• The threat of an overheated German economy

    The Eurozone economy is doing really well. Some data points to 3% growth. The German economy is doing even better – with some data pointing to 5% annualized growth. But there’s a downside – overheating. And with the ECB at negative rates and engaged in 60 billion Euros of QE to boot, overheating in Germany is a reasonable fear. Some thoughts below

    The threat of an overheated German economy
  • More Europe

    At the height of the European Sovereign Debt Crisis, German leader Angela Merkel was openly calling for ‘more Europe, not less’. With Emmanuel Macron elected to the Presidency of France on that platform, Merkel has perhaps her only chance to make good on that vision. First she needs to get re-elected though. But if she gets that far — and her party’s election win last night in Schleswig-Holstein suggests she will — she has to meet Macron with a reformer’s fervour or lose Europe to nationalism.

    More Europe
  • France: What Macron means when he says the EU must reform or face Frexit

    At the weekend, French Presidential election frontrunner Emmanuel Macron told the BBC that EU leaders “have to face the situation, to listen to our people, and to listen to the fact that they are extremely angry today, impatient and the dysfunction of the EU is no more sustainable”. He then warned that if EU leaders do not correct this dysfunction, either France would exit the eurozone or the National Front would take over or both. I think what he says is true and let me explain why.

    France: What Macron means when he says the EU must reform or face Frexit
  • Trump is just a conventional politician who uses over-the-top bluster, NAFTA edition

    This morning, the Trump Administration called the leaders of Canada and Mexico to tell them that he “agreed not to terminate NAFTA at this time,” showing, yet again, that Donald Trump is much less audacious a President than some expected. The question is why. About two months ago, I surmised that despite all his hot rhetoric, Trump’s bark was worse […]

    Trump is just a conventional politician who uses over-the-top bluster, NAFTA edition
  • Why Macron is a risky bet for France and for Europe

    About two months ago I wrote about Emmanuel Macron as a risk, rather than a saviour. Today, following his 1st round presidential victory in France, I feel even more that he represents a risk that is unappreciated. Here’s why.

    Why Macron is a risky bet for France and for Europe
  • Why the Fed minutes show the FOMC moving toward Bullard and balance sheet shrinkage

    What about running down the balance sheet — reverse QE if you will? I think this is where the Fed minutes offered some new thinking.

    Why the Fed minutes show the FOMC moving toward Bullard and balance sheet shrinkage
  • Why the Fed was talking to big money investors, leading to a major leak

    I think I have the answer to at least one question: why was the Fed talking to big money investors in the first place. My thoughts follow below.

    Why the Fed was talking to big money investors, leading to a major leak
  • Brexit is more important politically than it is economically

    Today’s news coverage is non-stop Brexit. And this is a big event. But it is the political implications which matter; the economic impact will be more muted.

    Brexit is more important politically than it is economically
  • Subprime auto delinquency rate at highest level since financial crisis

    Increased delinquencies in the auto sector will spell trouble given the high LTVs of loans and lower credit scores of borrowers. And I am troubled by the OCC’s depiction of the commercial real estate sector; we could see heavy loan losses there in the next downturn.

    Subprime auto delinquency rate at highest level since financial crisis
  • Will Brexit’s trigger, now set for 29 March, mean recession?

    British Prime Minister Theresa May will trigger her country’s exit from the EU on 29 March, a spokesperson for the Prime Minister has confirmed. Afterwards, the clock will be ticking, as the UK will have two years to wind up any negotiations for exit before the country’s membership ends on 29 March 2019 after 46 years. The biggest questions are what this means for the UK economy, the EU economy and whether it is a precedent others will want to follow. Some thoughts below

    Will Brexit’s trigger, now set for 29 March, mean recession?

