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.

An educated citizenry is a vital requisite for our survival as a free people– Thomas Jefferson

By seeking and blundering, we learn. – Johann Wolfgang von Goethe

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free rider

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The Last Central Banker With Balls

[Balls as in courage and bravery.  Exemplified in the quote,  “Margaret Thatcher was Ronald Reagan with balls.”  Don’t get all PC on us now!]

As a graduate student, I interviewed at the Federal Reserve Board in the Eccles Building on Constitutional Avenue (entrance on 20th Street) as a junior economist.  This was way before the exceptionally tight security now ubiquitous in government buildings.  I had worked at other Federal government agencies but never experienced the tight security upon entering those buildings as I did at the Fed that day.

Upon arriving upstairs for my interviews, I asked one of the economists why such tight security?   He responded something to the effect,

When Paul Volcker raised interest rates to near 20 percent to wring inflation from the economy, farmers and other disgruntled citizens were caught wandering the halls of the Federal Reserve Board with guns looking for the Fed Chairman. 


Paul Volcker had some brass ones and realized, and it was central to his policy that short-term pain would result in long-term gains, such as a thirty-year plus bond bull market, for example.

Mr. Volcker’s legacy contrasts sharply with the central bankers of today, who panic when, say,  the S&P500 drops 2 percent, which will almost surely result in the opposite of the Volcker monetary policy precept, i.e., trading short-term gains for long-term pain. It is already evident with the accelerating and now acute wealth inequality.

He was an intellectual monetary giant, honest and spoke what was on his mind until his last days.


“I’m not good,” said Mr. Volcker, 91, the former Federal Reserve chairman, who came to prominence after he used shockingly high interest rates to help end the runaway inflation of the late 1970s and early ’80s. Long one of finance’s wise men, he has been sick for several months.

But he would rather not talk about himself. Instead, Mr. Volcker wants to talk about the country, the economy and the government. And if he had seemed lethargic when I arrived, he turned lively in his laments: “We’re in a hell of a mess in every direction,” he said.  – NY Times

RIP,  Paul Volcker.  Still wishing President Obama appointed you Treasury Secretary as we would be in a much better place.

But at root, Paul was a public servant — someone who truly believed in the honor of serving others. His scorn was reserved solely for those who corrupted institutions or put their own selfish interests above the good of society.  – Christine Harper, Bloomberg


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December 7, 1941: “We are all in the same boat now”

Those words spoken to President Franklin Roosevelt by British Prime Minister Winston Churchill on this day 78 years ago.

On December 7, 1941, at around 1:30 p.m., President Franklin Roosevelt is conferring with advisor Harry Hopkins in his study when Navy Secretary Frank Knox bursts in and announces that Japan had attacked Pearl Harbor. The attack killed more than 2,400 naval and military personnel.

For weeks, a war with Japan had appeared likely since negotiations had deteriorated over the subject of Japan’s military forays into China and elsewhere in the Pacific during World War II. FDR and his advisors knew that an attack on the U.S. fleet at the Philippines was possible, but few suspected the naval base at Pearl Harbor would be a target.-

These words were spoken by the Japanese just a few days and hours earlier…

Niitakayama nobore 1208 –  a coded message: “Climb Mount Niitaka, December 8.”  The signal meant that war with the United States would commence on December 8, Japan time, or December 7 in Hawaii.

The message, which translated means “Climb Mount Niitaka 1208,” was uttered over the radio from the Japanese battleship Nagato and relayed to a transmission station in Tokyo. From there, it was relayed to another station before reaching the fleet and setting off the infamous surprise attack.  – Stars & Stripes

Tora, Tora, Tora” –  indicating that the surprise attack on Pearl Harbor had commenced and everything seemed to be going well for the Imperial Japanese Navy (IJN).   Well, at least until the slumbering Giant got woke.

Beware Of The Sleeping Giant

We are so grateful and thankful to everyone, from all of the Rosie the Riveters to General Douglas MacArthur, and, most of all, to the heroes that made theultimate sacrifice to help America win the war in the Pacific.



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Why The Stock Bull Is A Big Meh For Most Americans

Interesting piece by the FT today that only one-third of Americans feel the benefits of the great bull market.   Only 40 percent of the population realizes stocks are up for the year.  These are tough numbers for a so-called “populist” president who claims the stock market bull as one of his greatest achievements and much of his base is not participating in the gains.


Nearly two-thirds of Americans say this year’s record-setting Wall Street rally has had little or no impact on their personal finances, calling into question whether one of the strongest bull markets in a decade will boost Donald Trump’s re-election chances.

A poll of likely voters for the Financial Times and the Peter G Peterson Foundation found 61 percent of Americans said stock market movements had little or no effect on their financial wellbeing. Thirty-nine percent said stock market performance had a “very strong” or “somewhat strong” impact. 

The survey suggested most Americans are not aware of market movements, with just 40 percent of respondents correctly saying the stock market had increased in value in 2019. Forty-two percent of likely voters said the market was at “about the same” levels as at the start of the year, while 18 percent believed it had decreased.- FT

Say It Ain’t So, Joe.  How Can This Be So?

The above survey closely tracks the Fed’s data on the distribution of stock ownership by wealth percentiles.  Rarely does the economic data so closely confirm such a survey study.



The data show that 86.4 percent of all equities are held by the top 10 percent of households as of the end of June 2019.  Even with a very generous assumption that 60 percent of pension entitlements are allocated to equities, the numbers just don’t change much.

Most of the difference, when including our generous assumption on pension assets,  is allocated to the upper-middle class, who fall in the 50-90 percentile of households, where one-third of the assets of this cohort group are in the form of pension entitlements.

