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Tag Archives: inflation

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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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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Superforecasting A Bear Market

There’s an ongoing debate about whether or not the U.S. is approaching a recession. As an investor, this question is of utmost importance. It is precisely at these times when fortunes can be made and lost. There’s no shortage of pundits with strong opinions in both the affirmative and negative camps armed with plausible narratives and supporting data sets. How to decide which side to take? Applying some proven forecasting methods to historical data can help bring clarity to this question....

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The Path Clear For More Rate Cuts, If You Like That Sort of Thing

If you like rate cuts and think they are powerful tools to help manage a soft patch, then there was good news in two international oil reports over the last week. The US Energy Information Administration (EIA) cut its forecast for global demand growth for the seventh straight month. On Friday, the International Energy Agency (IEA) downgraded its estimates for the third time in four months. That wasn’t all, as the EIA’s report focused in on some more sobering aspects of the US economy....

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Fed Trapped In a Rate-Cutting Box: It’s The Debt Stupid

The Fed desperately needs to keep credit expanding or the economy will collapse. However, it’s an unsustainable scheme. Key Debt Points In 1984 it took $1 of additional debt to create an additional $1 of Real GDP.As of the fourth quarter of 2018, it took $3.8 dollars to create $1 of real GDP.As of 2013, it took more than a dollar of public debt to create a dollar of GDP.If interest rates were 3.0%, interest on total credit market debt would be a whopping $2.16 trillion per year. That...

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Recession Is Coming: Fed Cuts Rates & Bond Yields Crash

The long end of the yield curve continued its post-FOMC decline on poor manufacturing reports and new Trump tariffs. Bond yields were already in steep decline today on ISM news. Trump goosed the market with additional tariffs on China. Fed Gets Unwanted Reaction The Fed cut interest rates this week in hopes of steepening the yield curve. Counting the FF Rate, the yield curve flattened quite a bit but inversions between 3-month and long end widened. In its policy decision,...

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Powell Readies His Noose

The problem continues to be, I’m sure, is one of perception. Economists, politicians, and mostly central bankers have been saying for years that the real economy is the one you see in the unemployment rate. Things are booming. The labor market is awesome, even epically tight. Between last year and this year, going by the unemployment rate the economy has only gotten better. Why in the world would the Federal Reserve be contemplating rate cuts? After all, who cares if inflation is less than...

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Rate Cuts Will Not Be The Fed’s First Insurance Policy

I don’t think anyone really noticed the timing because nobody really noticed it had happened. What took place last year qualifies as a big deal in the world of central banking and moneyless monetary policy. The lack of clarity about it as well as what sure looks like indecision portrays an intellectual foundation at odds with public perception. First, the timing. The middle of 2018 should not have needed any shift toward the inflationary. As officials were quick to point out, the boom was...

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Federal Reserve Headlines – Fact or Fiction?

“When it becomes serious, you have to lie.” – Jean-Claude Juncker, former President of the Eurogroup of Eurozone finance ministers On July 16, 2019, Chicago Federal Reserve President Charles Evans made a series of comments that were blasted across the financial news wires. In the headlines taken from his speech on the 16th and other statements over the past few weeks, Mr. Evans argues for the need to cut interest rates at the July 31st meeting and future meetings. In this article, we look...

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Half-Point Rate Cut Odds Explode To 71%! Does It Really Matter?

The odds of a 50 basis point rate cut on July 31 topped the 70% mark in the wake of a dive in leading indicators. CME Fedwatch notes a huge jump in the odds of a 50 basis point cut by the Fed on July 31. This is an edited post. In the hour or so that it took me to write this, the odds jumped from 49% to 71%. Increasing Odds of 50 BPs Cut Today (one hour ago) 49.3%Now (2:48 PM central) 71.0%Yesterday: 34.3%1 Week ago: 19.9%1 Month Ago: 17.9%Why? The odds jumped yesterday from...

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