Monday , April 19 2021
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Jeffrey P. Snider

Jeffrey Snider

As Head of Global Investment Research for Alhambra Investment Partners, Jeff spearheads the investment research efforts while providing close contact to Alhambra’s client base. His company is a global investment adviser, hence potential Swiss clients should not hesitate to contact AIP

Articles by Jeffrey Snider

The Consensus

3 days ago

With government cash being shoveled into personal and corporate bank accounts, US consumers have reported that they are being more optimistic about the state of the economy. Before that, they went on a spending binge as stated unequivocally by historic retail sales figures. Why, then, so much higher spending than improved happiness and certainty while going about it?The University of Michigan’s consumer survey index increased to 86.5 for the month of April 2021, up from 84.9 (revised) during March. Last month’s estimate had shown the bigger jump with the arrival of Uncle Sam’s check writing; just 76.8 in the winter freeze of February. While up from the cold, hardly in the same territory as the scorch of retailer registers barely able to keep up printing consumer receipts. The

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Bonds v. Economists 5

3 days ago

Given the historic data for US retail sales, “somehow” the bond market ignored them yesterday (and today). Yields globally fell for the most part, with real yields (TIPS) really discounting the significance of consumers in March. Bonds aren’t buying that this is anything other than temporary.Not surprisingly, the mainstream media refuses not to buy what bonds aren’t. I mean, for the fifth time since 2009, bonds vs. Economists (with mainstream media not content to cheerlead, literally working their corner). And even though the former is undefeated against them, they say the market is now wrong.Seriously, forget all those prior mistakes this one is the one. If that’s so, it shouldn’t be so difficult to make a plausible case which sticks in more than a few points. Sure, there’s US retail

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Eurodollar University’s Making MORE Sense; Episode 64: What Did THE ECONOMIST Say?

4 days ago

64.0: LIVE! Reaction: Answering The Economist———Ep 64 Intro———Should central bankers fix inequality? Un-change climates? The Economist says, ‘No! They are white knights to be held in reserve; don’t sully them with politics.’ Jeff Snider agrees on the ‘No!’, but for entirely opposite reasons.
———SEE IT———
Twitter: https://twitter.com/izakaminskaTwitter: https://twitter.com/JeffSnider_AIPTwitter: https://twitter.com/EmilKalinowskiAlhambra YouTube: https://bit.ly/2Xp3royEmil YouTube: https://bit.ly/310yisLArt: https://davidparkins.com/
———HEAR IT———

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Perhaps Just One Word Absent From The Historic Consumer Splurge

4 days ago

Enormous. Terrific. Unbelievable. Biggest ever. The superlatives for US consumer spending during the month of March 2021 are appropriate, and for once they aren’t caused by some artifact of arithmetic or some other trick. While there are absolutely some base effects within the numbers, these levels of retail sales are far and away more than those. It’s so ridiculous that there’s really little purpose in producing charts since all the estimates one after another just print way, way off them.
Headline, total retail sales smashed upward by 30% year-over-year (not adjusted), only some of which, again, are due to the low comparison by way of March 2020 in decline. The latest figure is an historic 21.8% better than retail spending in March 2019. And so it continues: ex autos, up 21.0%

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Eurodollar University’s Making Sense; Episode 63; Part 3: To (be)Labor This Again

5 days ago

63.3 Why You Should Not Be Happy with 6% Unemployment———Part 3 Summary———America’s unemployment rate is a miraculously low 6% – a remarkable achievement. But behind the headlines is the sad fact that labor force participation is awful.
———See It———–
Twitter: https://twitter.com/JeffSnider_AIPTwitter: https://twitter.com/EmilKalinowskiAlhambra YouTube: https://bit.ly/2Xp3royEmil YouTube: https://bit.ly/310yisLArt: https://davidparkins.com/
———Hear It———

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Why *Only* That Specific One?

