Notes From Underground: Take Jerome With a Big Grain of Salt

September 20, 2022

A quick view on Wednesday’s FEDERAL RESERVE‘s meeting: According to the newest Fed stenographer, Nick Timiraos, look for the central bank to raise rates 75 basis points in an effort to get ahead of the curse of HEADLINE inflation. This level is baked into the present market values. Look to see if there is any discussion of slowing the FED FUNDS increases as the FED tries to get a handle on the impact of $95 billion a month balance sheet unwind and a DOLLAR that has risen 14% since the beginning of the year, and more than 20% versus the Japanese yen.

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Notes From Underground: Another Day, Another Podcast

September 14, 2022

It was a fortuitous day that Richard Bonugli arranged a podcast with Joseph Wang, author of the Fed Guy and an former employee of the New York Fed’s System Open Market Account (SOMA). The podcast was recorded 90 minutes after the release of Tuesday’s CPI data so there was much to discuss in real time about FED policy, the recent moves in the SPOOs, dollar, commodities and precious metals were all reversed because the MARKETS seemed to have been caught off guard by a much higher number than Wall Street pundits anticipated.

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Notes From Underground: Dear Jerome

August 24, 2022

I have not been a fan of yours since your January 2019 “Powell Pivot,” when you allowed yourself to be fooled by the markets. In an effort to rein in Ben Bernanke and Janet Yellen’s QE programs you went for what Stan Druckenmiller  called the “double shotgun approach” and raised interest rates while reducing the Fed’s balance sheet — what Peter Boockvar called Quantitative Tightening (QT).

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Notes From Underground: Neutral

August 16, 2022

On Friday I sat down with Richard Bonugli at the Financial Repression Authority and Doomberg to discuss the current situation in global energy and tried to peek into the future as to where Europe and the US are going to find the means to provide dependable and affordable energy to power economic growth. Enjoy the podcast and hopefully it will lead to more high levels of discussion on all things global macro.

Click here to view the podcast. 

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Notes From Underground: Dissecting the Fed With Darius Dale

August 3, 2022

I yet another effort to understand where are going with the FED and their so-called NEUTRAL RATE, FRA hosted a podcast with Darius Dale of 42 Macro. It entertains themes familiar to readers of NOTES FROM UNDERGROUND as yield curves and currencies provide the backdrop for a great part of the analysis. We also discussed the next vote of the FOMC to see if the newest GOVERNORS finally find their voice and begin elevating their research into policy. Lisa Cook and Philip Jefferson are well known labor economists that Professor Jason Furman called the most dovish appointees in decades, and yet we have not heard a discouraging word from the FED neophytes.

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Notes From Underground: We’re Back?

August 1, 2022

It has been quite an extended period since my last post, but now I’m trying to catch up on some reading and relevant research on all things pertinent to GLOBAL MACRO. Following the FEDERAL RESERVE’S INTEREST RATE DECISION and the POWELL PRESS CONFERENCE, I sat down with Richard Bonugli, Peter Boockvar and Daniel Lacalle. This 66-minute podcast is packed with several pertinent topics, including yield curves, the dollar, Europe and even ESG investments. Please enjoy and I await your feedback and hopefully disagreements. Only the parochialist in echo chambers pursue validation.

Click here to listen to the recording.

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Notes From Underground: Staring Into the Abyss

June 26, 2022
To my readers —
My apologies for the long hiatus, but in addition to my sojourn to the East Coast, my eyesight has been suboptimal. That said, my mind has been ruminating on what has been a very active first half of the year between Russia’s invasion of Ukraine, the Fed’s aggressive path — in addition to other central banks exiting a stimulative framework. While I may not be writing at the moment, I’ve taken the time to record a couple of Financial Repression Authority podcasts. The first was with Spanish economist Daniel Lacalle. As always, I look forward to your questions, comments and concerns as we head into the second half of what’s already turning into a tumultuous 2022.
Click here to listen to the podcast. 

Notes From Underground: Could Paul Volcker Find His Inner Volcker In This Environment?

May 22, 2022

Since the Zoltan Pozsar challenged Federal Reserve Chair Jerome Powell to find his inner Paul Volcker and raise interest rates high enough to bring the inflation expectations to heel. (He argued draining liquidity and raising rates to a NEUTRAL level OUGHT to be the medicine needed to truly render the current high inflation levels TRANSITORY.) Last week, Pozsar pushed on the theme again with a piece titled, “Ride of the ‘Volkyries'” in which the issue of financial conditions tightening is discussed in reflection to current FED policy of curbing inflation through the crushing of demand.

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Notes From Underground: Discussing Europe With Dr. Barbara Kolm

May 10, 2022

Last week the FOMC raised rates by 50 basis points, which seemed like the most likely outcome (although interest rate markets had assigned a slight probability of 75 basis point increase). The statement was nothing if not vague about the FED‘s plans, yet the last sentence left the central bank room for flexibility: “The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”

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Notes From Underground: A European Discussion With Professor Polleit

May 3, 2022

Yes, Wednesday is FED day and the markets are expecting a 50 basis point increase in the FED FUNDS RATE to a range of 0.75% to 1%. The most important issue will be the size of the balance sheet unwind and whether Chair Jerome Powell is good to his heightened concerns about headline inflation means a full throttle on balance sheet shrinkage, reaching the full $95 billion a month at a quick pace. So Jerome, let’s have at it and let the markets decide the impact on myriad asset classes. In 2018, this double shotgun of QT and interest rate hikes proved too much for the highly leveraged global markets. Now that the Fed’s balance sheet is twice as large let’s see how it will affect the leverage in the global system.

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