Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.


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A character in the film “It’s a Mad Mad Mad Mad World” reasons: “Now look, let’s be sensible about this thing. There’s money in this for all of us. Right? There’s enough for you, there’s enough for you, and for me, and for you, and there’s enough for…” [They all race to their cars]. (Stanley Kramer, director)



Sustained rising United States Treasury interest rates and a strong US dollar have played critical roles in creating the January 2022 price peak for and subsequent declines in the S+P 500. Increasing yields not only in America but also within emerging marketplaces, as well as the powerful dollar, assisted the construction of the earlier high (around February 2021) for emerging marketplace stocks in general. The ongoing UST and other yield climbs of recent months alongside the strong dollar have reestablished long run price and time convergence between the S+P 500 and emerging marketplace equities. The major trend toward higher US and other rates, alongside the high US dollar, and interrelating with the downward trends in the S+P 500 (and other advanced nation stocks) and emerging marketplace equities, probably have created summits for commodities “in general”.

The price spike in commodities (enlist the broad S&P GSCI as a benchmark) beginning in December 2021/early 2022 of course underscored inflationary fears, which assisted the rise in interest rates, thus helping to precipitate down moves in the S+P 500 and other stock marketplaces. However, the rising UST (and international) yield trend and strong dollar situation preceded the Russian invasion of Ukraine in late February 2022.

For a long time, yield repression by the Federal Reserve and its central banking friends created negative real returns relative to inflation for US Treasury and many other global debt securities. This very easy money policy (assisted by gigantic money printing/quantitative easing) and enormous US (and other) government deficit spending (especially after the advent of the coronavirus pandemic in early 2020) generated enthusiastic quests for yield (adequate return) by investors and other traders in stocks, lower-quality debt instruments (such as corporate and emerging marketplace sovereign bonds), and commodities. This helped to produce monumental bull trends in these playgrounds. Wall Street and the financial media eagerly promoted the reasonableness of these yield hunts. The sleepy Fed watchdog and other virtuous central bankers were long complacent about inflationary dangers, labeling inflationary signs as temporary, transitory, the result of supply bottlenecks, and so forth. Nowadays, these more vigilant guardian bankers, alarmed by the highest inflation in several decades, have commenced a rate-raising campaign.

Thus the sunny “search for yield” landscape for the S+P 500 and associated stock, debt, and many commodity marketplaces has darkened. An anxious “run for cover” liquidation of assets by many investors and other owners probably has been underway. Compared to the time just prior to the 2020 coronavirus pandemic (and the 2007-09 global economic crisis), the Federal Reserve (and other central bankers) and the American and other national governments probably have much less ability to readily rescue the S+P 500 and other “search for yield” marketplaces.


Previous essays noted that the S+P 500 probably peaked on 1/4/22 at 4819. Looking forward, the S+P 500 probably will venture significantly beneath 5/2/22’s 4063 low. The bear trend in emerging stock marketplaces will continue. Over the long run, given the American (and global) inflation and debt situation, the yield for the US Treasury 10 year note probably will ascend above its recent high around three percent, although occasional “flights to quality (safe havens)” and thus interim yield declines may emerge. Remember that the dollar rallied from April 2008 to March 2009, alongside the S+P 500’s collapse from its important mid-May 2018 interim high (S+P 500 major high October 2007) to its major bottom in March 2009. However, and although it is a difficult call, the current bull trend for the United States real Broad Dollar Index probably will attain its summit in the near future. Commodities in general (spot; nearest futures basis) probably made a major high in early March 2022 and will continue to retreat, although there may be brief price leaps above previous tops in “have-to-have” (very low inventory) situations.

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Running for Cover- Financial Marketplace Adventures (5-3-22)



Not only have emerging marketplace growth rates slowed. Many sentinels fear the substantial fall in emerging marketplace equities and currencies has “reached crisis proportions”. (Financial Times, 9/8/15, p3; citing the Institute of International Finance). The World Bank’s chief economist warned the Federal Reserve risks creating “panic and turmoil” in emerging marketplaces if it raises rates in its September 2015 meeting (Financial Times, 9/9/15, p1). However, in today’s globalized economy, central bankers and other important regulators and politicians also fear insufficient growth in many advanced nations. They also worry about further substantial increases in the United States dollar and drops in stock benchmarks such as the S+P 500. Some probably dread that an international crisis akin to the 2007-09 one, even if much less devastating, is underway or may soon appear.

The verbal barrage recently unleashed since late August 2015 by key central bankers and their comrades displays their fears and goals regarding these financial fronts. In any case, their enthusiastic wordplay at times raises marketplace hopes significantly. Their windy talk perhaps for the near term will stabilize the dollar around its recent highs and stop benchmark stock marketplaces from substantially breaching the lows reached in the past few weeks.