5 days ago

On February 23, the US Treasury sold off $60 billion and change of 2-year notes (CUSIP 91282CBN0). This particular shorter-term instrument has been in the crosshairs of the reflation trade, lurching in and out of it going back to last October, perhaps even late September. Caught up being the immediate tenor following the bills which have been bid (for “some” reason) and longer-term notes and bonds which are more reflation sensitive, the yield on the 2s has been yo-yoing back and forth between 10 bps and as much as 19 bp for more than half a year.Notwithstanding such volatility, and with reflation having ignited more completely since early January, Janet Yellen’s Department had no trouble whatsoever floating the allotment. For the $60 billion offered, $146.3 billion in bids came in

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Fragility (脆弱性)

6 days ago

For a short while, with reflation being traded in almost every corner of the global bond market, the Bank of Japan started to get “those” questions again. Almost of the humble brag variety. A few years ago, Japan’s central bank had widened what it considered to be an acceptable trading range for its 2016 QQE addendum of Yield Curve Control (YCC). In 2018, Haruhiko Kuroda’s regime stated that it would “allow” 10-year JGB yields anywhere between -20 bps and +20 bps. By late February 2021, optimism worldwide became such that the JGB 10s took off (sold off) in a trajectory that made it appear likely to test Kuroda’s power and commitment to YCC in its current iteration. Making it to 17 bps, yields then fell backward down toward 10 bps or so all over again. To the media, and to Kuroda, this

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Eurodollar University’s Making Sense; Episode 63; Part 2: Bills Disappeared From Public Mind But Not (Repo) Markets

6 days ago

63.2 Growing Economy? Treasury Bills Don’t Believe It!———Part 2 Summary———Economic recovery? Then why aren’t US Treasury Securities being OBLITERATED by the combined power of vaccines, fiscal stimulus and monetary easing? Maybe because stimulus is really ‘stimulus’ and easing is ‘easing’. Indeed, US Treasury Bills are being bid and signaling angst.
———See It———–
Twitter: https://twitter.com/JeffSnider_AIPTwitter: https://twitter.com/EmilKalinowskiAlhambra YouTube: https://bit.ly/2Xp3royEmil YouTube: https://bit.ly/310yisLArt: https://davidparkins.com/
———Hear It———

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Consumer Price(s) Incalcitrant

6 days ago

While we consider the PPI’s view of inflationary pressures as overstated by simple arithmetic and the math of commodities, there’s no denying that producer prices have risen by a substantial amount. The question, the whole issue, is why. If it is truly because price pressures are building and have grown close to breaking out in systemic fashion, then that would indicate the sustainable trend more consistent with the term inflation.In order to reach that threshold, producer prices must become consumer prices otherwise disaffected businesses are left holding the bag. Needless to write, that’s the opposite. Such a case very quickly turns depressive, disinflationary if not in the extreme – firms that can’t pass along input costs to their customers will be threatened as to their bottom

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Eurodollar University’s Making Sense; Episode 63; Part 1: Bernanke Was Not Making Sense, Bonds, Bubbles & Money

7 days ago

63.1 Bernanke’s Idea Doesn’t Make Any Sense———Part 3 Summary———In the early 2000s, bond markets ignored the Fed. Alan Greenspan called it a “conundrum”. Ben Bernanke blamed a “Global Savings Glut”. But recent Federal Reserve research notes events since 2008 upend the Bernanke glut and instead suggest economic weakness and financial fear as causal.
———SEE IT———–
Twitter: https://twitter.com/JeffSnider_AIPTwitter: https://twitter.com/EmilKalinowskiAlhambra YouTube: https://bit.ly/2Xp3royEmil YouTube: https://bit.ly/310yisLArt: https://davidparkins.com/
———Hear It———

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Scorching, Blistering, Highest In A Decade! Powell’s The Voice of Reason Here?

10 days ago

If there is one thing Economists understand very well, it’s mathematics. This is practically all they do, and all that means much to their discipline. If there’s one thing Economists don’t seem either competent with or interested in, it’s the economy. The math is supposed to match the other’s reality, yet rarely does.There are times, however, when simple calculation is sufficient and (figuratively) on the money (literally, that is the whole other story).Such was the case around 2011 and 2012. You might remember that period for exorbitant gasoline and food prices triggering FRBNY President Bill Dudley’s iPad debacle, or how restaurants began charging extra for extra napkins, of all things, as paper prices blew upward at a seemingly insane pace. Both those things as well as other similar

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Rechecking On Bill And His Newfound Followers

11 days ago

The benchmark 10-year US Treasury has obtained some bids. Not long ago the certain harbinger of bond rout doom, the long end maybe has joined the rest of the world in its global pause if somewhat later than it had begun elsewhere (including, importantly, its own TIPS real yield backyard). Even nearer-in inflation expectations have rounded off at their current top. Perhaps no more than a short-term rest before each rising again, then again with the rest of the world’s markets acting similarly it’s fair to ask which end is actually leading?
More importantly, if it’s the wrong end, why would that end be leading? Especially right now. As I wrote a few days ago, there doesn’t appear to be a single thing going wrong. Quite to the contrary, what’s good (in the textbook sense) is good to levels

