201702.23
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Time To Add Mexico?

Is Mexico about to go down the same road as China, Brazil, and so many others have the past few years? The more interesting question may be what took so long, if they are. Mexico’s central bank has been forced into action again, after interjecting itself last month supplying dollars directly to Mexican banks, as…

201702.22
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Of Banks, Europe, Euros, and Eurodollars

Rather than bury this chart in my earlier discussion of liquidity preferences, I felt it deserved its own piece to highlight what it shows. By all traditional and orthodox Economics, this just should not be possible. Yet, there it is and it’s not the only example of violation. For very different markets as robust as…

201702.22
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FOMC: All Those Times We Said QE Was Going To Work, We Really Meant That It Could Work

There was an extremely odd dynamic for monetary policy during the 1990’s and especially in the United States. The less Alan Greenspan said, the more markets were convinced he knew what he was doing. He purposefully said nothing, being attributed years later with developing this “fedspeak.” So long as he continued to say nothing, the…

201702.22
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Banks, Not France, Germany, Or Europe And Euros

If more people desire a certain thing, in a free market the price of that certain thing will go up regardless of any possible inherent value. Indeed, that is how market consensus is supposed to work, the backbone of efficient markets. I don’t believe that markets are or ever can be perfectly efficient, especially in…

201702.21
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Discounting, Or Never Learning?

The hedge fund industry is not quite dead yet, meaning that it can still cause a great deal of disruption before it expires. It is here where things like rehypothecation and the bastardization of prime brokerage functions were perfected, such that we might use that term in this manner. Despite so much outward attention paid…

201702.21
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The Stinking Politics of It All

It is largely irrelevant, but still the political theater is fascinating. As is now standard operating procedure, whatever comes out of the Trump administration immediately is conferred as the standard for awful. This is not my own determination, mind you, but that of the mainstream, whatever that is these days. And so it is with…

201702.21
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The Market Is Not The Economy, But Earnings Are (Closer)

My colleague Joe Calhoun likes to remind me that markets and fundamentals only sound like they should be related, an observation that is a correct one on so many different levels. Stock prices, in general, and GDP growth may seem to warrant some kind of expected correlation, but it has proven quite tenuous at times…

201702.17
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Why Aren’t Oil Prices $50 Ahead?

Right now there are two conventional propositions behind the “reflation” trade, and in many ways both are highly related if not fully intertwined. The first is that interest rates have nowhere to go but up. The Fed is raising rates again and seems more confident in doing more this year than it wanted to last…

201702.17
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Their Gap Is Closed, Ours Still Needs To Be

There are actually two parts to examining the orthodox treatment of the output gap. The first is the review, looking backward to trace how we got to this state. The second is looking forward trying to figure what it means to be here. One final rearward assessment is required so as to frame how we…

201702.16
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Transitory Again

The Consumer Price Index for January 2017 rose 2.5%, pulled upward by its energy component which thanks to oil prices now being comparing to the absolutely lows last year saw that part of the index rise 11.1% year-over-year. Given that oil prices bottomed out on February 11, 2016, this is the last month where oil…

201702.16
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Changes In TIC

If there has been a lot different about the past few months, it was reflected in the TIC figures and then some. What is usually pretty easy to decipher, there were instead all sorts of shifts across the most important categories. For one, the foreign official sector was busy in December buying up UST’s and…

201702.15
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Real Wages Really Inconsistent

Real average weekly earnings for the private sector fell 0.6% year-over-year in January. It was the first contraction since December 2013 and the sharpest since October 2012. The reason for it is very simple; nominal wages remain stubbornly stagnant but now a rising CPI subtracts even more from them. Consumers receive no significant boost to…