Treasury rates and global PMI

Correlation ain’t causality, and yet…

Via Matthew C. Klein.


Let's get some negative interest rates. At this point, the market is only rewarding growth and risk, not capital preservation. I do wish that the average investor was not restricted from being in VC and PE due to capital requirements. Ridiculous that one could bet it all on Bitcoin but be locked out of venture funding on Sand Hill road or any pre-IPO investment due to dated laws. We repealed Glass-Steagall while we still have accredited investor restrictions when it should be the other way around.

Found this a pretty good read:
"Software was eating the world. Now landlords are eating everything."

That's just 9 years of data, covering at best half of a contraction-and-recovery business cycle.

I wouldn't even call it n=9, more like n = 1/2 (half a business cycle) given the limited macroeconomic environment it covers.

The PMI has been around for decades. What does the graph look like if we extend it to prior years? One of the commenters to the article dismissed that idea saying that data pre-Basel III is irrelevant. Okay fine but then we're still stuck with n = 1/2.

It was by looking at graphs like this and thinking that they represented important truths that people started believing in the Phillips Curve. (Which does have some validity, but only in the short run and only for a given macroeconomic regime i.e. eventually the curve shifts.)

There is no point about that. All these "indicators" and "investment strategies" don't last more than half a business cycle. And when everyone notices a pattern it disappears.

I don't see the point of fighting it. Even if it's half a business cycle and clearly not a consistent leading indicator, it tells us something.

Probably that the fed is listening to something like the PMI, or the fed and business managers are listening to the same things.

Mood is global now? Global mood is tied to a few (possibly too few) fundamentals? Something like that.

Plot the Fed’s actions on FFR over the same period.

Jesus. Christ.

No to what? Are you claiming no correlation?

Probably just being contrary to no good purpose.

You're the equivalent of Senator Inhofe bringing a snowball into the Senate.



I can spot that you have never actually named a point of disagreement.

Probably because you don't want to risk having an opinion, defending a position, of your own.

You’re supposed to believe in science and technocracy. That’s the Dem appeal to people like me: technocracy. You’re supposed to instinctively bow to authority.

You’re word vomiting about things you do not understand, in exactly the same way an extremist Christian rants about eyeballs making evolution impossible. Or fossils being devil traps.

I know you’re an idiot. I know most people don’t understand stochastic calculus. That’s my threshold.

So let’s face the facts:

1. You’re at best a graduate from a CSU whose students fail reading comprehension. If you graduated it’s with a soft fake degree. Anonymous literally fails high school reading comprehension tests !

2. You had a semi-skilled job in Long Beach before tech became an actual industry

3. You’ve never passed a class in calculus

4. You have no idea what data analytics means; linear regression is as scientifically credible as Ocasio-Cortez to you.

My position is the truth. You don’t understand math, reality, or life.

lol, word vomit complaining about word vomit, and no concise point of disagreement.

Time to change your MR naming technique and begin again.

Oh, if I could make a suggestion.

You should be a pragmatic moderate who hates having Trump as president, next time.

Life is so much easier.

Literally every news day breaks in your favor.

We’re the moderates. You’re the Senator watching a snowball melt.

Your intention is obviously re-electing Trump no matter the cost. By being relentlessly idiotic in your denunciations.

Is that Long Beach IP a mask?

Being Right Since 2015(tm)

By the way, what do you think of the nuke the hurricanes idea?

I'd be more sympathetic if you didn't come off as an ineffectual dimbulb yourself.

That must be the manufacturing global PMI, in contraction. So here is the test of services, are they any good if manufacturing is contracted?

+1 The is global PMI, which includes China, and just manufacturing. The composition of the players contribution to manufacturing also changes over this period.

However, notice all the car advertisements?

If PMI is a proxy for global demand, and global demand is currently being constrained by money supply for which treasury rates are a proxy, then this makes sense. Perhaps though if money supply were much looser then global demand would not be constrained by money supply but by something else. Put it this way, if there was a PMI for Venezuela then I doubt that would be very correlated by 10 year Venezuela bond yields.

This probably means that the economy has not be operating at full capacity since 2011, which I guess we all knew.

The PMI has been falling since mid-2017, even as the Fed raised rates. Isn't that a significant disconnect? Not reflected in the chart above, but the latest PMI is as low as it's been since September 2009. By the way, at the G-7 today, Trump announced that he won't be imposing more tariffs on China imports and isn't ordering American companies to leave China, reversing his Friday tweets. The White House then announced that Trump had been misinterpreted. What's a purchasing manager to do. Indeed, what's the Fed to do. My question: why was Trump sitting at the G-7 presser with his hands forming a triangle in front of the zipper on his trousers? Does he feel emasculated in the presence of the other leaders of the G-7?

Remember the uncertainty index, around the time the Bush tax cuts were to expire, and how uncertainty was holding back the economy?

Forget the PMI index. Just look at the US, China and British uncertainty indices:

Looks like a heart attack during Trump's tenure, and Boris Johnson, off the charts.

Actually, the U.S. PMI didn't start falling until early 2018 (at the point where it had finally reached the pre-great recession level), unlike the global PMI which started falling sooner. But it was plummeting as the Fed raised rates at the end of 2018.


Actually, my comment was about the uncertainty index, not the PMI, so your comment doesn't respond to the observation.

What are you calling a raise, 2.9 to 3.2?

We are programmed to look for "differences" even when there isn't much difference. IMO, mid-2017 to mid-2018 was just noise. No signal. The steep drop since looks like signal.

And the trade war is probably a significant factor in that signal, yes.

Flight To Safety.

One of the take-aways may be the time-points where the PMI went "negative," i.e., below 50; and the 10 year T rate bottomed (prices rose).

I'm fairly confident that a similar graphs going back decades would show similar patterns. Likely gold moved in similar ways.

Investopedia, "The 10-year, UST yield is used as a proxy for mortgage rates, and other measures; it's also seen as a sign of investor sentiment about the economy. A rising yield indicates falling rates and falling demand for Treasurys, which means investors (that see economic positives) would rather put their money in higher risk, higher reward investments; a falling yield suggests the opposite."

Behavioral economics. We have numerous firm grasps of the obvious and often choose grasp over fact.

DtB might be a crazy old racist, but he obviously worked in finance. Unlike shills like anonymous.


I plead guilty to two of three.

“A rising yield indicates falling rates...”

If DtB worked in finance he would have never copied the above sentence. So, that leaves only crazy and racist.

Right. That is a typo. Lo, the inverse relation between debt securities price movements and yield movements. It should have been "market price."

It snuck up on me. I'm now so old. I forgot what I worked in. In the rare lucid moments when I can review account statements, I seems that it must have paid well.

So the old racist liked his bank bailouts. That makes him better?

I know what you mean. A friend of mine is making a killing investing in Brazil.

Invest in Grain storage equipment, and

Fine particulate filtering face masks

Indeed. I, for myself, am very glad I i vested in Brazil. My money multiplied as crazy rabbits.

I didn't even think of investing in Brazil, but after reading these posts from two Americans who had much success doing so, I have no choice but to do that same!

Thank you for the investing tip, my fellow Americans!

Yes, agreed. I too will be immediatly calling my American broker and investing on Brazil like these fine gentlemen.

It seems a great idea.

You are welcome.

Comments for this post are closed