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Eurodollar University’s Making Sense; Episode 62; Part 3: Downgrading ‘Stimulus’ Expectations

11 days ago

62.3 Why the Biden (and Trump!) Stimulus is OVERHYPED———Part 3 Summary———The 2007-09 crisis was a permanent shock. Neo-Keynesians do not believe such a thing is possible. But consumers? Not only do they believe in permanent shocks, they KNOW they are very real. Therefore, the Trump and Biden stimulus payments have NO CHANCE of fixing the economy.
———Episode 62 Intro———
“I glanced at the list, running over names (probably misspelled) that meant nothing to me, with my hand on the butt of my righthand gun. That one now contained a very special load. According to Vannay, there was only one sure way to kill a skin-man: with a piercing object of the holy metal. I had paid the blacksmith in gold, but the bullet he’d made me – the one that would roll under the hammer at first cock – was pure

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Real Dollar ‘Privilege’ On Display (again)

12 days ago

Twenty-fifteen was an important yet completely misunderstood year. The Fed was going to have to become hawkish, according to its models, yet oil prices crashed and the dollar continued to rise. Both of those things were described as “transitory” by Janet Yellen, and that they were helpful or positive (rising dollar means cleanest dirty shirt!), but domestically American policymakers’ clear lack of conviction and courage about that rate hike regime showed otherwise. It wouldn’t be until December 2015 that Yellen finally got on with it – and then promptly paused for an entire year (until December 2016) while explaining nothing about anything before or after. The US economy did not fall into recession, which is one key source of confusion. For most of the public, other than a scary hiccup

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Eurodollar University’s Making Sense; Episode 62; Part 2: *The* Market Speaks

12 days ago

62.2 Best Market Fed Always Ignores: Eurodollar Futures———Part 2 Summary———If there was A SILVER BULLET, if there was ONE RING TO RULE THEM ALL – if there was ONE MARKET TO FOLLOW to track the health of the global monetary order and world economy – it would be the Eurodollar Futures market. Incredibly, the Federal Reserve has a very low opinion of it.
———Episode 62 Intro———
“I glanced at the list, running over names (probably misspelled) that meant nothing to me, with my hand on the butt of my righthand gun. That one now contained a very special load. According to Vannay, there was only one sure way to kill a skin-man: with a piercing object of the holy metal. I had paid the blacksmith in gold, but the bullet he’d made me – the one that would roll under the hammer at first cock – was

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Can We Reconcile Jobless Claims To Payrolls?

12 days ago

The Bureau of Labor Statistics (BLS) estimates that in the month of March 2021 somewhere around 916,000 payrolls were added back to the economy. I have to disclaim the figure simply because the statistics used to create it aren’t really all that precise; piecing together data from a survey of 145,000 business establishments, a fraction of the economy’s total, the government comes up with a 90% (only 90%) confidence interval that’s a few hundred thousand in breadth.In other words, what the BLS is actually saying about last month is that if it was to resample the same survey respondents 100 times, in 90 of them the agency expects the monthly change for March would come out to somewhere between 803,700 and 1,028,300. It’s hardly the definitive economic accounting thrown around haphazardly

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Soar or Sour: Short Run, *Then* What?

13 days ago

The sound of economic sizzle finally within earshot, though perhaps nearly a year too late. PMI’s for the month of March 2021 were of the sort which should have come about in May and June 2020. The “V”-shaped recovery was much talked about at that earlier time, though in PMI terms (as well as regular “hard” data) the numbers fell way, way short of it. I and others had pointed out repeatedly that to be consistent with an actual recovery, given the depths from where the recession began, the indices really needed to get up into the high 60s if not low 70s. Both sets – manufacturing and non-manufacturing – for both of data providers – ISM and Markit – started out moving in that direction before falling off well short. With (further) reopening back on the schedule again, plus Uncle Joe’s

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Eurodollar University’s Making Sense; Episode 62; Part 1: Fed Starts to Figure Out How It Really Works, Or QE’s Achilles Heel

13 days ago

62.1 You Won’t Believe it: Fed Admits QE is Unhelpful———Part 1 Summary———Two Federal Reserve researchers claim the Fed, “can effectively reduce the [fragility] of the financial system by reducing the size of its balance sheet.” REDUCING, not growing! To understand their conclusion we discuss: money dealers, interbank loans and collateral.
———Episode 62 Intro———
“I glanced at the list, running over names (probably misspelled) that meant nothing to me, with my hand on the butt of my righthand gun. That one now contained a very special load. According to Vannay, there was only one sure way to kill a skin-man: with a piercing object of the holy metal. I had paid the blacksmith in gold, but the bullet he’d made me – the one that would roll under the hammer at first cock – was pure silver.”