All Content

The threat of an overheated German economy

The threat of an overheated German economy

The Eurozone economy is doing really well. Some data points to 3% growth. The German economy is doing even better – with some data pointing to 5% annualized growth. But there’s a downside – overheating. And with the ECB at negative rates and engaged in 60 billion Euros of QE to boot, overheating in Germany is a reasonable fear. Some thoughts below

Read more ›
More on why Trump’s woes aren’t driving markets

More on why Trump’s woes aren’t driving markets

This is a brief follow-up on the last post I wrote about how markets aren’t freaking out about the Trump scandals. I wrote that “this is only one day. What is happening with Trump – while negative – will not change the arc of the US economy and markets.” And we see that this is true today.

Read more ›
Markets actually aren’t freaking out about Trump

Markets actually aren’t freaking out about Trump

We are seeing decent selling in today’s US equity markets, with the VIX up some 25%. And most people are pointing to the Trump scandals. But this is only one day. What is happening with Trump – while negative – will not change the arc of the US economy and markets.

Read more ›
Why Macron’s work was made harder by German regional elections

Why Macron’s work was made harder by German regional elections

Germany held elections in Nordrhein-Westfalen (NRW) this past weekend. And the results, while encouraging for Angela Merkel’s CDU, point to difficulties that lie ahead for French President Emmanuel Macron’s reform agenda in Europe. This is negative for periphery bonds.

Read more ›
Trump’s abuse of power and monetary offset

Trump’s abuse of power and monetary offset

Here in Washington, the city is abuzz over the crisis engulfing the Trump Administration. But politics are less important to markets than one might expect, despite markets being forward-looking. That’s because it’s often hard to judge what impact the politics will have on interest rates and profits. The negative impact of Trump on the US dollar is palpable, but I […]

Read more ›
What Schäuble is really saying about Macron and Europe

What Schäuble is really saying about Macron and Europe

German Finance Minister Wolfgang Schäuble talked to German weekly Der Spiegel about the election of Emmanuel Macron as French President, and this interview is being widely quoted in the English-language press without benefit of a translation. Having read the article, I would say there is nothing extraordinary in his commentary. None of his positions have changed. Let me explain what he said below.

Read more ›

Weekly initial claims down to 236,000 as Q2 heads to 3% growth

The labor market in the US is tighter today than it was at the same period last year. This, in conjunction with the last jobs report, gives cover to the Fed to hike rates in June.

Read more ›
Why Comey’s dismissal is negative for the economy and markets

Why Comey’s dismissal is negative for the economy and markets

It is now clear that Donald Trump dismissed FBI Director James Comey in a fit of pique over the investigations into Trump’s ties to Russia. But this move has already backfired, with the Senate investigation issuing subpoenas to former Trump National Security advisor Michael Flynn. Rather than recede, the Russian investigations will dominate headlines for weeks and months to come. […]

Read more ›
Competitiveness: two tales of systemic reform with Trump and Macron

Competitiveness: two tales of systemic reform with Trump and Macron

I just finished reading an illuminating article by Andrew Ross Sorkin on healthcare and it got me to thinking about a review of structural reforms by Dani Rodrik which encapsulates the problem with fixes to ‘competitiveness’. The message: target reforms like a laser or they won’t work.

Read more ›
More Europe

More Europe

At the height of the European Sovereign Debt Crisis, German leader Angela Merkel was openly calling for ‘more Europe, not less’. With Emmanuel Macron elected to the Presidency of France on that platform, Merkel has perhaps her only chance to make good on that vision. First she needs to get re-elected though. But if she gets that far — and her party’s election win last night in Schleswig-Holstein suggests she will — she has to meet Macron with a reformer’s fervour or lose Europe to nationalism.

Read more ›
Some thoughts on healthcare, inequality, and Baumol’s disease

Some thoughts on healthcare, inequality, and Baumol’s disease

Baumol was a giant in promoting entrepreneurship. And most importantly here, his theory on rising costs in labor intensive industries is something that the Nobel committee considered in 2003 and should have given him an award for.

Read more ›
Jobs data: The US will hike in June amid high structural unemployment

Jobs data: The US will hike in June amid high structural unemployment

Remember the debates about structural unemployment back during the beginning of this recovery. The question was whether policymakers would write off a whole cadre of workers as ‘unemployable’ and formulate policy as if they weren’t important. After the April jobs report, I think we have our answer.

Read more ›