The breaking news during the weekend was the growing unrest in Middle Eastern nations as the contagion of TAHRIR SQUARE has created a desire for change in the autocracies dominating many Arab governments. Libya is the newest hotspot and protests against the Qaddafi regime has been met by state violence. Bahrain has also seen increased political unrest as the SHIITE majority is pushing for a greater say in how the small emirate is governed.
Posts Tagged ‘Geithner’
The acrimony at the G-20 is more than even I expected after the preliminary round in late October. Political leaders are trying to assuage feelings and massage the message but even U.K. Prime Minister David Cameron has said this is not the G-20’s finest hour. Heated words were/are being exchanged about how to resolve global imbalances and restructure the entire global economy to prevent future imbalances from wreaking havoc on economic growth. Secretary Geithner even went to the airwaves to criticize Alan Greenspan for suggesting that the U.S. was deliberately depreciating the DOLLAR.
The statements coming from G-20 central bank chiefs and finance ministers in South Korea tried to calm the markets nervousness about currency wars. Brazilian Finance Minister Guido Mantega didn’t attend as a form of mild protest to what he felt was previous inconsistencies between words and actions. The U.S. had put forth a proposal that was leaked to the media ahead of formal proceeding for some numerical target on current account surpluses and deficits. In the final communique no formal targets were established.
Notes From Underground: Geithner and Schumer put more dung on the fire to heat up the Chinese currency battleSeptember 19, 2010
The news over the weekend was was not market moving. The Center Right coalition in Sweden looks to win re-election, which is a very rare occurrence in the model welfare state of Europe. The Swedes have weathered the recent financial crisis fairly well, since they learned their lesson from the financial pains they endured in the early-to-mid 1990s. In fact, the Swedish crisis has provided some of the best solutions for policy markers in the U.S. and Europe as they seek ways to ameliorate the credit stresses that have been plaguing the developed economies for two-plus years. The biggest problem for the Swedes is the anti-immigration party of Democratic Sweden polled stronger than anticipated, which means they will have seats in Parliament for the first time. The move to the right is something to watch for in the EU as the fiscal austerity programs begin to take hold. If the right can rise in the Swedish Utopia, governments in the rest of Europe have to take note.
Notes From Underground: The Kiwi RBNZ CHECKS; the BOJ BETS; the CHINESE YUAN RAISES; and the Swiss … ?September 16, 2010
Wednesday night, we learned that the RBNZ held rates at 3 percent, as was expected. The bank’s governor, Alan Bullard, cited the recent earthquake and the havoc it has caused to the New Zealand economy as the main reason why the RBNZ was on hold for now and most probably for the near term. More importantly, Bullard was the second central banker in a week to note the slowing of the global economy, particularly the fact that the U.S. was “slowing noticeably.”
This weekend was a slow news weekend for impact-worthy events. The Chinese PMI data was somewhat tepid but not as weak as expected. Again, we state that we don’t trust the Chinese data at all. We must remember how the U.S. data is so badly flawed, so why should we trust the economic releases of an economy that is so ostensibly government controlled? Good, bad or ugly, we have very little respect for Chinese data. We hope we are clear on that but we report it only for the initial impact it can have on trades.
Notes From Underground: Risk on is not the trade it used to be–and the algorithms will be not so self-assuredJuly 13, 2010
Bob Pisani’s cheerleading outfit is back from the cleaners and all is well in the world. The talking heads are building pyramids of potential as the early earnings reports are giving reason for the recent rally to sustain itself. Has the earnings season changed the picture so dramatically since ALCOA came in with better earnings? We sincerely doubt it but as our readers know all too well, we don’t argue with the market but rather try to find profit potential in all its actions. Notes from Underground is always trying to make sense of 2+2=5.
Some are making a big deal out of Alcoa as a precursor of growth, but we notice that ALCOA is more than 60 percent off its early January highs and that is with the recent rally included. Our goal is not to be negative but rather to give some perspective to counter the screaming of the buy-side purveyors of illogical positivism. When the S&Ps were on their highs, we remained unconvinced until the private equity firms broke out of the sideways pattern. But the price action of Blackstone and Ochs-Ziff failed to establish any upside momentum. The private equity model has been broken since the global financial system has been in stress. Converting equity to debt could not have been a worse place to be and we still watch to see if the PE firms confirm a true turnaround in the credit markets.
On June 23, we put out a piece in which we noted that the British pound was rallying with the announcement of Chancellor’s Osborne’s AUSTERITY BUDGET. We noted that if the POUND was strengthening on austerity, then the DOLLAR was vulnerable as GEITHNER and company were furthering greater stimulus to stabilize the fragile U.S. and global recovery. Since then, the DOLLAR has weakened as the previous DOLLAR bulls were chased from their haven.
Today, we read an opinion piece from BLOOMBERG that caught our attention and alerts us to the British pound. David Blanchflower, aka the Dartmouth Dove, who was previously a member of the Bank Of England’s monetary board, admonished the Chancellor of the Exchequer for playing politics with the Office for Budgetary Responsibility (OBR). In pushing the recent austerity budget, Blanchflower claims that the chancellor played with the OBR’s analysis to soften the negative impact on jobs. The exchequer claimed that the increase in the VAT to 20 percent from 17.5 percent, plus cuts in public spending would not hurt employment as the private sector would create enough jobs to offset the governments cuts–fiscal austerity begets economic growth.
A leaked document showed that the OBR actually projected that job losses would be more than 1.0 million.The fudging of the data–our words–supposedly led to the resignation of the present head of the OBR, Sir Alan Budd. Regardless, this story needs to be watched to see if it halts the recent rally in the POUND STERLING. We have been bullish on the POUND, but our recent enthusiasm is tempered until the market brings some clarity. The DOLLAR may be weak enough to make this a tempest in a teapot.
The State Administration of Foreign Exchange (SAFE), which administers the vast CHINESE foreign reserves, said it would not go the “nuclear option” and dump U.S. treasuries in a one-off move to reallocate its holdings, but SAFE called upon Washington and other governments to pursue “responsible” policies. The SAFE official told the world that during the last four months they’ve been accumulating Japanese government bonds at a record rate, which has recently pushed the YEN to new highs. Also, the Chinese officials said they would not be purchasing GOLD as the market was too thin and volatile. Plus, whatever the Chinese purchased would not be enough to truly diversify their portfolio.
Notes From Underground: Unemployment was softer then expected; and CFIUS must not have read the G-20 communiqueJuly 5, 2010
Friday’s unemployment number was close to consensus but the average hours worked and average hourly wages were a little on the soft side. Yes, the unemployment rate fell to 9.5 percent, but that was due to the amount of people that left the work force as the ability to find work is causing workers to leave the job search in frustration. The rate itself is not important at this point because a higher jobless rate with a more robust economy would signal that people were returning to the labor force–a good thing.