Patriotism is supporting your country all the time, and your government when it deserves it.
                                                                                                                     Mark Twain

● A Brief History of Doom: Two Hundred Years of Financial Crises
By Richard Vague
Summary via publisher (University of Pennsylvania Press)
Financial crises happen time and again in post-industrial economies—and they are extraordinarily damaging. Building on insights gleaned from many years of work in the banking industry and drawing on a vast trove of data, Richard Vague argues that such crises follow a pattern that makes them both predictable and avoidable.
A Brief History of Doom examines a series of major crises over the past 200 years in the United States, Great Britain, Germany, France, Japan, and China—including the Great Depression and the economic meltdown of 2008. Vague demonstrates that the over-accumulation of private debt does a better job than any other variable of explaining and predicting financial crises. In a series of clear and gripping chapters, he shows that in each case the rapid growth of loans produced widespread overcapacity, which then led to the spread of bad loans and bank failures. This cycle, according to Vague, is the essence of financial crises and the script they invariably follow.
Continue reading →

The Treasury market’s outlook has turned grim, based on the inverted yield curve of late. Another dimension of the cautious outlook is yesterday’s sharp drop in the implied inflation outlook, based on yield spreads for nominal less inflation-indexed Treasury rates.

Continue reading →

US proposes tariffs on nations with undervalued currencies: Bloomberg
UK Prime Minister May announces resignation: Reuters
India’s Prime Minister Modi wins second term: NY Times
Inflation in Japan edged up to 3yr high in April: Reuters
New US home sales fell in April after reaching post-recession high: MW
US jobless claims dip to 211k, close to 50-year low: MW
KC Fed region factory growth is sluggish in May: KC Fed
US economic sentiment falls to 3-year low in May via Composite PMI: IHS Markit

Diversification is famously described as the only free lunch in investing and so it’s no surprise that modeling, analyzing and otherwise dissecting the concept is a core part of portfolio design and management. The correlation coefficient is often the go-to metric in this corner of finance. But like any one statistical measure, there are pros and cons with correlation and so relying on it exclusively can be misleading at times. Fortunately, there are alternatives.

Continue reading →

Trump rules out working with Dems on infrastructure legislation: WSJ
Pessimism rising for outlook re: US-China trade conflict: Bloomberg
US Navy sails through Taiwan Strait, again: Reuters
PMI: Eurozone growth remains subdued in May: IHS Markit
British prime minister reportedly ready to resign: CNBC
Fed minutes: no rate changes on the horizon: CNBC
Vanguard issues new 10yr return forecasts for US stocks (4%-6%): philly.com
5-year Treasury inflation forecast falls to four-month low — 1.68%:

Chinese equities have, for much of this year, led this year’s broad-based rise in global stocks. But then the Trump administration decided to play hardball this month on trade—a decision that’s reshuffled year-to-date leadership for equities, based on the world’s major regions and markets via a set of publicly traded funds.

Continue reading →

US: Syria may be using chemical weapons again: Reuters
Pressure on House Speaker rises to begin Trump impeachment: The Hill
St. Louis Fed Chief lays out case for cutting rates: WSJ
US considers blacklisting several Chinese tech firms: Bloomberg
China’s ambassador to the US: Beijing still willing to talk on trade: MW
The Fed is worried about low inflation and a strong economy: NY Times
UK Prime Minister May’s final Brexit gambit implodes: Reuters
Americans’ confidence in US job market rises to record high (since 2001): Gallup
US existing home sales in April continue to slide for one-year comparison: MW

Recent economic data is clouding the outlook for the US macro trend. Although a recession hasn’t started and isn’t likely to begin in the immediate future, several key indicators suggest that output is slowing and so uncertainty is rising for the second half of the year.

Continue reading →

Federal judge rules Trump must give financial records to House: Fox
House Dem leaders spar on whether to move forward with impeachment: The Hill
Iran dramatically increases production of uranium: Reuters
US slows hiring of Chinese nationals for semiconductor firms: WSJ
Fed Chair Powell: rising corp debt isn’t a threat, at least not yet: CNBC
Will China ban rare-earth elements that are critical for tech industry? Stratfor
Emerging markets bearing brunt of escalating US-China trade war: CNBC
Chicago Fed Nat’l Activity Index (3mo avg) fell to 3-year low in April: