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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

Eurodollar Futures Curve Update (spoiler: still inverted)

3 days ago

I guess I took my own advice a little too literally. I did write that when the eurodollar futures curve first inverted, it was going to be dull. Didn’t start out that way, of course, with a small bit of theatrics right during that front week in December when the inversion first showed up. Ever since then, it has stuck to what I had said on Day 2 about what you should expect, or not to:

For the time being, our focus for now remains on the twisting. And we shouldn’t expect much more out of it. At least, for now.

Though this was truly a Big One, a serious signal right up in the top tier of monetary and financial warning signs, it still goes on the backburner in this first stage. I hadn’t realized, however, that while I’ve kept it in the corner of me eye for myself, I haven’t updated

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The Historic Christmas Binge

3 days ago

The reason that store shelves are occasionally empty, as any social media hashtag trend will tell you, is that Americans are still buying an amazing amount of goods. For December 2021, Christmas was hardly canceled. The Census Bureau today reported that retailers during the biggest month of last year, of every year, grabbed an astoundingly huge $714 billion in overall sales. Almost three-quarters of a trillion in a single month.Not just the finale, though, total retail during the whole of last year was literally insane. See for yourself (one of these things is not like the others):But this is only where the macro story begins; because of this mass of consumer demand and the price impacts it has had, while somewhat more complicated from here the analysis remains relatively straightforward

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Let’s Talk TIPS

4 days ago

Real yields have moved higher, surging, actually, to start this year (up until more recently, that is). The 5-year TIPS rate has gone from ungodly ugly mid-November, sunk down to -191 bps, to a still-awful but much less so -130 bps as of today. That’s a 61 bps move in less than two months, thirty of those coming since the end of December.Good news? Something else?No sense in dragging this out, spoiler alert, the answer is quite clearly something else. Unless you take the Fed’s rate hikes for good news. Given recent history, as I’ll go through briefly, there’s simply no reason to.The FOMC’s rate hikes – both in action as well as perceived upcoming action – influences curve dynamics nominally, as noted previously, but also TIPS, too. This non-economic interference is sharpest at the front,

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There’s (still) A Ghost On The Monetary Throne

5 days ago

Dark leverage, that’s the real stuff. In a ledger-based monetary system, money creation comes from expanding leverage. Simple. Clean. Obvious. How it gets done, that’s the genius, the beauty, and the disaster. Call it money of account, or ghost money, fictional currency, whatever. It’s the secret sauce which, when you see it, you just can’t un-see it. This is the real red pill, as it were.
Eurodollar University’s Making Sense; Episode 89, Part 3: Bitcoin’s El Salvador Conundrum Easily Untangled By Realizing the Real Dollar Situation
Eurodollar University Episode 168, Part 3: The Red Pill of Growth ‘Scare’
The policymakers at the Federal Reserve play central bankers on TV. They talk the talk and make the necessary noises, but at the end of the day their only policy tools are sentiment

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US CPI Reaches Seven On US Goods Prices, With Disinflation Setting In Everywhere Else (incl. US Services)

5 days ago

How is that US Treasury rates out in the independent longer end of the yield curve have now “suffered” a seven percent CPI to go along with double taper and triple maybe quadruple (if the whispers are to be believed) rate hikes this year, yet have weathered all of that allegedly bond-busting brutality with barely a market fluctuation? The short end of the curve, as noted here, is being pressured by only the last of those things, rate hikes, and from them creating the malodorous Conundrum No5.Part of the explanation for this can still be found in the word “transitory.” The flattening curve here and elsewhere acknowledges this, how despite the US CPI achieving its lofty status it still is not inflation (OK, Emil, it’s not monetary inflation). This last point the purpose behind my recent as

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Sentiment v. Substance: Checking In On Collateral Via, Yes, The Fed

6 days ago

The Federal Reserve, like other central banks around the world, it does lend out the securities it owns and holds. Sophisticated modern wholesale money markets are highly collateralized, so much so that collateral itself takes on the properties of currency. Elasticity of collateral is as much – if not more – important as elasticity of other forms of wholesale money (therefore excluding bank reserves).Dealers, however, they don’t much like using the Fed’s Securities Lending operations for several reasons we won’t get into here (in fact, this article is going to be woefully inadequate in addressing these big issues; my purpose is just a bit of background before updating the data for early 2022). How do we know? For one thing, when the entire collateral system collapsed in late September

