There are a few correlations that I find particularly compelling. The first is Chinese RMB (or CNY) next to WTI crude oil, as both are proxies in their own way of multi-dimensional crosscurrents between global “dollar” finance and real economy function. Since March, that correlation has come into renewed and tight focus. In the past few days, the CNY has [...]
Over the weekend, Charles Schwab issued a “tool” for investment advisors to help them “feel good” about what is expected for 2016. With investors increasingly talking about risk, and stock market risk at that, there is a counter-rush to reassure. Some of that is expected in places like this, but increasingly the disparity between the form of that encouragement and [...]
When decrying the state of monetary policy that relies on essentially a “dead” money market, what does that actually mean? The FOMC, after all, is using the federal funds rate to “tighten”, ostensibly, even though there isn’t anybody there. They have developed other tools to go along with the federal funds rate, but all that does is highlight the central [...]
Immediately after the Fed hiked interest rates last Wednesday – after sitting at 0% for 7 years – markets acted pretty much as one might expect. The Fed tightens monetary policy when the economy is strong so rising stock prices, rising interest rates and a strong dollar are all things that make sense in that context. I am sure there [...]
Economic Reports Scorecard – 11/6/15 to 11/20/15 The incoming economic reports ran two to one negative over the last two weeks, continuing the trend we’ve seen all year. That’s one of the worst two week stretches we’ve seen all year. Janet Yellen has been telling us for over a year that changes in policy were “data dependent” but that is [...]
The Fed’s industrial production series also includes estimates on total motor vehicle assemblies. Auto sales in general have been one of the only bright spots in the economy, especially since the 2012 slowdown (even though it has been boosted artificially via credit far, far more than income gains). Given that trend, it is still difficult to assess whether activity in [...]
I covered a good deal of the background here, so I should only reiterate that it is a profound difference in actual mechanics this time as opposed to last. At the end of June 2004, Alan Greenspan’s Fed commanded that money market rates follow a new federal funds target (from 1.00% to 1.25%) and money rates did so. Of course, [...]
The FOMC at least still knows how to throw a party. It may not be what it once was, but for one day there was the familiar euphoria predicated upon the wish that central bankers might know something about anything. All-too-quickly, however, it vanished as it becomes increasingly clear, despite all attempts to rewrite this history, that there are no [...]
For an economy that is supposed to be on the verge of overheating, or at least moving decisively in that direction, there are an inordinate number of indications of a cyclical stall and termination rather than some beginning (or ripening). I’m not referring exclusively to economic indications, either, such as the Federal Reserve’s own industrial production figure that just showed [...]
Now that the FOMC has announced its intentions, it has to sit back and wait to see if it can actually do anything. This is the direct consequence of using the federal funds rate as the primary target, as it is a dead market that nobody really uses anymore. The only reason the Fed is still leaning on federal funds [...]
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