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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

The PBOC’s Involuntarily Enormous Bet

1 day ago

Central bankers are not nimble traders. By their very bureaucratic nature, they leave big muddy footprints all over markets. Sometimes that is by design, a show of force to scare some evil speculators into going straight. Other times, it just can’t be helped.
The way it works in China, the autocratic structure doesn’t leave much to interpretation – at least as to what may be going on. Why something is happening can be an entirely different matter.
The muddiest feet in the bunch surely belongs to Big Mama. It’s not quite an affectionate nickname, though people do tend to see the People’s Bank of China (PBOC) in that way for a lot of more selfish reasons. Cultivated by the regime of autocracy, and in a West allured by dreams of technocracy, once Big Mama is spotted it is immediately assumed

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Some Real Hope Appears In Japan, Of All Places

1 day ago

There are things to feel optimistic about. I’ve been pegged as a doom and gloomer, and so long as things remain as they are, I don’t see what’s wrong about it. Long term, however, I’m as optimistic as anyone. There’s a gigantic wave of economic growth and prosperity just waiting to be unleashed – the moment the shackles of benign neglect are discarded in favor of competence and honesty.
Those who have been calling for a BOND ROUT!!! the past few years, just you wait.
To get to that point, first there must be a paradigm change in how the world recognizes economic reality. Some of that is going on, if only in dribs and drabs.
The BIS, for example, is finally challenging Ben Bernanke’s preposterous global savings glut idea. That’s good. But researchers like Hyun Song Shin and Claudio Borio

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Some Seriousness In The Silly Beige

2 days ago

I confess to following the Beige Book lately for mostly entertainment purposes. It was always an exercise in intellectual vanity, an opportunity for Fed Presidents to cram into it their own biases. But to see the FOMC just abandon the LABOR SHORTAGE!!! like they have, that’s not strictly about amusement; though it is to some degree morbidly satisfying just how obviously lacking in conviction they’ve been.
The economy was in danger of overheating, they said.
The latest volume for July 2019 contains but three references to the “labor shortage.” That’s down another one from the past few, and from fourteen (!!!) last September at what was the inglorious height of inflation hysteria. How about that? The Beige Book as involuntary, indirect evidence for the landmine.

As labor shortage anecdotes

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Housing: Going Wrong In The Few Things That Were Going Right

2 days ago

It certainly doesn’t feel like a bubble. We’ve heard about home prices in many cities skyrocketing like there has been one, still there does seem to be something different. If it is a bubble, it sure isn’t the same as the last one, the big one fifteen years ago. Much is missing this time around.
For one thing, prices are disconnected from volume. For all the talk of a boom in the economy the housing sector never joined in. Not really. I wrote last year that a truly booming economy is one that builds houses. This candidate consistently refused.
Real estate, like the economy, has never recovered. In fact, the two go hand in hand; the labor market has its participation problem, the housing market beset by the same defect.
When talking about a strong employment condition, invariably the

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Not A Paradox Nor A Conundrum: TICked at Powell

3 days ago

It seems a paradox, at least like it is backwards. The financial media doesn’t help because good editorial standards rely upon the opinions and beliefs of credentialed people who have no idea what they are talking about. If you hold high office in some central bank, we are to assume you are competent about monetary issues.
It’s all given a gloss of geopolitics, too, which isn’t helpful. The dollar destruction people are also onboard with how interest rates have nowhere to go but up. If the dollar is to be globally rebuked, so must UST’s given how there’s so much deficit to be financed. Who’s left to do it without foreign assistance?
What I am talking about is “selling UST’s.” It seems just that straightforward. Why else would foreigners be dumping US assets? They hate America, probably

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Ticked About TIC: The Accidental Discovery of Perhaps The Big Bottleneck

3 days ago

From October 2000 to July 2001, the Treasury Department conducted a special survey of users of its Treasury International Capital (TIC) data. Nearly two decades ago, it had become apparent (to some) just how important international dollar flows were to the overall economic and financial landscape. And not just those of the United States.
TIC was created ostensibly to aid in balance of payments accounting; the old idea that money was (nearly) fixed so the only thing which mattered was measuring where it went. This left an early 20th century bias in it right up into the 21st century.
Because of this, most complaints about TIC in the first years of the new millennium dealt with this defect.
One user noted that due to the transactor-based system, holdings estimates for the UK are huge and for

