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Jeffrey P. Snider

Jeffrey P. 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 P. Snider

Where The Global Squeeze Is Unmasked

3 days ago

Trade between Asia and Europe has dimmed considerably. We know that from the fact Germany and China are the two countries out of the majors struggling the most right now. As a consequence of the slowing, shipping companies have had to make adjustments to their fleet schedules over and above normal seasonal variances.
It was reported last week that Maersk and MPC would “temporarily suspend” their sailings on one of the biggest routes between Europe and Asia.
Weakening demand and plummeting freight rates have so far obliged Asia-North Europe carriers to blank two-thirds more sailings than during the same period of last year, and now the 2M alliance is to suspend the loop for the second consecutive year.
This followed a material downgrade in Mexico, of all places, another economic system

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Retail Math, Stock Sentiment

3 days ago

According to the Census Bureau, auto sales in the US may be on the upswing. Rising 6.8% year-over-year in August, it was the highest rate in nearly three years for retail sales of automobiles. This follows an upward revised 6.3% increase during July, the best back-to-back months in the beleaguered sector since the end of 2016.

Are auto sales experiencing a rebound in the second half of 2019, just as Jay Powell has been predicting for the overall American economy? Or is it just another short-term fluctuation, the natural ebbs and flows in any economic segment wherein this particular one had been far more ebbing than flowing?
To go along with cars and trucks, there was still an afterglow of online expensing last month, too. July had Amazon’s huge Prime Day and though it was revised downward

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The Obligatory Europe QE Review

4 days ago

If Mario Draghi wanted to wow them, this wasn’t it. Maybe he couldn’t, handcuffed already by what seems to have been significant dissent in the ranks. And not just the Germans this time. Widespread dissatisfaction with what is now an idea whose time may have finally arrived.
There really isn’t anything to this QE business.
But we already knew that. American officials knew it in June 2003 when the FOMC got together to savage the Bank of Japan for their lack of results. It was decided then that what the Japanese got wrong was the execution part of QE; the idea was sound, especially when anyone might be confronted by the zero lower bound, so they decided instead that what must have gone wrong was a whole host of Japan-specific missteps.
There was just brief consideration to the only other

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Your Unofficial Europe QE Preview

5 days ago

The thing about R* is mostly that it doesn’t really make much sense when you stop and think about it; which you aren’t meant to do. It is a reaction to unanticipated reality, a world that has turned out very differently than it “should” have. Central bankers are our best and brightest, allegedly, they certainly feel that way about themselves, yet the evidence is clearly lacking.
When Ben Bernanke wrote for the Washington Post in November 2010 announcing somehow the need for a second QE despite the powerful and overwhelming success of the first, he didn’t say the goal was to maybe, arguably lower bond yield term premiums.
It was a recovery or nothing.
In other words, before we ever begin policymakers who are attempting to use R* as an excuse already admit there actually was no recovery. All

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Consumers Have To or Want To with Revolving Credit?

5 days ago

The Federal Reserve reported yesterday that revolving consumer credit in the US rose by a seasonally adjusted $10 billion in the month of July 2019. That was the largest single monthly increase since November 2017. Given how the latter month was related to “residual seasonality”, meaning Americans spending perhaps more than they wanted for the Christmas holiday, and the middle of summer is not, it raises some questions about what’s going on at the margins of the labor market.
As noted for some time, everything now hinges upon the employment and related data. What the Fed will do, how the public will see the economy, it will all come down to which way the BLS numbers trend. And I don’t mean the unemployment rate.

That’s why we might look at a tertiary indication like consumer credit.

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Dollar (In) Demand

5 days ago

The last time was bad, no getting around it. From the end of 2014 until the first months of 2016, the Chinese economy was in a perilous state. Dramatic weakness had emerged which had seemed impossible to reconcile with conventions about the country. Committed to growth over everything, and I mean everything, China was the one country the world thought it could count on for being immune to the widespread economic sickness.
That’s why in early 2016 authorities panicked into another huge, and wasteful, spending spree. In much of the West, it was seen as the government coming to its senses. For reasons that remained unclear (particularly that whole bit about CNY falling), the country experienced a momentary lapse of reason but regained its senses in time to re-open the Economics textbook to

