Posts filed under “Think Tank”

Lotta stuff going on

The FOMC tells us what they are thinking at 2:15pm and all eyes are on whether they extend their purchases of US Treasuries past the expiration of the plan in Sept. On March 18th they introduced this new form of QE and since then, 10 yr bond yields have risen from 3% to 3.67%, the implied inflation rate in TIPS has risen from 1.15% to 1.90%, the CRB index is up 21% and the US$ index has fallen 9%. I grant that the economic outlook looks dramatically better today than it did on March 18th but that’s my point, that the program was a waste in that the Fed can’t fight the market and win and the cost (loss of Fed credibility and potential inflation) has outweighed any benefits. With mortgage rates also higher, the MBS and agency debt purchase plan (the Fed’s own version of cash for clunkers) will likely continue. Chinese stocks fell almost 5% and to a one month low in a delayed response to Tuesday’s weaker than expected loan data.

The bullish sentiment continues as measured by the weekly II data where newsletter writers are now the most bullish since Jan ’08 and least bearish since Oct ’07 with those expecting a correction somewhere in the middle. The ABC weekly confidence poll rose 2 points to -47 and now puts it 2 points above the one year average. The gain was led by a 6 point rise in the Personal Finance component which rose to the highest level since mid May. Mortgage apps fell 3.5% led by a 7.2% fall in refi’s whereas purchases rose 1.1%. Bankrate.com said last night that the average 30 year mortgage rate is at 5.5%, just shy of the highest level since June 25th. The June Trade Deficit is expected to rise almost $3b to $28.7b led by a greater dollar value of oil imports as crude averaged $10 higher in June vs May. The Treasury auctions off $23b of our benchmark 10 year note this afternoon in a true sentiment test of that market.

Category: MacroNotes

FOMC

The FOMC statement said that economic activity is “leveling out,” an improvement from the “pace of economic contraction is slowing” that was said at the June meeting. The rest of the paragraph on the economy was very similar to the June meeting. The commentary on inflation is about identical to the previous one as they…Read More

Category: MacroNotes

10 year note auction

The 10 year note auction was on the light side as the yield at 3.734% was about 2-3 bps above where the when issued was trading and the bid to cover of 2.49 is slightly below the average seen this year of 2.54. The level of indirect bidders however totaled 45.7% which is above the…Read More

Category: MacroNotes

King Report: Productivity Gains Not What They Appear

> U.S. productivity rises at fastest pace in six years So what. Over the past decade productivity gains have NOT been accompanied by higher real wages and living standards – a first in US history. Long-time readers know our crusade to debunk the ‘Great US Productivity’ miracle, which rests on faulty, if not fraudulent US…Read More

Category: Data Analysis, Economy, Think Tank

3 year note auction

The 3 year note auction, the easiest of the big three this week because of its short maturity, was very good. The yield was about in line with expectations but the bid to cover of 2.89 is well above the average this year of 2.52 and the highest since Nov ’08. Indirect bidders totaled 62.5%…Read More

Category: MacroNotes

Wholesale Inventories

June Wholesale Inventories, which make up about 25% of Business Inventories, fell a greater than expected 1.7% vs a forecasted drop of .9% and May was revised down by .4% to show a decline of 1.2%. The greater than expected fall IF followed by a similar drop in Business Inventories, will lead to a revision…Read More

Category: MacroNotes

Baltic Dry Index falls for 9th straight day

Coincident with the July slowdown seen in the new bank loan data in China and also with a short term topping out in their stock market, the Baltic Dry Index today fell for a 9th straight day to the lowest level since May 18th. It’s down 25% over the 9 day stretch.

Category: MacroNotes

Productivity, NFIB and China

Over time, GDP growth is equal to population growth + productivity. With population growth in the US at about 1% and the 60 year average of productivity being 2.3%, GDP growth should be between 3-3.5% in order to maximize the country’s asset base. Anything below that means the US is not producing to its potential…Read More

Category: MacroNotes

Where to Next for Commodities?

Good Evening: U.S. stocks took a bit of a breather today after seeing little to dislike in Friday’s nonfarm payrolls report. The slight trimming to Friday’s gains came on light volume, and then only after another series of afternoon upticks. The weakest performers on Monday (and, actually, for much of the past week) were the…Read More

Category: Markets, Think Tank

Rate hike odds

After fully pricing in a 25 bps rate hike by the January FOMC meeting midday Friday after the better than expected jobs data, the February fed funds contract is backing off and now pricing in a 76% chance of a hike. There are a few levers the Fed will undertake before they start raising the…Read More

Category: MacroNotes