Quick note hereNeutral Fiscal PolicyI mentioned ‘augmented fiscal stabilizers’ and a neutral fiscal policy in the last message. And subsequently, I thought I should link out to a piece I published on these topics two years ago. Read that piece in full here. But let me quote from the piece and post…

Treasuries as a political weaponIf you don’t have the right model of the economy and markets in your head, you can lose lots of money. Case in point is ‘The Widowmaker Trade’ in Japan where speculators misunderstood the limits of monetary freedom enjoyed by the Bank of Japan and the Japanese govern…

Like yesterday, I have a few thoughts on the economic headlines below. This one is behind the paywall though and I am going to focus mostly on two topics.Yield curve inversionAt its worst yesterday, the risk-off play saw the 10-year falling to 2.40%, marginally below the 3-month yield. As I write …

I have some thoughts on economic headlines below. This one is outside the paywall. If you like what you read, please subscribe.
Uber as a signpost
I am just catching up to where I left off at the end of last week regarding the risk-off move in shares. That move continues into today. As I write this Uber is down 6.9% in the pre-market after a decline of nearly 8% Friday. This is after it went to market at the bottom of its trading range. Its smaller rival Lyft is also still hurting, with shares down 30% from its IPO price.
A number of things come to mind here. First, this is a near-term bad sign for the market. That Uber and Lyft were able to IPO at all tells you there is risk-on appetite. I am not talking about retail investors here. The fear of missing out is palpable among

Trade and Currency WarsI am starting this article just ahead of the equity market open in New York. And S&P futures have the market opening down 1%. The market continues to be unsettled by the political uncertainty around the US-China trade war, with tariffs looking likely to go into effect tom…

A quick note here with a few thoughts on technologyIPO companies with economic moatsI use Slack every day at work. It is an essential internal communications tool for my job. And, as such, I see it as a company with relatively high embedded switching costs. Moreover, because it is focused on the c…

The IPO market is hotAs I wrote last night, IPO conditions right now seem nearly ideal for growth companies to come to market. The appetite for loss-making companies shows us that public investors are willing to overlook losses as long as growth remains robust.
For example, Zoom Video has more tha…

Growth matters, profits don’tNearly 7,000 scooters appeared to be active in Los Angeles County in January, having logged a ride in the previous two weeks. By April, more than 5,500 of those same scooters appeared to be removed from active duty, with no rides logged for the prior two weeks.
-LA Tim…

Today’s jobs report in the US showed some fairly bullish headline numbers. Not only did the unemployment rate did to a 49-year low of 3.6%, but the monster 263,000 job addition was bolstered by net revisions of 16,000, bringing the total to 279,000 jobs.
I don’t want to go into the minutiae of this…

TeslaOn Thursday, I wrote that "Tesla has been forced to pony up for those converts. They now have $2.2 billion, $1.5 billion less than at the end of the last quarter. I think the need for more capital is a question of when, not if. But if Tesla is successful in raising money well before the next c…

I have been trying to organize a decent exchange on MMT on the new financial media platform Real Vision. My first attempt got dropped because the conversation wasn’t forward looking, diving into the issues people care about, namely the likelihood that MMT-oriented policy prescriptions get executed and the ability of MMT-oriented policy prescriptions to deal with inflation, growth, inequality, or full employment. So I am still on the hunt, trying to organize a ‘debate’ around those issues.
Now, this isn’t the newsletter entry I had intended to write today. But as I have been thinking about getting this exchange onto Real Vision, I thought it would make sense to tell you what I’m thinking about the subject.
Hippie punching the MMT crowd
I just looked this term ‘hippie-punching’ up

Let me pick through the news stories today with a few thoughts of mine on what’s happening in the markets and the economy. And I want to start with inflation.Inflation Picks Up, but Still Below Fed’s 2% Target – WSJThe Fed’s preferred inflation gauge, the price index for personal-consumption expen…

This is going to be real quick. The Q1 GDP numbers came out. And they were a huge beat, showing 3.2% annualized growth versus an expected 2.0%. Even the bullish Atlanta Fed nowcast undershot this at 2.7%.
If you look at how the quarter began and how it finished, especially regarding the most recent…

After the Fed overtightened in 2018, it reversed course abruptly. And risk assets have cheered the Fed’s volte face with a V-shaped surge to new highs. And, coincidentally (since Fed policy acts with a lag), the economic data have turned up at the same time. In the US, it is the best of times right …

Yesterday, in the US, the S&P 500 and the Nasdaq indices hit record highs. And the Dow Jones Industrial Average is not far behind. Financial markets are doing well.
In the real economy, for weeks now I have suggested that the signs of slowing at the beginning of the year were just a blip. And i…

