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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

China Enters 2020 Still (Intent On) Managing Its Decline

2 days ago

Chinese Industrial Production accelerated further in December 2019, rising 6.9% year-over-year according to today’s estimates from China’s National Bureau of Statistics (NBS). That was a full percentage point above consensus. IP had bottomed out right in August at a record low 4.4%, and then, just as this wave of renewed optimism swept the world, it has rebounded alongside it.
Rather than suggest the global economy is picking up, or ended last year in a “good place”, when placed in context of the rest of China’s economic numbers we are left with the impression of an isolated instance. Perhaps a sugar high as any number of firms rushed to overproduce in order to get product in and out ahead of the expected imposition of new tariffs and restrictions.

While IP has been higher, conspicuously

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Neither US Retail Nor Industry Ended 2019 In A Good Place

2 days ago

US retail sales were disappointing in December 2019, though it depends upon your perspective for what that means. Unadjusted, total retail sales were 6.01% more last month than the same month of the prior year. It was the highest year-over-year growth rate since October 2018.
The reason was entirely due to base effects. You might remember Christmas 2018 for its disastrous sales. Unless the economy struck another landmine, while still struggling in the aftermath of that previous one, the annual comparison was going to look good.
It might be another lesson in why central bankers pay so much attention to the stock market. The big difference between last year and the year before, particularly between each December, was the direction of the S&P 500.

But even with stocks at record highs to end

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Germany, Maybe Europe: No Signs Of The Bottom

3 days ago

For anyone thinking the global economy is turning around, it’s not the kind of thing you want to hear. Germany has been Ground Zero for this globally synchronized downturn. That’s where it began, meaning first showed up, all the way back at the start of 2018. Ever since, the German economy has been pulling Europe down into the economic abyss along with it, being ahead of the curve in signaling what was to come for the whole rest of the global economy.
The ECB, many complained, had panicked in Mario Draghi’s final act. Another QE that critics charged was unnecessary. Draghi, though, being stung by the “unexpected” decline warned that it shouldn’t be taken so lightly. Protracted was the word he specifically used.
And it’s interesting the contradiction of sorts created by Draghi. He said QE

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Why So Much Fuss Over SOFR?

3 days ago

More than two years into the SOFR regime, it’s not really going all that well. Adoption remains, shall we say, questionable and uncertain even though, everyone says, LIBOR is on its way out and the Secured Overnight Financing Rate is the future. Jumbled together by the Fed’s New York branch, the latter is, we are told, superior in every conceivable way.
Tell that to Chicago. Over on the CME, what you find in actual trading is no discernable decline in eurodollar futures volume and open interest. Authorities worldwide are serious about putting the kibosh on LIBOR, and yet the market operates business-as-usual. Eurodollar futures are settled in 3-month LIBOR.
Combined open interest in SOFR futures hasn’t once registered more than 600,000 (though the number is rising). There’s 1.5 million

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Inflation, But Only At The Morgue

4 days ago

Why is everyone so angry? How can socialism possibly be on such a rise, particularly among younger people around the world? Why are Americans suddenly dying off?
According to one study, two-thirds of millennials are convinced they are doing worse when compared to their parents’ generation. Sixty-two percent say they are living paycheck to paycheck, with no savings and no way to get any (though they also tend to “overspend” when compared to other age groups).
Worst of all, premature deaths. For decades, the average lifespan would rise as if it was preordained, that technological progress especially in the United States would mean its citizens would live longer, healthier, and happier lives. Catching everyone off-guard, mortality rates began to rise first a little and then by a lot.

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Why 2014? Less (Big) Banks, Fewer ‘Dollars’, No Growth

4 days ago

One of the biggest reasons why I always find the regulations explanation(s) so lacking is because of what is the biggest part of the scientific process. The excuses for problems in global liquidity and the dollar-based banking system in general have run the gamut of regulatory exercises.
Who can forget, for one example, 2a7? That was 2016’s preferred explanation for a range of imbalances and “anomalies” that showed up at seemingly the most inopportune time. Always “unexpectedly.” The worldwide economy was supposed to have accelerated into full blooming recovery, but it didn’t and more so it didn’t whilst the dollar system was embroiled in very obvious malfunctions somehow no one saw coming.
But, and I wrote at the time I would quit Alhambra and join a monastery, it would’ve been at least

