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Tag Archives: Reserves

3/5/20: Financial Strength Across Emerging Markets

A somewhat simplified, but nonetheless telling heat map of financial strengths and vulnerabilities across emerging market/middle income economies via the Economist: I have outlined European economies included (for some strange reason, the Baltics are not in the assessment, neither are Bulgaria, Moldova, etc). The top 9 as well as those ranked 11th, 12th and 15th are economies with no risk category at or below 'moderate'.  The bottom 15 have no risk category within a 'safety' zone.Have...

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What to Expect from the World Bank and IMF

The spring meetings of the World Bank and IMF will be held virtually this week amid a profound economic crisis spurred by a novel coronavirus.  Unlike previous such viruses, this went global in such a destructive way that many countries have responded the same way.  Encouraging social distancing, closing non-essential businesses, and enforcing lockdowns.  The economic contraction that has begun is beyond what has been seen since the Great Depression.  Even before the IMF's World...

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Earnings Lies & Why Munger Says “EBITDA is Bull S***”

Earnings Worse Than You Think Just like the hit series “House Of Cards,” Wall Street earnings season has become rife with manipulation, deceit and obfuscation that could rival the dark corners of Washington, D.C. What is most fascinating is that so many individuals invest hard earned capital based on these manipulated numbers. The failure to understand the “quality” of earnings, rather than the “quantity,” has always led to disappointing outcomes at some point in the future.  As Drew...

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Cool Video: Weaponization of the Dollar and the Search for an Alternative

I talked to Rick Santelli on CNBC earlier today about the dollar.  A link to the video clip can be found here.  Our brief discussion had two components.  In the first, talked about the seemingly never-ending quest for an alternative to the dollar.  I have argued that the biggest threat to the greenback's role in economics and finance does not arise from a challenger.  There is no compelling alternative.  A far bigger threat arises from the US removing what was an international public...

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China’s Next Warning

Chinese monetary authorities announced today what will be for some of its banks a seventh round of “stimulus.” For the largest institutions, it will “only” be their sixth and the first one since January 2019. The PBOC has decided it is time for more RRR cuts. Effective September 16, the ratio all banks are required to hold of reserves will be reduced by 50 bps; applying to certain city banks, the decrease will be 100 bps. It sounds like a flood of stimulus, enabling China’s...

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A Word on Q3 COFER–It Might not be What You Think

The IMF offers the most authoritative report on central bank reserves on a quarterly basis with a quarter lag.  The report, the Currency Composition of Official Foreign Exchange Reserves (COFER), covering Q318 has been released.  It may be have been overlooked during the holidays, but if and when the pundits see it, the leading takeaway is that the dollar's share of global reserves fell below 62% for the first time five years.  The end is nigh, we will be told.  Not to...

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The Dollar and Its Rivals

I was in graduate school, studying American foreign policy when I stumbled on Riccardo Parboni's "The Dollar and Its Rivals."  This thin volume showed how the foreign exchange market was the arena in which capitalist rivalries were expressed. More than any single book, it set me on a more than 30-year path. The dramatic world of foreign exchange that Parboni depicted changed in a significant way in the mid-1990s.  Led by the shift in the US, and the appointment of Robert...

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So Close, Yet So Far

The effective federal funds (EFF) rate actually dipped 1 bp last Friday. Having spent the prior eight trading days equal to IOER at 2.20%, it might’ve been heartening for US central bankers under siege. After all, they adjusted that particular policy tool back in June and then in July said this whole EFF thing was due to “special factors” that had long since dissipated. People were starting to question whether they know what they are doing. But EFF didn’t embark on a downward trajectory this...

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Yet Another Lesson In Nightmares

I don’t know how many different ways I can write this. Reserves are not insurance against monetary reversal, they are the calamity. If you have them, that only means you have a problem. And if you have a lot of them, well. The Financial Times yesterday writes again about Argentina. No matter what’s thrown at that country, nothing will staunch the monetary bleeding. The following is a good enough summation for 2018: Argentina may have reluctantly fallen back into the embrace of the...

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Stupid’s On The Other Foot Now

We’ve noted over the past few weeks just how much things have changed since earlier this year. We started off 2018 in the grips of inflation hysteria, the more extreme corollary to globally synchronized growth. Things were going to be so good, they said, it would be bad. Now there’s just growing worries about only bad. In some cases, these things have an even shorter shelf life. A week ago last Thursday, Brazil’s central bank confidently exhorted its entry into the bad part. The real has been...

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