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Tag Archives: Interest rates

Why You Should Care Germany More and More Looks Like 2009

What if Germany’s economy falls into recession? Unlike, say, Argentina, you can’t so easily dismiss German struggles as an exclusive product of German factors. One of the most orderly and efficient systems in Europe and all the world, when Germany begins to struggle it raises immediate questions about everywhere else. This was the scenario increasingly considered over the second half of 2018 and the first few months of 2019; whether or not recession. Over the past few months, however, the...

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Technically Speaking: 5 Reasons To Be Bullish (or Not) On Stocks

Just recently, Tom Lee, head of Fundstrat Global Advisors, published a list of 5-bullish signs for the stock investors which he says you should “ignore at your own peril.” As he notes: “In short, these signals are saying the S&P 500 is set up for a monster 2H rally. We are not ignoring the negative signal of a plunge in interest rates, nor saying that a full-blown trade war is negative for the World. But, we believe the trifecta of strong US corporates, positive White House (towards biz)...

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All You Really Needed Was the Yield Curve

It is absolutely amazing the lengths people will go to in order to deny the most straightforward and obvious explanation; to torture and twist plain evidence. That’s the thing about rationalizing, though. The narrative usually matters more than the facts. Take tax reform and interest rates. The problem with tax reform wasn’t actually tax reform. The Tax Cuts and Jobs Act of 2017 (TCJA) was chock full of good and reasonable ideas, measures that were desirable on their own merits. Beside the...

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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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No Matter What The Fed Does, It’s Bullish?

It’s Bullish…Always Last Wednesday, the Federal Reserve announced the latest decision concerning monetary policy which contained three primary components: A cut of 25bps Stopping balance sheet reductions (or Quantitative Tightening or Q.T.) An outlook suggestive this may be the only rate cut for a while. While stocks dropped on disappointment they Fed may not cut further; it didn’t take long for bullish commentators to start suggesting why the cuts were supportive of higher asset prices....

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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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There’s Dollar In The Rate Cut, But Not Nearly Enough Dollar

The insurance rate cut has been issued. Telling the assembled members of the press this is nothing more than a “mid-cycle adjustment”, Chairman Powell was cautious not to betray too much concern. The first rule of central banking is not to make anything worse. Subprime must always be contained. Yet, he has the unenviable task of explaining what is a complete (and for many an unnecessary) 180-degree turnaround. Mere months ago, inflation and acceleration, an economy risking becoming too good....

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Technically Speaking: 5-Charts Invested Bears Are Watching Now

In this past weekend’s newsletter, I discussed the rather severe extensions of the market above both the longer-term bullish trend and the 200-dma. To wit: There is also just the simple issue that markets are very extended above their long-term trends, as shown in the chart below. A geopolitical event, a shift in expectations, or an acceleration in economic weakness in the U.S. could spark a mean-reverting event which would be quite the norm of what we have seen in recent years.” “As...

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Technically Speaking: The Lessons Poker Can Teach You About Investing

Over the last couple of weeks, I have laid out the bull and bear case for the S&P 500 rising to 3300, and the case for the Fed to cut rates. In summary, the basic driver of the “bull market thesis” has essentially come down to Central Bank policy. This reliance on the Fed has led to a marked rise in “complacency” by investors in recent weeks despite a burgeoning list of issues. As shown in the chart below, the ratio of the “volatility index” as compared to the S&P 500 index is...

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Monthly Macro Monitor: Market Indicators Review

The markets we use to monitor the economy (and those that influence it, which amounts to the same thing) have been tracking an economic slowdown since the 4th quarter of last year. That’s when interest rates, real and nominal, long term and short term, started to decline, credit spreads started to widen and the copper to gold ratio started to fall. Those are all classic market signals of an economic slowdown. Some of those have moderated since the beginning of the year though and today...

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