Repo rates absolutely surged at month-end, LIBOR jumped a few more basis points and the eurodollar curve is bid almost everywhere in large chunks. Commodities continue to get smashed, especially crude oil, and currencies are devaluing in almost equally large portions. Even the treasury market is somewhat sporting the tell-tale collateral calls. In short, the “dollar” problems continue into this [...]
Headlines a few years back were about China's need to re-balance their economy away from a heavy reliance on exports and toward domestic demand. The thesis says that self-reliance will lead to a less volatile economy and lower cost of capital. China is succeeding with this goal, but the path is initially a very bumpy road. The MSCI China index [...]
The concept of a head-fake in stock investing is pretty well-established and well-known but it may have to be extended to economics. Every small increase in positive numbers for major statistics is extrapolated into grandiose projections for the final recovery that “everyone” knows has to be coming. Yet, each and every time those expectations are delivered, and swallowed without question [...]
The latest update for TIC “flow”, for the month of May, was mostly what was expected given the “dollar pause” at that time. Central banks were still active but not nearly as engaged as they had been through the worst parts of the “dollar” crisis in late 2014 and early 2015. Official accounts (central banks and foreign governments) had turned [...]
There is a lot about the crash in Chinese stocks that remains out of view. Of course, margin debt persists at the forefront of the reversal but I don’t think that begins to explain the depth and speed of the downturn. The timing seems to line up with very well with official policy measures intended to slow down the stock [...]
There have been, in the past year, two great inflections in wholesale finance. The first was in late June as the “dollar” began to rise, thus signaling a massive shift in balance sheet mechanics, the modern “money supply” that so confuses economists. That is why they at first enthusiastically embraced the “strong dollar” as that anachronistic interpretation seemed on the [...]
I understand the idea behind trying to get exports to fit into the orthodox conventions about the dollar and global trade, even if I don’t agree with that at all, as it at least makes some plausible sense. If the dollar is up against trade partners, in simple math terms you might expect to see fewer US exports heading overseas [...]
Some people are getting very nervous about China, and as usual that stems from a misreading of the Chinese intentions. This is not to say that one should not be concerned at all, but it is much better to be concerned for the right reasons in order to find a more suitable line of inquiry and analysis. The complications of [...]
I think at this point with China, everything from here on out until whatever final resolution to the bubble era will be “unexpected.” That qualification has been overused almost everywhere during this global “recovery” that never was, the latest being China’s exports sinking in April as well as March. Analysts and economists were thinking about a tepid plus sign, expectations [...]
Recognizing the danger of relying too much on a PMI, the official version of the Chinese PMI not only disappointed absent any detectable rebound it also contained at least a superficial indication that the US isn’t experiencing one either. Overall, the PMI stayed right at 50, for whatever that might be worth, but several key subcomponents moved deeper below that [...]
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