Relevant and even prescient commentary on news, politics and the economy.

Portfolio Capital Flows to Emerging Markets amid the Pandemic

by Joseph Joyce

Portfolio Capital Flows to Emerging Markets amid the Pandemic

Among the most notable economic responses to the COVID-19 pandemic has been the turnaround in capital flows to emerging markets. A sudden reversal in portfolio flows of over $100 billion to these countries in March has been offset by a surge of capital this fall. But many of these countries have accumulated debt burdens that will affect their ability to recover from the pandemic.

The IMF examined portfolio flows to these economies in last April’s issue of the Global Financial Stability Report (see also here). The report showed that prior to the pandemic, bond portfolio inflows had been larger than equity portfolio flows, with cumulative flows since 2005 of approximately $2.5 trillion for bonds vs. about $1 trillion for equity. The bonds included both bonds denominated in foreign currency as well as local currency debt. These flows had constituted significant amounts of finance in the emerging and frontier markets’ debt and equity markets.

Why Did AMLO Wait So Long To Recognize Biden Victory?

Why Did AMLO Wait So Long To Recognize Biden Victory?

 I do not know, but it is on the surface at least surprising.

AMLO is the nickname of Andres Manuel Lopez Obrador, the President of Mexico since Dec. 1, 2018.  Only yesterday, along with Mitch McConnell, President Putin of Russia and President Bolsonaro of Brazil, AMLO congratulated Joe Biden on his victory over Donald Trump in the US presidential eleciton, leaving only North Korea’s Kim Jong Un still not recognizing Biden’s victory among world leaders.  Putin and Bolsonaro and Kim have all been personally close to Trump, with Bolsonaro also imitating him in terms of policy positions.  But what is with the delay by AMLO, especially given that polls have long shown Trump having the lowest popularity rating in Mexico of any nation in the world, down around 5%?

Besides Trump’s massive unpopularity there are other reasons one might not expect this delay on AMLO’s part.  One is ideological, although Kim Jong Un is a left wing Communist supporting Trump.  But indeed, even though he started out in the centrist PRI, AMLO has long been identified as the leading left progressive figure in Mexican politics, running as the presidential candidate of the main leftist party, the PRD, in 2006 and 2012 (Mexican presidents serves single six year terms), then starting his own party, MORENA, which he ran from successfully in 2018, although in that year he did have the support of a minor socially conservative party.

Industrial production continues to progress, at a slower rate, in November

Industrial production continues to progress, at a slower rate, in November

I call industrial production the “King of Coincident Indicators” because it is the metric that is usually the decisive one for the NBER in determining when recessions and expansions begin and end.


November’s report continues the trend of a strong rebound in production, as overall production increased 0.4% from October, and manufacturing 0.8%. Total production has recovered about 70% from its April low compared with February just before the pandemic struck, and manufacturing has recovered over 80% from that point:



Even so, both are currently off their peaks by about the same percentage as the worst of the 2001 recession, and the 2016 “shallow industrial recession.”
The next graph compares overall production (blue) with nonfarm payrolls (red), both normed to 100 as of February:

The US economy is primed for takeoff in 2021

 by New Deal democrat

The US economy is primed for takeoff in 2021

The fist vaccine against COVID-19 began to be distributed today. At last there is light at the end of the tunnel.

The pandemic has been dictating the state of the economy ever since it hit. But for the last several months and longer, the “high frequency” data I follow each week has painted a picture of an economy that “wanted” to accelerate.

But because the weekly data can be very volatile, a look at the more reliable, long-established leading indicators that are provided monthly or quarterly is worthwhile.

I have prepared a post doing exactly that, first with the long leading indicators that help us know the direction of the economy about 1 year out. This post is up at Seeking Alpha.

As usual, clicking over and reading should be informative for you, and a little bit $ rewarding for me.

The Fiscal Stimulus Gridlock

The Fiscal Stimulus Gridlock

The best can be said about a possible fiscal stimulus in the face of a renewed Covid-19 surge that is dragging the economy down as many areas shut down in various degrees is that at least a few hours ago the US Senate approved a one week continuing budget resolution to keep the fed govt functioning. In past years govt shutdown was a big deal, but with the current president threatening to seize power in a coup even in the face of the SCOTUS unanimously repudiating his final “Kraken” lawsuit, not to mention the positive drama of the FDA approving the Pfizer vaccine for US use, well, a govt shutdown right now does not look like such a big deal. But, hey, for at least the next week it will not happen, snore.

But we are facing a much more serious matter than the matter of just keeping the US fed govt going now, given that the US economy seems on the verge of possibly going into “double dip,” as cutbacks on economic activity spread as we see the coronavirus surging across the country. The House back in either April or May or thereabouts passed the HEROES bill that was a $3 trillion bill. Mitch McConnell in the Senate said no.

