The eurodollar curve’s latest twist exposes what’s behind the long end. To recap: big down day in stocks which, for the first time in a while, wasn’t accompanied by massive buying in longer maturity UST’s. Instead, these were sold, too. Rumors of parity funds liquidating were all over the place, which is consistent with this curve behavior. Let’s start with [...]
Basic recession economics says that when you end up with too much of some commodity, too much inventory that you can’t otherwise sell, you have to cut the price in order to move it. Discounting is a feature of those times. What about a monetary panic? This might sound weird, but same thing. In other words, if you have too [...]
Is the dollar rising, or falling? Does it matter? In one sense, obviously it does. The way in which the dollar behaves dictates how everything else goes. The potential mix-up and confusion start when we have to define exactly what we mean by “dollar.” Or rising. The rising dollar doesn’t always rise. If we are talking about the US currency’s [...]
The Federal Reserve has been trying to propagate two big lies about the economy. Actually, it’s three but the third is really a combination of the first two. To start with, monetary authorities have been claiming that growing liquidity problems were the result of either “too many” Treasuries (haven’t heard that one in a while) or the combination of otherwise [...]
Taking another look at what I wrote about repo and the latest developments yesterday, it may be worthwhile to spend some additional time on the “why” as it pertains to so much determined official blindness, an unshakeable devotion to otherwise easily explained lunar events. The short version: monetary authorities as well as the “experts” describe almost perfectly risk averse behavior [...]
It’s interesting what the eurodollar futures curve has done today. Over the past several weeks, of course, the curve has collapsed though with much more focused buying at the front end of it. That’s understandable given the common scenario being priced in – that the Fed will reluctantly be forced into sizeable rate cuts very soon. In fact, the current [...]
With interest rates tumbling all over the world, gold should be killing it. Instead, gold is getting killed. The major correlation for this precious metal has been the bond market, falling yields. And that makes intuitive sense; gold as a hedge pays no interest, but if competing safety instruments like UST’s end up paying up a lot less then gold [...]
That’s the thing about these eurodollar cycles; they aren’t short. We’re conditioned on the belief that the business cycle is, or at least the recession piece. According to convention, the economy peaks and within a relatively short period of time it falls apart. The shock and its very immediate aftermath. The lengths of time involved here in the post-crisis era [...]
It’s another example of the difficulties in trying to evaluate and analyze non-economic factors. China’s virus outbreak is a nightmare for those unfortunately living through it, and Chinese officials aren’t doing themselves any favors. Trust is a sketchy enough concept. The WHO today says there is no pandemic, which, as Erik Townsend of MacroVoices points out, immediately puts this announcement [...]
We certainly don’t have a crystal ball at the ready, and we can’t predict the future. The best we might hope is to entertain reasonable probabilities for it oftentimes derived from how we see the past. Which is just what statistics and econometrics attempt. Except, wherein they go wrong we don’t have to make their mistakes. For example, in the [...]
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