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Nastier Number Four: A Broader Industrial Base On The Wrong Side

4 days ago

There’s always weakness even in the most booming of economies. Even in the real booms, not the 2017 hysteria kind, not all cylinders will be firing. What makes them real, however, is when the vast majority are. The concept behind globally synchronized growth was a valid one, it just never came out in practice.
The impression has been incorporated into various data points over the years. These are quantitative measures designed to relay information about this idea of broadness. If so many pieces are in lockstep one way or another, then that’s probably something worth paying attention to and investigating.
The Federal Reserve’s Industrial Production (IP) statistics include several of these. They are diffusion indices, though a bit different than the sentiment surveys (also diffusion indices)

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Globally Synchronized, After All

4 days ago

For there to be a second half rebound, there has to be some established baseline growth. Whatever might have happened, if it was due to “transitory” factors temporarily interrupting the economic track then once those dissipate the economy easily gets back on track because the track itself was never bothered.
More and more, though, it appears at least elsewhere that the track was bothered. Whether China, Singapore, or Germany, a nastier number four is taking shape particularly since last year’s landmine (October to December). What happened in the global economy doesn’t appear to have been anything other than a categorical change.
Globally synchronized growth is transitioning, slowly, into global synchronized contraction. But how synchronized is the transition, or, more to the point, the

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Poring Over Poor Singapore’s Far Nastier Number Four

5 days ago

You aren’t going to find the worst economic quarter in Singapore’s modern history in either 2008 or 2009. It was actually posted in 2010. During the third quarter of that year, GDP declined by a whopping 11% annual rate. While that’s the biggest contraction still on record, initial government estimates thought it was closer to -20%.
Singapore’s Monetary Authority wasn’t worried, however. Officials often complain about lumpiness in their numbers, and in the city’s case it was actually true for once. For strictly local reasons, the pharmaceutical industry had experienced pure joy the quarter before. Output in this one sector had increased by more 350% sequentially in Q2 from Q1. There could only be a sizable pullback in Q3.
What that had meant was overall GDP gained a ridiculous 27% (Q/Q,

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China’s Managed Decline Manages Another Quarter

5 days ago

The latest batch of economic from China featured a little something for everyone. For those thinking about a second half rebound, retail sales gained nearly 10% in June. It was the first time near to double digits since March 2018. At the other end of the spectrum, Real GDP rose just 6.2% year-over-year in the second quarter. That’s the lowest in modern China’s history.
The rest of the data fell somewhere in between, a muddled middle of low-state growth and cancelling oscillations. Some are already seeing that as the point, given the obvious context of ongoing “trade war” posturing.
The strong showing of the domestic economy helps bolster Beijing’s argument that growth is robust enough to withstand a prolonged trade war with its top export market.
For the vast majority of the Western

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What Has Markets Spooked? Probably Something To Do With That Huge Offshore Dollar Hole

8 days ago

Like a shark smelling blood in the water, I don’t care that the blood is in the water from leaking out of what will be a dead horse, if it isn’t deceased already. I pretty much intend to beat on it one way or another. The issue isn’t just fed funds, it’s why anyone cares about that market at all in 2019.
The answer, as even FRBNY admits this week (the dead horse), is how the monetary world is much more complex than you’ve ever been told. It’s not just a matter for correcting textbooks.
In school, college or earlier, it’s all very simple. The Federal Reserve as a central bank being central will move money rates around at its whim. As Ben Bernanke said in 2002, it possesses this thing called the printing press.
Only, in practice it’s mostly just bank reserves which are the primary mechanism.

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The Lying Statistics Behind Globally Synchronized Growth, And What It Could Mean For The Globally Synchronized Downturn

8 days ago

Numbers really don’t tell us much all by themselves. Context always matters. That’s why 19th century British statesman Benjamin Disraeli claimed there are three kinds of lies; lies, damned lies, and statistics. Numbers employed in isolation are either misleading or useless. In the 20th century, Darrell Huff wrote in his classic How To Lie With Statistics:
Averages and relationships and trends and graphs are not always what they seem. There may be more in them than meets the eye, and there may be a good deal less.
That’s always what struck me most about “globally synchronized growth.” Even while it is was in full swing during 2017, it was at best a midget. The numbers all looked good until you put them into some context; any context. There was a good deal less to it than how it was ever

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Much More Than Rate Cuts On (Dis)Inflation

9 days ago

Things have changed, obviously. Chairman Powell and the rest of the FOMC, the majority anyway, have come around to rate cuts. Where they were hawkish in December, noncommittal as late as May, they’ve been spooked into them over the last month or so. As it stands, the first one is less than three weeks away.
It’s not so much the lack of inflation any longer. No one should ever forget the 2018 story, the inflation hysteria which raged throughout much of last year and ended in a pile of confused regrets. The unemployment rate told of an economy on the verge of boiling over, beyond overheating in a good way. The Fed had to get ahead of those pressures else a new danger would emerge, more like 1975 than 2015.
But if it was the lack of inflation which first flip flopped the FOMC from hawk to

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Dollar Destruction Potential: From China ‘Outflows’ To The FOMC Considering QE5

10 days ago

Tucked away in a quiet little corner of the BIS publication library, a study was published in the organization’s September 2015 Quarterly Review. One of the biggest mysteries of that time was Chinese “capital flight.” It was breathtaking, and it would only get worse. What was really going on?
Many if not most mainstream stories focused on capital restrictions. There were plenty of published anecdotes about how wealthy Chinese billionaires were, by hook or by crook, trying to get their money out of the country while they still could.
Here’s one such story published early in 2017:
Analysts said that despite tighter scrutiny, the outflows were likely to remain strong for years to come, with companies and individuals looking for better investment opportunities while safeguarding their money

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As Chinese Factory Deflation Sets In, A ‘Dovish’ Powell Leans on ‘Uncertainty’

10 days ago

It’s a clever bit of misdirection. In one of the last interviews he gave before passing away, Milton Friedman talked about the true strength of central banks. It wasn’t money and monetary policy, instead he admitted that what they’re really good at is PR. Maybe that’s why you really can’t tell the difference Greenspan to Bernanke to Yellen to Powell no matter what happens.
Testifying before Congress today, in prepared remarks the Federal Reserve Chairman threw cold water on what was supposed to be the second half rebound. It still might happen, according to the FOMC’s models, but it is more and more “uncertain.”
“…it appears that uncertainties around trade tensions and concerns about the strength of the global economy continues to weigh on the U.S. economic outlook.”
The word itself is

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A Trickle of Belgian Colored Deutsche Bank Speculation

11 days ago

In October 2011, the bank’s Chairman bristled at the characterization. His was not going to be a “bad bank” as many in the financial media had been saying. Pierre Mariani, chief executive of Belgium’s Dexia, preferred instead to call it the “residual bank.”
No matter the label, the firm was being bailed out for the second time by the Belgian government in combination with French authorities. Any assets which could be sold at a reasonable (meaning not terrible) price would be. There were already investors lined up for the pieces of Dexia’s balance sheet unencumbered by stupidity.
It’s always a complex story with these things; in this case a little less so at least from an overview. What someone might call “reach for yield” in later years, banks across Europe not just Dexia came out of 2008

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Embroiled by Fed Funds, FRBNY 143 Months After BNP Finally Says ‘Offshore’

11 days ago

It was a poignant moment that has gone totally unappreciated. Lost in the noise about subprime mortgages, on August 9, 2007, what actually happened that day represented perhaps the best example of how things worked. Or suddenly didn’t.
On the occasion of the 10th anniversary, I recounted the tale of BNP Paribas. You’ve heard of Lehman and Bear Stearns, countless stories about Countrywide and Wachovia. Maybe even something about money market funds. This one French bank’s contributions weren’t really all that remarkable; which is what made it so deadly.
Reuters filed a single report at 2:44am ET on August 9, 2007, detailing the relatively non-specific plans of BNP Paribas to halt NAV calculations for three of its funds. The world hasn’t been the same since.
If the world hasn’t been the same,

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The New Hysteria: Rate Cut Rationalizing

