Posts filed under “Think Tank”

Where are those evil speculators?

In the context of the CFTC hearings this week discussing speculators, particularly in the crude contract, the CFTC today said the net speculative long position in crude totaled 34k, a 6 week high but is just 7k contracts above its average since March 2003 when the economy began its prior recovery. It got as high as 130k contracts in Aug ’07 when crude was $77, not far from where it’s now. When crude hit its all time high of $145, the net spec long position was just 26k contracts, close to the 6 1/2 year average.

Category: MacroNotes

Consumer Credit/GDP

In addition to the health of the US consumer’s balance sheet, a key factor in transitioning the US economy from the mean reversion improvement we are now seeing from the awful Q4 and Q1 performance to a healthy, sustainable long term growth rate will be its ability to deal with the consequence of higher interest…Read More

Category: MacroNotes

A tug of war sometime in the future

In addition to the health of the US consumer’s balance sheet, a key factor in transitioning the US economy from the mean reversion improvement we are now seeing from the awful Q4 and Q1 performance to a healthy, sustainable long term growth rate will be its ability to deal with the consequence of higher interest…Read More

Category: MacroNotes

Payrolls

July Payrolls fell by 247k, much better than expectations of a decline of 325k and a clear differential from ADP. Net revisions in the prior two months were higher by 43k. A major factor was a decline of 52k in manufacturing, 48k better than expected. The seasonal distortions from the auto companies may have had…Read More

Category: MacroNotes

Random Thoughts Ahead of Payrolls

Good Evening: Reversing its recent trend, U.S. stocks went up this morning before selling off and finishing lower. The S&P 500 broke its 21 session streak — barely — when it fell just more than 0.5% for the first time since July 7. Since the news flow was decidedly mixed, the catalyst was likely nothing…Read More

Category: Markets, Think Tank

NYSE Volume

For a 2nd day, volume in the financials are an extraordinary percentage of overall NYSE trading. Today, Citi and Bank America alone are 25% of total consolidated NYSE volume. Yesterday, Citi was part of a rebalancing and was the excuse for the large volume but amazingly, volume today is almost tracking yesterday’s pace.

Category: MacroNotes

Jobless Claims

Initial Jobless Claims totaled 550k, a large 30k less than expected and down from 588k last week. After the lumpiness in the July data due to the seasonal distortions of auto plant shutdowns that didn’t occur, today’s data is clean according to the Labor Dept. Continuing Claims though did rise by 69k and was 60k…Read More

Category: MacroNotes

BoE ramps up its printing press

While keeping rates unchanged as expected, the BOE surprised many by ramping up their QE policy when they announced they will grow the size of its Gilt purchases by 50b pounds to 175b. They said while both capital markets and economic conditions have shown signs of stabilization, conditions are still fragile. In an immediate response,…Read More

Category: MacroNotes

Trade of the Century?

Paul Brodsky & Lee Quaintance run QB Partners, a private macro-oriented investment fund based in New York.

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We advanced our macroeconomic analysis last month to a level we feel confirms the future course of US monetary policy and the consequent likelihood of a highly inflationary outcome.

First, we tweaked the calculation of our Shadow Gold Price (SGP) from Federal Reserve Bank Liabilities divided by official gold holdings to Monetary Base (MB) divided by official gold holdings. (FRB Liabilities are bank assets while Monetary Base, plotted in the graph below, is a truer accounting of money – currency in circulation plus bank reserves held at the Fed.) The switch recognizes that borrowed reserves from the Fed included in FRB Liabilities are self-extinguishing, unlike additions to high-powered MB, which tend to remain permanent throughout all economic environments (and which may be further levered by the banking and shadow banking systems).

monetary-base

The change in our calculation produced a change in value of our Shadow Gold Price, yet we believe this new calculation is more robust and intellectually honest. As you can see from the graph below, the time series for the SGP mirrors the time series of the Monetary Base in the previous graph because the other variable in the equation (official gold holdings) has remained constant.

shadow-gold

As the SGP implies, an ounce of gold would fetch almost $6,000 if we lived in a world characterized by disciplined money issuance. In effect, people and governments around the world would have been exchanging their Federal Reserve Notes for gold to the point that it would take 6000 bills to buy an ounce. The Shadow Gold Price solves for the price of an ounce of gold if the US dollar were still pegged to gold and its rise reflects the inflation of the Monetary Base. (Gold used to actually be the US Monetary Base prior to 1971, when the US and other governments abandoned the Bretton Woods Agreement that imposed monetary discipline on their money printing.)

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Category: Think Tank

What do PG and AXP Tell Us About the Economy?

Good Evening: And so it continues. The pattern of an early drop in stock prices, followed by a late day rally held true to form again today. This trend has become so entrenched in recent weeks that, according to CF Global’s Philip Grant (who writes a fine market recap of his own), “the S&P 500…Read More

Category: Markets, Think Tank