Jeffrey P. Snider
@JeffSnider_EDU • 139,337 subscribers
Host Eurodollar University channel. Monetary science reborn. Putting central banks where they belong.
Videos
The Bank of Japan finally admits the carry trade is the problem. So they raise rates to fix it. Except the pension funds and insurance companies they need to buy Japanese bonds are refusing. Not because rates are too low. Because the policy environment made investing in Japan too unpredictable in the first place. So the hikes meant to strengthen the yen are pushing the same institutions further away, and the yen weakens anyway. They diagnosed the disease correctly for once. They just cannot write a prescription that matches reality, because the whole framework they are working from does not match reality. That is the pattern. Not just in Japan.
Jeffrey P. Snider207,607 次观看 • 17 天前
Everyone is watching crude prices. Wrong number. Crude inventories are only 6% below normal. Fine, seemingly. But gasoline stocks just dropped 5 million barrels in a week. Diesel is 12% below average, even with soft freight demand. This isn't a demand story. US gasoline demand is down 2.2% year over year. It's a supply story. Refineries are running at 95.8% and still can't keep up. That gap between crude and refined product is the crack spread, and it's at record highs. Which means the refinery, not the oil field, is setting your price at the pump.
Jeffrey P. Snider89,293 次观看 • 9 天前
China stopped buying oil. Not because it ran out, because it stopped needing it. Crude imports collapsed 41 percent year over year in June. Refinery processing hit its lowest level since March 2020. No lockdown this time. Just a property downturn and a banking system under stress. China was the marginal buyer propping up global oil demand. Without it, exporters discount and reroute cargo just to find buyers. Bearish for crude. But less Chinese refining also means less gasoline, less diesel, less jet fuel reaching the market. Crude is bearish. Fuel can stay tight. Crude moves globally in weeks. Fuel is local and slow. A surplus of crude on a tanker doesn't become gasoline overnight.
Jeffrey P. Snider69,160 次观看 • 8 天前
Everyone thinks the Fed prints endless money. So why does the world keep running short of dollars? Because what the Fed actually creates is not the money the world uses. It creates bank reserves. Those are not real money. They are limited-use tokens that only work inside the interbank system. The dollars that move the world are private bank money, created when commercial banks lend. Ledger entries on JP Morgan, on Deutsche Bank. That is the disconnect. The Fed can flood the system with reserves, but if banks will not lend, no real money reaches the economy. That was the entire 2010s. Everyone saw the reserves and screamed inflation, dollar to zero. The opposite happened, because the banks stayed constrained. So a dollar shortage has almost nothing to do with the Fed. It is about whether banks are willing to move. And right now, they are not.
Jeffrey P. Snider62,060 次观看 • 14 天前
The mainstream story about the weak yen is a cartoon. Everyone points to hedge funds borrowing cheap yen to buy Treasuries. Simple story. Easy headline. But Japan just spent tens of billions defending the yen directly in FX markets. Got almost nothing for it. Why? Because they were treating a symptom, not the disease. The real carry trade isn't a hedge fund trade. It's Japanese pension funds, insurers, institutional money, all quietly deciding that returns are better outside Japan than inside it. That's not speculation. That's domestic capital voting with its feet. And it explains something the textbooks can't: why BOJ rate hikes don't strengthen the yen. Under this framework, hikes can actually make it weaker. Japan may have finally named the real problem. Naming it and fixing it are two very different things.
Jeffrey P. Snider47,624 次观看 • 16 天前
The crack spread just hit records. It's not a Fed story. Crude collapsed almost overnight after the Iran ceasefire. Tankers sailed again, storage cleared fast. Gasoline and diesel didn't follow. Crude reroutes in weeks. Refined fuel is regional, spec locked, bottlenecked by pipelines and refinery configs that take months to adjust. So crude is cheap again, fuel stays scarce, and the gap between them is sitting at a record. That spread isn't profit. It's a receipt for a supply shock still working itself out.
Jeffrey P. Snider25,151 次观看 • 8 天前
Everyone had a story for why gold was ripping. Almost nobody had the right one. It wasn't central banks quietly stacking gold ahead of some new standard. It wasn't fear driven retail buying. It was a carry trade. Traders long spot in London, short futures in New York, pocketing a healthy spread. Then tariff threats made physical delivery a 20 percent liability, so the metal got rushed across the Atlantic just in case. Gold bugs called the inventory buildup bullish. Then called the drawdown bullish too. Same data, same conclusion either way. That is not analysis, that is a narrative looking for cover. The real signal was never the metal moving between vaults. It is what happens to the opportunity cost of holding gold once rates start falling again. Keith Weiner
Jeffrey P. Snider30,958 次观看 • 11 天前
Everyone was positioned for oil at 200 a barrel. Inventories were low. The trade made sense. Then the curve flattened. In two weeks. Almost overnight. A flat curve after a supply shock is not supposed to happen. Normal shortage logic says near term prices trade at a premium while the market waits on inventories to refill. Instead the front of the curve collapsed hardest. That is not a supply story. That is the market pricing in demand disappearing faster than constrained supply can even matter. Stack it next to the household employment numbers, the drop in labor force participation, falling real incomes. The oil curve is not an isolated signal. It is confirmation.
