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Economy

How Markets Are Supposed To Work

By |2016-07-05T12:41:34-04:00July 5th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

In a regime where math acts as money, there are a few major potential chokepoints where shifts in math can become systemically important difficulties. In 2008, the most visible example was in repo haircuts, but the most devastating to the financial system certainly fixed income (MBS, in particular) correlation. The system could not survive rising correlation because nobody was prepared [...]

The Income of ‘Full’ Employment

By |2016-06-29T13:16:30-04:00June 29th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

In some contrast to spending or even “demand”, the economic problem is and has always been the lack of income growth. The difference in economy between income and spending is debt. As noted earlier, it was clear that the asset bubbles, based on debt via eurudollar expansion, created a boost in overall “demand” as represented in GDP’s Real Final Sales [...]

Revisions Don’t Change The Great Dislocation

By |2016-06-29T12:09:46-04:00June 29th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

The final revision to Q1 GDP changed very little, at least in its natural format given that there are benchmark revisions coming in less than a month that could significantly alter all of this. Even with “residual seasonality” there is every reason to suspect that the economy is weak even as compared only to the past few years. That seems [...]

The Warning Embedded Within The Interest Rate Fallacy

By |2016-06-28T18:28:57-04:00June 28th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

On November 4, 2010, then-Federal Reserve Chairman Ben Bernanke wrote his infamous oped for the Washington Post “welcoming” the world to a second round of quantitative easing. The very fact that there was a second iteration belied the whole point of “quantitative”, but the mistakes about “easing” have proven far more problematic. There wasn’t anything new or unusual in his [...]

GDP Corporate Profits And Cash Flows Rebound in Q1, But Not Really

By |2016-06-28T12:07:07-04:00June 28th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

Accompanying the final estimate for Q1 GDP is the first estimate for the corporate profits and cash flow components. Profits rebounded from a dismal Q4, but that actually means much less than it sounds especially in the more important segments. Corporate profits before tax (without IVA and CCadj) were an estimated $1.86 trillion in Q1, better than the $1.77 trillion [...]

Money Market Illiquidity Further Removes A Central Myth

By |2016-06-27T18:02:52-04:00June 27th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

It might be expected that monetary policy would fail to achieve its goal in attempting to manage the economy when it cannot even meet its own basic technical requirements. The main lever of Fed policy continues to be the federal funds rate even though it is entirely irrelevant, and has been for a long time. There is much more to [...]

Politics of the Monetary Noose

By |2016-06-27T12:05:06-04:00June 27th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

In June 2015, Pew Research Center conducted a poll of citizens in European countries in order to gauge public sentiment of the European integration project. They found what they thought was a rebound in favorability. The survey conducted in 2013 appeared then to have been the low point, with the 2014 update finding an uptick in support. By last year, [...]

Liquidity And Risk

By |2016-06-27T10:49:04-04:00June 27th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

The real nature of liquidity is not what you see today but what we might find when the going gets tough. Though it is an intangible concept (not that that hasn’t kept economists from trying to quantify it), we can reasonably assume that if overall liquidity today appears impaired under relatively benign conditions, it will be significantly worse as malignancy [...]

Bi-Weekly Economic Review

By |2016-06-26T13:53:52-04:00June 26th, 2016|Alhambra Research, Bonds, Commodities, Currencies, Economy, Markets|

Economic Reports Scorecard While everyone was focused on the potentially negative impact of Brexit, the Census Bureau was reporting evidence of actual economic weakness in the form of the durable goods report. The report was weak pretty much across the board but the weakness in autos is particularly concerning. The auto industry, along with construction, has been a leader in [...]

Durable Goods Add To The Idea of Depression (Small ‘d’)

By |2016-06-24T17:03:34-04:00June 24th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

There wasn’t anything new or surprising in the advance durable goods report. Shipments (ex transportation) were flat and orders were up 1% year-over-year (NSA). Capital goods (non-defense, ex aircraft) shipments fell 3.4%, the tenth straight month of contraction, while new orders were down again (2.6%) for the sixteenth time out of the past nineteen months. The slump only continues. With [...]

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