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central banks

Why PCE is the Fed’s “Preferred Measure”

US from a year ago: – Export Price Index: 4.9% – Import Price Index: 4.3% – Shelter: 3.5% – Fuel oil: 25.3% – Transportation Services: 3.8% – Case Shiller Home Price Index: 6.8% – Retail Sales: 6% – Real Average Hourly Earnings: 0% (would be negative with a “less adjusted” index) Fed’s “preferred” PCE Index: still below 2%. Thank goodness […]

central banks

Bond Rally to Be Limited by Incoming Data and Treasury Issuance

Safe-haven sovereign bonds are experiencing a counter-trend snapback rally as the focus has shifted to a slew of troubling yet still mostly second-tier geopolitical events. The incoming populist Italian Five Star Movement/right-wing League political coalition is pursuing a shift away from painful austerity back toward the type of popular but damaging heavy borrowing and spending regime that led to Italy […]

central banks

Inflationary Upside Surprises Are on the Way and Still Underestimated

Oil, Sticker Shock, and Upward Pressure on Yields A perfect three-pronged storm is brewing:  oil, the labor market, and fiscal policy in the US will soon propel inflation notably higher than appreciated by overly complacent economists and analysts stuck in a delusion of “low-flation” recency bias. Just this past Friday afternoon–Friday afternoons being the most notorious time to quietly dump […]

central banks

Macro Snapshot – Where from Here?

Synchronized global growth heading into early 2018 has become more complicated. Global divergences are forming in growth and inflation. US Treasuries are not coming off the hinges just yet but an increased risk of (too) sharp of a rise in interest rates is clearly in the back of investors’ minds. China and Europe are decelerating somewhat but from elevated levels. […]

central banks

Why It Is Encouraging the Old Guard Still Doesn’t Understand Crypto Adoption

The current fiat-based monetary system is becoming insolvent from a dead-end Keynesian “debt and inflate” feedback loop paired with a lack of needed structural reforms, and it can only be kept intact going forward with capital controls and financial repression–which is what will eventually kill the current trickle-down system of centralized government fiat and precisely what spawned cryptos in the first place.

central banks

Current Global Macro Backdrop: A Sea of Debt and Monetary Base Expansion

Global Macro Backdrop: Absolutely remarkable and historically unprecedented Developed market equity indexes are scorching higher across the board. New all-time highs or multi-decade highs are being reached nearly every day in the US, Japan, Germany, and elsewhere. Bond yields are constrained across the duration and risk spectrum near multi-decade lows. European sovereign 2-year notes in periphery nations such as Italy, Portugal, and Spain are negative and continuing to hit new lows. Bond spreads between Germany and the periphery are generally narrowing to new lows, pricing in similar levels of risk between EU nation states. European high yield bonds are trading below 2%. Equity, bond, and currency market volatility are all at or near historic lows. This is the least volatile […]

stocks

US Economy Is Increasingly Dependent on Elevated Stock Shares and Real Estate As Personal Saving Rate Hits Decade Low: “Central Bank Put” to Remain in Place if Core PCE Stays below 2%

The “central bank put” safety net for asset prices will remain in place because it is too late to do otherwise. Therefore, selling risk assets short will remain the equivalent of pushing an inflated basketball under water. We reiterate our call to accumulate equity index longs on any dips and trim position sizes on rallies until core PCE convincingly rises above 2%.

currencies

New Zealand Takes Step in Direction of Economic Nationalism and Less Central Bank Independence: How This Impacts Our Long Standing Bullish Stance on Kiwi

We view the incoming coalition as openly hostile to the New Zealand dollar, all else equal, though Labour’s coalition lead is a moderating force compared with what would be the case if NZ First party leader Peters were fully in charge. This means risks increase notably for the kiwi dollar but not in an extreme fashion overnight.