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China’s Petroyuan, Uncle Sam’s Checkbook, The Fed’s Bank Reserves: Who Really Sits On King Dollar’s Throne? (trick question)

6 days ago

A full part of the inflation hysteria, the first one, was the dollar’s looming crash. The currency was, too many claimed, on the verge of collapse by late 2017, heading downward and besieged on multiple fronts by economics and politics alike. Basically, the Fed had “printed” too much “money” and the Chinese playing some “long game” were purportedly ready at any moment to snatch the role of world reserve by manipulative force from the out-to-lunch Americans. Those two came to a head early in 2018 when CPIs began to modestly rise at the same time China debuted its so-called petroyuan. Setting aside its utterly botched launch, when oil futures contracts denominated in CNY were finally set up and running, everyone called it a game-changer, a profound upset to the world order that had been

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It’s Not Perfume But It Does Smell Funny: Conundrum #5

7 days ago

When Alan Greenspan sat in front of the politicians in Congress back in February 2005, he purposefully made it seem like what was taking place at that time was some kind of new and unusual development. Yeah, the guy who had previously become famous for fedspeak – the ability to use a lot of words while saying nothing – would regularly slip right out of it whenever it suited his purposes.Those were inflation, back in early ’05. Already people were growing nervous, something about house prices and how these were being financed. The Fed’s job, as those at the “central bank” saw it, was to influence behavior so that neither the economy nor the financial system moved too far in either direction – inflation or deflation.Keep everything right down the middle, as seemed to have suited everyone

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Taper Discretion Means Not Loving Payrolls Anymore

10 days ago

When Alan Greenspan went back to Stanford University in September 1997, his reputation was by then well-established. Even as he had shocked the world only nine months earlier with “irrational exuberance”, the theme of his earlier speech hadn’t actually been about stocks; it was all about money.The “maestro” would revisit that subject repeatedly especially in the late nineties, and it was again his topic in California early Autumn ’97. As Emil Kalinowski and I had just talked about in our latest podcast episode of Eurodollar University, Greenspan wasn’t so much letting the audience in on the Federal Reserve’s dirty little secret out of kindness. Money supply numbers were rendered unhelpful a long time before. They stopped using M1 around 1982, or so they later declared, when the FOMC had

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Conflict Of Interest (rates): 10-year Treasury Yield Highest in Almost Two Years

10 days ago

The dollar was high and going higher. Emerging markets had been seriously complaining. In one, the top central banker for India outright warned, “dollar funding has evaporated.” The TIC data supported his view, with full-blown negative months, net selling from afar that’s historically akin to what was coming out of India and the rest of the world. China was cutting its RRR multiple times. This was all following May 29, 2018, too, a day in the global “bond market” which had left no doubt collateral conditions had already become seriously strained; the monetary tightening exclamation point on all of the above. Clear dollar shortage stuff, one after another after another. And since the “bond market” and US Treasuries are at the center of it all, or closest viewpoint from which to peer

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Previewing Payrolls By PMIs

11 days ago

With the monthly Friday Payroll Ritual lurking tomorrow morning, and having been focused on PMI estimates before it, a quick look at the ISM’s Non-manufacturing PMI especially its employment index to bridge the latter to the former. The update today for the month of December put the headline estimate at 62.0, down from 69.1 the month prior.Omicron?While a rather sharp and unexpected 7-point drop, other than the size of the decline at 62.0 there’s little to suspect anything really off. This one’s been the outlier anyway; even among sentiment indicators for services if not US services sentiment. Compared to IHS Markit’s, for instance, the ISM is in a place by itself, though that hasn’t been anything unusual.Ever since around the end of 2017, the index has kept positioned perpetually

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As The Fed Seeks To Justify Raising Rates, Global Growth Rates Have Been Falling Off Uniformly Around The World

12 days ago

Sentiment indicators like PMI’s are nice and all, but they’re hardly top-tier data. It’s certainly not their fault, these things are made for very times than these (piggy-backing on the ISM Manufacturing’s long history without having the long history). Most of them have come out since 2008, if only because of the heightened professional interest in macroeconomics generated by a global macro economy that can never get itself going.What PMI’s do have going for them is that they allow us to compare – on nearly like terms – conditions across various geographical and national boundaries. The proliferation of data, thanks largely to Markit and its growing list of partners, makes this possible even if the figures themselves aren’t “hard” data like we might otherwise want.We start with the US