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De-dollarization By Default Is Not What You Might Think

5 days ago

Last month, a group of central bank governors from across the South Pacific region gathered in Australia to move forward the idea of a KYC utility. If you haven’t heard of KYC, or know your customer, it is a growing legal requirement that is being, and has been, imposed on banks all over the world. Spurred by anti-money laundering efforts undertaken first by the European Union, more and more governments are forcing global banks to take part.
KYC is a particularly onerous demand. Essentially a compliance function, the costs are high given the huge administrative difficulties that often amount to repetitive manual tasks in the back office. Tracking customer accounts from all over the world is easier said than done.
Making that information transmittable from one depository to the next is a

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Clarida Picks Up Some Data

5 days ago

I should know better than to make declarative all-or-none statements like this. I said there isn’t any data which comports with the idea of a global turnaround, this shakeup in sentiment which since early September has gone right from one extreme to the other. Recession fears predominated in summer only to be (rather easily) replaced by near euphoria (again).
Narrative yes, sentiment maybe, data nope. The vast majority of the economic accounts, anyway. There are a few which might suggest things are turning around. Another one (not quite two) was added to the positive side of the divide late last night.
The Baltic Dry Index (BDI) has had a rough run of late. Shipping rates on the most important commodity routes, which the index measures, have been down sharply particularly late in December

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Not Abating, Not By A Longshot

6 days ago

Since I advertised the release last week, here’s Mexico’s update to Industrial Production in November 2019. The level of production was estimated to have fallen by 1.8% from November 2018. It was up marginally on a seasonally-adjusted basis from its low in October.
That doesn’t sound like much, -1.8%, but apart from recent months this would’ve been the third worst result since 2009. Mexico has rarely experienced that kind of seemingly mild contraction. It signals how something has significantly changed since the middle of 2018.
Month-to-month changes aside, Mexican industry continues to paint a bleak picture of global activity. Like Germany or Japan, Mexico’s economy especially its major manufacturing base (maquiladoras) is linked directly to exports and therefore global demand.

We are

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Very Rough Shape, And That’s With The Payroll Data We Have Now

9 days ago

The Bureau of Labor Statistics (BLS) has begun the process of updating its annual benchmarks. Actually, the process began last year and what’s happening now is that the government is releasing its findings to the public. Up first is the Household Survey, the less-watched, more volatile measure which comes at employment from the other direction. As the name implies, the BLS asks households who in them is working whereas the more closely scrutinized Establishment Survey queries establishments as to how many are on their payrolls.
The benchmark update for the Household Survey was negligible. There were only minor alterations to the data in both directions, leaving the series for its January 2020 benchmark in much the same place it was leaving off from the January 2019.

We’ve known for

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Global Headwinds and Disinflationary Pressures

10 days ago

I’m going to go back to Mexico for the third day in a row. First it was imports (meaning Mexico’s exports) then automobile manufacturing and now Industrial Production. I’ll probably come back to this tomorrow when INEGI updates that last number for November 2019.
For now, through October will do just fine, especially in light of where automobile production is headed (ICYMI, off the bottom of the charts).
Mexico is, as I’ve been writing this week, the presumed winner of trade wars. You might be astounded by just how much the country and its economy is benefiting from companies leaving China. The Trump administration may not have equalized wage rates between Asia and the US, but it appears the tariffs are making it much harder to employ Chinese workers over Mexicans.
As such, Mexico really

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The Word Is: Prolongada

11 days ago

You don’t have to tell Mexico the bad news about how US auto sales ended 2019. They already know; in fact, knew ahead of time. Production workers who should be busy building more and more new cars for sale outside of Mexico, particularly for prospective American owners, must instead be worried if they’ll still have a job if things go on like this.
The global economy is on the mend, they say. Yet, there are so many signs that it isn’t. In a lot of important places, getting worse sometimes awful quickly. One of those signs is US imports including falling US demand for what’s made in Mexico.