12 days ago

Even though it was everywhere, one of the primary things that struck me about the peak period for Reflation #3 was how ridiculous it got. If you have a strong argument, there’s no need for so much hyperbole. But it wasn’t just that, it had become openly ridiculous.
Interest rates had nowhere to go but up, “they” said. Fine, it was always possible. But inflation, we were repeatedly told, was the only outcome, the definite product of skillful monetary handling leading to a biblically tight labor market. And to prove it, there would be no data just the strongest possible wording?
There was scarcely a day that didn’t go by without some anecdotal story of the labor shortage. If it had been real, there wouldn’t have been any need for them. The data on its own would’ve more than sufficed. The

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Hard Times In The Eurodollar Straits

12 days ago

As of trading on Friday, federal funds for the third time is now back to above where all this began. For much of 2017 and Reflation #3, the effective federal funds rate (EFF) remained steady at 16 bps above the RRP “floor.” Apart from month-end dumpings, it was consistent and predictable; the best of times, or at least what passes for them in this day and age.
As of July 5, 2019, FRBNY puts EFF at 2.42%. To give the relevant context, in case you haven’t been following, that 17 bps spread today includes three “technical adjustments” to IOER. In other words, IOER, the so-called ceiling, is 15 bps lower than it was for EFF being higher than when this all started.
There’s a lot that is going wrong in those 17 bps (or the 15, however you want to look at it).

It isn’t the payroll reports which

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Lagarde and Germany, How It Keeps Getting Worse

12 days ago

Maybe this was inevitable. After all, it is how things work in a lot of other places. When all is lost, that last thing that happens is the lawyers come in and pick through the bones.
Christine Lagarde has been nominated to replace Mario Draghi as the next head of Europe’s central bank. She has a very long and distinguished career, currently as head of the IMF. Largarde, however, is no banker. Nor is she an Economist.
Having worked as a lawyer first and then a politician, it remains to be seen whether or not her lack of formal training in Economics ends up being a benefit. It was the Economists who led the world into this state, and then left the global economy in the clutches of its aftermath. Perhaps trying someone else outside of the discipline may get things back on track.
While that’s

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I’d Like To Solve The Puzzle: Nastier Number Four, The New Lows in Germany

15 days ago

The European slump had been a combination of several transitory factors. At least that’s what they had kept saying. ECB officials and staff Economists didn’t use that specific word, so far that’s the exclusive domain of the Federal Reserve. Regardless of semantics, the message was clear: the 2018 economy ended on a sour note but that was nothing to be worried about, soon to be forgotten.
In January 2019, various private Economists pitched in. One working for JP Morgan, Greg Fuzesi, estimated that the low level of water in the Rhine and other waterways was responsible for taking 0.7 percentage points away from 2018 German GDP.
The implication was clear – in theory. Dissipating also “temporary shocks in the auto and pharmaceutical industries” along with a little more rain and Germany would

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Post-Landmine Payrolls

15 days ago

It’s never about a single payroll report. Even still, there’s something significant in how the “good” ones aren’t measuring up the way they used to. According to the Bureau of Labor Statistics (BLS), the US economy gained 224k payrolls in the month of June 2019. Well above consensus, the headline is being described as relieving some of the growing economic anxiety.

Set aside 224k being anything like good in a wider historical context, it doesn’t even stack up for recent times. Last year, for example, from February to August the monthly payroll change beat 250k in four out of those seven months. This year, dating back to January’s “blowout” above 300k, that hasn’t happened even once during the latest five months.
That’s a meaningfully long time to go without something better. The last time

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Contracting Factories, Curiously Rebounding Inbound Cars, And the Confirmed End of Decoupling

17 days ago

The US manufacturing sector may not be in as bad a shape as its German or Japanese counterparts, though it appears to be catching up on the downside. The Census Bureau reports today that new orders for all types of goods in all industries fell 1.6% year-over-year (unadjusted) in May 2019.
This was the first minus sign for the broad category which includes both durable and non-durable goods manufacturing. Orders hadn’t fallen on annual basis since 2016.

