PPG
@PPGMacro
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PPG Macro Independent Strategy. Only tweet when worth it. Not an economist. Former trader. Always an economic historian. LSE. Publican.
London, England
Joined February 2010
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China rates falling sharply. Rest of the world ignoring for now. Hmm...
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Liquidity is evaporating. Reserve balances at Fed banks fell by $172bn by 20 April. 2nd biggest weekly fall. Wondering why equities getting hit? See 2nd chart. And reserves will be down to $3trn by year-end.
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Housing. Surprise, Surprise! Mortgage purchase applications collapse. Sales numbers are next...
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Whatever the CPI number is today inflation is peaking. Base effects will impact sharply in the coming months.
Thread
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TRUCKED - Trucking jobs saw the biggest monthly fall since April 09. Always lead payrolls. Nuff said.
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The 30y Mortgage rate has surged by 50% since the end of the year. Now the highest since 2011. The biggest 3mth rise since q2 1987. But houisng bulls think there will little impact....
3mths later: Black Monday
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Only the biggest nominal $ monthly fall in new house median price. Ever.
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While the West obsesses about inflation and rate hikes too many are ignoring China where CPI and PPI undershot forecasts for the past 3 months.
PPI still high at 9.1% but with base effects is set to fall sharply. Will be down YoY by Q4.
#China
#inflation
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China - It's not just Evergrande. Contagion spreading. Check out Guangzhou R&F 2023 $ bond.
#contagion
#china
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US 30y mortgage at 4.2% yesterday. Up 1% this year. Fastest rise since taper tantrum in 2013. Housing affordability in Nov was already the worst since 2008. Yet many still think housing will stay strong. Oops.
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Is China really selling US Bonds? No.
Mainland holdings of long-term US securities (USTs & Agencies) fell in 2022 But are not far off where they were in 2016, post-devaluation.
However, holdings in Belgium (Euroclear a proxy for China) have increased.
The combination of
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When
@ChinaBeigeBook
tweets stuff like this you know it's serious. They rarely agree with the press who are more usually wrong.
"Signs of stress are appearing in 🇨🇳 banks’ loan books, as more of their corp loans to developers go sour...“We haven’t seen such a high level of bad
#property
loans in over a decade”
Balance sheets only provide visibility into the tip of the NPL iceberg
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Yield curve implosion. Bond yields say Powell is wrong with 30y yield at the lows of the day and the 2s30s 1y forward OIS is now almost 10bp lower at -39bp.
The curve says recession...
#FederalReserve
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US Housing - Homes under construction relative to the 25-54 year-old working population. Higher than at the peak of the housing boom....
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China exports to the US are over $600bn a year. EU roughly $400bn.
Total trade with Russia is $140bn.
How long will Xi be Putin's best friend?
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The street, yet again, completely wrong on China PMI. All order data weak with non-manu new orders collapsing. Only weaker in lockdown panic in Feb 2020. Weaker growth coming.
#china
#recession
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SVB & First Citizens - markets are relieved about the acquisition. Good.
Not enough attention is being paid towards the real nasty of the deal.
It's the 23% discount on the $72 billion of loans that First Citizens is taking.
Now think about all the CRE bank loans out there...
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US Small Business Outlook falls to lows at -37. Only worse in November 2012.
Building back better?
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One of the most negative signals in yesterday's ISM Services PMI was the fall in new orders and the rise in inventories. Now -8.5. A classic recession signal. Econ 101.
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Shelter is driving US CPI, but it is cracking rapidly. More cities with lower rents happening and then there are prices. New homes for sale/sales ratio at June 08 levels.
Then compare that with prices...
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The most successful KGB sleeper agent in history...
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US Treasuries 10y10y now at 3.20%. Powell may say that financial conditions are still accomodative but this represents a huge tax on the rest of the world.
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Remind me. Who liberated Europe and sacrificed their sons on the beaches of Normandy?
Macron: “Is it in our interest to accelerate [a crisis] on Taiwan? No. The worse thing would be to think that we Europeans must become followers on this topic and take our cue from the U.S. agenda and a Chinese overreaction”
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Ignore the pandemic. Redbook goes negative for the first time since the GFC. And this is a nominal number.
Redbook Retail sales goes negative for the first time since the COVID collapse.
-.4% year-over-year shrinkage in retail sales.
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@DiMartinoBooth
@CNBC
But it’s fine to bail out badly managed companies who wasted their cash on buybacks and CEO pay
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Invert the Kansas Fed and the comparison with 2007 becomes much clearer.