Market Capitalism

Then and Now

Once the birthright of lords and kings, the association of wealth with power, is, of late, more often than not, the prerogative of the very wealthy; theirs as a right derived under the aegis of capitalism, and, one defended, it seems — under the aegis of the Constitution.

For a long time now, capitalism has provided both the rationale and method for continuing the status quo; it granted the wealthy the right to employ the power of their wealth to control a nation’s wealth, and more. Of late, the US Supreme Court has ruled that this right to power extends to politics and beyond.

Surely, the wealth of a nation is a consequence of production by its many, or, even if stolen from another land, that other land’s many; not the efforts of a handful of men. Just as assuredly, the wealth of a nation, the world, belongs to all its citizens; not to a handful of them. And, again, just as assuredly, the right to decide what to do with a nation’s wealth, belongs to all its citizens. So, surely, too, the political power of the Nation belongs to its citizens.

Today, in these, our United States of America, to an extent unseen at least since the Gilded Age, the struggle is about who gets to decide everything. That’s everything as in: What is legal and what is not. How the laws are enforced, …. The distribution of wealth, of healthcare, …. Whether or not to go to war, …. Even what to think. Today, we are seeing the extremely wealthy spend $millions and $millions on think tanks and lobbyists, political campaigns, getting justices appointed to the US Supreme Court, …, in order to ensure that they, not we the people, continue to get to decide what to do with the Nation’s wealth, …, to decide everything. These are they, the very same, who took our wealth, invested it in Asia, then told us, we the people, to go fish.

Weekly Indicators for December 7 – 11 at Seeking Alpha

by New Deal Democrat

Weekly Indicators for December 7 – 11 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha. Here’s the link:

https://seekingalpha.com/article/4394374-weekly-high-frequency-indicators-weakness-spreads-still-no-fundamental-change-in-outlook

With the big increase in jobless claims, as well as a deteriorating situation for restaurant dining, weakness has spread further among the indicators – but the forecast, both long and short term, remains very positive.

As usual, clicking over and reading should bring you up to the virtual moment, and I appreciate the jingle jangle of a penny or two extra in my pocket.

November inflation tame again, with the economy weak, but real wage gains strong

November inflation tame again, with the economy weak, but real wage gains strong

Consumer prices rose 0.2% in November on a seasonally adjusted basis, but declined -0.1% unadjusted:


As shown in the above graph, a November decline in prices is typical. This year’s decline was less than either of the past two years.
On a YoY basis, consumer prices were only up 1.2%:

JOLTS report for October: similar to previous 2 recoveries, but a decline in actual hiring may be a warning

JOLTS report for October: similar to previous 2 recoveries, but a decline in actual hiring may be a warning

This morning’s JOLTS report for October showed a jobs market recovery that, for one month at least, paused. Openings and quits were up (good), but layoffs and discharges were also up (bad) while hires were down (bad).

While the JOLTS data is a deep dive into the dynamics of the labor market, since it only dates from 2001, there are only 2 previous recoveries with which to compare the present. Nevertheless it is worthwhile to make the comparison.

In the two past recoveries:

  • first, layoffs declined
  • second, hiring rose
  • third, job openings rose and voluntary quits increased, close to simultaneously

Let’s examine each of those in turn. In each case, I break out 2001-19 in a first graph and then this year in a second.


What appears below is that, although there has been some variation, the past several months have recapitulated the pattern from the last two early recoveries: the first two data series to turn – layoffs and hires – has indeed turned, while the last two – job openings and voluntary quits – have appeared to bottom but have had a much less dramatic rise.

This first graph compares layoffs and discharges (blue) with the 4 week average of initial jobless claims (red):


You can see that, by the end of the recessions, layoffs were already declining, and continued to decline steeply over the next 3-8 months before reaching a “normal” expansion level.

Jobless claims rise: a break in the trend?

Jobless claims rise: a break in the trend?

This week’s new and continuing jobless claims all rose off of last week’s pandemic lows, but while I suspect the downward trend has broken, I don’t think we can say so decisively yet.

On an unadjusted basis, new jobless claims rose by 228,982 to 947,504. Seasonally adjusted claims rose by 137,000 to 853,000. These were the worst readings in 4 and 2 1/2 months, respectively. The 4-week moving average also rose by 35,500 to 776,000, the highest reading in a little over a month. Here is the close up since the end of July (for comparison, remember that these numbers were in the range of 5 to 7 million at their worst in early April):

Before proclaiming DOOOM, let me point out that the YoY changes have barely budged higher in the adjusted claims, and *unadjusted* claims had their best week yet since the start of the pandemic: