Long-Term Treasury: 4 Percent Or Bust

Posted on September 17, 2018 by macromon

Great chart from Charlie B.   He asked 3.5 or 2.5 percent?

We say beeline to 4 percent, when the rate breaks 3.13 percent, and quicker than the market believes.

It’s been 10 years since Lehman,  nominal GDP is growing close to or over six percent (which, in normal times, the 10-year trades around nominal GDP growth), and inflation hovers at the 3 percent level, yet real long rates are zero to negative?  Come on, man.

Central banks own the yield curve and could give a rat’s ass if they are making money.  But that is starting to change.

Yes, record shorts in Treasury futures.  But that has been the case for almost the entire last year.  In early February, for example, the stock market experienced its biggest spike in volatility in history.

What did the 10-year rate do?  It rose several basis points.  That is important information, folks.

All bets off given a major financial or macro shock.

There are many structural forces working against keeping long-term rates low and the term premium suppressed.  We will be out this week with our work.  Promise.

 

TNote

Source:  

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Asian markets versus other developing economies – FT

Posted on September 16, 2018 by macromon
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Distorted Inflation Data & Dynamic Pricing

Posted on September 16, 2018 by macromon

Just bought Bob Woodward’s new book for a birthday gift from Amazon yesterday for $18.00.  I tried to buy another one this morning and was quoted a price of  $19.32 per book.

 

Fear

That’s Venezuela-esque inflation, folks.  Works out to 406,506% on an annualized basis.

Dynamic pricing based on predictive analytics is horseshit, in my book, and literally on Woodward’s book.

As the economy moves more and more to pricing in this framework,  how are we to trust the CPI data?  In fact, why do we trust CPI now?

I read sometime back that only about 40-50 percent of the CPI basket are actual, real, measurable prices.   Don’t quote us on this as I need to document it.  Will get back to you on it.

CPI & Cherry COLA

You know in your heart, and your pocketbook, real inflation is running hotter than 3.0 percent.

Here is the main reason why the government works so hard and has a vested interest in repressing the CPI inflation through excess massaging of the data and hedonic adjustments.  Higher COLAs = Bigger Deficits.

An automatic annual Social Security benefit increase is intended to reflect the rise in the cost of living over a one-year period. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), updated monthly by the Bureau of Labor Statistics (BLS), is the measure that can trigger a benefit increase.  The Social Security cost-of-living adjustment (COLA) is based on the growth in the index from the highest third calendar quarter average CPI-W recorded (most often, from the previous year) to the average CPI-W for the third calendar quarter of the current year. If the CPI-W triggers a COLA, the COLA becomes effective in December of the current year and is payable in January of the following year. (Social Security payments always reflect benefits due for the preceding month.) A COLA trigger mechanism was first adopted in P.L. 92-603, the Social Security Amendments of 1972, and triggered COLAs were first payable in 1975.  Prior to 1975, Congress sporadically approved COLAs through the adoption of legislation.  – CRS

More so now than ever.  The mode of the baby boom, 1957, will begin to retire next year and the ranks of the retired set will begin to accelerate dramatically.

Oh, by the way, the Social Security fund will run a deficit this year for the first time since the early 1980’s.  It has been in primary deficit since around 2010.

 

COLA

 

COLA_2

 

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Dalio on Turkey, Argentina, and the Next Economic Downturn

Posted on September 15, 2018 by macromon

Sep.12 — Ray Dalio, co-chairman and founder at Bridgewater Associates, examines the crises is Turkey and Argentina and explains his expectations for the next economic downturn. He speaks with Bloomberg’s Erik Schatzker on “Bloomberg Daybreak: Americas.”

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Week In Review – September 14

Posted on September 15, 2018 by macromon

Summary

  • Decent week for risk
  • Nice action in Euro periphery and most EMs
  • Tighter U.S. credit spreads

Commentary:   Not much this week.  Markets reflecting strong U.S. economy.  It’s a mug’s game trying to predict short-term stock moves (frickin’ futile), especially in our QE distorted, supply-side restricted world.  We can’t help ourselves.