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Labor Data Dependent

6 days ago

Right now, everything comes down to the labor market. Does the US economy hang on despite stubborn and evidently non-transitory overseas turmoil cross currents? Or do American consumers rightly confident of the economic situation re-assert themselves via their wallets and deliriously spend the economy back on track?
You better believe Fed Chairman Jay Powell will be watching the data very closely. If there is one thing which will move policymakers more than a plunge at the NYSE, it would be even the smallest possibility of a pure (meaning non-hurricane) negative payroll number. Given the way things stand right now, widespread uncertainty, should it ever look like there is a very real chance the government ends the Establishment Survey’s 107-month streak, the FOMC will have already debated

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A Bigger Boat

6 days ago

For every action there is a reaction. Not only is that Sir Isaac Newton’s third law, it’s also a statement about human nature. Unlike physics where causes and effects are near simultaneous, there is a time component to how we interact. In official capacities, even more so.
Bureaucratic inertia means a lot more than just resistance to change, it also means, at times and in certain capacities, all sorts of biases. When the bureaucracy predicts one set of circumstance, it is as likely if not more likely to hold to them at the expense of incoming contradictory information.
Central bankers claim to be data dependent. It is true but only in the narrowest sense; only when the data is overwhelming does it seem to matter. Thus, when a central bank changes course you really have to wonder just how

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Is The Negativity Overdone?

7 days ago

Give stimulus a chance, that’s the theme being set up for this week. After relentless buying across global bond markets distorting curves, upsetting politicians and the public alike, central bankers have responded en masse. There were more rate cuts around the world in August than there had been at any point since 2009.
And there’s more to come. As Bloomberg reported late last week:
Over the next 12 months, interest-rate swap markets have priced in around 58 more rate cuts, assuming central banks maintain their current trajectories in easing. Those cuts could total another 16% in global reductions.
This week, the ECB is almost certain to join the ranks. Not just some interest rate adjustments, either, with short-term rates there already negative, very likely a restarted perhaps modified

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China’s Next Warning

10 days ago

Chinese monetary authorities announced today what will be for some of its banks a seventh round of “stimulus.” For the largest institutions, it will “only” be their sixth and the first one since January 2019. The PBOC has decided it is time for more RRR cuts. Effective September 16, the ratio all banks are required to hold of reserves will be reduced by 50 bps; applying to certain city banks, the decrease will be 100 bps.
It sounds like a flood of stimulus, enabling China’s beleaguered financial system to utilize more of its own stored up monetary resources. A lower RRR means they can put more of these reserves, more of their money to work in the Chinese economy. That’s how these measures are universally characterized. As you’ll see in every news report, the claim 50 bps RRR is equal to

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Simple Payrolls Right Now, Before Getting To The More Complex Issues

10 days ago

Where things stand right now is actually a pretty simple matter. How and why everything might change, as well as how and why we got here, those are more complex issues which depending upon your understanding may not lead to a clear picture of conditions. Right now, we are told, there will be just the one rate cut, maybe a second one coming up, because the US economy while not as robust as last year is still very strong underneath everything else.
This mainstream view is predicated on only one factor: the labor market. It is employment which will see us all through the darkness and get the positive economic forces realigned so that the system gets back on track and we can all go on with our booming lives.
That’s either the case right now, or it isn’t. In the past, such as last year, for

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It All Comes Down To The Service Sector

11 days ago

It was framed as a good news/bad news sort of situation. For many, the entire issue of possible recession revolves around the service sector. As far as manufacturing goes, no one will argue otherwise; it’s already in trouble. But it’s a much smaller slice of overall economic activity, and unless we are talking 2008 levels of collapse there “needs” to be more on the downside for it to make a big enough difference in tipping the whole economy.
The hope rests entirely upon services. If services begin tilting too far the wrong way, then there’s no basis for avoiding a serious economic dislocation. Once manufacturing weakness begets services weakness, then the last line of defense is rate cuts. Meaning, there would be nothing left on the plus side.
Competing forward-looking indications, the ISM

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Just Who Was The Intended Audience For The Rate Cut?

