Jim’s Mailbox

Posted at 3:31 PM (CST) by & filed under Jim's Mailbox.

Jim/Bill,

The labor force participation rate declined by 0.2 percentage points to 62.7 percent in May, but has shown no clear trend over the past 12 months. The employment-population ratio edged down to 60.0 percent in May. (See table A-1).

Don’t forget that the figures are misleading because a lot of people that work part time are included in the employment rate. It is all optics!

CIGA GG

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I expect we will see a belated reaction when people finally wake up to what is happening or when we again see some weak economic figures. The US dollar is toast!

CIGA GG

Jim/Bill,

I have only one question………

Who will buy the “crap” (MBS)?

and the bigger “crap” (TRSY’s)?

CIGA Wolfgang Rech

Fed Reveals Balance Sheet “Normalization” Schedule: Will Reduce Reinvestments By $10BN/Month
June 14, 2017

Coming in earlier than many expected, the Fed for the first time laid out how it plans to “normalize” its balance sheet which it expects to reduce by trimming reinvestments in TSYs at a rate of $6Bn/month initially, and MBS at $4Bn/month, or a total of $10bn/month, and will increase the reinvestment caps in steps of 10bn at 3 month intervals over 12 months until it reaches a total 50bn per month.

Indicatively this is well below Goldman’s expectation of $10bn and $5bn initial caps for TSYs and MBS, as we showed over the weekend.

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As its said in the addendum to the materials, “the Committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated” with directions to read a Policy Addendum.

More…

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One noteworthy reality about Europe’s current political leadership is summarised here by Phil Lawler:

“• Macron, the newly elected French president, has no children.

• German chancellor Angela Merkel has no children.

• British prime minister Theresa May has no children.

• Italian prime minister Paolo Gentiloni has no children.

• Holland’s Mark Rutte,

• Sweden’s Stefan Löfven,

• Luxembourg’s Xavier Bettel,

• Scotland’s Nicola Sturgeon—all have no children.

• Jean-Claude Juncker, president of the European Commission, has no children.

“So a grossly disproportionate number of the people making decisions about Europe’s future have no direct personal stake in that future.”

If true, this is most interesting…

CIGA B

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Jim/Bill,

Yields on the 10 year bond crashed from 2.20 to 2.11 this morning, indicating worsening economic activity, continued loose monetary policy, and after today, possibly no more rate hikes…lest we dive into a depression.

The smart money (Bond Market) has voted.

CIGA Wolfgang Rech

GM Extends Plant Shutdowns As Toxic Trifecta For Auto Loans Fuels Carmageddon
June 14, 2017

In yet another unsurprising headline, The Wall Street Journal reports that GM will extend the typical summer shutdown at certain U.S. factories to deal with slumping sales and bloated inventory, a sign the industry’s hot streak is grinding to a halt.

The No. 1 U.S. auto maker in terms of sales will idle its Chevrolet Malibu factory near Kansas City for five weeks starting in late June, Vicky Hale, president of the United Auto Workers Local 31, said. Job cuts will be needed if GM is forced to slow assembly-line speeds when those workers return.

Additional downtime is also slated in Lordstown, Ohio, a small-car factory already stung by deep layoffs related to a pullback in demand for passenger cars. A GM spokesman declined to comment on specific plans.

More…

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Tanzania’s Acacia Spat Shows Deepening Battle With Business
June 14, 2017

Tanzanian President John Magufuli’s escalating battles with business risk alienating the very investors he needs to drive his multi-billion dollar industrialization policy.

On Monday, the 57-year-old leader ratcheted up his dispute with miners by accusing Acacia Mining Plc of operating illegally in Tanzania and insisting the government is owed billions of shillings of unpaid taxes. It’s the latest in a series of broadsides against private investors who are being unnerved by his administration’s stance and its lack of consultation on policy. Shares in Acacia, which denies any wrongdoing, slumped as much as 16 percent.

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