US And China Credit Impulses Are Negative (Annual Change As % Of GDP), Along With The Eurozone

The bad news? The credit impulses (annual change as a percentage of GDP) for both the USA and China are negative.

creditimpulse

The good news? The decline in China’s credit impulse is lessening.

If we throw the Eurozone into the Papusa, we see that the Eurozone has negative credit impuse growth, but is better than China or the USA.

eurozpme

Since 2005, China’s sovereign yield curve has actually increased will Japan’s has dropped into negative territory.

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Bubble Monster! Central Bank Continued Surrender Leading To Declining VIX, Reduced VIX Positions And Rising SMART Money Flow Index

As I wrote at the beginning of The Fed’s quantitative easing (QE)  ventures back in 2008, The Fed will never be able to “normalize” monetary policy. As we have seen, The Fed has all but quit rate hikes and has annoucned end an to QT (quanitative tightening) in the Fall.

In celebration of the eternal Central Bank monetary stimulus, S&P500 volality (VIX) is collapsing … again as VIX Futures open interest is shrinking. Accordingly, the SMART Money Flow Index is rallying as investors see Central Bank surrender.

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The global Central Bank asset purchase bonanza!!

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Coupled with low rates.

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The Fed and other Central Banks are contuning to run their bubble machines!

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Here is a video of The Federal Reserve.

Rollercoaster! Global Economic Growth (G10, US, Emerging) Sliding Down Together

The global economy is in a rollercoaster pattern.

And unfortunately the G10, US and Emerging nations are on the downward side.

rollercoaster

 

This might explain Larry Kudlow’s call for a 50 bps drop in the Fed Funds Target Rate. At least Trump’s nominee for The Fed’s Board of Governors was previously the President of the Kansas City Federal Reserve. And CEO of Godfathers Pizza! Conditional on the US Senate approving his appointment, “Welcome to the party, pal!”

 

 

Take It Easy! Fed Risks Stoking Financial Bubble in Drive to Lift Inflation (Here We Go Again!)

Fed Chair Jerome Powell is singing “Take it easy.’

The Federal Reserve risks stoking the same sort of asset bubbles that Chairman Jerome Powell has linked to the last two recessions with its new-found eagerness to fan inflation.

The Fed’s surprise pivot away from any interest rate increases this year has boosted prices of stocks, high yield bonds and other risky assets in spite of nagging investor concerns about slowing global economic growth. Financial conditions, at least as measured by the Chicago Fed, are at their easiest since 1994. And they could well get looser.

takeiteasy

That would put policy makers in a pickle. In unveiling the Fed’s U-turn last month, Powell highlighted the central bank’s determination to promote price pressures by declaring that low inflation was “one of the major challenges of our time.’’ And he left open the possibility that the Fed’s next rate move might be a cut after four increases last year.

But a drive to boost inflation through low interest rates could end up threatening financial stability by encouraging supercharged risk-taking, according to Allianz SE chief economic adviser Mohamed El-Erian.

And it’s just such “destabilizing excesses” that Powell has pinpointed as leading to the last two economic downturns. First it was the dot-com stock market boom of the late 1990s that crash landed and led to the 2001 recession. Then it was the housing boom and bust of the 2000s that preceded the biggest economic contraction since the Great Depression.

Easy Policy

The quandary for the Fed is that easy monetary policy seems more effective in spurring asset values than it does in boosting prices of goods and services.

The S&P 500 Index rose by an average 8.5 percent from 2014 through 2018, while the personal consumption expenditures price index increased 1.3 percent, well below the Fed’s 2 inflation target. In January, the most recent month for which data is available, it stood at just 1.4 percent.

laagginginflation

Well, bank lending YoY for all but Commercial and Industrial (C&I) loan are slowing.

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S&P 500 e-mini Futures On The Rise Again As China Signals Growth (UST 10Y-3M Curve Turns Positive Again!)

China signalled positive manufacturing growth and the market react positvely.
(Bloomberg) — Stocks strengthened worldwide as strong manufacturing data out of the world’s second largest economy (China) helped ease investor worries about a slowdown in global growth. Treasuries extended losses after as a gauge of U.S. factories topped estimates in March.
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The S&P 500, Dow and Nasdaq were all in the green. Shares of Lyft dropped below its IPO price as analysts noted there is limited visibility into the company’s path to growth and profitability. The Stoxx Europe 600 Index climbed on the heels of its best quarter in four years after key China manufacturing PMIs for March beat the highest estimate in Bloomberg surveys of economists. That’s despite manufacturing data for Europe coming in at the lowest since 2013, which briefly caused the euro to pare some of its gains.
E-mini S&P 500 futures are on the rise … again!
 

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And the 10 year – 3 month yield curve turned positive!

103yc

 

Remain Calm! VIX-MOVE Spread Separates As Fed Rate Cut Predicted

Welcome to the topsy-turvy world of financial markets!