 

 

Week_2018_ETFs

 

Week_Table

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Sector ETF Performance – September 14

Posted on September 15, 2018 by macromon

ETF_D

ETF_W

ETF_M

ETF_Q

ETF_YTD

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Global Risk Monitor – September 14

Posted on September 15, 2018 by macromon

RiskMon_1

RiskMon_2

 

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Pols Warn Of “Deep Fakes”

Posted on September 15, 2018 by macromon

Don’t say we didn’t warn you,

“Deep fakes could become a potent tool for hostile powers seeking to spread misinformation,” wrote Representative Adam Schiff, the ranking Democrat on the House Intelligence Committee, in a letter to Dan Coats, the director of national intelligence.

“As deep fake technology becomes more advanced and more accessible, it could pose a threat to United States public discourse and national security, with broad and concerning implications for offensive active measures campaigns targeting the United States,” said the letter, co-signed by Representatives Stephanie Murphy (D-FL) and Carlos Curbelo (R-FL). 

If you guessed that the government is more likely than not going to use this as an excuse to continue to kill free speech, you’d most likely be correct.  – SHTFplan.com

You heard it here first,

Midterm “Deep Fake” Oppo Research

It’s coming.

We expect “deep fakes” (probably not just porn) to proliferate as we approach the 2018 midterm election.  Most likely peaking a few days or week before election day leaving little time for a candidate’s rebuttal

Thomas Jefferson must be rolling over in his grave,

 “An educated citizenry is a vital requisite for our survival as a free people.” – Thomas Jefferson (paraphrased?)

Get ready for a wild frickin’ ride, folks.   The complete weaponization of social media.

Reality is blending with the virtual, the real with the fake, and fewer and fewer can, and are finding it increasingly difficult to distinguish the difference.  –
Global Macro Monitor,  July 25th

Prepare for the Techlash to accelerate.

Even we were “faked out” this morning with a tweet showing a shark swimming on a submerged freeway in “Flo” ravished North Carolina.

Thanks to our friend for pointing out it was a fake.  We took it down.

During the dot.com bubble, I used to joke around with my friend,  Bill Fleckenstein, “…if its on Reuters, it’s true…”   Now, we really have a problem.

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Hymn For The Weekend – Coldplay

Posted on September 14, 2018 by macromon

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Massive Lavender Political Tsunami Forming

Posted on September 13, 2018 by macromon
They’ll eat their words with a fork and spoon
And watch ’em they’ll hit the road
And all be surfin’ soon
And when they catch a wave they’ll be
Sittin’ on top of the world

Catch a wave and your sittin’ on top of the world – Beach Boys

 

Lavender Wave

 

No political statement here, no wishful thinking,  just inference from the data and our sense of the political mood of the country.

Recall, we did predict on the eve of the November 2016 election, Trump would win the electoral college and HRC the popular vote, based on analysis and not our personal partisan politics.

The biggest gender gap in American electoral history is also taking shape, with women saying they prefer Democrats by 58 percent to 33 percent, an eye-popping 25-point margin. – Vanity Fair, Semptember 12th

You did hear it here first,

Massive Lavender Wave Coming In November

We believe there will be a massive “lavender wave,” in the November midterms.  Lavender is the color combination of pink and blue.  

…In elections, women are also more likely to vote in higher numbers and have done so for decades.  Women have cast between four and seven million more votes than men in recent elections.

Moreover, the revulsion toward the president among women has not only made them more likely to vote but has turned them into activists.  Women are running for office this year in record numbers.

Recall it was the African-American women who put Doug Jones over the top in Alabama’s special U.S. Senate election against Roy Moore last year.  Exit polls showed that 98 percent of black women supported Jones.

…Do the math, folks.  Listen to the water cooler talk, read the cartoons. — Global Macro Monitor, August 5th

We suggest you give a careful read to yesterday’s Vanity Fair piece, GET OVER YOUR ELECTION-NEEDLE P.T.S.D.: THE BLUE WAVE IS REAL, AND IT’S A MONSTER.


It’s Not The Economy,  Stupid

No level of the S&P or GDP growth is going to change the women’s vote from here until November.  The die is cast, folks.

Trade Negotiations

The Canadians and Chinese surely have very astute political analysts.  Why in the world would either government cut a deal with an administration that will effectively end on November 6th?

We expect nothing of substance to come out of the trade negotiations from now until election day.  Unless, that is,  President Trump caves on everything in order to declare victory,  no matter how Potemkin or meaningless the deal is, just as his Korean and Mexican deals are.

Potemkin Mexico Deal

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