When it comes to vehicle production, you might have missed the news from our Southern neighbor earlier today. According to that nation’s Instituto Nacional de Estadística y Geografía (INEGI), total

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The Word Is: Protracted

11 days ago

What relaunched Europe’s QE four months ago was the word “protracted.” Central bankers love its opposite, the term “transitory”, which they use quite often at every sign of a weakening economy. To be fair, economies ebb and flow all the time and we don’t want policymakers to jump at every minor swing one way or another. The problem, it seems, is that they can’t tell which one it is.
Back on September 12, basically Mario Draghi’s final act as head of Europe’s Central Bank was to acknowledge that what he and everyone thought were transitory factors temporarily interfering with Europe’s economy had turned out instead to be “more protracted weakness.” Reluctantly, that meant more QE only this time around with tempered expectations.
“Now is the time for fiscal policy to take charge,” Draghi

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More Trends That Ended 2019 The Wrong Way

12 days ago

Auto sales in 2019 ended on a skid. Still, the year as a whole wasn’t nearly as bad as many had feared. Last year got off on the wrong foot in the aftermath of 2018’s landmine, with auto sales like consumer spending down pretty sharply to begin it. Spending did rebound in mid-year if only somewhat, enough, though, to add a little more to the worst-is-behind-us narrative which finished off 2019.
That’s the version that is being described, Jay Powell’s underlying labor market strength supporting everything to bring it all back from the brink.
What seems to be happening, however, is the sharper slowdown may have been pushed into 2020 instead. A question of timing perhaps more than depth. Looking at it from the perspective of the auto industry, it isn’t following the resurgent economy script.

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The Real Trade Dilemma

13 days ago

When I write that there are no winners around the world, what I mean is more comprehensive than just the trade wars. On that one narrow account, of course there are winners and losers. The Chinese are big losers, as the Census Bureau numbers plainly show (as well as China’s own). But even the winners of the trade wars find themselves wondering where all the spoils are.
They may be winners because of it but somehow they all still end up in the losing column.
Late in 2018, in response to the Trump Administration imposing large tariffs on certain Chinese-made goods, GoPro announced that it was going to shift a large amount of its production out of China.
That was, after all, the whole point; if cheap labor and unfair trade practices had stolen manufacturing jobs from the US, then raising the

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The Booming Depression

13 days ago

It is the inversion of the seventies. Four now five decades ago, the economy was caught in the grips of an inflationary condition it seemed unable to escape. It just went on and on, and while it was roaring officials up and down the spectrum assured us that they were doing their best, the only things that were able to be done (even idiotic Nixonian interference like wage and price controls).
Toward the end, of course, we found out that just wasn’t true. The problem wasn’t so much embedded idiosyncrasies within the economy (like “cost-push” labor inflation) authorities had been helpless to overcome, rather it was the rigidity of central bankers who petulantly refused to understand their jobs. They blamed us and, as usual, the problem turned out to be them.
All you have to do is put together

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One Part Of The Bond Market Seems To Be Cooperating, But Not The Other

16 days ago

While the world tries to digest the latest in geopolitics, as well as guess what could come next with them, on the topic of the economy the TIPS market registered a notable high yesterday. The 5-year breakeven rate, the difference between the “real” yield on the 5-year TIPS and the nominal yield for the 5-year US Treasury Note, was pulled up to 172 bps. It hadn’t been that much since early last May.
In fact, all the inflation expectations and breakevens have been moving higher. This would appear to be consistent with the idea that the global economy is on the rise again, especially given purported US economic strength (unemployment rate) combined with the Federal Reserve’s considerable alleged aid (repo, not-QE) and insurance (rate cuts).
The TIPS market is, after all, a primary target for

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Manufacturing Clears Up Bond Yields

17 days ago

Yesterday, IHS Markit reported that the manufacturing turnaround its data has been suggesting stalled. After its flash manufacturing PMI had fallen below 50 several times during last summer (only to be revised to slightly above 50 every time the complete survey results were tabulated), beginning in September 2019 the index staged a rebound jumping first to 51.1 in that month.
Subsequent months of data had continued the trend. By November, the PMI registered 52.6 and solidly on the upswing. The trend was expected to continue in December, but both the flash and now the full reading have stuck at 52.4.
One month obviously doesn’t make any kind of trend, nor by itself indicate anything conclusive. But the somewhat disappointing lack of follow through toward a more developed rebound is becoming