The S&P 500 Cboe Volatility (Equity) index versus the Merrill Lynch 1-month Treasury bill index (MOVE) show a further separation.

vixvmove

This comes as the WIRP Estimated Number of Moves Priced in for the US (Futures Model) is indicating one rate cut coming up (although Trump’s economist Larry Kudlow wants 50 points in cuts as does Trump’s nominee for The Federal Reserve Board of Governors, Stephen Moore.

Rateciuts

Despite Kudlow and Moore touting 50 basis point cuts (and a slowing advanced retail spending report for February) …

retailsalesslowdown

Remain calm .. all is well!

 

Slowing! US Pending Home Sales Fall 5% YoY In February As Inventory Remains Low (Fed Rate CUT At 72% In 2019)

The US housing market is slowing and The Federal Reserve is likely to CUT interest rates in 2019 (at least the market is betting on it).

(Bloomberg) — Contract signings to purchase previously owned U.S. homes fell more than estimated in February, suggesting that the prior month’s surge resulted from pent-up demand and that a sustainable recovery may take more time.

The index of pending home sales fell 1 percent from the prior month, after a downwardly revised 4.3 percent increase in January, according to data released Thursday from the National Association of Realtors in Washington. The gauge fell 5 percent from a year earlier following a 3.3 percent annual decline.

And pending home sales fell 5% YoY in February,

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Not only are pending home sales YoY slowing, but so is home price growth.

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Existing home sales inventory is down considerably from 2007.

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At least interest rates are likely to be cut by The Fed in 2019.

ratecutyikes

Ichimoku Blues! Rocky Times Ahead For Emerging Market Currencies (And Stocks/Gold)

The bloodbath for emerging-market currencies that erupted Friday may just be getting started, according to the Ichimoku cloud strategy that correctly forecast last year’s five-month slide. The technical analysis shows that MSCI’s currency gauge has once again broken downward through its forward-looking cloud, or the space between two moving averages. Once it pierces the cloud multiple times, it’s likely to gain momentum in that direction.

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The S&P 500 also remains above the Ichimoku cloud. Also a sign of rocky times ahead.

spxicihi

This scary chart supports the Ichimoku cloud expectation of a rocky road ahead for the S&P 500 index.

spxeps

The gold spot could also experience turbulence, but less so. Gold is near the top of the Ichimoku cloud.

goldichi

 

 

Broken Arrow! U.S. Treasury Yield Curve Inverts for First Time Since 2007

Since an inverted Treasury curve occurs before a recession, the Federal Reserve may have to expend all remaining policy tools.

The US Treasury 10-year yield declined 10 bps today which is a large pop.

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The Federal Reserve finally achieved an inverted Treasury yield curve for the first time since 2007.

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The Federal Reserve, in the past, has reacted aggressively when the yield curve slope breached 0 slope. Aka, Snake and Nape (Snake Eye Missiles and Napalm).

It’s been a lovely *%*$#$$  non-recovery from the last recession. Just asset bubbles.

SF2ARROW

 

Venezuela’s 2Y Sovereign Yield Tops 100% … Again As US Imposes More Economic Sanctions (Oil And … GOLD!)

The US is imposing additional economic sanctions on Venezuela, both on oil … and gold!

The United States imposed sanctions on Venezuela’s state-run gold mining company on Tuesday, accusing it of illicitly propping up the government of President Maduro.

The US Treasury claims Maduro has relied on an illegal mining boom in recent years with the profits generated by the gold mining company, Minerven, proving vital to maintaining the military’s support for the government.

“Treasury is targeting gold processor Minerven and its president for propping up the inner circle of the corrupt Maduro regime,” US Treasury Secretary Steven Mnuchin said in a statement.

The announcement comes days after Uganda opened an investigation into US$300 million of unexplained gold suspected of originating with Maduro’s government. Flights this month from Caracas to Entebbe raised concerns that the government is smuggling gold out of the country and selling it to traders in Africa and the Middle East.

It is the sixth round of sanctions imposed by the U.S. since January as they attempt to wrest power away from Maduro and towards opposition leader Juan Guaido. Most Western countries have recognised Guaido as Venezuela’s interim president.

Venezuela’s gold industry is allegedly one of the country’s most lucrative financial schemes in recent years. Minerven is accused of purchasing high volumes of gold from local miners using the countries depreciated currency. The gold is then melted into bars and transported to the Central Bank of Venezuela.

The sanctions have led to a spike in Venezuela’s 2-year sovereign yield (in USD) as their economy continues to liquify.

ven2yyir

The Cafe con Leche index, meant to reflect inflation for the average coffee-drinking citizen. 2019 has been a bad year, in particular, for the average Venezuelans.

vencafelicgh

And the Gold/Venezuelan Bolivar Cross hasn’t looked so good in 2018 either.

goldbolcross

The good news? At least Venezuela isn’t on the Pacific coast of South America so they can avoid the Fukushima reactor meltdown aftermath. Chile, on the other hand. …

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