Eurodollar University

The dollar index jumped to a more than two-year high leaving everyone to ask why. Some say Trump, others the Fed. They might as well have said it was Burger King (who blames Wendy's). Though the dollar is rising here in the short run, to really understand what's going on you have to consider more than just developments in November 2024. This has been in the works for several years. Eurodollar University's Money & Macro AnalysisReuters US dollar continues uptrend as Fed policy provides lifthttps://www.reuters.com/markets/currencies/dollar-over-two-month-high-yen-near-150dlr-2024-10-15/Bloomberg Wall Street Sees Dollar Soaring More, But Splits on How Muchhttps://www.bloomberg.com/news/articles/2024-11-12/dollar-s-trump-fueled-rally-unites-wall-street-on-bullish-betshttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

After Germany's governing coalition collapsed last week, the country's ZEW added more solid evidence about why that was. The ZEW also collapsed into November. That's not just about Germany since the "zoo" is really what the rest of the world looks like from the German perspective. That also has a lot to say about the ongoing Treasury selloff (just like April).Eurodollar University's Money & Macro AnalysisZEW November 2024https://www.zew.de/en/press/latest-press-releases/falling-economic-expectations-after-trump-victoryBloomberg German Investor Confidence Slumps on Political Strife, Trump Winhttps://www.bloomberg.com/news/articles/2024-11-12/german-investor-confidence-slumps-on-political-strife-trump-winhttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

The economic challenges the incoming Trump administration is facing are far and away greater than those confronted in 2016. From the cyclical standpoint, 2024 has far more in common with 2001. While structurally, there's nothing close to this in generations. Amidst the election euphoria there needs to be sober analysis. Eurodollar University's Money & Macro Analysishttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Repo fails jumped by 50% in the latest weekly data, which just so happens to be the same week swap spreads plunged to record lows. It was also when the US economy, at least its labor data, took a turn for the worse. Understanding the connections between all these money and macro indications is critical. Eurodollar University's Money & Macro AnalysisFinancial Times New York Fed examines banks’ role in money market turmoilhttps://www.ft.com/content/83a5bb70-dbca-11e9-8f9b-77216ebe1f17FOMC Chair Powell Press Conference Transcript October 2019https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20191030.pdfhttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Credit card usage isn't really about spending. Americans use their credit cards when they're confident about jobs and incomes. The latest data from the Fed contains a more serious warning especially how it lines up with jobs and income data...and the Fed's actions. Eurodollar University's conversation w/Steve Van Metrehttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Is there era of massive government "stimulus" finally over? Bonds are certain it is. The Chinese are doing their best to make sure that's the result, in large part because they don't know what to do. That much is becoming clear and the implications are already going global. Just ask anyone with oil.Eurodollar University's Money & Macro AnalysisBloomberg China Unveils $1.4 Trillion Debt Swap, Saves Stimulus for Trumphttps://www.bloomberg.com/news/articles/2024-11-08/china-unveils-839-billion-debt-swap-to-rescue-local-governmentsBloomberg China Debt Plan Underwhelms Bond Market Betting on More Stimulushttps://www.bloomberg.com/news/articles/2024-11-08/china-bond-market-eyes-fiscal-plans-from-key-legislative-meetinghttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Germany's government is the latest casualty of the "vibecession." Amid a flurry of political activity, the markets throw up another major warning with the first ever negative swap spread. Predictably, the mainstream media can't make sense of swaps, the situation, or the economics. It's the economy, stupid. Eurodollar University's Money & Macro AnalysisBloomberg Germany’s Government Puts Itself Out of Its Miseryhttps://www.bloomberg.com/opinion/articles/2024-11-07/germany-s-coalition-government-puts-itself-out-of-its-miseryBloomberg Fear of German Debt Binge Flips Key Market Gauge for First Timehttps://www.bloomberg.com/news/articles/2024-11-07/fear-of-german-debt-binge-flips-key-market-gauge-for-first-timeBloomberg Scholz Sees Germany Riding Out War in Ukraine Without Recessionhttps://www.bloomberg.com/news/features/2023-01-17/german-chancellor-olaf-scholz-on-2023-economic-outlook-war-in-ukrainehttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Huge moves, major negatives, and record declines for one of the most critical pieces of the entire global system. While election euphoria has gripped certain financial markets, this one is doing the opposite. It is a key warning about where everything stands before even considering whether or not Trump's victory changes anything. Eurodollar University's Money & Macro Analysishttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Demand for gasoil, the basic fuel which runs the entire modern world, is actually declining. Having stumbled over the summer, this exceptionally rare development is another really negative sign to go with, relatedly, even more production and job cuts across the auto industry. Energy, autos, economy. Eurodollar University's Money & Macro AnalysisBloomberg Diesel Set For Growing Glut as Demand Faltershttps://www.bloomberg.com/news/articles/2024-11-05/diesel-set-for-growing-glut-as-demand-faltersWorld Bank Commodity Markets Outlookhttps://openknowledge.worldbank.org/server/api/core/bitstreams/bbda9ad3-4f12-4626-ad4b-94a4d20fbd52/contentBloomberg OPEC Cuts Global Oil Demand Growth Forecasts for Third Consecutive Monthhttps://www.bloomberg.com/news/articles/2024-10-14/opec-cuts-global-oil-demand-growth-forecasts-for-third-consecutive-monthOPEC June 2https://www.opec.org/opec_web/en/press_room/7339.htmOPEC Sept 5https://www.opec.org/opec_web/en/press_room/7369.htmOPEC Nov 3https://www.opec.org/opec_web/en/press_room/7409.htmBloomberg Even Some High-Income Americans Can’t Afford New Cars Anymorehttps://www.bloomberg.com/news/articles/2024-11-04/soaring-2024-new-car-prices-turn-more-buyers-toward-used-vehiclesNikkei Nissan cutting production of main U.S. models by 30%https://asia.nikkei.com/Business/Automobiles/Nissan-cutting-production-of-main-U.S.-models-by-30Guru Focus Nissan Cuts Production Amid Declining U.S. Demand, Threatening Global Sales Goalshttps://www.gurufocus.com/news/2582356/nissan-cuts-production-amid-declining-us-demand-threatening-global-sales-goalsEuroNews Thousands of jobs to go at German car parts maker Schaefflerhttps://www.euronews.com/business/2024/11/05/thousands-of-jobs-to-go-at-german-car-parts-maker-schaefflerhttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Why are interest rates rising at one end of the yield at the same time falling on the opposite side? With more recession data coming in all the time, starting with payrolls, it seems as though there should be a uniform response from the marketplace. But that's not how steepening works. Eurodollar University's Money & Macro AnalysisWashington PostHouse Passes Bush Tax Cuthttps://www.washingtonpost.com/archive/politics/2001/03/09/house-passes-bush-tax-cut/99152799-f156-414f-82c4-bed4fca05bb3/Time ‘The Worst Is Over’https://time.com/archive/6917914/the-worst-is-over/https://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

October payrolls were exceptionally weak, yet LT rates jump? With more rate cuts from the Fed basically assured, questions swirl around the Treasury selloff having many people wondering if there is a 'Trump trade' going on here. The answers are right there in front of us.Eurodollar University's conversation w/Steve Van Metrehttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

This isn't about October or hurricanes. Government just confirmed jobs market is in big f-ing trouble. Eurodollar University's Money & Macro AnalysisBLS Employment Situation October 2024https://www.bls.gov/news.release/archives/empsit_11012024.pdfCNN Messy October jobs report muddied by strikes and storms ahead of Election Day https://www.cnn.com/business/live-news/us-jobs-report-october-11-01-24/index.htmlhttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

