Archive | Economy

Mark Blyth at Google on Why Austerity Is So Dangerous

Tuesday, June 11, 2013


In this talk, Mark Blyth (Brown) works through some of the material in his

Money flows confirm the weak-yen trend

Thursday, January 17, 2013


One of the knock-on catalysts for yen weakness is the flow of capital out of yen-denominated money market funds. International investors have been in the habit of investing money into yen-denominated money market funds, hoping that the appreciating currency would “pay the dividend” in lieu of meaningful yields. For context, here is the cumulative flow into yen-denominated money market instruments since 2005: Fig. 1. Cumulative sum of net purchases of yen money market instruments by non-residents, 2005-2013. Source: Japan…

The one USDJPY chart to rule them all?

Friday, January 11, 2013


In his latest Viewpoints note, Jim O’Neill explains that, despite the recent move in the yen, there is still plenty of room for more depreciation against the dollar. He attaches the following chart, which really clarifies what a successful BoJ 2% inflation target would look like: The yellow line (“Goldman Sachs Dynamic Equilibrium Exchange Rate”) shows that, even before we start thinking in terms of revised inflation goals, the yen is still very overvalued vs. the USD. The…

Citi Economic Surprise Indexes for U.S. and Asia-Pacific Diverge

Tuesday, December 11, 2012


Here is one explanation why so many analysts have been bullish on U.S. equities this year versus emerging markets. U.S. economic data improved more than expected in early 2012 to a much greater degree than did the data for Asia Pacific (ex Japan) countries. Fig. 1. Citi Economic Surprise Index, U.S. and Asia Pacific ex Japan. Source: Citigroup, Bloomberg, Deutsche Bank The economic surprise indexes for both regions fell in the middle part of the year, but have recovered…

How to trade a stall in fiscal cliff negotiations

Thursday, November 8, 2012

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The emerging post-election consensus is that the fiscal cliff is more likely to be addressed without roiling markets. President Obama, the theory goes, is stronger politically than he was in 2011, and Speaker Boehner also has more control over the Tea Party wing of the Republican party. The new power dynamic should make it easier for moderates to find a palatable mix of revenue increases and spending cuts. This morning, John Carney mentioned an alternative view: The…

The Decline of Angry White Guys

Tuesday, November 6, 2012


This post discusses the election, what I expect to happen, and my views on fiscal and monetary policy. This is a normally politics-free blog, but economic policy impacts markets in a big way, and investors who believe myths about the nature of debt and money put themselves at a disadvantage. Comments engaging with the substance of the arguments below are welcome; the rest will be deleted. I predict Obama will win the election by at least 33 electoral votes. My…

Preparing for the Fiscal Cliff Debate

Wednesday, September 5, 2012

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The approaching U.S. fiscal cliff has been on the radar of every strategist and portfolio manager since the compromise was reached in 2011. If policymakers are not able to amend the current mix of changes, mandated spending and benefit cuts and the expiration of several tax cuts will create a significant drag on the economy. A recent overview from Goldman Sachs makes clear just how much is at stake. If no changes are made to current law, the contraction in…

Friedman Hearts Pinochet

Tuesday, July 31, 2012


Today would have been Milton Friedman’s 100th birthday and, predictably, people on the internet are stumbling over themselves to give rapturous applause.  In his Nobel lecture, Friedman famously claimed that it was possible to do value-free economics. However, Friedman’s own experience in the policy realm either disproves that claim, or shows Friedman to have had some truly perverse moral values. In “Friedman, Positive Economics, and the Chicago Boys,” Eric Schliesser (Gent) explains the problems with Friedman’s methodology, in part…

The U.S. Economy is Doing Better Than You Think – Fine, Even

Saturday, June 9, 2012


On Friday, President Obama remarked that “the private sector is doing fine,” especially relative to state and local government employment. Partisan opponents got so excited about this “gaffe” that they forgot to show contrary data. Marketwatch put together a few charts, some of which actually supported the President’s view, and some, like this one, which supposedly paint a more tepid picture. But notice that this is a chart of year over year profit growth. Second-derivative divination does not…

Will the Eurozone Buy Itself Another Call Option?

Wednesday, December 14, 2011


I have been trying to understand what might motivate Germany to give permission for the European Central Bank unequivocally to don the mantle of “lender of last resort” and allow monetary policy to complement fiscal austerity in the hope of avoiding disaster.* What follows is just a speculative thought that you can dismiss if it seems like nonsense. A metaphor that makes sense to me is one in which Germany is determining whether the purchase of another market-moving call option…


Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More


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