I have an interview on Real Vision with currency specialist Marc Chandler of Bannockburn Global Forex coming up later today. And I wanted to sort out some of my macro thinking ahead of it. Let me run by you what I’m seeing in the markets and what I think it meansThe strong US dollarWhile the US Fe…

I apologize in advance for posting this downbeat narrative. But it’s what came to mind after reading the news after the Mueller Report was released in the US yesterday. Let me tell you where I’m going with this and what I think it means.The Backfire EffectFor a long time now, I have realized that …

Real quick here today, since I’m supposed to be on Holiday. The data out this morning in the US were extremely bullish in my view. And, as I’ve been saying April data would make or break the economic re-acceleration thesis, I am finally going to tip my hand and go all in on the bull side.
Here are …

I apologize for missing Monday and yesterday. I am actually on Holiday right now. And though it seems strange to work on Holiday, I have always written through my vacations. I reckon I will be off tomorrow. But, who knows. I have my laptop with me for this brief beach week. But, in contrast to Monda…

As I note today how the upcoming Uber IPO tells us that equity investors are still quite bullish, I also realize that this particular bull market is unique in its absence of volatility. There have been a few hiccups a long the way, including the Feb 5th, 2018 purge of XIV punters. But that’s been the exception, not the rule. The question is why and what does this mean for the future. I have a few thoughts I want to share on that score below.
Let me say first, though, that this is one of the occasional free Credit Writedowns posts I write. If you like what you read please consider subscribing to the newsletter at the link below.
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My own bullish views
Let me start with my own bias here. In the wake of the financial crisis, I called the market bottom fairly early to

The overall macro message I have been making the past several months is that the global economy has cooled to perhaps its slowest growth since the financial crisis. Yet, when we look for signs of imminent recession in the US or for catalysts for a global recession, there are none. A no-deal Brexit w…

Very quickly here:Yesterday, British Prime Minister Theresa May gave an informal address to the nation from her couch at a the Prime Minister’s country retreat, Chequers.The informality of the address is what first caught people’s eye.
But, I want to concentrate you on the part starting 46 seconds…

The jobs report released at 8:30 this morning was as a good a report as we could expect, more than ten years into the US economic expansion. The headline March numbers were an increase of 196,000 non-farm payrolls and an unemployment rate holding steady at 3.8%. I have some brief thoughts on this be…

Sorry for the lack of posts. I haven’t been feeling well. But let me make a short appearance with some brief thoughts on the global economy.1 – BrexitI have been distracted a lot by the Brexit drama unfolding in the UK. In general, I think economics leads politics rather than vice versa. But, this…

This post is going to be relatively long because I am going to try to combine a number of threads together. I thought about putting this post in the investor newsletter pool. But I am going to give it a wider distribution because of the economic implications. But, look for any follow-ups via the inv…

Hearing what Boston Fed President Eric Rosengren makes of the US economy, you get the feeling that the Fed may not be ready to roll over completely. And with the yield curve inverted between the 3-month and 10-year yields, we are at a crucial time regarding the importance of Fed policy action. So I …

Back in September 2018, Fed Governor Lael Brainard dismissed yield curve inversion as a signal of recession, something I saw then – and still see now – as a mistake. And what I said then is that this mistake would lead to the Fed’s over-tightening, yield curve inversion and potentially recession. Th…

Yesterday’s climbdown by the Federal Reserve on both interest rate policy and balance sheet reduction was not enough to satisfy the market’s disquiet about the US economy. Equity markets sold off and US Treasury yields rallied as the inversion in the middle of the yield curve steepened. What’s driving this is renewed concerns about the real economy. And ultimately, the Fed may have not proven itself dovish enough yesterday. Some thoughts below
The real economy
The big question now is whether the US economy has bottomed. And while I don’t think we can answer that question until April, some of the recent data have been positive on that score. But the data are mixed at best.
For example, today’s jobless claims number showed a 4-week average of 225,000, bang inline with the year ago

I want to get to the Fed decision later today. But, before that, let me update you on Brexit under the rubric "Brexit as Europe’s Lehman moment". I am thinking of it this way because many policy makers want to avoid the political and economic fallout of a no-deal Brexit, but are unable to climb down…

Very quick here on Brexit.
British Prime Minister Theresa May has now submitted a formal request to the EU to extend the Article 50 time period to June 30th. The reason for the extension is that Britain has nearly run out of time, and it is clear her deal cannot get over the line. So, she needs mor…