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Economy

Unbreaking Okun

By |2016-03-18T12:56:31-04:00March 18th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

There was a robust debate inside economics earlier in the recovery period over Okun’s “Law”, the seemingly stable relationship between the unemployment rate and real GDP. The Great Recession was stunningly large in terms of the skyrocketing unemployment rate given that initial estimates for real GDP were bad but not as catastrophic. This was more than a theoretical problem for [...]

Does It Matter If Oil Prices Have Already Traded In The Same Pattern Just One Year Offset?

By |2016-03-17T18:48:56-04:00March 17th, 2016|Commodities, Economy, Federal Reserve/Monetary Policy, Markets|

From June 2014 until late January 2015, oil prices (WTI) fell about 60%. From June 2015 until late January 2016, oil prices (WTI) fell about 60%. The exact track each annual trading history took to achieve those results is different (2014-15 much more straight ahead and persistent; 2015-16 jagged and irregular), but you can’t deny the repetition in both the [...]

Unemployment Rate Doesn’t Fit JOLTS, Either

By |2016-03-17T18:19:38-04:00March 17th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

The latest JOLTS update finds total hires in January down by a rather large 372k, leaving the monthly seasonally-adjusted rate at still 5 million. Given that the estimated hires rate increased unusually in December, it seems as if January was the statistical catchup or seasonal give-back. That leaves intact the same sideways pattern that first appeared around October 2014. Throughout [...]

Weakness in the Global Economy; Japan Edition

By |2016-03-17T16:55:38-04:00March 17th, 2016|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Setting aside all other considerations and doubts about QQE, there was one factor that was supposed to be unassailable. That was the yen. QQE as a “money printing” operation was understood to act heavily on the exchange value of the Japanese currency so that it would drastically alter the competitive pricing of Japanese goods in Japan’s favor. From that point, [...]

No Rate Hikes Because FOMC’s Models Don’t Even Believe the Unemployment Rate

By |2016-03-16T18:39:44-04:00March 16th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

If there is any doubt as to the confusion inside the FOMC, one needs only to examine its models. The latest updated projections make a full mockery of both monetary policy and the theory that guides it. Ferbus and the rest don’t buy the labor market story, either, which is why the Fed can only be hesitant at best about [...]

Industrial Production Drops For A Fourth Straight Month

By |2016-03-16T16:17:43-04:00March 16th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

US Industrial Production contracted for the fourth consecutive month in February, falling 1.03% year-over-year. It was the third drop of more than 1% in those four months, leaving the 6-month average now at -0.57%. A single month of -1% is usually associated with recession, let alone three of the past four and a negative six-month average. Except for one four-month [...]

Economic Destiny

By |2016-03-16T13:05:18-04:00March 16th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

The idea that China was transitioning to a “consumer led” economy was always a precarious wish. Doubts start with the timing, as it wasn’t until 2009 that it was even proposed, but the idea really didn’t gain any traction until after 2012. In other words, the only time Chinese consumers were ever given much thought was when industry was facing [...]

The Remarkable Inferences About the PBOC’s Unremarkable February Balance Sheet

By |2016-03-16T12:33:00-04:00March 16th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

The PBOC’s balance sheet was relatively quiet in February, with no large moves on either side of its ledger. In fact, these minor shifts appeared to be more so adjustments than the more extreme efforts the central bank had become used to undertaking. The heavy lifting was accomplished in January at least as far was what is visible, leaving February’s [...]

Bubble Cycle Inefficiency And Valuations

By |2016-03-15T17:32:57-04:00March 15th, 2016|Economy, Federal Reserve/Monetary Policy, Markets|

Last week the Federal Reserve updated its quarterly Financial Accounts of the United States Z1 (formerly Flow of Funds) meaning that we can recheck valuation levels of the stock bubble from alternate points of view (data). The most common valuation given by the report is Tobin’s Q which compares the estimated value of corporate equities (liability) to nonfinancial corporate business [...]

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