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You can no longer see daily traffic and metro data for China. However, this one slipped through : Highway passenger traffic. Incredibly soft and pre-Delat spread. Au revoir.
#recession
#china
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Since 1949, every time US unemployment has clearly picked up the US economy has suffered a recession.
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The Fed changing Jackson Hole to a virtual meeting tells you that taper is not happening soon.
#FederalReserve
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Small business pricing plans for the next 3 months have an incredible track record over the past 30 years against inflation. Nuff said...
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Money growth is decelerating rapidly. It's been "transitory". And given it leads growth and inflationthe view remains that global growth is transitory.
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Unfortunately, with Biden, I expect to see days get darker. Nordstream 2, Iran & now Afghanistan show a woeful sense of foreign and defence policy. And look at allowing Huawei to buy chips. FFS
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Thought I'd tidy the chart up and do monthly change. Note the 6mth average. It's been negative since August.
Everybody’s focus is on NFP which are lagging, temps are a much better leading recession indicator 👇 It’s getting closer.
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Not tweeted for a while. Against the gloom, note the strong recovery in Korea and Taiwan exports.
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The 6th-10th eurodollar spread is inverted. Looks like late 2018. Hard to be bearish bonds here.
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After 15 years, it was goodbye to Rex today.
Time to mourn, but also a time to celebrate a friend who brought so much joy to my family.
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Long Term Unemployment = Jay Powell’s Unexpected Weakening = Recessions
It was in his May FOMC presser that he said that an ‘unexpected weakening’ of the labour market could cause the Fed to change course.
Two months on he’s got one.
Long term unemployment, defined by being
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US student loan payments soar. Even though they are not obligatory before October borrowers are paying at a rate of $9bn a month.
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Kansas Fed Labor Market Conditions Index fell sharply in April (Inverted on this chart).
But it's different this time...isn't it? Isn't it?
This is its composition:
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Following the repayment of ECB TLTROs last week major central bank assets are the smallest since October 2020. Down $2t in past 3 months. Ho hum...
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Linkedin say the JOLTS data is wrong.
MOST IMPORTANT TWEET OF WEEKEND
Powell KNOWS job openings FALSE
FED research: NET OUT openings for EMPLOYED workers, aka poaching vacancies, vacancies for UNEMPLOYED (blue line), & there’s been no improvement this CENTURY.
This draws me to conclude Powell wants to kill Fed Put
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Selling what they can get a bid on. Never a good sign.
“Blackstone may sell half of the $4.25 billion interest it acquired in the Bellagio Resort & Casino in Las Vegas in 2019. If true, it would represent the liquidation of an asset that is performing well”
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You get a lot of people posting the rise in container rates and inflation. What they ignore is freight rates within the US.
The dry van rate is at 2012 levels. Such is the strength of US consumer demand....
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Putting Ukraine to one side - UMich consumer confidence expectations have signalled every downturn since it started in 1978.
This time will be different?.....No
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Meanwhile the U-6 unemployment rate is at 7.9% and Jay Powell told us in his press conference that he thinks BLS payroll numbers are BS.
Atlanta Fed's GDPNow forecast is now nearly 3%, which is higher than where it was before the last Fed meeting at the end of July (see red arrow below.)
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China PMI - Another big miss. 50.4 compared to forecasts of 50.8. Worse, it does not include the impact of Delta spread. New export orders down to 47.7. The dismal levels of 2019. Global demand is fading...rapidly.
Where China goes, US follows.
#china
#recession
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ALLY - Note equity to assets and low Tier 1 ratio. One of the biggest auto lenders where delinquencies are surging...
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A MUST WATCH
Brace for a credit crunch + a "serious" recession
So counsels Dr Lacy Hunt, one of the most-respected living economists
And don't use the financial markets as a signal for economic health. They're a near-useless indicator in his opinion
This is a hugely important discussion:
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China. There are official statistics and there are statistics. NBS China says that existing home prices are down 13.6% from 2021 peak. But Centaline data says that the fall is double that and prices are back to 2016 levels.
Leverage is lower but housing is the main store of
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Despite all the talk of strong balance sheets total US debt rose by $1.66 trillion in Q1. The 2nd biggest rise on record. Federal debt? $940bn. Household? $372bn. Business $370bn.
Now think of the increased interest costs with rates and credit spreads surging.
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Far too much being made about China PMI. Of much greater importance was Taiwan's that plunged to 44.6.