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Before Nodding Along w/FOMC’s Hawks On Inflation, First Grab Yourself A Beveridge

12 days ago

The Beveridge Curve was a useful guide for checking the intuitive relationship between the economic demand for labor and the actual use of it. Downward sloping, what it implies is that as more companies demand more labor the less unemployment there should be. No duh, right?Because of this fundamental relationship, we might also use the Beveridge Curve in order to check the viability of the statistics which are constructed to measure these pieces of the economy. Picking up on yesterday’s jolt to JOLTS and what it might imply along these lines, the nagging question with regard to this series is and has been Job Openings (JO).For practically all of 2021, JO has been the primary source of gasoline being poured on the fire that is the alleged LABOR SHORTAGE!!! Anecdotal stories are nice, and

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Inflationary Overheating, Tapering and Terminating QE, We’ve Seen These Before And It Didn’t End The Way It Was Supposed To

18 days ago

The economy was in danger of running hot, too hot they all said. In order to stay ahead of such inflation potential, as central bankers saw it, first it would be necessary to wind down quantitative easing. Taper then terminate. After that, rate hikes.Hawks buzzing around everywhere.But Mario Draghi’s ECB had a problem. The inflationary pressures were there, he reasoned, just no one including Mario himself could find them in evidence. More worrisome than that, Europe’s economy also appeared to slowing down right then rather than speeding up or just maintaining the momentum from the prior year.Whether or not Draghi really believed what he would say, or if Europe’s top central banker was just rationalizing for the public’s behalf, he crafted the story anyway as an excuse to bridge what was

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Taper Rejection: Mao Back On China’s Front Page

20 days ago

Chinese run media, the Global Times, blatantly tweeted an homage to China’s late leader Mao Zedong commemorating his 128th birthday. Fully understanding the storm of controversy this would create, with the Communist government’s full approval, such a provocation has been taken in the West as if just one more chess piece played in its geopolitical game against the United States in particular.No. The Communists really mean it. Mao’s their guy again.
No. Let's recall that Chairman Mao• slaughtered thousands of his political adversaries in early 1930s• exterminated hundreds of thousands of landlords in early 1950s• starved 45 million peasants to death in Great Leap Forward• murdered 2 million in the Cultural Revolution— TheSeeqer (@TheSeeqer) December 26, 2021
When Deng Xiaoping

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White-Hot Cycles of Silence

21 days ago

We’re only ever given the two options: the economy is either in recession, or it isn’t. And if “not”, then we’re led to believe it must be in recovery if not outright booming already. These are what Economics says is the business cycle. A full absence of unit roots. No gray areas to explore the sudden arrival of only deeply unsatisfactory “booms.”Every once in a while, however, even the mainstream media meanders closer to the actual economics (small “e”) of the real world. Sometimes the evidence simply overwhelms the ideologically enforced myths, leading honest inquiry to tremendous if unorthodox clarity. One of those cases was written up in The New York Times late in September 2018. If only to (correctly) bash Trump’s “boom”, still there was every reason to suspect before the man took

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The Historical Monetary Chinese Checklist You Didn’t Know You Needed For Christmas (or the Chinese New Year)

26 days ago

If there is a better, more fitting way to head into the Christmas holiday in the United States than by digging into the finances and monetary flows of the People’s Bank of China, then I just don’t want to know what it is. Contrary to maybe anyone’s rational first impression that this is somehow insane, there’s much we can tell about the state of the world, the whole world and its “dollars”, right from this one key data source. And the timing is equally as festive; holidays in America and Europe soon to be followed by a big one in China.To begin, the real big stuff; as we know, another RRR cut came in close succession to the eurodollar futures inversion at the beginning of December. Those being related, as to the former the PBOC balance sheet update for November 2021 describes the basis

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Start Long With The (long ago) End of Inflation

27 days ago

With the eurodollar futures curve slightly inverted, the implications of it are somewhat specific to the features of that particular market. And there’s more than enough reason to reasonably suspect this development is more specifically deflationary money than more general economic concerns. What I mean is, those latter have come later (“growth scare”) only long after the world’s real money truly began to dry up.Money then economy.How do we know? For one, sequence of events. And because of that sequence, this means something important about the balance of future risks. Overall, the eurodollar futures twist doesn’t leave for us anything that’s good on either of those accounts, yet by itself and to such a small degree this doesn’t indicate a full-blown red alert by any means. If that

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Taper Rejection and ‘Inflation’, This Right Here Is Your 2022

