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Thoughts About Q3 GDP

July 31, 2009
Wtih the preliminary estimate of Q2 GDP behind us, we can focus more on Q3 data. But the sharper than expected drop in Q2 inventories (of course subject to revisions)--$141.1 bln after $113.9 bln in Q1, leaves it in a good position to make a positive contribution to Q3 GDP. As long as inventories fall less than $141 bln, it will be bolster GDP, …
Thoughts About Q3 GDP Thoughts About Q3 GDP Reviewed by Marc Chandler on July 31, 2009 Rating: 5
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Race to Debase?

July 31, 2009
There seems to be a rough agreement that the world economy is on the mend. Earlier this year the focus was on the turning of second derivatives, which is how some economists refer to the pace of economic contraction slowing. Increasing amounts of data from a broad array of countries suggest positive growth is at hand; the world economy seems poise…
Race to Debase? Race to Debase? Reviewed by Marc Chandler on July 31, 2009 Rating: 5
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Q2 Better , Flattered by Downward Revision to Q1

July 31, 2009
The US economy contracted at a 1% annualized pace in the second, a bit better than the consensus expected and Q1 was revised to -6.4% from -5.5%. Benchmark revisions reveal weaker growth on balance in the recent past as well. Consumer spending fell 1.2%, nearly twice the pace economists had expected. The net export function added 1.4 percentage…
Q2 Better , Flattered by Downward Revision to Q1 Q2 Better , Flattered by Downward Revision to Q1 Reviewed by Marc Chandler on July 31, 2009 Rating: 5
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$28 billion 7-yr Note Auction Amid Lukewarm Demand

July 30, 2009
The U.S. Treasury market is on its back foot today. The stars are aligned against it. Equities are posting strong gains. Recent string of economic data has been consistent with the end-of-recession story. There has been record supply hitting this week and today's 7-year note sale complete the week's operations. Demand in the 2-year an…
$28 billion 7-yr Note Auction Amid Lukewarm Demand $28 billion 7-yr Note Auction Amid Lukewarm Demand Reviewed by magonomics on July 30, 2009 Rating: 5
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Significance of IMF Comments

July 30, 2009
The euro was trading heavily even before the IMF's comments hit the wires suggesting that in the February 25-March 25 period, the single currency was over-valued by 0-15%. Although this is wide enough to be nearly meaningless substantively, the significance may lay in the shift. In recent years IMF officials were often seen on the side of thos…
Significance of IMF Comments Significance of IMF Comments Reviewed by magonomics on July 30, 2009 Rating: 5
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Beige Book: Little New, Little Reaction

July 29, 2009
The initial read of the Fed's Beige Book is ho-hum. Most districts report slower pace of economic contraction. Labor markets remain soft. Modest manufacturing recovery in 6-12 months. There were few signs of positive growth, but we would anticipate that by the end of Q3 there will be positive growth signs. The Beige Book was compiled by the Bo…
Beige Book: Little New, Little Reaction Beige Book: Little New, Little Reaction Reviewed by magonomics on July 29, 2009 Rating: 5
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More and Clearer on SNB

July 29, 2009
The earlier estimate of SNB intervention was derived from last week's data that showed that its euro holdings rose by 32 billon euros in Q2 after a 20.26 billion euro increase in Q1. Dollar holdings rose to almost $20 billon from $13.2 billion. Of course the full increase might not reflect only intervention as there may be a valuation componen…
More and Clearer on SNB More and Clearer on SNB Reviewed by magonomics on July 29, 2009 Rating: 5
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SNB Details Size of Intervention

July 29, 2009
According to Reports the Swiss National Bank has confirmed it has spent $32 billion to weaken the Swiss franc since March. How effective has it been? The trade-weighted index (BOE calculation CEERSZ on bloomberg) has effectively depreciated by about 3.2% from its peak on March 6th to today. Against the euro, the Swiss franc has fallen about 4.3%. …
SNB Details Size of Intervention SNB Details Size of Intervention Reviewed by magonomics on July 29, 2009 Rating: 5
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Durability of Durable Goods Orders

