The Market Radar

We anticipate monitor and comment on market-moving global economic and geopolitical issues.  No dark side brooding, no wanting the world to end, no political rants.  Traders, investors, policymakers, or market observers can’t afford to ignore us.  In one word, perspicacity.


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The Open

Wow!  Check out Darren Clarke off the tee.  Love that guy, who won the Open in 2011, and wish we could have a pint together.   The Brits are very sensitive to the fact that the British Open is “The Open.”

Our money is on Jon Rahm, the Spaniard from ASU.

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Who Is Winning The Trade War?

China on Wednesday urged the Trump administration to “make up its mind” about reaching a trade deal with Beijing, warning that additional tariffs could send negotiations further off track. — South China Morning Post, July 17

We state emphatically,

Nobody Wins In A Trade War

We’re not sure how to even keep score in a trade war.  The relative performance of stock markets?  Economies?

Trade Deficit

President Trump likes to look at the bilateral trade deficit.   However, during his tenure, the cumulative trade deficit with China has increased by almost $100 billion, 8 percent higher relative to the prior 28 months before he took office.


China Trade War

Trade Deficit Shrinking For The Wrong Reason

In the first five months of 2019, the trade deficit with China is $15 billion lower than the same period in 2018 but it is the result of a reduction of total nominal trade volumes, which is far from the optimal solution of growing exports faster than imports.  Both countries are worse off.

Total merchandise trade between the world’s two largest economies fell 14 percent in Jan-May 2019 versus Jan-May 2018.

We don’t think it’s coincidental that global growth is also slowing sharply.


Trade Data

U.S. exports to China fell 19.3 percent while imports from China declined 12.3 percent.

World Of Hurt

If the U.S. and China continue on this path of attempting to reduce the bilateral trade deficit through erecting trade barriers, the global economy, including all Americans, are in for a world of hurt.

The hope of a trade deal anytime soon is fading fast as China digs in (see the SCMP article cited above).


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One Small Step In A Playtex Space Suit

Yes, you heard that right, Playtex, the bra-maker.

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Our Summer Of Discontent

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere   
The ceremony of innocence is drowned;
The best lack all conviction, while the worst   
Are full of passionate intensity. –  W.B. Yeats
As we expected, the rivets are beginning pop in Washington and in the American body politic,
We are expecting a Summer of Discontent. That is increased political instability, which will eventually weigh on the markets.  We are the only out there with this call and it is not even close to the market’s radar. – GMM, April 25th,
It’s Mueller Time on Capitol Hill next week and the debt limit looms.  The ugly scene that took place in Congress today (see below) doesn’t exactly grease the skids for a debt deal.
The political noise is about to spike, folks.
Have your ear plugs ready and keep an eye on the American Street.

A divided House voted Tuesday to condemn President Trump’s racist remarks telling four minority congresswomen to “go back” to their ancestral countries, with all but a handful of Republicans dismissing the rebuke as harassment while many Democrats pressed their leaders for harsher punishment of the president.

The imagery of the 240-to-187 vote was stark: A diverse Democratic caucus cast the president’s words as an affront to millions of Americans and descendants of immigrants, while Republican lawmakers — the vast majority of them white men — stood with Trump against a resolution that rejected his “racist comments that have legitimized fear and hatred of new Americans and people of color.”

…McCarthy rose to attack Democrats afterward, calling it “a sad day” for the House. “Our rules of order and decency were broken today,” he said.

But Democrats said the day, in fact, was a long time coming — a rare occasion on which members of the Republican caucus have been forced to go on the record regarding Trump’s rhetoric. Since Trump has tightened his grip on the GOP, many lawmakers in his party have gone to great lengths to avoid criticizing him, fearful of the president’s wrath sinking their electoral chances.

“This resolution is harassing the president of the United States,” said freshman Rep. Dan Meuser (R-Pa.). – Washington Post

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Liftoff, We Have A Liftoff

So cool.


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Codependent Central Bankers

Codependency is characterized by a person belonging to a dysfunctional, one-sided relationship where one person relies on the other for meeting nearly all of their emotional and self-esteem needs. It also describes a relationship that enables another person to maintain their irresponsible, addictive, or underachieving behavior. — Pysch Central


Let us preface this post by first stating, thank goodness the central banks, especially the Fed, for their bold and decisive actions during the Great Financial Crisis (GFC).  Their behavior prior to, and after the GFC is more suspect but we know how close the global markets came to a total collapse, not just once but many times during the crisis.  This comes from our sources at the highest levels of policymaking. 

Collapse, not as in the S&P500 falling another 20 percent, but a complete meltdown of the global payments system, rendering trade in goods and services in the marketplace almost impossible.   The hijacking of Safeway trucks and martial law probably only a few days later.   

Maybe the Fed could have done things different, more effective, more efficient, and more sustainable but act they did and kept most of us from living under a freeway and eating bark for the rest of our lives.    

Stay with us if you disagree for the rest of the post. We are willing to listen to your arguments if you have better information. We are very confident in ours. 


One of our twitter mates, who resides in the home country (led by a man named Justin) of the team that stole the NBA championship from our Warriors, tweeted out the WSJ article with the above headline.

We immediately replied with something close to the following but with much fewer characters,

When will the central bankers learn?  That they can’t solve structural economic problems with their limited cyclical toolbox — no matter how large, no matter how expanded.   