The great chip shortage is ending rapidly.
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China leads the way.
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There is a basic reality. Fed got suckered by UMich and data that has been substantially revised lower. The consumer is fading as is employment.
Basic question? If the data they have now was in front of them now was there in June would they have done 75bp?
I doubt it.
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Dallas Fed prices paid & US CPI. In 2020-21 when DFed was shooting up the Fed said inflation transitory. Now prices paid has collapsed, the Fed says inflation won't fall quickly. Wrong both times?
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Hong Kong - Interest rates surging. Not seen action like this since LIBOR crisis in 2007 and Lehamn collapse in 2008. This will not end well.
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Combined central bank assets have fallen by $1.2t since March (PBOC assets down CNY 1.5t). With continued QT and the ECB's TLTRO expiry next week of EUR 478bn they will soon hit a new low.
The divergence with global equities is clear.
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Fed researchers saving excess savings gone, and now lower.
= consumption being supported by credit.
+ risk that savings ratio starts to rise as well below average.
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Strange. Fed cut in January 2001. It took until September 2006 for the S&P to get back to where it was.
Fed cut in September 2007. It took until February 2013 to recover.
There have been 20 occasions when the
#Fed
cut rates at all-time highs. While there were bumps along the way, stocks were higher 12-months later 100% of the time.
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For the first time ever, using data back to 1967, continuing unemployment claims exceed the off unemployment count by 1.54 million. BLS data looks meaningless.
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US wholesalers auto inventory/sales ratio. Only higher during GFC - ignore the brief Covid spike.
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For all the noise surrounding US CPI, this chart is hard to ignore.
It's Chinese export prices and US CPI.
With China interest rates already low and monetary policy pushing on a string, the risk is that the currency could once again be used as a tool.
One needs to think of the
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ADP Small Business employment (less than 500 workers) has fallen by almost 200k YTD.
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US private residential construction spending continues to collapse Down 6.3% YoY, led by residential at -11.2% YoY. And yet Fed sees no recession. Ummm
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The Utilities Index is generally seen as a bond proxy. Compared to TLT.
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Freight: Total inbound container volumes at ports of LA and Long Beach. February is always the seasonal low but the weakness is profound.
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If global chip demand is so strong how come Taiwan export orders are down YoY and the new orders PMI is at 45.6?
#recession
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With growth negligible, export orders PMI at a recessionary 46.7 how long can China survive with a yuan that has appreciated against other big exporters?
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China reminds me more and more of 2014/15. Fiscal policy has been front-loaded and the overall public sector deficit is around 10%. Monetary policy is easy and pushing on a string. PPI is heavily negative YoY for 7 months in a row.
Only other option?..Devalue as they did in 2015
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The idea that China will be back to normal any time soon is nuts.
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Hardly a soft landing. Rail weakest since 2013 (Weekly data). LA inbound containers 3mth av weakest since 2016. Bulk rates at lows.
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The JOLTS number remains highly suspect. The best example is job openings in real estate and rental/leasing. Supposedly there are a record 221k vacancies when activity is plunging.
Yeah right....
red line is existing home sales
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Never mind debts in Greece or Italy, it’s France that’s heading for a crisis
It's much worse when one includes corp debt. France's debt service ratio is the highest of any major economy
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Killer Charts. Reserves are more important than the Fed's balance sheet. In the first week of this year they fell by $236bn. They are down $476bn from high and could be down to $3t by year-end.
Guess what? Margin debt also plunged. The implications for risk assets are clear.
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JOLTS more - Openings at establishments with 1,000-4.999 employees fell to the lowest level since the beginning of 2016 (ex-pandemic).
Would Jay Powell call that an 'unexpected weakening'?
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China $ Junk yields surge to new highs. The credit impulse warned us, but nobody thought it would get this bad. Not that markets seem to care...They will.
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Redfin Lays Off 13% of Staff, Shuts Down Home-Flipping Business.
D.R. Horton Stock Falls After Earnings Miss Expectations, As Home Orders Fell And Cancellation Rates Rose
B(L)S says record real estate job openings. FFS!
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The Fed categorises big banks as the largest 25 by assets. The rest go in the small bank sector in the H.8 report.
Cash assets are essentially reserves and liquidity at small banks has plunged by almost 50% this year.
If it's this bad for banks it is much worse for non-banks.
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A JGB Warning - Past experience has taught me to ignore at one's peril. Global 30-year yields.
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