However, the foundations of worldwide growth nevertheless remain shaky, despite about seven years of highly accommodative monetary policy by the Fed and its allies. In addition, substantial debt and leverage troubles still confront today’s intertwined global economy. Consequently, this magnificent rhetorical display aiming to boost real global economic growth, significantly alter currency patterns (reverse the dollar’s strength, or at least significantly slow its appreciation) and substantially rally (or at least successfully support) stocks probably will not achieve long-lasting success.


The sustained rally in the broad real trade-weighted US dollar since mid-2011, and particularly its recent climb slightly beyond March 2009’s crucial peak, has played a key part in encouraging (confirming) weakness in emerging marketplace stocks and commodities “in general”. The S+P 500’s slide since its 5/20/15 pinnacle indicates that its major trend probably will not diverge significantly from those of emerging equity marketplaces.

Focusing on the trials and tribulations of emerging/developing countries and their stock and foreign exchange playgrounds indeed helps analysis of other marketplaces around the globe. However, concentrating on and comparing exchange rates of “commodity currencies” offers additional notable insight into various interrelated financial marketplace trends. “Commodity currencies”, associated with countries with large amounts of commodity exports, are not restricted to emerging nations. Commodity exports are significant to the economies of advanced nations such as Australia, Canada, and Norway, so they likewise can be labeled as commodity currencies.

Paying attention to the currency trends of important emerging and advanced nation commodity exporters highlights the similar trends among them during the 2007-09 worldwide economic disaster era as well as nowadays. Such past and current collective effective exchange rate weakness contrasts with the robust strength of the trade-weighted US dollar. The feebleness both in 2007-09 and in recent times for the commodity currency group, as it involves both advanced and emerging marketplace domains, hints at global (not merely emerging marketplace) crisis. The exchange rates of many commodity exporters are at or near their lows achieved during 2008-09.

Thus noteworthy rallies, if any, in these commodity (exporter) currencies from their recent depths will tend to confirm (inspire) climbs in commodities “in general” and emerging (and advanced) nation stock marketplaces. Renewed deterioration of the effective exchange rates of the commodity currency fraternity “in general” probably will coincide with renewed (additional) firming of the US dollar. Such depreciation in the commodity currency camp likely will signal worsening of the current dangerous global economic situation and another round of declines in global stock marketplaces.

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Marketplace Twists and Shouts- as the World Turns (9-10-15)

STEPPING HIGHER: UST TWO YEAR NOTE YIELDS © Leo Haviland September 21, 2014

The US Treasury two year and 10 year notes over the past several years have made many important marketplace turns around the same time. The yield spread relationship between those instruments provides insight into and offers guidance regarding Federal Reserve policies. Although other variables of course are relevant, this spread offers indications regarding the extent of American (and international) economic strength or weakness.

Important trend moves in the 10 year less two year United States government yield spread often have roughly coincided with significant Federal Reserve Board policy decisions (sometimes assisted by major ones by the European Central Bank and others). Especially since around the time of its mid-December 2008 low around 125 basis points (10 year yield higher than two year; a positive yield curve), and thus during the Fed’s yield repression and quantitative easing era, the 10 year less two year spread has tended to widen (become more positive) during times of US economic growth (or notable signs or hopes for it) and decline during times where economic expansion slows or slumps (or when fears rise that this will occur). Fed quantitative easing moves link up with a widening of the yield spread (particularly via boosting the 10 year UST yield). The ending of the Fed’s money printing ventures have tied to narrowing of the yield spread (especially via falls in the UST 10 year yield). A narrowing pattern in this spread and the UST 10 year itself after the ending of QE (including the current tapering round) suggests that noteworthy “underlying” weakness remains in the US economy. See “Bond Yield Perspectives: Easing Comes: Easing Goes” (9/1/14) and related essays.

However, since the UST 10 year’s 1/9/14 plateau at 3.05pc, its yields on balance have moved sideways to down, whereas the two year yield pattern seems sideways to up over that period. The slip in the 10 year yield since then, given the Fed’s determination to increase inflation, indicates less than robust US (worldwide) economic growth. The increase in two year yields may reflect Fed plans more than notable overall economic strength (or the Fed’s faith that such strength is or will soon emerge). Yet will yields for both UST notes keep moving higher since their mid-August 2014 lows?

From the depths of the international economic disaster through most of the succeeding years, these US Treasury yield curve ventures (trend changes) generally have occurred around the same time as significant moves not only in the US Treasury 10 year note but also in the US stock marketplace (S+P 500). Many lows in the 10/2 UST yield curve spread have tied up with (occurred within a few months of) important S+P 500 bottoms; pinnacles in the spread likewise connect somewhat closely in time with plateaus in the US stock landscape.