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Maybe The Biggest Challenge Is Not To Get Carried Away

13 days ago

Like a child fixated on a shiny new toy, I was enthralled by trading in WTI futures on Monday. There are times when end-of-day closing prices just don’t capture the full extent of what actually goes on during the several hours of any regular session, and yesterday was certainly one of those times. We’ve been on top of front-end contango for some weeks now. At first wondering if merely an artifact of growing technical illiquidity as the lead contract lurches toward its expiration, then the upside-down spread was passed over to the next one in line. And it hasn’t been all that much, just a few pennies here or there. On the surface, surely not something to be riled up about. Still, it’s not supposed to be there. A rip-roaring reopened economy stuffed to the brim with Uncle Sam’s cash freely

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Reopening 2

14 days ago

Last Friday’s March 2021 payroll report exceeded expectations in nearly every category. Analysts were hoping for something like the ADP’s private employment gains (+517k), somewhere in the ballpark of 550,000 to 600,000. Instead, the BLS thinks the whole economy had added between 803,700 and 1,028,300 (90% confidence). This translated into the “headline” of +916,000, of which +780,000 in the private sector (the balance due to government re-hiring). Unquestionably a good month, however leaving unanswered the same question plaguing the economy since the recession began over a year ago: is it anything more substantial than reopening?In March, there were two possible reopening categories at least when compared to February; the ever-present COVID restrictions plus literal rewarming, as in the

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Eurodollar University’s Making MORE Sense; Episode 61: What Did JAY Say?

18 days ago

61.0: LIVE! Reaction: Answering Jerome Powell———Intro———With no way to avert a US downturn, the Fed had to act forcefully to limit damage. So says Federal Reserve Chairman Jerome Powell. Jeff Snider listens and reacts to Powell’s case that the disruption wasn’t the Fed’s fault.
———SEE IT———
Twitter: https://twitter.com/izakaminskaTwitter: https://twitter.com/JeffSnider_AIPTwitter: https://twitter.com/EmilKalinowskiAlhambra YouTube: https://bit.ly/2Xp3royEmil YouTube: https://bit.ly/310yisLArt: https://davidparkins.com/
———HEAR IT———

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Chock Full of Japanese

19 days ago

At the very least, you have to recognize the correlation. If you aren’t willing to consider causation, in part, there’s troubling coincidence in every place around the world between huge government deficits and less growth (therefore the constant inflation “puzzle”). You can argue that the former causes the latter, and that’s absolutely a valid case; when things get rough, neo-Keynesians gain traction. Therefore, an economy in trouble is going to be one – if Economists rule over politics – where governments (including their central banks) will be doing a lot. That the break in growth comes first, however, doesn’t really settle the matter.
The issue on these narrow grounds becomes one of simple efficacy; does all that spending (and QE) actually work? If it did, there’d be inflationary

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Yes, Curves Have Been Forced To Speak Japanese

19 days ago

Economists’ R*, or R-star, is a fiction. It’s one that they came up with after-the-fact to try to explain why their policies didn’t actually work the way policymakers had initially promised. While in public, officials still speak glowingly of each QE, one after another after another, in private they know it deserves absolutely no praise. Study after study has shown basically the same thing (this pulled from a 2012 IMF research paper):

Research on the effectiveness of earlier quantitative easing has yielded mixed results, with most pointing to limited effects on economic activity. While most papers found evidence that quantitative easing helped reduce yields, its effect on economic activity and inflation was found to be small. The reasons cited included a dysfunctional banking sector,

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Eurodollar University’s Making Sense; Episode 60; Part 3: The Cheques Didn’t Cash At Jay’s Dunkerque

19 days ago

60.3 Powell likens Fed’s COVID response to Dunkirk———Part 3 Summary———Federal Reserve Chairman Jerome Powell analogized the central bank actions in March 2020 to the heroic evacuation of soldiers from Dunkirk in WW2. A more fitting analogy is the blunderous loss at Dunkirk that necessitated the rescue at all.
———Episode 60 Intro———
Jeff Snider is in his element in Episode 60, in which he observes the 20th anniversary of quantitative easing and notes the unsettling twist in oil futures; also, he reacts to the Federal Reserve Chairman who recently likened the Fed’s actions last year, to the heroic Dunkirk evacuation.Your podcaster on the other hand comes out of the gate staggering by slandering everyone’s favorite nation: New Zealand. Operating under the false impression that The