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2019: The Year of Repo

17 days ago

The year 2019 should be remembered as the year of repo. In finance, what happened in September was the most memorable occurrence of the last few years. Rate cuts were a strong contender, the first in over a decade, as was overseas turmoil. Both of those, however, stemmed from the same thing behind repo, a reminder that September’s repo rumble simply punctuated.
To be frank, every year should be the year of repo. But by and large nobody cares because no one can see it. They don’t have an immediate reason shoved in their faces for why that would be the case. For the first time since 2008, last year they were given that justification.
And all its attention was squandered – twice – on the wrong part of it. Milton Friedman was exactly right. Because central banks employ most of all the

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A Sour End To The 2010’s Doesn’t Have To Spoil The Entire 2020’s

19 days ago

It has been perhaps the most astonishing divergence in the first two decades of 21st century history. In late 2017, Western economic officials (mostly central bankers) were taking their victory laps. They took great pains to tell the world it was due to their profound wisdom, deep courage, and, most of all, determined patience, that they had been able to see their policies through to the light of day (no thanks to voters around the world).
This set up the third decade of this century for a return to normalcy in sharp contrast to the deep struggles throughout its second. Before he was nominated as President Trump’s pick to replace Janet Yellen as the Federal Reserve’s Chairman, FOMC Governor Jerome “Jay” Powell summed up globally synchronized growth as only he could. This was October 12,

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The 2019 Tailwinds of Housing Describe the 2020 Headwinds of Economy

20 days ago

It’s all somewhat confusing, once acclimated to this new paradigm. The highest in years can still be nearer the lowest in history. Given that apparent contradiction, it seems as if only one of those perspectives can apply. Which one you focus on often depends upon which way you already lean.
Toward the end of last year, mortgage interest rates had climbed up near 5% (average 30-year). It was the highest since early 2011, a surefire calamity for the housing market. And that market was under severe pressure. In terms of volume and even prices, real estate was experiencing its greatest slump since the big bust.
But a 5% mortgage rate really wasn’t that big of a deal. Closer to record lows than the vast majority of modern American experience, it was akin to being the least low of a period of

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Which Way Is Japan Really Leaning (Which Means For A Whole Lot More Than Japan)?

23 days ago

Last year’s landmine was a global affair. It wasn’t just US markets and the US economy which were so negatively impacted by it. Since it originated in the eurodollar system, the landmine (its effects) spread pretty much to all corners of the globe.
Take Japan, for example. There really isn’t any (other) reason why October 2018 should show up in data series after data series. Yet, it does.
Interpretations of Japanese economic figures have been clouded of late by the VAT tax hike which the Abe government finally got around to implementing (it was originally scheduled to take place in October…2015; I guess QQE wasn’t all that convincing to Japan’s government, either). Japanese retail sales surged by 9.2% year-over-year (unadjusted) in September 2019 as unusually price sensitive consumers

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The Public Knows, But Doesn’t Quite Realize, Another Crash Is Not The Worst Case

23 days ago

Back at the end of April, the FOMC and its dozens of staff members gathered around to talk policy as those people always do every six weeks or so. The agenda was quite full, with Jay Powell having had to switch from rate hikes to a Fed “pause” the few months before and none of them really sure why. Economic weakness had appeared “unexpectedly” (they never pay attention to the dollar) and along with it inflation rates began to stumble, too.
Many participants viewed the recent dip in PCE inflation as likely to be transitory, and participants generally anticipated that a patient approach to policy adjustments was likely to be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective.
Chairman

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Which Way Is Domestic Manufacturing Really Leaning?

24 days ago

The way the global economy shifted from globally synchronized growth to globally synchronized downturn was specific: dollar then trade then manufacturing and industry which then spread into other areas. If the economy is to avoid moving further down that same track, then something in that chain of events must actually change.
Meaning just that: actual change in the way the numbers are pointing rather than just applying more positive words to mostly the same data.
As far as the dollar goes, not much luck there. In terms of trade, no dice, either. How about manufacturing, then?
In terms of the US economy, where industry is lagging behind the rest of the world’s trend, there has been renewed hope for revival especially in this area. Primarily due to the way Markit’s PMI’s have trended, the

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Listen To China: Managed Decline, Not ‘Stimulus’

