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Tag Archives: Economy

Making Sense Of 100-Year Bonds At 0% & 30-Year Bonds At Negative Yields

Over 50% of European gov’t bonds have a negative yield. Globally there’s $15 trillion in negative-yield debt. $15 Trillion in Negative-Yield Debt Excluding the US 44% of Bonds Have a Negative Yield European Negative Yield Government Bonds As of mid-June, over 50% of European government bonds have a negative yield. The total is higher now. Negative-Yield 30-Year Bond Yesterday, Germany issued a 30-year bond yielding less than 0%. Held to maturity you will not even get your...

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The Fingerprints of Bumbling (China)

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...

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

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...

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No Recession In Sight? But Cutting Rates To Avoid One

President Trump and his economic advisor Larry Kudlow have important announcements. I can help with translations. Please consider Trump ‘Not Ready’ for China Trade Deal, Dismisses Recession Fears. Consumers Doing Well Trump: “We’re doing tremendously well, our consumers are rich, I gave a tremendous tax cut, and they’re loaded up with money.”Trump Translated: The “tremendous tax” cut primarily benefited the wealthy. Consumers are tapped out. That’s why housing and autos are on the...

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Eurodollar University: Diagramming Repo Reserves And Negative Yields

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...

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China’s Superplan; Or, The Familiar (Dollar) Disorder of Bumbling Failure

Always aspiring to technocratic greatness, China’s Communist Party is set up to run like clockwork. It’s supposed to go off in predestined fashion, a course programmed into the vast apparatus by highly proficient experts. It is, or is supposed to be, comforting that order and control over the complex main spheres of daily life can be managed down the detail and on a preset schedule. Every five years, the Communist Party holds its Congress. The main meeting is devoted to the big stuff. The...

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Collateral Reserves: What Is Behind Record Low and Negative Yields

It was truly startling when it was announced. The second and more dangerous phase of the Global Financial Crisis had begun on July 15, 2008. Within two weeks, Merrill Lynch had etched its name on the growing list of “troubled” institutions. On July 28, 2008, Merrill Lynch agreed to sell $30.6 billion gross notional amount of U.S. super senior ABS CDOs to an affiliate of Lone Star Funds for a purchase price of $6.7 billion. At the end of the second quarter of 2008, these CDOs were carried at...

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That Can’t Be Good: China Unveils Another ‘Market Reform’

The Chinese have been reforming their monetary and credit system for decades. Liberalization has been an overriding goal, seen as necessary to accompany the processes which would keep the country’s economic “miracle” on track. Or get it back on track, as the case may be. Authorities had traditionally controlled interest rates through various limits and levers. It wasn’t until October 2004, for example, that the upper limit on lending rates was rescinded. In August 2006, the mortgage rate...

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The “Trade War” Is Over, Trump Just Doesn’t Realize It Yet.

On Tuesday, the markets bid higher following a statement from the U.S. Trade Representative’s office that tariffs will commence on September 1st, but that some products will be delayed until December 15th. To wit: “…some tariffs will take effect on Sept. 1 as planned, ‘certain products are being removed from the tariff list based on health, safety, national security and other factors and will not face additional tariffs of 10 percent. Further, as part of USTR’s public comment and hearing...

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Pay Attention To The Message The Yield Curve Is Sending 08-16-19

Quick Review Listen To The Yield Curve Message No One Ever Says Sell Sector & Market Analysis 401k Plan Manager Follow Us On: Twitter, Facebook, Linked-In, Sound Cloud, Seeking Alpha Quick Review Do you love #volatility yet?  Last week the market swung wildly back on forth on “trade talks,” “tariff relief,” inverted yield curves, and recession fears to finish the week on “hopes” banks will rescue the markets once again. The bounce on Friday, was not unexpected as the market had...

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