However, whereas the 10 less two year spread and the 10 year yield itself have declined in recent months (265 basis point high in the yield spread 12/31/13; 3.05pc high on 1/2/14 for the UST 10 year), the S+P 500 this year has ascended to new highs over 2000. Thus the S+P 500’s relationship relative to the 10 less two year spread and the UST 10 year itself seems to have diverged from its prior pattern.

Significantly, the rise in two year note yields since very late 2013/early 2014 contrasts with the fall in the UST 10 year yield and the narrowing of the 10 less two year spread. Since end December 2008, roughly simultaneous declines in the 10 year note yield and the 10 less two year UST spread have been associated with a relatively weak US economic situation (or fears that such feebleness will emerge; international players such as the Eurozone affect this picture).

This slide in the 10 year note and the 10 less two year UST spread connects with the end of Federal Reserve money printing festivals, including the current one. Thus the US may be economically weaker (or more vulnerable to such feebleness) than many marketplace players or even the Fed (judging from its Fed Funds projections) perceives.

Emerging stock marketplaces have not followed the S+P 500 up to record highs. Given the slowing of economic growth in those economies, this represents a warning that the massive bull move in the S+P 500 may not continue forever. Look at the “MSCI Emerging Stock Markets Index” (from Morgan Stanley: MXEF). The MXEF over the past year or so has advanced from lows near in time to those in the S+P 500. Note the MXEF troughs at 878 on 6/25/13, 905 on 8/28/13, and 914 on 2/4/14. However, the MXEF remains below its Goldilocks Era pinnacle at 1345 (11/1/07), as well as 4/27/11’s 1212 plateau. In addition, it has started to fade from its recent top at 1104 on 9/4/14 (despite the ECB’s monetary easing action). If the MXEF starts to step significantly lower (keep an eye on 2/29/12’s high at 1085 and 1/3/13’s one at 1083), that will suggest increasing risks for the S+P 500 (especially if the UST 10 year yield also is unable to breach the 3.05pc level). Renewed weakness in emerging stock marketplaces increases the odds that the continued S+P rally will end (S+P 500 divergence from UST 10 year and 10 less two year trends will cease).

The S+P 500 eventually dropped after QE1 and QE2 ended. Since the current round of US quantitative easing will end in October 2014 (tapering of purchases will finally finish), one should be especially watchful for a reversal (even if it is modest) of the S+P 500’s epic bull trend.

Another sign of sluggish economic growth, particularly in emerging marketplaces, has been the decline in commodities “in general” since spring 2011 (broad Goldman Sachs Commodity Index/GSCI). The GSCI peaked at 762 on 4/11 and 5/2/11. Since then, it generally has displayed a pattern of declining (lower and lower) highs. It recently made an interim top around 673 on 6/23/14, slipping to 582 on 9/15/14.



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Stepping Higher- US Two Year Note Yields (9-21-14)
Charts- Two Year UST, 10 Year v 2 Year UST spread (9-21-14, for essay Stepping Higher- UST Two Year Note Yields)


Yet despite these economic rescue and repair programs, the continued substantial overall weakness in the US real estate marketplace reflects and warns of trouble. In particular, what do the housing sector and its consequences for the consumer balance sheet suggest? One should view real estate in the context of consumer confidence. The foundation for and structure of the recovery fabricated by the homespun policies of the Fed and the political herd is fragile. Although progress has been made, the shattering damage of the international economic disaster that commenced in 2007 has not been fixed. Though the worldwide economic recovery that emerged in spring 2009 is not entirely a house of cards, it’s also not entirely built on solid ground.

Nominal GDP growth is better than none at all, right? All else equal, money printing does not over time breed permanent real GDP growth. Also, deficit spending borrows from the future to spend in the present; it may boost current output, but at the end of the day, this factor primarily involves a shift of money between players and across time. All else equal, even if a slump in the broad real US trade weighted dollar benefits the US economy, that tends to undermine those of many of its trading partners. Holding policy interest rates such as Fed Funds low does not preclude higher yields later. Don’t those substantially in debt or suffering injury to their net worth often endorse easy money policies? Despite optimism indicated by rosy prices in the S+P 500 and lofty corporate profits, US real economic growth probably will be mediocre looking forward from now. What happens to American real estate still matters a great deal for the global economy.

Given the still-weak home and commercial real estate marketplaces, the net worth of many banking institutions probably is vulnerable to marking-to-market of existing real estate loan portfolios. Renewed economic weakness of course would worsen that problem. In any event, banks nervous about their capital strength will not hurry to significantly expand their overall lending.

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American Real Estate (The Money Jungle, Part Two)