The government's latest data confirms the dramatic slowdown sweeping across the labor market. We've been documenting hours being cut, quitters quitting quits, no one hiring, and now even a few layoffs. Not only do the latest figures back all that up, they also help explain consumer behavior and even the last GDP estimate. Eurodollar University's Money & Macro AnalysisCNBC Ford guides to low end of 2024 earnings forecast as it slightly tops Wall Street’s third-quarter expectationshttps://www.cnbc.com/2024/10/28/ford-motor-f-earnings-q3-2024.htmlFord Q3 https://media.ford.com/content/fordmedia/fna/us/en/news/2024/10/28/third-quarter-2024-financial-results.htmlChallenger Gray & Christmas October 2024https://www.challengergray.com/blog/job-cuts-fall-in-october-2024-but-ytd-up-4-from-last-year/https://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Another seemingly solid US GDP report for the books thanks in large part to a huge allotment of missiles. Does this mean the soft landing has been achieved?  Even if it has been achieved, we wouldn't know it from GDP data. Instead, history shows cyclical changes all look decent just before them. The latest quarterly data is not just comparable, it is, surprisingly, worse than every other period entering recession.Eurodollar University's Money & Macro Analysishttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Repo fails make sense being an indicator of collateral difficulties. Same for the 4-week US Treasury bill rate when it falls substantially. But how does Japanese government bill yields fit into the US$ repo picture? And why are they such a solid fit for it? The answer lies in the carry trade and what it means for funding markets as well as US recession risks. Eurodollar University's Money & Macro AnalysisBloomberg Mizuho Buys ‘Safe’ Assets on Risk That US Soft Landing Failshttps://www.bloomberg.com/news/articles/2024-10-08/mizuho-buys-safe-assets-to-cut-damage-if-us-soft-landing-failshttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Some unexpected bad news out of South Korea has implications for AI and a lot more. The investment boom triggered by ChatGPT has been a critical support for especially the Asian economy. Now there are signs it is cooling off along with a further setback in autos. Inopportune timing, to say the least.  Eurodollar University's conversation w/Steve Van MetreBloomberg South Korea’s Economy Ekes Out Growth as BOK Assesses Riskshttps://www.bloomberg.com/news/articles/2024-10-23/south-korea-s-economy-ekes-out-growth-to-emerge-from-contractionhttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Gold continues to soar to record highs, but why? Most will say inflation though bullion is actually a terrible inflation hedge. The reason why many people believe this is the one time during the Great Inflation. Gold's run in the seventies was instead about what happened in the sixties long before the inflation. And it's the same thing - the other end of it - that we're seeing today. Eurodollar University's Money & Macro AnalysisFRB Boston Bretton Woods Conference 1984https://www.bostonfed.org/-/media/Documents/conference/28/conf28.pdfAlan Greenspan Testimony Before the Committee on Banking and Financial Services, U.S. House of Representatives July 24, 1998https://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htmhttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

A lot of people are asking if the Fed now regrets cutting rates by 50 bps in September, or maybe cutting at all. Recent data make it seem as though the soft landing never went anywhere, plus what appears to be happening with market interest rates. In truth, every part of this Fed "regret" trend is wrong, starting with the view from the central bank itself. Eurodollar University's Money & Macro AnalysisFederal Reserve Beige Bookshttps://www.federalreserve.gov/monetarypolicy/publications/beige-book-default.htmFOMC Chair Powell Press Conference September 2024https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20240918.pdfBloomberg Fed’s Beige Book Shows Little Growth Across Most of UShttps://www.bloomberg.com/news/articles/2024-10-23/fed-s-beige-book-shows-little-economic-growth-across-most-of-ushttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Another central bank moves up its rate cut plans, accelerating its rate reductions with a 50-bps cut. At the same time the IMF lowers growth projections and warns risks of more downside are rising. These two developments are related to the same thing. It's becoming clearer where this weakness is coming from and that's why the public sector is starting to become more aggressive. Eurodollar University's Money & Macro AnalysisBank of Canada October 2024 Monetary Policy Reporthttps://www.bankofcanada.ca/wp-content/uploads/2024/10/mpr-2024-10-23.pdfBloomberg IMF Lowers Global Growth Forecast, Warns of Increasing Riskshttps://www.bloomberg.com/news/articles/2024-10-22/imf-lowers-global-growth-forecast-warns-of-increasing-risksIMF WEO October 2024 Policy Pivot, Rising Threatshttps://www.imf.org/en/Publications/WEO/Issues/2024/10/22/world-economic-outlook-october-2024https://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Huge thanks to Eric Basmajian and train-traveler Mike Green for answering member questions. Member/Subscriber Live Q&A recorded October 22, 2024.