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USD loses ground as the labour market cools
Read Time: 2 minutesThe US non-farm payrolls report for October indicated a noticeable decrease in labor demand, primarily due to strike actions by autoworkers. However, this drop couldn’t explain the significant downward revision of over 100,000 jobs in previous months, the rise in the unemployment rate, the cooling of average earnings growth, and the decline…
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Currency Volatility & Currency Wars!
Read Time: 2 minutesWe are in an unusual world where — thanks to the lagged impact of the pandemic — the dollar’s strength hasn’t raised import volumes or reduced import prices. It won’t last. A 10% rise in the dollar usually reduces non-oil import prices by 2-3% (not a ton, true) and reduces net exports…
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Aggressive selling of US Treasuries by Saudi
Read Time: < 1 minuteSaudi Arabia is the latest country to offload a massive amount of their US Treasury holdings. In February 2020, their holdings peaked at $184 billion and are now down 41%, to $108 billion. Meanwhile, China’s US Treasury holdings just fell to $835 billion, a fresh 14-year low. Chinese holdings of US…
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Fed Hikes and the probablity
Read Time: < 1 minuteThe probability that the Fed hikes in September is still just 13%. But, as this chart shows, the probability of a November hike is now 46%. It is very much “in the game.” We now await Jay in J-Hole on Friday. Amazingly, the market still expects 4 net *cuts* by Jan…
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Is the dollar that strong?
Read Time: 4 minutesThe dollar is quite strong, especially v Asian currencies. The yen is insanely weak; the yuan is 7% below its level during the “repeg” of 08/09 (and that was considered an undervalued yuan) … So it is reasonable to ask how the dollar is impacting import prices! The answer is “not very…
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Tesla, Lithium and its sources
Read Time: 4 minutesUS carmaker Tesla needs lithium to power its electric vehicles, but where does the company get it from? Find out more here. Tesla’s Strategy to Secure Raw Material Supply for EV Production As the energy transition continues, Tesla has been making moves to secure the supply of raw materials required to meet…
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Saudi Pile of US Treasuries at Six-Year Low in Shift to Risk
Read Time: 4 minutesSaudi Arabia’s stockpile of US Treasuries fell to the lowest level in more than six years, as the kingdom allocates more of its oil wealth to riskier assets.The Gulf country in June sold more than $3 billion in US government debt, offloading the securities for a third consecutive month to bring its…
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Housing Vs Money Supply
Read Time: 2 minutesThis chart is a useful basic description of why the real estate bubble of 2021 is quite different than the one from 2006. 2006: House prices had grown way faster than money supply. 2021: House prices had grown in line with money supply. If you adjust for inflation, then home prices just…
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United States is entering an exponential debt spiral
Read Time: 7 minutesA little over a month ago, deja vu struck Congress as they underwent their ritual debt ceiling brinkmanship. This time, the players fought over what concessions could be made as the U.S. approached the deadline of $31.4T in total debt outstanding while Yellen warned of severe austerity measures that the Treasury would…
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The US just published their budget deficit report and the numbers are alarming.
Read Time: 3 minutesUS government spending “unexpectedly” soared 15% to $646 billion in June. More importantly, interest payments on US debt are set to hit $1 TRILLION per YEAR. This is a debt crisis. Here’s a chart summarizing federal government spending over the last 20+ years. As zerohedge points out in their note about this…
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US: The world’s big debtor!
Read Time: 4 minutesOne small but in my view important point about global finance. The US is the world’s big net debtor — with net external debt of around 50% of its GDP. Interest payments on that debt will thus rise in a high for longer world — but the process plays out somewhat slowly.…
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The US-China Rare Earth battle
Read Time: 2 minutesThe Mountain Pass Rare Earth Mine in Southern California is reviving with a patriotic twist, with workers wearing US flag patches and souvenir crystalline chunks of orange rare-earth ore. The mine’s regeneration has received U.S. government backing, including funding from the Department of Defense, as part of a Washington plan to rebuild…
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Why hasn’t Fed tightening led to an EM crisis?
Read Time: 4 minutesFor most of my 30-year career, many investors viewed emerging market (EM) equities as a beta play on the global economic cycle. Money aggressively moved into EM in environments where global industrial production, trade, and growth were good and then retreated when the US Federal Reserve (Fed), for whatever reason, needed to tighten.…
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Comparing the Speed of Interest Rate Hikes (1988-2023)
Read Time: 4 minutesComparing the Speed of U.S. Interest Rate Hikes After the latest rate hike on May 3rd, U.S. interest rates have reached levels not seen since 2007. The Federal Reserve has been aggressive with its interest rate hikes as it tries to combat sticky inflation. In fact, rates have risen nearly five percentage points (p.p.)…
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Event Guide: FOMC Statement – June 2023
Read Time: 8 minutesThe most awaited economic calendar this week, is almost here. I’m talking about the Fed’s monetary policy decision on Wednesday! Here are major points you need to know if you’re planning on hedging/trading the event: Event in Focus: Federal Open Market Committee (FOMC) Monetary Policy Statement When Will it Be Released: June…
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Debt ceiling update: A big week ahead
Read Time: 3 minutesThe debt ceiling drama has reached a fever pitch in recent weeks. As of May 17, the U.S. Treasury had roughly $68 billion of cash on hand and another $92 billion of untapped extraordinary measures. Taken together, Treasury had just $160 billion of additional borrowing capacity remaining under the debt ceiling. How…
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US and its labour market!
Read Time: 3 minutesThe US labor market remains pretty strong……or, does it really?! Let’s have a look together. US Non Farm Payrolls surprised on the upside.The 3-month moving average in NFPs sits now at ~270k jobs, in line with the mid-2018 pace: the labor market was strong back then.From peak job creation in 2021, the…
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Fed’s hawkish blitz
Read Time: < 1 minuteIf your head is spinning from the Fed’s hawkish blitz, small wonder. The turn in real rates has been stunning—from -2.01% to +1.64% in less than a year.