Jeffrey P. Snider57,605 次观看 • 22 天前
Most people read the dollar exactly backwards. A rising dollar looks like strength. Strong America, good economy, the Fed doing its job. A falling dollar looks like weakness. Inflation, debasement, the end of dollar dominance. It is the other way around. A rising dollar usually means global funding is tightening. The world is short of dollars and scrambling to find them. That is not strength. That is stress. Think of a hurricane coming and everyone rushing to buy bottled water. The price spikes. That does not mean the water got stronger. It means people are scared and desperate. The dollar works the same way. When it surges against everything at once, it is telling you dollars are getting scarce, not that America is winning. That is why the dollar spikes in crises. The 1997 Asian crisis. 2008. The 2015 emerging market squeeze. March 2020. The 2024 carry trade blow up. The pattern is not random. None of this is really about the Fed or money printing. The dollar's exchange value is mechanical. It runs on the eurodollar system, the offshore dollar funding made of bank balance sheets, collateral, repo, and swaps. The biggest driver is dealer balance sheets. When dealers expand, dollars flow and the world feels calm. When they pull back, dollars get scarce and the dollar climbs. And this is the part everyone gets wrong. When foreign central banks sell US treasuries, the headlines scream that they are dumping America. They are not. They are using their reserves exactly as designed. When their markets are short of dollars, they sell treasuries to supply them. Sell treasuries, the dollar goes up. That is stress, not rejection. Which is why the dollar doom story keeps failing. They said QE would destroy the dollar after 2008. They said the deficits would collapse it. It never happened, because the problem was never too many dollars. It was not enough usable ones in the right places. So when someone tells you a strong dollar means America is strong, be careful. The strongest looking dollar is often the biggest warning sign. And a falling dollar is usually just the storm passing.
Jeffrey P. Snider103,799 次观看 • 1 个月前
Gas prices aren't following oil down. Here's why. Crude supply is coming back. China stopped absorbing barrels. But refined fuel is different. Gasoline and diesel got drained during the disruption. Refineries can't refill overnight. That gap is the crack spread. Above sixty dollars, it means the bottleneck isn't crude anymore. It's turning crude into usable fuel. Record spreads don't last. Either runs catch up, bottlenecks persist, or demand crashes. Only one of those is good news.
Jeffrey P. Snider18,825 次观看 • 9 天前
The Bank of Japan raised rates to save the yen. The yen got weaker. Here's the part nobody in the mainstream story explains: raising rates was supposed to make yen assets more attractive and keep money home. Instead it made the JGB market less stable, so Japanese institutions want to invest overseas even more. Meanwhile small and midsize Japanese companies are hedging currency exposure, and the swings are blowing through those hedges. Unlike the big firms, they can't just go source dollars freely. Bankruptcies are climbing while everyone is being told inflation finally coming back is a good sign. The only time the yen has actually strengthened in the last few years wasn't policy at all. It was August 2024, when the carry trade itself reversed on its own. Rate hikes didn't do that. A dollar funding problem did.
Jeffrey P. Snider29,353 次观看 • 16 天前
Everyone is watching the price of oil. The real story is who is not buying it. Months of scarcity trained the system to function without certain barrels. Now those same barrels are reentering supply all at once, and there is nowhere for them to go. Contango has shown up across every major benchmark, in the US, Europe, and Asia. Not one isolated market, the entire global system pricing in the same weakness at the same time. UAE crude is turning up in Hawaii. A tanker full of Venezuelan oil sailed over 10,000 miles to India and sat offshore for two weeks with no buyer. Oman crude, a grade Chinese refiners rely on, just hit its biggest discount since 2020. A Congolese cargo failed to sell even at a record discount to Brent. The question was never whether China grabs a few cheap cargoes when prices fall far enough. It is whether China is still willing to be the marginal buyer for the entire world. Increasingly, it looks like the answer is no.
Jeffrey P. Snider20,094 次观看 • 11 天前
Walmart just cut prices on thousands of items. Groceries, household goods, even lawn mowers. Sounds like good news. It is not the story you think it is. Retailers do not slash prices across the board because demand is strong. They do it when customers start saying no. And Walmart already told us why. Tax refund money ran dry. Gasoline stayed painfully expensive even as oil moved lower. Savings are razor thin. Line that up with last week's labor data. Plunging participation. A headline payroll number that was almost certainly negative. Line it up with the flat yield curve. With forward rates and tips breakevens plunging. The curve has been saying this for months. Walmart is just the part of the story you can see on a shelf. The Fed's inflation theory has no good answer for why the largest retailer in America is discounting groceries to convince people to buy more.
