By the time you read this, markets around the world will be reacting to the Trump administration's imposition of tariffs on Canada and Mexico and additional tariffs on China. I don't know what exactly that reaction will be although it seems unlikely to be positive, at least initially. Regardless of the market reaction, investors need to be careful not to [...]
I don't write or talk much about trade but it is, obviously, an important part of the global economy. With all the talk of deglobalization, you'd think that the US trade deficit must be shrinking, right? And with all those tariffs, imports must be falling right? Well, okay but the US doesn't make anything anymore and our trade policies have [...]
Some call it the accordion effect while others refer to it in terms of a bullwhip. Whatever the terminology, the supply chain mess has created a set of perverse incentives leading to a positive feedback loop: the greater the mess, the longer the times for delivery, the more product gets ordered if in only to increase the chance something, anything [...]
The Germans managed to do it, to avoid meeting the dreaded technical definition of recession. While not a meaningful one, conventional wisdom assigns the classification to any economy which features two straight quarters of declining output typically measured by real GDP. Germany’s was slightly negative in Q2 with most expectations for a repeat in Q3. Instead, deStatis reported last week [...]
When I first got in this business oh-so-many years ago, my mentor told me that I shouldn't waste my time worrying about the things everyone else was worrying about. As I've related in these missives before, he called those things "well-worried". His point was that once everyone was aware of something it was priced into the market and not worth [...]
Engaged in one of those protectionist trade spats people have been talking about, the flow of goods between South Korea and Japan has been choked off. The specific national reasons for the dispute are immaterial. As trade falls off everywhere, countries are increasingly looking to protect their own. Nothing new, this is a feature of when prolonged stagnation turns to [...]
It’s another one of those things that just blows up the whole convention, another pretty clear sign that the mainstream has it all backward. We are seeing it play out right now with China. The Chinese are being accused of unfair currency manipulation, the sort of “competitive devaluation” that fills whole chapters in the Keynesian Economics textbooks. The idea is [...]
We're changing the format on our Macro updates, breaking the report into two parts. This is part one, a review of the data released the previous month with charts to highlight the ones we deem important. We'll post another one next week that will be more commentary and the market based indicators we use to monitor recession risk. We are [...]
The Q2 GDP report (+4.1% from the previous quarter, annualized) was heralded by the administration as a great achievement and certainly putting a 4 handle on quarter to quarter growth has been rare this cycle, if not unheard of (Q4 '09, Q4 '11, Q2 & Q3 '14). But looking at the GDP change year over year shows a little different [...]
Welcome to the slowdown. It isn't much - yet - and it may just be a passing phase, but there is little doubt that the US economy has slowed somewhat. The rise in short term interest rates has stalled and the long end of the curve has rallied. The result is a flatter yield curve but it isn't the flatness [...]
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