28 days ago

How does QE work? That’s actually a trick question given how all the evidence produced in examination of the various programs undertaken across the world under that label uniformly indicates that it doesn’t. On the contrary, the most studied and tested government efforts in history have yielded consistent results up and down the board.It’s just that the public has never been told what they are.Instead, the media continues to be filled with stories about trillions of whatever currency being poured into whichever economy when none of those things are true. That’s not even how those who believed in it said it was supposed to work. The way it is meant to go, in theory, is by at least one of three ways: lowering interest rates; portfolio effects; or, positive sentiment. When the Japanese were

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One Shock Case For ‘Irrational Exuberance’ Reaching A Quarter-Century

December 18, 2021

Have oil producers shot themselves in the foot, while at the same time stabbing the global economy in the back? It’d be quite a feat if it turns out to be the case, one of those historical oddities that when anyone might honestly look back on it from the future still hung in disbelief. Let’s start by reviewing just the facts. First up, yesterday the Federal Reserve published the November 2021 estimates for Industrial Production in the United States. As has been the case around the rest of the world, American domestic crude and natural gas output continues to be constrained. And not by a little.Compared to the prior peak way back almost two years ago, the Fed’s research staff figures the amount of overall energy pulled out of the industry remained about 7.6% less last month than it had

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TIC October: The Deflationary ‘Dollars’ Behind The Flat, Inverting Curves

December 17, 2021

Seems like ancient history given all that’s happened since, but on October 13 Treasury Secretary Janet Yellen announced a planned deluge of cash management bills in the wake of the debt ceiling resolution (the first one). The next day, China’s currency, CNY, broke free from its previous and suspiciously narrow range. Speculating a connection a few days thereafter, I wrote:

…it had been on the 13th when Treasury announced its intention to unleash a CMB (cash management bill) deluge of sorts. A welcome development for a truly bill-starved collateral marketplace which was then fed the first of these CMB auctions just yesterday, the 19th.Fits very neatly into CNY’s recent range-busting appetite.

It went something like this: a reprieve in eurodollar markets for Chinese borrowers by way

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Trying To Project The Goods Trade Cycle

December 17, 2021

One quick note on yesterday’s retail sales estimates in the US for the month of November 2021. The increase for them was less than had been expected, but these were hardly awful by any rational measure. Instead, they seemed to further indicate only what we had proposed upon release of the October estimates: Christmas shopping came a bit early for more shoppers than otherwise. Not terribly dramatic by any means, yet noticeable. Even the “real” series adjusted for, because deflated by, the CPI merely suggested consumer spending in terms of volume was slightly less; and has been trending slightly lower since mid-year.
The question is whether this becomes a problem for not just retailers, given other inventory data, particularly wholesalers at the current time. In nominal terms, wholesale

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Taper Rejection

December 16, 2021

For the FOMC, there was no alternative. The CPI’s keep going higher while the unemployment rate continues lower. Those who are Economists and practice Economics’ brand of econometrics, these would be scary times ahead. Inflationary times unless someone puts a stop to them first. Not because of consumer prices today, but because officials are worried consumers are becoming normalized to these high rates of price acceleration. If the public and businesses all begin to expect these to continue, according to the unsubstantiated official theory, for central bankers (who don’t work at an actual central bank) that combined with a tight labor market is nearly their worst case.Thus, today double taper. Rather than go through this convoluted, misdirected pathway to inflation and expectations, Jay

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The FOMC Chases The US Unemployment Rate Regardless of China’s Huge Mess

December 15, 2021

In certain quarters, “scientific” quarters, the Chinese haven’t just done a fantastic job managing their own outbreak of COVID-19, the Communist government has produced a pandemic response model for the entire world to envy. After all, according to the WHO’s most recent data (up to December 15, 2021), only 5,697 of the nation’s citizens have died of (with?) corona since the whole thing began.Outside the WHO and partisan political circles, of course, no one believes these numbers; nor should they since that tally is evidently fake. While case counts and cumulative death statistics are made to flatter China’s pandemic performance, the economic statistics tell a far different story – even though these have been questioned for even longer than the COVID figures. Those doubts as to the

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Eurodollar University Episode 177, Part 1: Confirming Euro$ Inversion And Its Huge Signal