12 days ago

Federal Reserve policymakers appear to have grown more confident in their more optimistic assessment of the domestic situation. Since cutting the benchmark federal funds range by 25 bps on July 31, in speeches and in other ways Chairman Jay Powell and his group have taken on a more “hawkish” tilt. This isn’t all the way back to last year’s rate hikes, still a pronounced difference from a few months ago.
The common forecast relies entirely on the subjective interpretation of the labor market. According to the Fed’s models, employment growth remains strong which will support consumer spending and therefore the economy through these “transitory” “cross currents.” In order to ensure this is only what happens, the one-and-done rate cut (as well as an abrupt end to the so-called QT).
When these

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Copper Confirmed

13 days ago

Copper prices behave more deliberately than perhaps prices in other commodity markets. Like gold, it is still set by a mix of economic (meaning physical) and financial (meaning collateral and financing). Unlike gold, there doesn’t seem to be any rush to get to wherever the commodity market is going. Over the last several years, it has been more long periods of sideways.
That’s what makes any potential breakout noteworthy. Dr. Copper’s place in the hierarchy is already assured because of its lengthy history of closely mirroring impending economic conditions. When the dollar started “rising” last April and May, it was copper a few months later which ended up confirming the negative signal; or, more precisely, the growing perceptions that a renewed, sharp dollar shortage would almost

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The ISM Conundrum

13 days ago

Bond yields have tumbled this morning, bringing the 10-year US Treasury rate within sight of its record low level. The catalyst appears to have been the ISM’s Manufacturing PMI. Falling below 50, this widely followed economic indicator continues its rapid unwinding.
Back in November 2018, at just about 59 the overall index had still been close to its multi-decade high. Over the next nine months through the latest update for August 2019, it has shed almost 10 points. Dropping into the 40s, still on the downswing through as late as August, it is a powerful rebuke to some of the more optimistic narratives that have been haphazardly put together as this year has developed the wrong way.

The economy of 2018 was supposed to have been strong; unusually strong, in fact, since the major message

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Gold: Big Difference Which Kind of Hedge It Truly Is

17 days ago

It isn’t inflation which is driving gold higher, at least not the current levels of inflation. According to the latest update from the Bureau of Economic Analysis, the Federal Reserve’s preferred inflation calculation, the PCE Deflator, continues to significantly undershoot. Monetary policy explicitly calls for that rate to be consistent around 2%, an outcome policymakers keep saying they expect but one that never happens.
For the month of July 2019, the index increased 1.38% year-over-year. That’s only slightly above June’s 1.33% advance. After having achieved the inflation target for all of eight months in 2018, despite an unemployment rate at a half-century low they’ve missed the mark now in each of the nine months following.

The so-called core inflation rate, the deflator stripped of

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GDP Profits Hold The Answers To All Questions

18 days ago

Revisions to second quarter GDP were exceedingly small. The BEA reduced the estimate by a little less than $800 million out of nearly $20 trillion (seasonally-adjusted annual rate). The growth rate therefore declined from 2.03502% (continuously compounded annual rate) to 2.01824%.
The release also gave us the first look at second quarter corporate profits. Like the headline GDP revisions, there wasn’t really much to them. At least not when viewed in isolation. Across the series, profits were up in Q2 after being down in Q1. The amount differed depending upon the definition, but overall it wouldn’t be classified as a rebound.
In other words, corporate profits were largely unchanged for the first half of 2019. Already, that’s not good.
As noted not that long ago, benchmark revisions had

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Drawing The Line (while we can)

19 days ago

What is the economy? It seems as if the word has been turned inside out in the modern world. The Greeks who supplied us with its basis simply put together two others of their own; oikos, meaning house, and nemein, meaning manage. Therefore, oikonomia was the management of one’s own household.
Today, “the” economy is far less personal and tangible. To most if not the vast majority, it is an outside view from afar. What’s GDP? How’s the unemployment rate? Someone check the NYSE ticker. These are things which shape a distant view of what must be going on over the horizon. How it is for everyone else out there in the world.
Closer to home, this creates a lot of room for some great distance. Household management is my problems. If there is a very distinct difference in impressions, you can

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The Shock, The Squeeze, and The Downside

