Wednesday , July 17 2019
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Edward Harrison

Edward Harrison

I am a former European credit markets and M&A guy who started out as a diplomat. — so I have some pretty diverse interests.

Articles by Edward Harrison

Obama the Conservative vs Trump the Revolutionary

7 days ago

I was thinking about this topic this morning and I wanted to run it by you. The genesis of it all was an interview I did with Rohan Grey and Kevin Muir on Real Vision regarding MMT. And one conclusion I drew – partially motivated by the debate – is that Millennials face a very different world than Gen X or baby boomers did. I think that means their receptivity to change is different. So I wanted to sketch out how I am thinking about some of these things using Obama and Trump.
The generational backstory
I’ve been mulling this over for quite some time. In the past, I had seen surveys that say Millennials are more open to socialism than any generational cohort in recent memory including Gen X and the baby boomers, who make up the rest of the working-age population.
Looking this up,

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The Fed’s Pickle

8 days ago

This is a follow-up to my subscriber post from earlier today on the US economy. For those of you who are not paying subscribers, let me summarize the post by saying I think the US economy is slowing but not in a recession. Nevertheless, I think we are likely to see a recession before the end of 2020. That’s actually my base case.
The obvious questions regard policy responses, particularly the Fed’s. So I am writing this post to address some of that.
50 basis points won’t happen
A few weeks ago, I spoke to David Rosenberg of Gluskin Sheff on Real Vision. Here’s the link. This was a follow-up to a March interview in which he predicted a capex recession and a bunch of other stuff. All of his points came to pass. He was perfect in prognosticating how the data would turn out and how

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The Downside Risk to the Mid-2019 Macroeconomy

8 days ago

None of the metrics I look at are screaming recession right now. In fact, for the US, some of the data is improving. Nevertheless, there is reason to be concerned about the state of the US economy in mid-2019 – so much so that my base case is for recession by the end of next year. Let me tell you wh…

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The Mid-2019 Macroeconomy

15 days ago

In the US, we are officially in the longest expansion of all time. And, as yet, there are no definitive indicators I can see that it will end in short order. So I remain hopeful, if cautious about the potential for the US economy to avoid recession over the coming 18 months through the end of 2020. …

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What the yield curve is signaling about the US economy

27 days ago

Today, we saw a nice pop in equities on the back of a dovish Fed and falling interest rates. Equities moved to new highs as a result. But, clearly, falling yields are a sign of economic distress that one might think would cause equity investors to run for cover. What gives?
Here’s my answer.The Fe…

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More negative signals, this time from the economy

29 days ago

At the end of May, I started a post on very negative market signals saying "[t]he economic data out of the US and elsewhere still point to continued economic expansion over the near term. But, what we’re seeing in financial markets right now suggests markets are discounting serious economic problems…

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The convergence to zero trade is back

June 12, 2019

Let me follow up this morning’s general post with some longer term thoughts here via the Patreon platform. And while I want to make some geopolitical comments, let me look at this mostly from a markets perspective.
I am once again thinking a lot about the long Anglo-Saxon bonds relative value trade…

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The problem with Europe

June 12, 2019

I have been troubled by the lack of policy space in Europe for some time now, particularly as it concerns Italy. But this is coming to a head for me this morning, with the German government auctioning 10-year paper at 24 basis points below zero and some German interest rates almost 70 basis points below zero. So I want to explain what I see as the challenges ahead as well as the opportunities.
By the way, this is one of the occasional free Credit Writedowns posts I write. If you like what you read please consider subscribing to the newsletter. Plus, I have just started running a limited promotion for paid subscriptions.
Back to Europe
Currency Sovereignty
In Europe, it all starts with the currency. And that’s because the euro is not a national currency which individual member

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The Fed basically has to cut now

June 7, 2019

The latest jobs report out of the US was relatively poor. While the comprehensive U-6 unemployment rate went down to the lowest since 2000, other data points suggested the labor market is topping. And with bond markets already predicting a need for two cuts this year, the Fed has to cut this summer …

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Geopolitical confrontation and the breakdown of globalization

June 5, 2019

Everything I am reading this morning in the news flow points to increased geopolitical confrontation and the breakdown of the post-Cold War world order. We are quickly moving to a more hostile balkanized geopolitical environment. And I believe this will negatively impact medium-term growth, with glo…

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The US economy is now on recession watch

June 3, 2019

Recession Watch
America’s business leaders are growing more worried that the United States will enter a recession by the end of 2020. Their primary fear: protectionist trade policy.That is the topline finding of a report released Monday by the National Association for Business Economics. The surve…

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Henry George: The economist to watch in the 21st Century

May 31, 2019

I am sitting here diving into a brand new copy of a book – Progress and Poverty – that was written 140 years ago, in 1879. And it occurred to me I should write you about it because the ideas in this book are as relevant to the 21st century as any other school of economic thought.
The author is Henry George, a political economist and journalist who was influential in the late 19th century. And although Georgism isn’t getting a lot of buzz in the business press right now, this book I am about to re-read has sold millions of copies since it was written. And that’s because its themes resonate.
I am actually now on the board of a small economics school headquartered in Manhattan called the Henry George School of Social Science. But, I had never even heard of Georgism before 2017. So

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Very negative market signals

May 31, 2019

The economic data out of the US and elsewhere still point to continued economic expansion over the near term. But, what we’re seeing in financial markets right now suggests markets are discounting serious economic problems down the line. So, let me go through the news flow and comment on what I’m se…

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More on the Collapse of the Center

May 30, 2019

SplinteringI am in the process of editing a video at Real Vision where the founder, Raoul Pal, is talking to Dee Smith, the CEO of Strategic Insight Group. It’s going to be released in early June. Interestingly, Dee Smith was making a lot of the same points I made in my post on the Collapse of the …

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The Collapse of the Center

May 28, 2019

It’s the politics, stupid?Credit Writedowns is back. And right now, it’s the politics that are on my mind more than the markets or the economics. I have had a long while to sit and think about what’s been happening and where we’re going. And what stands out for me on the economic front is just how …

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Automatic stabilizers and a neutral fiscal stance

May 16, 2019

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…

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The hardening trade war and the pause in IPO easy money

May 14, 2019

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 …

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Risk-off selling continues as Uber slides

May 13, 2019

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

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Just when you thought it was risk-on

May 9, 2019

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…

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Facecoin, Slack and loss-making IPOs

May 7, 2019

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…

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IPOs, a global rebound and Tariff Man

May 6, 2019

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…

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2019 may be the best time to IPO

May 6, 2019

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…

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Brief thoughts on the jobs report

May 3, 2019

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…

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Melting Up?

May 2, 2019

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…

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Hippie-punching MMT

May 1, 2019

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

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The huge beat in US GDP growth

April 26, 2019

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…

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Re-acceleration, but for how long?

April 25, 2019

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 …

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The Best of Times

April 24, 2019

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…

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