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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SHOW ME THE MONEY! © Leo Haviland, September 19, 2011

In various forms and fashions, accounting greatly matters in cultural domains. Economic realms employ professional accountants and other measurers and judges of accuracy (and compliance, responsibility, and virtue), but money meadows are not the only field involving accountability. In financial playgrounds- as in politics, war, romance, and elsewhere- it’s important to carefully evaluate the truth, quality, and implications of accounts and other storytelling.

Despite the ongoing excitement of the European sovereign debt crisis, European banks are not the only ones facing significant challenges. Thus some gloomy bystanders perhaps want to avoid renewed scans of America’s banks in the context of real estate and derivatives.

Sometimes the titanic numbers of billions and trillions mask the crucial importance of what’s going on in the provinces of smaller quantities. US real median household income in 2010 was about $49,400, a 2.3pc slide from 2009. Since 2007, real income has tumbled 6.4pc. It is 7.1pc under the median household income peak in 1999, back to the 1996 level of $49.1m.

According to the US Treasury’s recent TIC statistics (9/16/11), major foreign holders (official and others) of Treasury securities (these include bills, notes, and bonds) held about $4.48 trillion of them in July 2011. This is down slightly from June 2011’s $4.50tr and May’s $4.51tr. They held $4.45tr in January 2011. In sum, they’ve essentially not been net buyers for several months. Even relative to July 2010, they’ve been mediocre net buyers. Foreigners held $4.13tr in July 2010; July 2011 thus represents a meager add-on of only about $353 billion to the year-ago month.

Though money supply data are only one variable relevant to inflation, they have started to hint that the future inflationary picture will be less pretty than ardent Fed professors proclaim. Even in a sluggish or recessionary economy, and even if some deflationary forces at home or overseas are strong, that does not prove that inflation will not increase. And inflation perhaps will float considerably higher than many predict.

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Show Me the Money! (9-19-11)


The sustained economic rescue and repair efforts by America’s resolute yet fearful central bank and politicians and their overseas allies will continue to encourage rising US interest rates. The Federal Reserve’s seeds of very low Federal Funds rates and its quantitative easing deluge play crucial roles. As part of its heated quest to propel a recovery and rehabilitate injured consumer net worth, the Fed scrambles to create some inflation. Congress and the President, enamored of stimulus, place fiscal discipline aside in the tool shed for the foreseeable future.

Such US regulatory and political permissiveness erodes the broad real trade-weighted dollar. Rising interest rates and a slipping dollar tend to diminish the appetite of foreigners for US securities in general and debt ones in particular.

Are climbing interest rates a sign of the success of “green shoots” economic policies? Many weathervanes proclaim them as such. Yet over the next several months, higher yields will tend to reflect and encourage economic weakness.

Take the US 10 year government note as a benchmark for rate trends. Yields will test the 400/430 range, probably by end-June 2011 at the latest.

The likelihood of an eventual move in the 10 year Treasury toward 500/550 is higher than many believe. In that regard, inaction regarding the deficit rot and a substantial wilting of the US dollar are key ingredients. Moreover, the Fed’s deliberate cultivation of some inflation creates the danger of more than sufficient inflation. The Fed and many other watchdogs display minimal concern about inflation hints from high-flying equity and commodity marketplaces. Signs of more than adequate money floating around trouble them little. Recall the sluggish analysis and action of such guardians in the prelude to and dawn and early afternoon of the economic crisis that emerged in 2007. Will exit strategies to preclude so-called excessive inflation be rapid or forceful enough to preclude marketplace tragedies?

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American Debt Gardens- Higher Yields (Desperate Housewives, Episode 7)