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Eurodollar University’s Making Sense; Episode 60; Part 2: Oil Twisting

20 days ago

60.2 Oil Market Issues Economic Warning———Part 2 Summary———The headline oil price has been falling since early-March, but insiders were alerted 10 days earlier of possible trouble by the futures curve. What is contango? What is backwardation? Do oil futures tell us the economy is struggling to gain additional liftoff?
———Episode 60 Intro———
Jeff Snider is in his element in Episode 60, in which he observes the 20th anniversary of quantitative easing and notes the unsettling twist in oil futures; also, he reacts to the Federal Reserve Chairman who recently likened the Fed’s actions last year, to the heroic Dunkirk evacuation.Your podcaster on the other hand comes out of the gate staggering by slandering everyone’s favorite nation: New Zealand. Operating under the false impression

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How Does Reflation Look From The Point of View of the One Market That Gets It

20 days ago

Eurodollar futures are derivative, cash-settled contracts linked to 3-month LIBOR (forget about SOFR and the official hatred of this offshore dollar rate regime). Though that rate acts independently especially at the worst times (thus, the hate), it is heavily influenced by the front-end monetary alternatives set by the Federal Reserve’s monetary policy (IOER, RRP). Because of this, LIBOR kind of seems like it should reflect whatever the Federal Reserve wants; and domestic central bankers love to make it sound like this is how it works (therefore, because it doesn’t work this way, they really, really want to get rid of it).Institutions betting and hedging in this market aren’t positioning based on what Jay Powell and models at the Fed (and other money markets) thing the future might look

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The Simple Equation

21 days ago

My entire premise was to make this mockingly simple. Econometrics demands mathematical precision yet always comes up empty because its calculations, no matter how elegantly complex, proceed from the falsest of subjective assumptions. It won’t matter how awesome the computing power if the thing you’re trying to compute doesn’t work or act the way you believe (because everyone says so rather than the evidence).When any currency falls especially against the dollar even today the mainstream convention attributes it to some kind of central banker intent (“devaluation” or its fancier cousin “competitive devaluation”). The mythology behind the Greenspan version of the central bank just won’t die; that if something happens it’s because the all-powerful monetary agency theoretically at the center

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Eurodollar University’s Making Sense; Episode 60; Part 1: QE At Twenty, Not Large, No Money, Nowhere Near the Economy

21 days ago

60.1 Quantitative Easing 20 Year Anniversary!———Part 1 Summary———On March 19, 2001 CNN described quantitative easing by the Bank of Japan as “inject[ing] a large amount of money into the Japanese economy.” It wasn’t large, it wasn’t money, and it never got to the economy. In two decades nothing has changed; not in Japan – not anywhere.
———Episode 60 Intro———
Jeff Snider is in his element in Episode 60, in which he observes the 20th anniversary of quantitative easing and notes the unsettling twist in oil futures; also, he reacts to the Federal Reserve Chairman who recently likened the Fed’s actions last year, to the heroic Dunkirk evacuation.Your podcaster on the other hand comes out of the gate staggering by slandering everyone’s favorite nation: New Zealand. Operating under the false

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Throw A German ‘Log’ On The Possible Fedwire Fire

24 days ago

One other fascinating, corroborating angle to the short run picture comes at us from Europe, specifically Germany. As illustrated yesterday, there’s a whole bunch of market prices/indications from around the world which have keyed in on February 24-25 as a possible turning point. The most obvious candidate which may have triggered it would be February 25th’s major US Treasury selloff.
But if that was the case, why would there have been a split from Germany’s bunds (schatzes, too)? These two crucial collateral heavyweights trade in tandem quite often, more often than not, and when they don’t it gets your attention beyond the idiosyncrasies plying each – such as the idea of COVID impacting Europe far more than the US, especially given the utter vaccine debacle developing over there.These

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Data Downgrading Uncle Sam’s Helicopter

24 days ago

There is, or at least can be, value in treating economic variables in the way econometrics does for the purposes of understanding generalized behavior. The problem for Economists, these statisticians, is that they’ve turned stylized lessons drawn from regression analysis into literal rules defining their worldview. By 1957, Milton Friedman had already been busy publicizing just those. Positive Economics was meant to become the scientific standard for how economists might better understand – by testing their knowledge – the complex systems of the real economy and how they often interacted. To attempt to make this “soft” social science into a hard one like Physics required, Friedman reasoned, rigorous mathematics.In the area of consumers and spending or income, how does any scientist

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