Note the bottom 50 percent of households have almost no exposure to the stock market, except, of course, indirectly as their income and job prospects are determined by an asset-driven economy, highly dependent on ever-increasing bubbles.

The New “Stock Market Conundrum”

Alan Greenspan used to talk a lot about the bond market conundrum and lays much of the blame of the credit and housing bubble on it.  Simply put, the Greenspan Fed raised the funds’ rate by over 400 basis points from 2004-2006 and the 10-year yield barely budged allowing the housing bubble to rage on.

In his February 17, 2005, testimony before the Committee on Banking, Housing, and Urban Affairs of the U.S. Senate, Federal Reserve Chairman Alan Greenspan observed that long-term rates had trended lower despite the 150-basis-point rise in the Federal Open Market Committee’s (FOMC’s) target for the federal funds rate. Rejecting a variety of possible explanations for the behavior as implausible he called it a “conundrum.”  – St. Louis Fed

We have posted several times that the conundrum was largely explained by foreign central banks recycling their FX reserves back into the U.S. Treasury market and the relative dearth of Treasury securities at the time.

We fear a new conundrum is developing in stocks or has already evolved. Though the equity market directly impacts only a small segment of the population, it has an outsized impact on the economy.   This, we believe, may result from the fact the market considers it the last financial sector with any semblance of an economic signal, though faint and often wrong as it may be, to divine future economic prospects, which determines confidence and thus consumer and capital spending decisions.

In 1966, four years before securing the Nobel Prize for economics, Paul Samuelson quipped that declines in U.S. stock prices had correctly predicted nine of the last five American recessions.  –  Bloomberg

Our suspicions are bolstered by the fact that QE has almost completely neutered and drowned out the economic signals of the bond market.  Great Ph.D. dissertation material.

Can somebody, for example,  please explain the fundamental economic signal of the Italian 10-year trading at 75 bps in September?

As the Brits head to the polls next week to choose a new government, we can paraphrase their great war-time PM with some confidence with respect to Mr. Market’s outsized impact,

Never in the field of political economy are so many so dependent on so much owned by so few



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QOTD: Churchill On Truth

QOTD:  Quote of the Day

The truth is incontrovertible. Panic may resent it, ignorance may deride it, malice may distort it, but there it is.  — Winston Churchill, HOUSE OF COMMONS, May 17th 1916

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Rollback Is The Word And Dealbreaker

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The Trend Toward Hyperautomation & Autonomous Things

Where is the policy response to help the U.S. labor market prepare for this?  
Michael Kung, a senior partner at the US research and advisory firm Gartner Inc, told reporters at a press conference in Taiwan yesterday hyper-automation tops the list of 10 most important strategic technology trends for next year.

The ultimate goal of hyperautomation is to automate anything that can be automated, everything from single tasks to entire business operations… Among all trends that we have uncovered over the course of the year, I believe that hyperautomation and autonomous things are the two most crucial trends that businesses shouldn’t ignore… By taking hold of related technologies, businesses can transform and satisfy key performance indicators..It might be hard for us to visualize, but autonomous devices will be much more perceptive and will be able to interact with other devices.  — Michael Kung, Tapei Times

Gartner research director of personal technologies Lu Chun-kuan also predicted that AI-related research conducted by businesses would increase 10-fold over the next five years, from an average of three to 30.    See full articel at Tapei Times here

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COTD: Apple’s Global Supply Chain

COTD:  Chart of the Day

Maybe a bit dated but you get the picture, no surprise, China dominates the supply chain, which also includes fabs.  Apple is very exposed to a protracted or forever trade war and deterioration of the global trading system, which of course makes the stock market much more vulnerable to the spectre of anti-globalization haunting the world.


Apple Global Supply Chain.png

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Getting Narrow Up Here


Apple and Microsoft

We are not big fans of high and narrow.


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If Facts Mattered…….

The just-released phone logs in the House Intel report would be a nuclear bombshell and could potentially take down a government.   Unless, of course, Rudy is working on a balanced budget amendment with the OMB.

Phone Records

Democracy cannot survive if facts don’t matter.  The pols may start repeating propaganda and conspiracies propagated by America’s foreign adversaries.  Wait….

Poltical Spectrum

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American Democracy In A Bear Market


…As partisans have drifted apart geographically and ideologically, they’ve become more hostile toward each other. In 1960, less than 5 percent of Democrats and Republicans said they’d be unhappy if their children married someone from the other party; today, 35 percent of Republicans and 45 percent of Democrats would be, according to a recent Public Religion Research Institute/Atlantic poll—far higher than the percentages that object to marriages crossing the boundaries of race and religion. As hostility rises, Americans’ trust in political institutions, and in one another, is declining. A study released by the Pew Research Center in July found that only about half of respondents believed their fellow citizens would accept election results no matter who won. At the fringes, distrust has become centrifugal: Right-wing activists in Texas and left-wing activists in California have revived talk of secession…

What has caused such rancor? 

But the biggest driver might be demographic change. The United States is undergoing a transition perhaps no rich and stable democracy has ever experienced: Its historically dominant group is on its way to becoming a political minority—and its minority groups are asserting their co-equal rights and interests. If there are precedents for such a transition, they lie here in the United States, where white Englishmen initially predominated, and the boundaries of the dominant group have been under negotiation ever since. Yet those precedents are hardly comforting. Many of these renegotiations sparked political conflict or open violence, and few were as profound as the one now under way.  — The Atlantic

The above is a must-read, folks (click on the link to the Atlantic).

Rather than just momentum and central bank haruspicy — the reading of the Fed’s entrails, for example –  there are much bigger forces at work which will determine the future path of asset prices in the long-term.  Politics and demographics are a couple of the biggies.

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