Trying to do so only exasperates the unintended consequences, such as political stress and the blowback caused by the increasing wealth inequality.  Not to mention the growing blackhole of negative yielding debt in the global bond market.  We suspect the consequences of negative yields will not, let’s just say, be optimal in the long run.    

Can the Fed and ECB arrest the decline in the international liberal economic order, which may plunging the global economy into a deep recession, with more quantitative easing?  

We believe it would behoove central bankers to stop enabling the politicians and go on something similar to  a “sex strike,” forcing governments to implement the painful but necessary structural reforms to put their economies on more stable and sustainable trajectories. 

Govenments don’t like to make the tough choices, especially given the current state of the western democracies, and this would take some major stones by central bankers as bullying from political leaders would become intense.    

Do you think Chairman Powell would/has passed that test?   

The codendency of the monetary authorities, coupled with the addictive behavior of most governments to debt and deficits is a very toxic brew.   We don’t think it ends well. 

Here are some data on the unintended consequences of quantitative easing.

Wealth Ratio of Top One Percenters To Bottom Fiddy Skyrockets


(Note not all of the wealth inequality is due to asset inflation but a large portion is.)

Negative Yielding Debt Spikes

Value of Negative Yield Debt_July13

EM Corporates Now With Negative Yields – Are You Kidding Me?


It’s time for the global central bankers to kick that Bear Off The Balcony At Bretton Woods and meet in New Hampshire to construct a plan to force their governments to act on structural reform.

By the way,  the Raptors are a class act. Sorry to see their star leave for the Clips.  Wonder if Microsoft stock was affected?

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QOTD: Bund Dearth

QOTD: Quote of the Day

Nice pithy quote, which thoroughly encapsulates our narrative of global markets that the major central banks have created a yuuuge shortage of risk-free assets tipping the world economy into a bizarro Twilight Zone, where, now even Petrobras bonds trade with a negative yield.  You heard that right, Petrobras, Brazil’s state oil company.

Some speculate the ECB will soon reach its limit of 33% ownership of a single issue and be forced to raise it to 50%, as the German government is reducing the stock of bunds with perennial budget surpluses.  Many believe a -2% handle on the bund is in the cards during the next round of QE by the ECB.

Please, don’t ask: What is the bund market telling us?

bunds are “scarce potatoes” – Bond Vigilantes 

By the way, Germany and Japan have the world’s oldest populations.  Don’t you think reducing the income of retirees through QE may have/had some unintended economic consequences?

It is probably more difficult to turn a 60-year something German conservative investing retiree into a stock jockey than it is retraining a coal miner to become a data scientist.  The political blowback against QE in D-land is already evident, and will most likely grow as the country comes under tremendous pressure to implement a massive fiscal stimulus to save the euro zone economy, while receiving  -2 percent on their bunds.

It’s getting complicated, folks.

Posted in Bonds, Uncategorized, Weekly Eurozone Watch | 1 Comment

Emerging Market Sub-Zero Corporates

Stunning.  Kind of gums up the valuation models, no?

What have the CenBanks wrought?

  • The amount of negative-yielding corporate bonds almost tripled to $109 billion from a week ago
  • Sovereign bonds with sub-zero rates climbed about 50% to $136 billion

Corporate heavyweights such as China Everbright Bank Co. and Petroleo Brasileiro SA, and sovereigns including Poland and Hungary have seen their rates drop below zero after a dovish turn at Federal Reserve and the European Central Bank sparked a mad dash for yield. Emerging-market bonds handed investors 3.5% over the past two months, more than a percentage point above returns on U.S. Treasuries, according to Bloomberg Barclays indexes. – Bloomberg

Posted in Capital Flows, Credit, Uncategorized | Tagged | 1 Comment

What Keeps The Credit Markets Up At Night

Credit investors rank their concerns, which are almost identical to ours.  That makes us a little nervous to be bearish.  Prefer to catch the off-radar incoming.

Credit Market Concerns

Hat Tip:  Chi @chigrl


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The Bear On The Balcony At Bretton Woods

Ursa Major waits patiently as she watches over,  in amazement, the yield chasing salmon in a panic buying frenzy over fears of NIRP, ZIRP. negative and near zero bond yields forever and ever.

The Bear on the Balcony is giving,

…them a little more room to run, setting her entry and stop levels, and placing her finger on the trigger.  Letting the market tell her when it’s time to fire.

She knows it’s close to feeding time and ready to hunt at S&P 3025-3100 or if the salmon retreat and begin to swim downstream in earnest.   But, also wise enough to remain flexible to retreat if the salmon really lose their minds and jump the 3125 S&P level, where the oxygen in the bubble becomes a little too thin to hunt or that this time is really different, where the fish know something that she doesn’t.

Ursa’s preference is to pickoff the salmon as they swim upstream to the 3100 level rather than chasing them downstream.

An Omen?

Could the Bear on the Balcony be an omen and confirmation of the major motivation of our bearish view?  That is, the tectonic plates of the western liberal international economic order, which has been in place since the end of World War ll, are breaking apart and moving in the wrong direction.  And, no, we do not mean San Francisco Liberals.

Bretton Woods

The balcony where Ursa is mapping her shorting strategy is at the same hotel that hosted the Bretton Woods Conference in July 1944, where the post-war liberal international economic order was born.  The legendary economist, John Maynard Keynes, represented the British government at the conference, which also gave birth to the International Monetary Fund and World Bank.

Hollywood can’t make this stuff up.

Black Bear.png



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