Notes From Underground: Waiting for Godot, or Waiting for Jerome?

September 15, 2020

President Donald Trump has had his issues with his own hand-picked Federal Reserve Chairman Jerome Powell. At one point there were even discussions about Trump attempting to demote the chairman if not “firing” him for failure to keep interest rates low enough to finance the massive budget deficits. The Covid pandemic, coupled with 2019’s Powell pivot, seems to have satisfied the President’s lust for negative REAL YIELDS as Powell is no longer the object of Twitter derision. Read the rest of this entry »

Notes From Underground: Venturing Into the Global Morass

August 25, 2020

As we get back up to speed, here is another FRA podcast, with Barry Ritholz, David Rosenberg and myself. Enjoy the discussion as we prepare for the the coming volatility of the election season. Pandemics, recessions, elections, oh my.

Click the link to listen to the podcast.

Read the rest of this entry »

Notes From Underground: A Long, Long Time Ago

August 23, 2020

We are back. This is the first blog post after a 10-week break. It has been a nice hiatus from writing as we took some time to reflect and respect the sanctity of motherhood.

I’m linking to an FRA PODCAST hosted by Richard Bonugli taped on Thursday featuring Barry Ritholtz, David Rosenberg and myself. This will be a solid starting point for NOTES FROM UNDERGROUND as it picks up where we left off on June 12:  LONG EUROS, LONG GOLD and looking for some vigor in the commodity markets.

Read the rest of this entry »

Notes From Underground: A Podcast for the Road

June 10, 2020

There were no surprises from the FEDERAL RESERVE on Wednesday. There was no discussion of yield curve control but there was plenty of confirmation about the FED‘s concern surrounding the damage done to the lowest on the employment ladder.

Read the rest of this entry »

Notes From Underground: “Hoist With His Own Petard”

June 9, 2020

This quote from Shakespeare explains the position that the Jerome Powell-led Federal Reserve has created for itself. The U.S. central bank has been captured by its massive monetary stimulus in addition to its willingness of aiding and abetting the Mnuchin Treasury by purchasing of hundreds of billions of Treasuries. The FED has maintained that its dual mandate provides the theoretical and practical approach to keeping interest rates lower for longer.

Read the rest of this entry »

Notes From Underground: Policy Trumps Data

June 6, 2020

The MISS by the economic analysts of Friday’s unemployment data has rendered all data as tertiary relative to the policy that has been enacted to counteract the malicious effects of the Covid-19 shutdown. Global stock markets have rallied as if normalization has occurred and UNEMPLOYMENT has returned to its historic lows of 3.5%.

Read the rest of this entry »

Notes From Underground: Central Bank Policy Peeks

June 2, 2020

On Monday night, the Reserve Bank of Australia issued its policy decision and as expected, there was no change in overnight rates at 0.25%. More importantly, the RBA is targeting three-year Aussie government bonds at 0.25%, keeping the yield curve flat or inverted out to that point.

Read the rest of this entry »

Notes From Underground: Friday’s Wall Street Rally?

May 31, 2020

Friday’s Wall Street rally into the close of month end was the ultimate statement of the FED listens. Yes, only to the needs of the financial world as ULTRA CHEAP MONEY pushes equity prices ever higher in the search for yield beyond 50 basis points. The BONDS remain bid as short sellers live in fear of central bank intervention. When the 10- and 30-year yields begin to rise the FED speakers discuss the increased possibility of YIELD CURVE CONTROL, or YCC, making it difficult for any type of signaling mechanism to develop.

Read the rest of this entry »

Notes From Underground: A Podcast for the Long Weekend

May 21, 2020

This Memorial Day weekend I’m going to take some time to reflect on those who gave their lives to provide the opportunity for all of us. This epidemic has made a shambles of everything we thought was a certainty just three months ago. In that spirit I present a 50-minute discussion with the highly respected Louis Gave of GaveKal on all things macro. Be at peace and enjoy.

Also, a note to Secretary of State Mike Pompeo: Tone down the China rhetoric, especially on the Taiwan issue. A thermonuclear war is not a quality vaccine against COVID (Where are you Tom Lehrer?)

Click here to listen to the podcast.

Notes From Underground: The Economic Consequences of President Trump

May 17, 2020

(NOTE: The following post is not political in any sense, but just a criticism of a major ill-conceived POLICY.)

This is a story of two pivots.

The first is Federal Reserve Chairman Jerome Powell in January 2019. The second is President Donald Trump in May 2020.

Powell’s pivot away from interest rate increases and balance sheet shrinking created a significant rally in equity and asset prices. Trump’s pivot on the DOLLAR will have disastrous results that are manifested in the GLOBAL DEFLATION that central banks have been trying to prevent. What is the reasoning behind the President’s recent shift away from a weak dollar to promoting the positive outcomes of a strong currency?

Read the rest of this entry »