• Some thoughts on this global economic recovery amidst longer-term economic uncertainty

    For the first time in several years, we are seeing economic growth everywhere in the global economy. it almost seems too good to be true. So I want to put this upbeat economic period in context and talk about where I see the opportunities and where I see the threats for policy makers going forward.

    Some thoughts on this global economic recovery amidst longer-term economic uncertainty
  • It’s the booming economy driving bond prices down, not Chinese selling

    Until we see slowing in the US economy, we should expect rates to rise somewhat and for a modest steepening of yields. If inflation starts to rise, expect these trends to become even more pronounced.

    It’s the booming economy driving bond prices down, not Chinese selling
  • On China, Japan and the Eurozone’s determining US interest rates

    There are a lot of stories floating around today that moves by central banks in China, Japan and Europe are having – and will continue to have a noticeable impact on US interest rates. Some are even saying this marks the end of the long bond bull market. I am sceptical of these claims because I have fundamental disagreements with the ‘model’ they use to make those claims.

    On China, Japan and the Eurozone’s determining US interest rates
  • Galbraith: The Fed is like the little Dutch boy with the finger in the dike

    There hasn’t been inflation in the economy since the early 1980s. It collapsed with the end of the Soviet Union and with the rise of China as a supplier for consumer goods.

    Galbraith: The Fed is like the little Dutch boy with the finger in the dike
  • Growth in non-farm payrolls peaks mid-cycle

    You don’t get the same level of job growth after eight years of an economic upturn as you do after one. And this is borne out by the statistics.

    Growth in non-farm payrolls peaks mid-cycle
  • The 1999 bombing of Kosovo as historical precedent for Trump’s approach to North Korea

    I’ve looked at Ian Bremmer’s list of potential geopolitical crisis triggers and the one that stands out for me is North Korea. And so I want to use the bombing of Kosovo as a historical precedent to explain what could be driving US policymakers’ thinking. Downside risk is high.

    The 1999 bombing of Kosovo as historical precedent for Trump’s approach to North Korea
  • ISM Manufacturing index shows US in brisk expansion; Fed to respond

    Economic activity in the manufacturing sector expanded in December 2017, marking the 103rd consecutive month of economic expansion in the US. The numbers point to a continued brisk pace of expansion, likely inviting multiple Fed policy responses in early 2018.

    ISM Manufacturing index shows US in brisk expansion; Fed to respond
  • European reform and the German model to the rescue

    When we talk about winners and losers in Euroland, the natural question is, “how can you make everybody a winner?”. And I think this is important while Euroland goes through a cyclical upswing since that’s when reforms can actually be the least painful. Will the ‘German Model’ be the one to save Europe?

    European reform and the German model to the rescue
  • Eurozone winners and losers

    The eurozone is fully recovered from the sovereign debt crisis. And that’s been true since early in 2016. But it’s only now that big growth is kicking into high gear as the synchronized global upturn takes hold. But who are the winners and who are the losers here?

    Eurozone winners and losers
  • The Fed has been and probably will be more hawkish than you think

    Markets seem to think the Federal Reserve’s recent policy statement and Chair Yellen’s subsequent press conference comments were dovish. This is a misread that I believe will have a meaningful impact on fixed income markets. The big question is whether a Fed that is more hawkish than usual is bearish for bonds or simply presents a relative value play as the yield curve slope changes. Some thoughts below

    The Fed has been and probably will be more hawkish than you think
  • Yellen: The relationship between the slope of the yield curve and the business cycle may have changed

    The biggest takeaway from Chair Yellen’s press conference was her belief that there is “reason to think the relationship between the slope of the yield curve and the business cycle may have changed.” To me, this suggests that some Fed officials will be inclined to disregard a flattening yield curve as a market signal. Some thoughts below

    Yellen: The relationship between the slope of the yield curve and the business cycle may have changed
  • Minsky’s financial instability hypothesis and the Fed’s reaction function

    As the Federal Reserve meets today to decide how to communicate its messaging on future rate hikes and balance sheet reduction, financial stability will play a key role. The risk of overheating was real. So let’s put some framing around this issue and ask how the Fed reacts as the data come in down the line.

    Minsky’s financial instability hypothesis and the Fed’s reaction function
  • As the Fed meets, expect expansion through 2018, but problems thereafter

    Given where we are right now, I think this expansion will continue through the end of 2018. And I want to talk about what that means in the context of my last post and recent BIS warnings on financial markets.

    As the Fed meets, expect expansion through 2018, but problems thereafter
  • We are in the most dangerous period in the business cycle

    Why would I be writing about ‘danger’ when we are experiencing the first synchronized global economic upturn in over 8 years? It’s the business cycle.