Jeffrey P. Snider25,868 次观看 • 15 天前
Walmart just cut prices on thousands of items, including Coke and Pepsi. That is not supposed to happen if the inflation story were true. The whole narrative rested on one assumption: companies have pricing power because consumers have income to absorb higher costs. Walmart cutting prices says the opposite. And when the largest retailer in America moves, suppliers, competitors, grocery chains, discounters all get dragged into the same price war. There are two kinds of disinflation. One comes from supply improving and productivity rising, consumers win without any pain. The other comes from demand being too weak to support higher prices, so companies are forced to cut. This is the second kind. Meanwhile the TIPS market has been pricing exactly this for over a year, through the tariff scare, through the energy shock, breakevens never bought the inflation spiral story. Now they have crashed even further. The Fed and mainstream economists are still staring at headline payroll numbers, calling the labor market resilient. The market pricing real money is telling a very different story.
Jeffrey P. Snider23,755 次观看 • 15 天前
China's growth engine did not slow down. It broke. Households just posted a record decline in borrowing. That is not caution, that is fear. Healthy consumers take on mortgages and auto loans. Scared ones do not. Retail sales just logged their first annual decline since the zero Covid lockdowns. Auto sales collapsed 16 percent, and cars are the clearest tell of household confidence because they are big financed purchases tied to future income. Real estate investment fell 16 percent in five months. That is not a slowdown, that is the collapse of the actual foundation China's growth model was built on. Property was never just a sector. It was the collateral behind local government debt, developer financing, and household wealth. Rate cuts and easier mortgage rules cannot fix a credit machine when nobody wants to borrow and nobody wants to lend. And when domestic demand keeps failing while China keeps exporting, that gap has to show up somewhere. Oil is one of the places it shows up first.
Jeffrey P. Snider19,311 次观看 • 12 天前
The Fed can talk tough all it wants. The dots can suggest another hike. But Walmart just told you what is actually happening in the real economy. Price cuts. Not a promotion. A signal. Weak payrolls. Household employment plunging. Labor force shrinking. Savings gone. Gas still eating paychecks. This is not inflation cooling into a soft landing. This is demand destruction. The tips market never bought the inflation story. Breakevens are crashing. The forward curve is already pricing what the Fed has not admitted yet: maybe one more hike, then reality wins. The lesson: watch what consumers and markets are actually doing, not what officials are saying they might do.
Jeffrey P. Snider23,516 次观看 • 16 天前
Everyone wants to know how to trade what the eurodollar system is telling us. Turns out oil futures hand you the answer. Watch Cushing inventories hit tank bottoms. Overlay long-term rates on top. They move together, every time. Why? Oil futures are leveraged. Funding costs are priced in. When contango steepens hard, that is not just a supply story, it is a dollar shortage story. The futures curve went from screaming historic deficit to flat in a matter of months. That is not supply. That is demand destruction, and it is showing up in the payroll data too. Different markets, same signal. That is the whole point of following the plumbing instead of the headlines.
Jeffrey P. Snider27,973 次观看 • 22 天前
Oil sold off the moment the Iran peace deal appeared. That part makes perfect sense. Nobody wants to be long crude into open supply routes and normalizing tanker flows. The fundamental value of oil is closer to 50 a barrel than 150. But here is where it gets interesting. If this were only supply normalizing, the curve would still hold its shape. Inventories are drained. Tankers are disrupted. Refineries are scrambling. As long as demand is firm, the curve should stay in strong backwardation. Backwardation means front-month crude trades above later contracts. It is the market telling you it wants barrels today. It is a sign of tightness. That backwardation is nearly gone. The prompt spread, the first two contracts, has narrowed to under a buck. The three-month spread has dropped to just over 2, after being 30 not long ago. The front is selling off far harder than the back. Some of that is supply normalizing. The good kind. But when the curve gets this close to contango this fast, it points to something more troubling. Contango is what a glut looks like in the futures market. Too much oil for the demand in front of it. The curve is not there yet. But it is moving that way. And that is the warning. You have to be careful about exactly why oil is plunging this far, this fast.
Jeffrey P. Snider49,942 次观看 • 1 个月前
Bitcoin just fell below 60,000. First time in about two years. The easy story: crypto liquidation, fading leverage, ETF outflows. But look at BlackRock's chart next to it. Same move. Same timing. That is not a coincidence you can explain with crypto jargon. When the world's largest asset manager and Bitcoin start moving together, they are probably not causing each other's problems. They are both reacting to the same thing underneath. Private credit stress. Shadow banking pressure. Falling bond yields. A eurodollar risk indicator flashing the same warning. The question was never really about Bitcoin.
Jeffrey P. Snider21,916 次观看 • 18 天前
Everyone thinks the oil story is simple: not enough supply, that's why prices are high. But look at the futures curve right now. It's flattening into contango, and not down the road, right at the front. August. September. That is the market pricing in too much oil, today, not in some far off normalization. Here is the part that should stop you. If supply hasn't fully come back, and the curve is still saying there's a glut, the math only works one way. Demand is falling faster than supply is recovering. This was never a supply story. It's a demand story wearing a supply costume.
Jeffrey P. Snider24,348 次观看 • 21 天前