Notes From Underground: If …

September 30, 2014

Tonight I’m paying homage to Rudyard Kipling’s great poem, “If.” It’s a reminder of what the fourth quarter holds for global investors, and particularly traders with a much quicker reaction:

If you can keep your head  when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about,don’t deal in lies,
Or being hated,don’t give way to hating,
And yet don’t look too good,nor talk too wise

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Notes From Underground: CNBC — EU Referendum

September 30, 2014

Yra on CNBC September 30, 2014

Click on the image to watch Rick and I discuss European referendums.

Notes From Underground: The Washington Redskins Should Change Their Name to the Washington 37ers

September 23, 2014

Just a quick note in the run up to the beginning of the Jewish New Year. A happy and healthy new year to all the readers of Notes From Underground. May your year be blessed with less turmoil both on a micro and macro level. For all my readers no matter what faith or no religious view: May we all find peace and have the wisdom and grit to prosper. Best Wishes, Yra.

This title is a tribute to the recent movements in the world financial and commodity markets. The “strong” dollar has been attributed as the dynamic factor pushing commodity prices lower and creating the environment for potential DEFLATION around the world. Emerging markets are under pressure as raw material prices drop and the fear of rising U.S. interest rates are combining to generate outflows from Mexico, Brazil, Turkey and many others. Europe is struggling to create any growth as even the EU‘s great locomotive, Germany, is beginning to feel the pains of its growth-constrained neighbors.

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Notes From Underground: Nineteen Ways To Leave Your Lover

September 16, 2014

The reference of 19 ways to leave your lover is a reference to Janet Yellen’s Labor Market Condition Index (LMCI), which is what the Fed chair noted as the most important “dashboard” for measuring SLACK in the labor market. To achieve a true measure of labor market slack it is important for the Fed to dig deep into the statistical data of the unemployment report giving the Fed latitude in its decision-making. Remember, the Fed has twice moved the parameters of the jobs data as the different thresholds established by the Fed were breached quicker than anticipated. First it was an unemployment rate of 7 percent and then moved again to 6.5 percent. The threshold was then moved lower again as slack and its impact on WAGE PRICES was deemed to be the best measure of the health of the jobs market. If the Fed’s focus is wages then the FOMC statement tomorrow should be unchanged as the recent data has continued to reflect that wage gains are stagnant.

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Notes From Underground: The Swiss Finally Realize They’re the Ones Holding a Zero Hand

September 10, 2014

After the newest moves by the wily fox Mario Draghi last Thursday, NOTES raised the issue of what the Swiss National Bank would do in response to the negative vibes emanating from the guardians of the EURO currency. The SNB has supported the EUR/CHF cross at a floor of 1.20 to “prevent” the Swiss economy from slipping into a deflationary spiral. The SNB has accumulated a massive foreign exchange portfolio as it has bought hundreds of billions of euros to ensure the floor holds on the. The massive buying of euros has been somewhat successful  as 1.20 holds but the market still puts pressure on the Swiss as the cross is trading between 1.2050 and 1.2100. All that buying and the CROSS is a mere 0.8% off the floor.

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Notes From Underground: Mark Carney Lives Up to His Name (A Master of the Strange and Inane)

September 9, 2014

Did he really say that about currencies and sovereignty? In an article in tomorrow’s Financial Times it is reported that Mark Carney said during a Q&A that a “… currency union between England and an independent Scotland would be ‘ incompatible with sovereignty.'” Carney said a currency union needed three elements for success. “These were the free movement of goods and services across different parts of the currency, a banking union underpinned by common institutions such as a central bank, and elements of shared fiscal arrangements.” Fanning the flames of criticism against the euro and Brussels, Carney added: “You only have to look across the continent to look at what happens if you don’t have those components in place. A currency union is incompatible with sovereignty.”

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Notes From Underground: Mama, Don’t Let Your Children Grow Up To Be Global Macro Traders

September 4, 2014

Well, NOTES FROM UNDERGROUND gets an A+ for analysis and an F or incomplete for EXECUTION. Caught off guard by Draghi’s timing, the market never provided a rally for the more cautious trader. The euro currency began its break 55 minutes before the official ECB rate announcement as Reuters ran a story revealing the governing board’s discussion of a supposed EU500 BILLION ABS program. A leak during the meeting should provide reason for the ECB to investigate its security breaches and find out who is making money from revealing important information ahead of the governing officials. It must be like Congress, where elected representatives are allowed to be insider traders.

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Notes From Underground: N-O-T-H-I-N-G … Thats What the ECB Means to Me

September 3, 2014

The wires are burning with the possibility of the ECB moving forward with a quantitative easing announcement. I would give it a 1% chance, or, in options pricing terms, A CABINET BID. It is too early for President Draghi to impose a QE plan for next month the European authority reveals its asset quality review (AQR), a stress test by any other name. The ECB would be wasting its ammunition until it sees how the market reacts to new information on the health of European banks and thus the European financial system. If the results are as dismal as I believe, Draghi will want to initiate his asset-backed security program so as to create a market mechanism for relieving the banks of their problem loans. The market maker for these ABS instruments will be the ECB as they will be the only buyers willing to pay inflated prices for NONperforming loans. High prices will need to be paid to keep the banks solvent for if the haircuts on the troubled loans is too large the banks will collapse.

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Notes From Underground: The ECB Is On the Horns of a Dilemma … Again

August 28, 2014

Let us continue where last night’s blog ended. This week’s move by the French President Hollande to reshuffle the government’s cabinet should be perceived as a way for France to negotiate for a depreciation in the EURO and an end to the German-imposed conditions of growth through austerity. Prime Minister Valls cast out previous Economic Minister Arnaud Montebourg because his continuous attacks on the Germans’ push for austerity wasn’t appreciated by Chancellor Merkel. Montebourg is a beloved leader of the Socialist Party and has been a close confidant of President Hollande. The change in the cabinet can be disastrous for Hollande’s socialist standing so we must examine Hollande’s political maneuvering as representative of something bigger.

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Notes From Underground: Santelli Exchange — European Deterioration

August 28, 2014

In a follow-up to last night’s blog post, click on the image below to watch Rick and I discuss the EURO on the Santelli Exchange August 18.

Yra on the Santelli Exchange, August 18


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