19 days ago

Yesterday, Eurostat confirmed that German GDP in Q2 2019 had contracted. Also issuing benchmark revisions, the European government agency found that GDP growth had been slightly better than previously thought at the top of Reflation #3. The last two quarters of 2017 saw the biggest upward revisions.
But if Europe’s “boom” really was a little closer to having been a real one, all that does is magnify the disappointment which has followed. Why didn’t it keep going? Eurostat’s newest benchmark series puts the German economy a little worse during Euro$ #4. Apart from Q4 2018, GDP growth was marked downward in the other quarters particularly for the clear transition into the first quarter of last year.
In other words, the change from reflation to renewed global monetary squeeze was even more

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The Corroboration and Costs of Fear Gold

20 days ago

Gold is the ultimate hedge, but it is far from perfect. Unlike, say, sovereign bonds there should be no expectation for a negatively correlated price. You can buy a UST or German bund even at negative yields and at least expect the price to rise when things are at their worst. Flight to safety or flight to liquidity.
You can’t with gold. One big reason is its seemingly opposing uses. I got a chance to sit down once again with Erik Townsend of MacroVoices to talk about gold, negative rates, and the lies (of omission) of Janet Yellen, but to further that discussion, particularly the gold parts of it, I’ll add more here.

While a UST will rise in value during a liquidity event partly or even mostly because of its status in repo, the opposite happens in the gold market. Though gold is a

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China Throws More ‘Stimulus’ At The Wall

20 days ago

Earlier this year, Chinese authorities reduced the VAT tax the government charges auto manufacturers. Intended to boost consumption, the levy was reduced from 16% to 13% in the hope automakers would pass along the savings to consumers. Many if not most manufacturers did.
The results were immediate, and fleeting. In the month of March 2019, total car sales fell “only” 5.2% after six straight months of double-digit declines. Many were encouraged by the single result. According to the China Association of Automobile Manufacturers (CAAM), sales were even worse in April and May than they had been before March. No lasting effect from the price boost.
The latest figures from CAAM for July have improved but not because China’s auto sector is on the rebound. Total car sales dropped another 4.3%

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Definitely A Downturn, But What’s Its Rate of Change?

21 days ago

The Chicago Fed’s National Activity Index (NAI) fell to -0.36 in July. That’s down from a +0.10 in June. By itself, the change from positive to negative tells us very little, as does the absolute level below zero. What’s interesting to note about this one measure is the average but more so its rate of change.
The index itself is a product of econometric research. Economists had been searching for an alternative to the unemployment rate in order to increase the predictive power of their inflation signals. They came up with the original index consisting of 61 variables. The latest incarnation includes 85.
Rather than do much for inflation forecasting, the NAI captures a broad sense of the economy’s ups and downs. That’s hardly surprising given the wide scope of the underlying data contained

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Japan: Fall Like Germany, Or Give Hope To The Rest of the World?

21 days ago

After trading overnight in Asia, Japan’s government bond market is within a hair’s breadth of setting new record lows. The 10-year JGB is within a basis point and a fraction of one while the 5-year JGB has only 2 bps to reach. It otherwise seems at odds with the mainstream narrative at least where Japan’s economy is concerned.

Record lows in Germany, those seem to make sense. By every account, the German economy is in trouble. So obvious, even the notoriously frugal government is floating debt-stimulus trial balloons. And why not? Its factory and industrial sector are contracting at rates closer to the Great “Recession.” You know its bad when the 2012 recession becomes more of a best-case scenario.
Japan, on the other hand, while an export industrial powerhouse in the same category as

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Not Bond Bull, The Bull of Bonds

24 days ago

In January 2018, Bill Gross was at it again. Famous for being the longtime public face of PIMCO, he’d acquired as much notoriety for being the boy who cried bear. By the way he talked and by what he predicted, you’d have to think the US Treasury had visited some horrible circumstance on a young Bill early in his life. It’s like he was possessed with unnatural hatred bonds for some reason.