December 15, 2021

177.1 Eurodollar Warning Confirmed(?) by USA GER JPN & CHN———Ep 177.1 Summary———The Eurodollar futures curve inverted on December 1st – what’s happened since? Also, does the American, German and Japanese sovereign bond market corroborate the Eurodollar futures warning? Lastly, does China’s lowering of its bank Required Reserve Ratio buttress the E$ warning too?
———Ep 177.1 Topics———
00:00 INTRO: Updating the Eurodollar futures curve inversion; also global bond market yields.00:41 The 2021 Eurodollar futures inversion had an active first few days.01:40 A tiny negative in the Eurodollar futures curve is actually a big deal, even if tiny.05:05 Did the 2018 Eurodollar futures curve predict the 2020 pandemic when it inverted?08:06 Is the 2021 Eurodollar futures curve warning that something

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Playing Dominoes

December 15, 2021

That was fast. Just yesterday I said watch out for when the oil curve flips from backwardation to contango. When it does, that’s not a good sign. Generally speaking, it means something has changed with regard to future expectations, at least one of demand, supply, or also money/liquidity. Contango is a projected imbalance which leaves the global system facing realistic prospects of being overwhelmed with too much oil. Back during 2014’s crude crash, Economists and central bankers tried to claim steeper contango then was the product of supply – as if the futures market hadn’t been anticipating the US shale production.No sir. Late 2014 like again in late 2018, each curve distortion into contango had been from the demand as well as money side; as in, markets looking ahead and figuring

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Testing The Supply Chain Inflation Hypothesis The Real Money Way

December 14, 2021

Basic intuition says this is a no-brainer. Producer prices rise, businesses then pass along these higher input costs to their customers in the form of consumer price “inflation” so as to preserve profits. This is the supply chain hypothesis. Statistically, we’d therefore expect the PPI to lead the CPI.And this was expected for much of Economics’ history, taken for granted as one of those self-evident truths (kind of like the Inflation Fairy). After the dreadful experience of the Great Inflation, and the dreadful performance of Economics during it, a few scholars went back to take a second look.One of the most cited contrary studies was published in 1995 by Todd Clark of the Federal Reserve’s branch in Kansas City (Economic Review; vol. 80, issue Q III, 25-39). Using econometric evidence,

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A Few More For Potential ‘Days’ Of Deflation

December 14, 2021

I’m not much for writing, so I’m sure nothing of a song-writer. While that may be the case, what I do know is that two of the missing lines in our Twelve Warnings of Deflation carol would belong to JGB’s and oil. How to fit them in, someone else would have to do so; the number we’d associate for JGB 10s is zero; while in WTI, we’re looking for a similarly negative number.Setting aside trying too hard to be cute, what I mean is very serious. There have been a bunch of warnings thus far, escalating indications of the deflationary potential type. Just recently, the second RRR followed closely the eurodollar curve’s inversion (still there today). Looking ahead, what might be next set of escalations from which we might mark the monetary system’s continued descent? A collateral day, sure. The

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FOMC’s Taper Preview: Inflation Fairy

December 13, 2021

With the CPI inching closer to 7% and everyone talking about consumer prices, the FOMC meeting which begins tomorrow can’t be anything else other than inflation. Even if there was something else on the economic horizon, say a material “growth scare”, it’s too late for policymakers since they’d already painted themselves into a narrow corner months ago.If they don’t accelerate their QE taper now, they risk sending the wrong signals to the economy which everyone says verges on the edge of 1973. Wait, wait, wait. Isn’t inflation at least something to do with money? After all, the old adage of too much currency chasing too few goods hung around for ages because there was unambiguous historical truth to the saying. You can go back to Isaac Newton and Copernicus realizing there wasn’t mere

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Eurodollar University Episode 175, Part 3: Trick Question, Stock or Flow When It Comes to QE?

December 11, 2021

175.3 Trick Question: How Much QE Will Move the Bond Market———Ep 175.3 Summary———Since 2008 the pace of purchases, sales – and everything in between – has not affected the price of bond yields. Indeed, bond yields seem to go the opposite way of they’re ‘supposed’ to act. But what about the stock of purchases? Is there a total, that once reached, becomes critical?
———Ep 175.3 Topics———
00:00 INTRO: Does either the flow or stock of quantitative easing impact bond yields?00:44 Central banks have bought a lot of bonds, therefore the bond market is rigged.01:51 From 2008-11 the Fed’s purchases (flow) of UST were ‘contradicted’ by the bond market.05:24 Central bank balance sheet expansion correlates well (enough) with capital market values.08:41 Central banks were buying assets that the

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