201807.17
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Gold, Dollar, and Repo: Who Cares About Taper, or QE?

It’s funny how these things work. He didn’t actually say the word “taper”, at least not when the frenzy first started. The very idea of the “taper tantrum” was the media’s work, the easy slogan that could be used as shorthand for the conventional explanation. The economy was improving, everyone was told and easily believed,…

201807.13
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A Derivatives View On Q1 That Might Help Explain Q2 (and after)

Morgan Stanley is bit more complicated as a derivatives dealer than the Big 4. Those other banks hold most of their books at their bank subsidiaries. In this case, the term bank actually means something, the legal distinction of a depository institution. Each of the four banks, JPM, C, GS, and BofA, have a holding…

201807.11 2

Not Exactly Paradox, Reflation In Oil Deflation In Copper

The PBOC really needn’t have conducted the last few of its RRR raises. By the time they were in the books, Chinese inflation was already well underway toward being tamed. Though their CPI wouldn’t register for a few more months still, peaking in July 2011, commodities had already turned decidedly downward. Copper went first, hitting…

201806.27
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There Is Only One Global Trade War

IHS Markit reported last week that its composite Purchasing Managers Index (PMI) rebounded slightly in its first reading for June 2018. In January, the index had managed nearly 59, the highest in a very long time. It was taken as a definitive sign that Europe’s economy was not only booming, that boom was sustainable. Global…

201806.26
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The Money of Metals; More Gold Beyond Repo

In all honesty, I do mean to beat this one particular dead horse. In fact, I intend to pulverize it until there is nothing left but the smallest particulate matter. This is everything that is wrong with how things are right now. Either they are willing to put out what could only be legitimately classified…

201806.26
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The Money Of Metals; Or, Inferring Collateral Beyond Repo

It’s been a wild month for copper. June began normal enough for the metal, with the front month futures price (HG1) still ~$3.05 where it had traded since early March. Then, out of nowhere, the price surged. Starting June 4, in a matter of days HG1 was just less than $3.30. It was the highest…

201806.22
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Where Innovation Just Doesn’t Belong

Some things are not supposed to be innovative. It’s no surprise that given the high technology of our modern lives that modern humans tend to be drawn to the new and shiny. We’ve marked the advance of society along the lines of big leaps in understanding and doing. Quite easily, we can get lost equating…

201806.18
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BoJ Blames Amazon; Or, What A Difference A Few Months Make

The Bank of Japan gathered its policymaking members in Tokyo at the end of last week. The statements released and the commentary given pursuant to it exuded a renewed darkness. When they had last met on April 26 and 27, things were already different. But the conclave before that, March 8 and 9, they were…

201805.09
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What China’s Trade Conditions Say About The Right Side Of ‘L’

Chinese exports rose 12.9% year-over-year in April 2018. Imports were up 20.9%. As always, both numbers sound impressive but they are far short of rates consistent with a growing global economy. China’s participation in global growth, synchronized or not, is a must. The lack of acceleration on the export side tells us a lot about…

201805.03
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Someone Is On Drugs, Alright

For the second straight quarter, the Bureau of Labor Statistics (BLS) estimates US productivity growth was less than 1%. That’s not surprising given the weakening in output as measured by GDP, the data reported by the Bureau of Economic Analysis (BEA). Productivity is the bridge between the BLS’s labor numbers and the more general economic…