Gross: Bond bear market confirmed today. 25 year long-term trendlines broken in 5yr and 10yr maturity Treasuries.
— Janus Henderson U.S. (@JHIAdvisorsUS) January 9, 2018

In truth, he just disliked low interest rates because as a quant trader, a pioneering one for the bond market, he presumed that the next big payday in the sector would be a rout. With interest rates so low following the 2011 crisis,

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Gifts of Wyoming, Complicating A Simple Story About Bears

24 days ago

Curiously short on star power, the Jackson Hole gathering this year has already taken an odd turn. It’s been practically subversive. Usually when the Kansas City Fed gets together for these things each and every August, the main attraction is the top central bankers in the major economies. Outside of the Bank of England’s Mark Carney, this year there’s only Fed Chairman Jay Powell.
And the only real worthwhile mention is all the discussion about bears.
The symposium typically opens with a speech by whomever is president of the Fed’s Kansas City branch – which encompasses Wyoming. That means Esther George and her dissenting brand of hawkishness yesterday gave the first word. It had been George who in 2015 kept voting no against not voting for a rate hike. Sorry for the double negative but

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Way Beyond The ‘12%’

25 days ago

It’s becoming fashionable again to dismiss manufacturing. In 2015, we heard repeatedly how it represented only 12% of overall economic output. Any minor problems affecting such a small slice would surely be nothing much for the other seven-eights of the economy to overcome. There was no way Yellen’s rate hikes and the booming recovery they would anticipate would be derailed by such a trivial segment.
The idea has been given new life now that one rate cut has been undertaken. Last year, the downplaying had been more straightforward; there’s absolutely nothing wrong and nothing to stop a hawkish Powell. This year, maybe there is something wrong, but it’s only manufacturing. One-and-done rate cut should be sufficient.
IHS Markit reported today its flash PMI numbers for the US economy in

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Did The BLS Just Find The Landmine? One-Fifth Of Previously Estimated Payroll Gains May Not Have Existed

25 days ago

The entire basis for what the Fed is now calling a “mid-cycle” adjustment rests upon a specific view of the labor market. There was weakness in consumer spending, there remains weakness in business investment, but none of these cross currents or headwinds are going to matter. Americans are experiencing robust employment conditions which when these reassert themselves will cycle the economy through nothing more than a minor rough spot.
This is the mainstream baseline. The one rate cut was just a little insurance to make sure it stays that way. Nothing at all panicky about it. Jay Powell says the employment figures are too solid for anyone, policymakers included, to be otherwise nervous.
With that in mind, every year the BLS carries out benchmark revisions. Like any other data series, the

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The Fingerprints of Bumbling (China)

26 days ago

For a cabal of superpatient supergeniuses, the Chinese tend to play with fire quite often. According to many, the Communists have perfected the art of technocracy and are merely waiting out the impetuously free West. The dollar system will destroy itself (there’s the kernel of truth) allowing a perfectly positioned China to swoop in and rescue the global economy with its scientifically specified yuan.
Some even have gone so far as to claim the new world order of CNY will surely be gold-backed.
I’m sorry but I just don’t see it. The Chinese to me resemble an increasingly frantic regime pushed around by forces way, way beyond their control. In a vain attempt to placate them, authorities continually appeal to the dangerous and disproven. That doesn’t strike me as patient choice, more like

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Germany’s Superstimulus; Or, The Familiar (Dollar) Disorder of Bumbling Failure

26 days ago

The Economics textbook says that when faced with a downturn, the central bank turns to easing and the central government starts borrowing and spending. This combined “stimulus” approach will fill in the troughs without shaving off the peaks; at least according to neo-Keynesian doctrine. The point is to raise what these Economists call aggregate demand.
If everyday folks don’t want to spend – because a lot of them can’t – then the government will spend on their behalf. And the central bank will make it easier on everyone, including the government, to borrow while doing it.
Faced with the early parts of what would only later be called the Great “Recession”, that’s just what had happened. Rates were cut worldwide and governments sprang into action.
Among them, people today have largely

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Eurodollar University: Diagramming Repo Reserves And Negative Yields

27 days ago

Following up on yesterday’s look at the concept of repo reserves. These are, as hopefully that narrative retelling established, very different from the inert byproducts of QE; or, bank reserves. The explanation for record low and negative yields amounts to a pretty intuitive process, though in practice it is incredibly complex.
Sovereign bonds as “pristine” repo collateral (what some Economists have called information insensitive securities not subject to adverse selection processes) are not investments. They may be to you and me, but they are little more than ballast or balance sheet tools to the financial institutions holding and using them.
Their usefulness is derived from the threat of losing repo funding due to several possible factors – mostly related to the potential for other parts

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