    We are in the most dangerous period in the business cycle
  • Places to avoid for commercial real estate investment

    Recently I have indicated I see a lot of problems in asset markets despite the economic acceleration in Europe, Japan, and the US. Commercial real estate is a problem that I want to highlight briefly since I believe it will be a locus of distress in the next global downturn.

    Places to avoid for commercial real estate investment

All Content

Bitcoin’s big problem: The modern state can make anything it chooses generally acceptable as money

Bitcoin’s big problem: The modern state can make anything it chooses generally acceptable as money

Even allowing for the recent gyrations — If bitcoin and its equivalents could deliver what its champions promise, what’s not to like? Well, American economist Abba Lerner said “The modern state can make anything it chooses generally acceptable as money”. That’s the rub.

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Grantham: US asset bubble to pop in 2019

Grantham: US asset bubble to pop in 2019

Veteran value investor Jeremy Grantham says that we won’t see an imminent end to the US bull market. He expects a melt-up, not a meltdown. But Grantham goes on to say that we will see an asset bubble implosion in 2019, with as much as 50% downside.

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The government versus the central bank: monetary policy as the only game in town

The government versus the central bank: monetary policy as the only game in town

The working economic model in North America and Europe is one in which the central bank and the fiscal agents are working at cross-purposes, with the central bank doing the heavy lifting if stimulus is desired.

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More Thoughts about Japan and US Treasuries

More Thoughts about Japan and US Treasuries

If China wants to accumulate reserves, it will have to buy US Treasuries, even if not every month. Japanese institutional investors are thought to be attracted by the high yields available in the US Treasury market.  But, the wider differentials at short-end make hedging the currency risk more expensive

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Jobless claims data show no disruption yet; Apple touts investment in jobs

Jobless claims data show no disruption yet; Apple touts investment in jobs

Initial claims for unemployment insurance of 220,000 in the week ending January 13 underscore the strength of the US job market. With the 4-week moving average decreasing to 244,500, there is no sign on the horizon of disruption to jobs.

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The tax cut benefits for corporations are now more clear

The tax cut benefits for corporations are now more clear

Now that the Trump tax cuts have been passed and US companies have had the opportunity to incorporate the changes into their projections, we are starting to see big payoffs, particularly for banks. This development is supportive of further gains in share prices.

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The Yuan’s Reserve Currency Status

The Yuan’s Reserve Currency Status

There is nothing quite like a falling dollar to spur take of the erosion of the greenback’s reserve status. For various reasons, countries have chosen to build reserves. Following the decision to hold or build reserves, the question arises as to what currencies to hold. Here’s a take specifically on the Yuan

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Some thoughts on this global economic recovery amidst longer-term economic uncertainty

Some thoughts on this global economic recovery amidst longer-term economic uncertainty

For the first time in several years, we are seeing economic growth everywhere in the global economy. it almost seems too good to be true. So I want to put this upbeat economic period in context and talk about where I see the opportunities and where I see the threats for policy makers going forward.

Read more ›
Republican presidential candidate Donald Trump speaks to supporters as he takes the stage for a campaign event in Dallas, Monday, Sept. 14, 2015. (AP Photo/LM Otero)

Project Syndicate on Trump’s promises to America’s working class citizens

The question: When November comes, will voters shun the GOP because they dislike Trump or will they look at the economy and return the GOP back to two more years of total control?

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Bailout bank Monte dei Paschi sub deal three times over-subcribed as Euro hits 3-year high

Bailout bank Monte dei Paschi sub deal three times over-subcribed as Euro hits 3-year high

A subordinated deal in a bank bailed out just a year ago and the currency at a three -year high underscore European investor confidence.

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Some thoughts on the Walmart minimum pay increase

Some thoughts on the Walmart minimum pay increase

Walmarts plan to raise the minimum pay for some employees to $11 an hour is big news. I also think this is good news for Trump and the Republicans as well as for wage rates in the US.

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Bill Gross: The bond bear actually began 18 months ago, after the Brexit vote

Bill Gross: The bond bear actually began 18 months ago, after the Brexit vote

Even though commentary focused on the prevailing bond levels today, what Gross is saying is that the bottom in yields was actually July 2016, 18 months ago.

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Proof that bonds are moving more because of the Fed than China

Proof that bonds are moving more because of the Fed than China

2018 has started with a lot of angst about bond yields. And there is some cause to be concerned. But this owes to an economy that is growing more briskly and to the Fed that has been and probably will be more hawkish than you think.

Read more ›
It’s the booming economy driving bond prices down, not Chinese selling

It’s the booming economy driving bond prices down, not Chinese selling

Until we see slowing in the US economy, we should expect rates to rise somewhat and for a modest steepening of yields. If inflation starts to rise, expect these trends to become even more pronounced.

Read more ›