201602.10
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It Was Never About Oil Part 2; It Was Always Leverage and Volatility

The entire point of leveraged positions is the margin of safety. That is true on both sides of that equation, as for the provider and the borrower/user. In the most famous examples of collapse, from AIG to LTCM losses were never really the issue. None of them could withstand instead collateral calls to their liquidity…

201602.10
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Fundamental About Oil

The front month WTI futures contract traded as low as $27.27 this morning, a few dimes less than the low of January 20. Just three months out, however, the June 2016 contract is trading at $33.17 and up $0.43 on the day (as of this writing). Just two months further to August, that futures price…

201602.10
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The Double Fallacy Recovery

Everyone knows the Titanic sank in April 1912, and if they didn’t they were reminded only a few years ago at its centennial. Less well known, for good reason, is the novel Futility, written by Morgan Robertson in 1898 years before Titanic had even been conceived. Robertson’s book includes the largest vessel ever constructed and…

201602.09 0

It Was Never About Oil

The link between stock prices and oil has been especially high of late, and that has left quite a few traders and experts stumped. For a good long while any impact from oil was denied as only “transitory” or even helpful to consumers through some sort of “tax cut” effect. In January 2016, however, liquidations…

201602.09
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The Great Economic Task Ahead

The wholesale level of the supply chain continued its divergence, though it seems increasingly likely that inventories have at least rolled over even if they are still building. Sales fell by 4.2% unadjusted year-over-year while inventories were up only 1.8%. That was the slowest inventory growth since the summer of 2010, but it still leaves…

201602.08
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Futures Curve Now Suggests Far Less Recovery Than Early 2009

When the June 2018 eurodollar futures price touched above 98.50 on October 2, I thought that was an impressive bid suggesting just how much negativity had survived the August liquidations. It was interrupted by some backward optimism about China’s October Golden Week, but the eurodollar curve overall with the June 2018 maturity as a specific…

201602.08
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Why Japan Went NIRP: No More Doubts About QQE

When real household spending fell by 4.6% in April 2014 it was cause for concern. That was the first month after the tax hike hit and the decline in spending was much larger than anticipated (by economists, at least). Despite the heavy toll, Bank of Japan officials remained (outwardly) wholly unconcerned over what was believed…

201602.08
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No Surprise To Find Dealers Hoarding For A Third Time

If the world is poised upon the precipice of “deflation” and the ugly economic consequences of reduced “money supply”, at the middle of all that are the primary dealers – still. While it is technically correct to claim that the Fed expanded its balance sheet to $4.5 trillion, with $2.4 trillion left after autonomous factors…

201602.05
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The Monetary Root

How did the world get this way? I don’t mean the oncoming recession, if that is indeed, as it appears, the economy’s fate. How did the payroll statistics ever attain this kind of deference and even religious zeal? U.S. manufacturing is shrinking, corporate profits are declining and goods are piling up on warehouse shelves. Those…

201602.05
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Empty Consumers

If the Chinese were intent on financial reform, and that meant trying perhaps the impossible task of a managed bubble deformation, the genesis of the idea was forged in the United States. China’s vast industrial machine was made to service US consumers and financed with the full throat of eurodollar expansion, leaving so many goods…