move, the dollar index reversed into negative territory. Many EM currencies moved sharply on the renminbi rally. The South African rand reversed course and posted a 1.2% gain. The Brazilian real also jumped 1%. Curiously, the Japanese yen gained about 0.5%.
Continue reading “Periphery to Core Crisis Dynamics”
By Doug Noland
I have a rather simple Bubble definition: “A self-reinforcing but inevitably unsustainable inflation.” Most Bubble discussions center on the deflating rather than the inflating phase. A focus of my analysis is the progressively powerful dynamics that fuel Bubble excess, along with attendant distortions and maladjustment – and how they sow seeds of their own destruction.
The ongoing “global government finance Bubble” is unique in history. Rarely has market intervention and manipulation been so widely championed. Never have governments and central banks on a concerted basis inflated government debt and central bank Credit. And almost a full decade since the crisis, the massive inflation of “money”-like government obligations runs unabated – across the continents.
The IMF calculated first quarter real global GDP growth at 3.64%, near the strongest expansion since 2011. U.S. Q2 GDP of 4.1% was the strongest since Q3 2014. There have been only eight stronger quarters of U.S. growth over the past 18 years.
Continue reading Latent Fragilities
By Heisenberg Report
So long as there are little signs of stress building into the system, there is little incentive for China to discourage FX weakness. After all, the nearly 10% USD/CNY move since March has almost completely offset the impact of Trump’s potential tariffs before they have even happened. Perhaps this is why the US President’s Twitter feed has turned back to talking down the dollar.
It doesn’t get much simpler than that when it comes to explaining how effective Beijing has been thus far in using the yuan to cushion the blow from the trade frictions.
It’s not entirely clear whether the Trump administration realized just how many policy levers the PBoC has at its disposal when it comes to micromanaging liquidity conditions and otherwise imparting an easing bias in a kind of under-the-radar fashion, the scope of which is only discernible after the fact.
China is countenancing yuan depreciation and while some of the measures taken in the course of that effort are headline worthy (RRR cuts, record MLF, etc.), others aren’t as overt. One way or another, they’re all reflected in the market and the cumulative effect has manifested itself in a rapid weakening of the currency, much to the chagrin of Donald Trump.
Continue reading Chinese Yuan Slump Zeros Out First Two Rounds Of Trump Tariffs: By The Numbers
By Jeffrey Snider
We are closing in on a record for economic expansion. It’s been talked about more frequently, especially since one has already been reached in the labor market. According to the BLS, there hasn’t been a negative employment report since September 2010 (there was one in September last year, but it has since been revised to slightly positive). That’s 93 consecutive months, but does it even qualify as expansion?
Continue reading Expansion, Record or Not At All?
By Jeffrey Snider
One soft indication of how far things have gone is Bloomberg. Six or eight months ago, its newsfeed was filled with uniformly apocalyptic hyperbole over inflation. The tight labor market, according to the Federal Reserve, was going to lead to a faster and farther rate trajectory. Sparked by quickening confidence in the short part of the curve, there was just no way the long end could resist.
Then it did.
Such inflation hysteria has almost entirely subsided. Yield curve flattening will do that. Even those who never pay attention to curves are suddenly gripped by them. One has inverted already (eurodollar futures), at the very least sparking a global conversation rather than BOND ROUT!!!! where no discussion would have been necessary.
For places like Bloomberg, the one-sided hysteria has been replaced by near schizophrenia. Take individual stories whichever way, my view is more of a big data type perspective. They sound much less confident over there these days. Economists and Federal Reserve central bankers can ignore curves at their leisure, but Bloomberg has to cater to people in the markets who might wish they could but in reality cannot.
In other words, unlike for Jay Powell’s assessments there has to be some grounded basis.
Continue reading From Inflation Hysteria to Curve Crazy
By Joseph Calhoun
Note: This will be a short update. We are shifting the timing of some of our reports. The monthly Global Asset Allocation update will now be published in the first week of the month, aiming for the first of each month. I’ll put out a full report next week. The Bi-Weekly Economic Review is shifting to a monthly update, published on the 15th of each month. We are doing this to make room for some new reports, podcasts and videos.
The risk budget is unchanged this month. For the moderate risk investor, the allocation to bonds and risk assets is evenly split. There are changes this month within the asset classes.
Continue reading Global Asset Allocation Update
By Michael Ashton
The question about the impact of trade wars is really two questions, and I suppose they get conflated a lot these days. First, there’s the near-term market impact; second is the longer-term price/growth impact.
The near-term market impact is interesting. When the market is in a bad mood (forgive the anthropomorphization), then trade frictions are simply an excuse to sell – both stocks and bonds, but mostly stocks. When the market is feeling cheerful, and especially around earnings season, trade wars get interpreted as having very narrow effects on certain companies and consequently there is no large market impact. That is what seems to have happened over the last few weeks – although trade conflicts are escalating and having very concentrated effects in some cases (including on markets, such as in commodities, where they really oughtn’t), it hasn’t dampened the mood of the overall market.
Continue reading The Important Trade Effects Are Longer-Term
By Heisenberg Report
Jamie Dimon is not a fan of Donald Trump’s approach to trade.
And although he’d probably contend that’s not an entirely accurate assessment of his thinking, a new interview with CNN Money certainly seems to the support the notion that he believes the President and his team are increasingly detached from reality when it comes to global trade and commerce.
“I would remind folks that the president’s team has already said, ‘There will be no retaliation.’ They’ve already been wrong,” Dimon told the network’s Christine Romans, adding that “if I was the president, I’d be a little ticked off at some of my advisers, to tell you the truth.”
Advisors like, say, Peter Navarro who is a standing joke in the academic community and has failed on any number of occasions when it comes to getting involved in politics.
Dimon also criticized America’s approach to NAFTA negotiations, going so far as to accuse Trump of “torturing” Mexico.
Continue reading ‘They’ve Already Been Wrong’: Jamie Dimon Blasts Trump’s Trade Policy In CNN Interview
By Anthony B. Sanders
1st Time Since 2013 As Median Price Hits All-time High With Low Inventory (Simply Unaffordable!)
According to the National Association of Realtors, existing home sales for June declined for the third straight month.
What is unusual is that it is April, May and June. The year 2013 saw six straight months of declining home sales, but that was August 2013 through February 2014 (post peak season). June is typically the peak in a year for existing homes sales and median price.
Continue reading June Existing Home Sales Decline For 3rd Straight Month
By Jeffrey Snider
One way to read the inversion in eurodollar futures is that the market expects the Federal Reserve to ignore growing economic and financial concerns. There is a very reasonable basis for this structure given recent history. Central bankers and Economists have shown a remarkable, and remarkably consistent, ability to talk themselves out of any negative indications.
This is the idea behind “transitory.” We see it, but we ignore it anyway because reasons.
The whole point of econometrics and Positive Economics was so that it would never be this way. There was great interest in turning economics from more so an art form dependent upon subjective interpretations into a science where mathematically determined evidence would remove a great deal of opinion-based noise.
Continue reading Housing Errors