It is further evidence that the supply chain is being forced to adjust to the inventory pile up from the end of last year. Despite the unemployment rate, the slowdown in consumer spending has persisted. With inventory levels running too high, retailers and wholesalers are starting to order less new product while they try to work through

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The 10s Back To A 1-handle Again; New Information That Isn’t New

18 days ago

The benchmark 10-year US Treasury yield closed below 2% for the first time since Donald Trump was elected President. Having flirted with that level several times over the past week, today the most-watched interest rate on the planet finally breached this one startling round number. And it comes during a week which by every conventional account should have been hugely positive.
Despite what has been called a trade truce between the US and China, the bond market has been unimpressed in every way imaginable. Not only is this 10-year yield back sporting a 1 handle, Germany’s federal 10-year bund is way ahead in the race to becoming Japan. It finds new record lows, record negative lows, seemingly a few times consistently every week.
At -35 bps in “yield”, the German market like the UST market

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How To Properly Address The Unusual Window Dressing

18 days ago

Unable to tackle effective monetary requirements, bank regulators around the world turned to “macroprudential” approaches in the wake of the Global Financial Crisis. It was mostly public relations, a way to assure the public that 2008 would never be repeated. A whole set of new rules was instituted which everyone was told would rein in the worst abuses.
Among the more prominent of these was Basel 3’s leverage ratio. Of the banks that failed or nearly failed more than ten years ago, they did so with what seemed to authorities hidden leverage. Their capital ratios, for the most part, were fine. Yet, the amount of leverage each institution had employed was beyond imprudent.
The reason for what may seem to be a contradiction was simple: regulatory arbitrage. Banks found a way to game the

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Toward Rate Cuts: What If The Landmine Was Real?

19 days ago

It was supposed to be the Chinese government who was going to rescue the global economy. Once the rationalizations ended and officials around the world realized there was serious economic weakness building at the end of 2018 instead of a globally synchronized inflationary recovery, the green shoots of 2019 were going to be in one big part a fiscal stimulus boost.
It didn’t happen over in China. From PMI’s to FAI’s, the Communist government remains largely absent. That’s the difference with “managed decline.”
With the Chinese on the sidelines, other governments are picking up the pace. In this one case, there is no obvious reason why. I doubt it is intended stimulus. Regardless, US state and local governments are absolutely binging, spending on construction projects at a breakneck pace.

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The Domestic PMI Picture, Still A Dollar Shortage

19 days ago

This green shoot didn’t wilt so much as it exploded into a fireball. FRBNY’s Empire State Manufacturing Index had captured the landmine in its initial 2019 readings. Starting from 21.4 (this version uses zero rather than 50 as its dividing line) in November 2018, by January the index had dropped 17.5 points in just two months. It then stabilized and by April was moving up again.
This rebound or green shoot pushed the PMI to 17.8 by May, almost retracing the entire landmine aftermath. No doubt it was one of the most widely cited statistics inside policy circles. One “cross current”, at least, seemed to have abated.
Two weeks ago, however, FRBNY reported the index’s largest plunge on record. Falling 26.4 points just in June 2019, it left the headline at -8.6. It was the first contraction

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The Asian PMI Picture of A Dollar Shortage

19 days ago

It’s actually one of the few areas that has been studied in mainstream Economics. The links between global financial upset and broader economic consequences are pretty well understood. Trade gets shut down, therefore economies which are highly dependent upon the exchange of goods experience the effects first. When you see these bellwethers under pressure, it’s a bad sign.
The mysterious part is where these financial problems might come from. It’s one of the more uncomfortable aspects of the 2019, being in agreement with Economists who can clearly see that “trade wars” just aren’t significant enough to be this much of a disruption. In addition, it’s a huge stretch to believe that worries over a few billion in future US tariffs on Chinese goods would’ve produced such a decline in trade

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The Road To July Rate Cut Runs Through the Brazilian Zone

22 days ago

The way I look at the global economy, there are basically five different zones. The first is the US and the second is Europe. China might be third on this list but often second if not first in terms of what’s driving marginal changes. In behind those is Japan, not what it once was but still often a bellwether for those changes. Lastly, there is the developing world (as well as any small DM economies not otherwise assigned).
Standing in for the final group, I often turn to Brazil as a proxy. It is one of the most highly developed and in sheer size already one of the largest in the world.
In those other zones, economic data has been weak but not yet minuses in the big overall accounts like GDP. Though German manufacturing conditions, for example, are already equivalent to recessionary

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