It’s standard textbook stuff. Convention has it that “capital flows” are determined by the portfolio effects of interest rate differentials. Quite simply, if yields aren’t very high for low risk US instruments (like UST’s) or their European counterparts, fixed income managers must go hunting for yields overseas in Emerging Markets who offer fatter returns by comparison. Thus, “capital” is said [...]
Putting some charts and data behind Friday’s extensive essay about bank reserves and inflation intended to further highlight some key parallels…The precursor event to yield caps being imposed in the United States actually took place during the Great Depression. Then – as now – officials at the central bank expected their “money printing” efforts to pay off in the reverse [...]
54a US TIPS Curve Inverts: An Economic Warning? ———Part 1 Summary———The US Treasury inflation-protected security curve has gone upside down. Indeed, it has NEVER been more upside down. What is the Treasury market telling us about the economy's prospects? Also, how long does reflation typically last? Are we closer to its beginning or end? ———Episode 54 Intro——— "The pen is [...]
I've been getting that question a lot these days. How high can rates go? It is asked in a way that seems to imply that the answer is obvious - not much. Why? The answer is almost always the same; the Fed can't and won't let rates go up. If they did, it would kill the economy and raise the [...]
I keep saying to take them at their word. For years now, China’s top Communists have been upfront and honest in a way that compared to what goes on in Western nominally-free democracies would be refreshing. Don’t get me wrong; this is no way implies, nor do I claim, that authoritarian thuggishness can be superior. Rather, this is the small(ish) [...]
At first glance, the numbers weren’t bad. Maybe even borderline OK. The headline payroll figure nearly doubled consensus estimates, even better when taking into account only private payrolls even after ADP earlier this week had reported the opposite. Topline, the Establishment Survey gained 379,000 in February 2021, of which 465,000 were reportedly added to the private economy (government employment shrank [...]
53.0 Inflation? Depends on Where You Look for ItShould speculative ventures be included in calculations of inflation? What about productive investment? Housing? All transactions? Or just consumer prices? Jeff Snider reacts to a Wall Street Journal opinion column. ———WHO——— Twitter: https://twitter.com/JeffSnider_AIPTwitter: https://twitter.com/EmilKalinowskiArt: https://davidparkins.com/ Jeff Snider, Head of Global Investment Research for Alhambra Investments with Emil Kalinowski, not spending money on haircuts. Art by Winterfell [...]
There is precedence for this, though not to this extent; it has reached a record. And when it happened before, oil prices were right in the middle of it, too. The 5-year TIPS breakeven rate has surged to equal its highest in a very long time. Considered by many evidence for an inflationary breakout – these are inflation breakevens, after [...]
52.3 US Oil Market Update + Texas Power Credit Crisis?What does the oil market (production, demand, inventory) in the USA tell us about the economic recovery in early 2021? Also, is a power market credit crisis in Texas causing a national run on banking-system collateral? [Emil’s Summary] The theme of Making Sense Episode 52 is how an environment reacts to an [...]
It’s understandable, even natural to focus on the amplitude of this or any BOND ROUT!!! and make comparisons to past reflationary trends on that basis alone. But what about frequency? By that, I don’t mean how frequently reflation shows up, though it has been fairly regularly if only because we never get any of that inflation and recovery predicted during [...]
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