July 29, 2009
The headline decline in durable goods orders (-2.5%) was greater than the market expected, but ex-transportation figure rose 1.1% , well above the flat expectation and is the highest in four months. In addition to the closure of auto plants in the first part of the month, commercial aircraft bookings fell 39% after the 60% jump in May. Orders for …
Durability of Durable Goods Orders Durability of Durable Goods Orders Reviewed by magonomics on July 29, 2009 Rating: 5
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Japan Industrial Production Expected to Continue to Recover

July 29, 2009
Japan reports retail sales figures first thing on Wednessday in Tokyo. A 0.4% month-over-month gain is expected, which would leave it off 6% over the year. Retail sales tends not to be a significant number in Japan or for the yen, as the Japanese economy traditionally stands on three legs: government spending, capex and exports. Japan reports indu…
Japan Industrial Production Expected to Continue to Recover Japan Industrial Production Expected to Continue to Recover Reviewed by magonomics on July 29, 2009 Rating: 5
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Hard Asset Investor: Rethinking Trade Deficit Hard Asset Investor: Rethinking Trade Deficit Reviewed by magonomics on July 28, 2009 Rating: 5
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CNBC: Too Late to Ride Market Rally? CNBC: Too Late to Ride Market Rally? Reviewed by Marc Chandler on July 28, 2009 Rating: 5
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China: New Colonialism?

July 24, 2009
The United States and China will hold a Strategic Economic Dialogue during the last week of July. The talks were an initiative of former Treasury Secretary Hank Paulson, but have continued under President Barrack Obama and Treasury Secretary Tim Geithner.
China: New Colonialism? China: New Colonialism? Reviewed by magonomics on July 24, 2009 Rating: 5
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Hard Asset Investor: Re-evaluating Our Path Hard Asset Investor: Re-evaluating Our Path Reviewed by magonomics on July 21, 2009 Rating: 5
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Virus on Wall Street

July 10, 2009
The swine flu continues to spread, but there appears to be another ailment afflicting many Americans. There are two strains. The first has been dubbed America Firsters, but is different than the isolationists of the ‘30s and ‘40s and more contemporary times. When inquiring into nearly all of the world’s problems, the illness makes them typically b…
Virus on Wall Street Virus on Wall Street Reviewed by magonomics on July 10, 2009 Rating: 5
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Dollar Spanked

July 09, 2009
The dollar has been hit again since the close of European markets. Losses are broad based, with most emerging market currencies participating, though the Mexican peso is a clear laggard as concerns about the budget (and therefore rating) implications of last week's elections. The main driver appears to be players being stopped out of short for…
Dollar Spanked Dollar Spanked Reviewed by magonomics on July 09, 2009 Rating: 5
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G8 - Not That Great

July 09, 2009
The G8 meeting is wrapping up and there have been no surprises to speak of. The global economies and financial systems appear too fragile to begin reversing the emergency measures. There were the usual platitudes about completely the Doha trade round and promises to avoid protectionism. Of note, especially in light of the various comments in recen…
G8 - Not That Great G8 - Not That Great Reviewed by magonomics on July 09, 2009 Rating: 5
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Who is Buying U.S. Treasuries?

July 08, 2009
One of the persistent questions from investors is who is going to buy all these Treasuries the government is issuing to finance the yawning budget deficit. Ironically, thus far this year, at least three countries, Germany, the UK and today, joined by China, have failed in selling the amount of bonds they intended. The U.S. has not had that problem…
Who is Buying U.S. Treasuries? Who is Buying U.S. Treasuries? Reviewed by magonomics on July 08, 2009 Rating: 5
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Tension Rising Between Australia and China

July 08, 2009
Outside of the ethnic turmoil in China, there is another story that appears to be hitting the markets. Earlier today, Chinese authorities "detained" Rio Tinto's top iron ore negotiator on suspicion of espionage and stealing state secrets. This comes as a Shanghai paper reported that Chinese steel companies have belatedly agreed iron …
Tension Rising Between Australia and China Tension Rising Between Australia and China Reviewed by magonomics on July 08, 2009 Rating: 5
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Is Intervention Suggestion for Real?