25 days ago

So much of the growth scare scenario relies upon China’s willingness to end it. By count of conventional Economics, there cannot be a case where a country like China just sits back and lets the economy fall into (further) decay. The argument will always devolve into some form of debate as to economic potential, but surely in a place like that such a thing is up from here not down.
Perversely, the more the Chinese economy slows the more Western commentary assures anyone who will listen to Western commentary that Communist China will spring into action.
These commentators in the West should start listening to China’s Communists.
The most recent template for the conventional approach is found in early 2016. As both the old and updated Keynesian textbooks say, officials are supposed to respond

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Everything Comes Down To Which Way The Dollar Is Leaning

December 19, 2019

Is the global economy on the mend as everyone at least here in America is now assuming? For anyone else to attempt to answer that question, they might first have to figure out what went wrong in the first place. Most have simply assumed, and continue to assume, it has been fallout from the “trade wars.”
That is a demonstrably false guess, one easily dispelled by the facts. A trade war produces winners from its losers. But we cannot find a single one. There have only been losers.
The most obvious culprit, therefore, is rather the dollar. It goes up and everything else goes down. From trade volumes and economy to interest rates and even the stock market on several occasions. A rising dollar is good for no one. Even academic Economists (in certain places) have begun to catch on.

Thus,

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Out Of The Onion Wars, Why Are There Only Losers?

December 19, 2019

Whereas China is embroiled in pig wars, its neighbor India is waging one against onions. African swine fever has decimated the former’s stock of hogs, leading to rapidly rising food prices at maybe the worst possible time. On the Indian subcontinent, same result as far as prices only in this case late monsoons have swamped the onion harvest.
The shortage has been so bad it led the Modi government to halt exports of the vegetable in order to keep enough supply in-country; therefore, prices down. It hasn’t really worked, at least not yet.
According to the Reserve Bank of India (RBI), the nation’s central bank, inflation has jumped over recent months due almost entirely to onions. The overall CPI index gained 5.54% year-over-year in November 2019, accelerating from 4.62% in October and 3.99%

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Latest European Sentiment Echoes Draghi’s Last Take On Global Economic Risks

December 17, 2019

While sentiment has been at best mixed about the direction of the US economy the past few months, the European economy cannot even manage that much. Its most vocal proponent couldn’t come up with much good to say about it – while he was on his way out the door. At his final press conference as ECB President on October 24, Mario Draghi had to acknowledge (sort of) how he is leaving quite the mess for Christine Lagarde.
Incoming data since the meeting in September confirm our previous assessment of a protracted weakness in euro area growth dynamics, the persistence of prominent downside risks and muted inflation pressures.
Everyone else has forgotten, but recall what the same guy was saying and not all that long ago. Less than a year ago, in December 2018, while interest rates were

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Sentiment Vs. Sentiment (and Diffusions Plus Production)

December 17, 2019

Over the past several months, there has emerged a divergence in sentiment; or, more precisely, sentiment indicators. The ISM’s PMI’s have remained at or near their lowest levels (in years) while IHS Markit’s have moved somewhat higher. Since the narrative has shifted toward “growth scare” at the same time, you can guess which surveys have carried more weight.
But Markit’s contributions toward the numerous descriptions of this resurgent economy hit a bit of a snag in its flash readings for December 2019. For one month, at least, the manufacturing side stumbled while the rise in services sentiment failed to reach expectations. As a result, the composite PMI gained just 0.3 points to come in at 52.2.
In other words, after four months on the rise the index still hasn’t reached July. As of now,

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TIC Rolling Over Would Mean Other Things Having Rolled Over

December 17, 2019

According to the latest TIC estimates from the Treasury Department, foreign governments continued their heavy selling of US Treasuries. During the month of October 2019, the most recent data, the official sector disposed of more than $40 billion of those securities on net. It was the third straight month of substantial declines.

Some observers try to link this kind of selling with falling bond prices (and rising yields). Without overseas governments to buy a whole lot of what the US federal government wants to sell, interest rates, they say, have nowhere to go but up.
The last time foreign holdings of UST’s were “shrinking pretty substantially” was in the same years 2014 to 2016. China sold, according to official figures, nearly $1 trillion in foreign reserves including hundreds of

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