July 08, 2009
Yesterday's Financial Times carried an op-ed type of piece that acknowledged there was no alternative now to the dollar as the main reserve currency and numeraire. While this is consistent with our own analysis, we take exception at the idea that "the chances for coordinated intervention among developed economies to support the dollar are…
Is Intervention Suggestion for Real? Is Intervention Suggestion for Real? Reviewed by magonomics on July 08, 2009 Rating: 5
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CNBC: Is the Dollar in Danger CNBC: Is the Dollar in Danger Reviewed by Marc Chandler on July 08, 2009 Rating: 5
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German and US Data Review - Glimmers of Optimism

July 07, 2009
A number of observers are suggesting that the recent heavy tone in equities and the relative dollar and yen's strength in the foreign exchange market is a function of growing doubts about the green shoot story that unfolded for most of Q2. There have of course been some disappointing data. The recent employment report comes to mind. However, i…
German and US Data Review - Glimmers of Optimism German and US Data Review - Glimmers of Optimism Reviewed by magonomics on July 07, 2009 Rating: 5
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Developments in U.S. Inflation

July 06, 2009
Talking with a range of market participants, we have been struck by the fact that the vast majority are very concerned about inflation in the United States. Leaving aside our usual arguments about the output gaps that will require a protracted period of above trend growth to close, there a several other considerations that may help ease inflation …
Developments in U.S. Inflation Developments in U.S. Inflation Reviewed by magonomics on July 06, 2009 Rating: 5
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Covered Bond Purchases Begin

July 06, 2009
The unconventional policy in Europe, under which the central banks will buy up to 60 billion euros of covered bonds kicks off today. European officials are loath to call it quantitative easing, but exactly why it isn't, has not been explained. The ECB itself will buy 8% of the targeted amount with the national central banks responsible for the…
Covered Bond Purchases Begin Covered Bond Purchases Begin Reviewed by magonomics on July 06, 2009 Rating: 5
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Dollar Worries Persist Despite Today's Gains

July 06, 2009
The dollar is posting broad based gains today, with the yen as the notable exception. Despite the upticks, which are carrying the greenback to the upper end of its recent consolidative ranges, there continues to be much talk about the dollar's future as the numeraire--the key currency in the world economy, especially ahead of the G8 meeting la…
Dollar Worries Persist Despite Today's Gains Dollar Worries Persist Despite Today's Gains Reviewed by magonomics on July 06, 2009 Rating: 5
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U.S. Mortgage Rates Slip, Fed Course Affirmed?

July 02, 2009
Freddie Mac reports that mortgage rates fell in the U.S. in the past week. The average 30-year fixed rate mortgage fell 10 basis points to 5.32%. Fed officials may find some comfort in this development, but it is unlikely to silence its critics.
U.S. Mortgage Rates Slip, Fed Course Affirmed? U.S. Mortgage Rates Slip, Fed Course Affirmed? Reviewed by magonomics on July 02, 2009 Rating: 5
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End of Era Looms for Japanese FX Leverage?

July 02, 2009
Japan's Financial Service Agency will reportedly will limit the amount leveraging available to retail foreign exchange participants, who according to estimates account for around a quarter of the daily turnover in Tokyo, which according the the BIS survey averaged about $302 billion a day.
End of Era Looms for Japanese FX Leverage? End of Era Looms for Japanese FX Leverage? Reviewed by magonomics on July 02, 2009 Rating: 5
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China: More Talk

July 01, 2009
News wires report that China has announced it wants to talk about reform of the international monetary order at next week's G8 meeting in Italy. The dollar has been hit in a knee-jerk reaction to the news headlines, but we are skeptical of the merits.
China: More Talk China: More Talk Reviewed by magonomics on July 01, 2009 Rating: 5
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May Construction Spending Reverses April Gains

July 01, 2009
Construction spending fell 0.9% in May, completely offsetting the revised 0.6% gain in April (which was initially 0.8%). This is slightly weaker than the consensus forecasts. Overall, construction spending has fallen 11.6% from year ago levels. Residential construction was poor, off 3.5% after a flat reading in April. Yet we know that housing star…
May Construction Spending Reverses April Gains May Construction Spending Reverses April Gains Reviewed by magonomics on July 01, 2009 Rating: 5
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South African Rand Stalls

July 01, 2009
The South African rand has been the strongest currency this year, appreciating 23% against the dollar in H1. Since putting its recent low (with the dollar at ZAR8.28) on June 23, the rand has appreciated every day, for a cumulative gain of 6.2%, until today. The rand is off by a little more than 0.5%. The ostensible cause of the modest profit taki…
South African Rand Stalls South African Rand Stalls Reviewed by magonomics on July 01, 2009 Rating: 5
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