Notes From Underground: Powell, Lagarde and Payrolls, Oh My

February 2, 2023

It was the week that was as three main central bank interest rate decisions from the FEDERAL RESERVE, BANK OF ENGLAND and EUROPEAN CENTRAL BANK rocked the markets. There is more to follow Friday morning as the vaunted employment data will be released. The market is expecting 190,000 jobs created, a 3.6% unemployment rate, a 34.4-hour workweek and a 0.3% gain in average hourly earnings. After all of the central bank-induced volatility that last data point carries little weight unless it shocks to the robust economic upside.

If the unemployment rate fell too much — to say, 3.3% — or AHE soared above 0.7% it would send bond yields much higher, reversing the recent sizable rally in global bond prices triggered by central banks preparing to “pause.”

Read the rest of this entry »

Notes From Underground: Talking With Louis Gave

January 29, 2023

It is always a great pleasure to be able to discuss the global financial situation with Louis Gave and have Richard Bonugli moderate the discussion. There are several issues discussed in this hour podcast but I want to provide listeners with a key rule of Gave: While it may seem like forecasting it is anything but. It is merely adapting to a changing landscape as global investing is dynamic in nature while so many critical academic models are STATIC. It is up to those who invest in myriad number of relevant asset classes to be aware of the changing conditions in an effort to MINIMIZE losses from ill-conceived trades while seeking to find the greatest profits potential from being able to analyze the changing conditions.

Click here to listen to the podcast.

Read the rest of this entry »

Notes From Underground: The Story of Two Doctrines

January 5, 2023

Happy New Year! We’re starting 2023 with a podcast I recorded with Richard Bonugli and Marc Faber. We didn’t make any forecasts (in traditional CNBC fashion), but just discussed potential outcomes in the macro global financial situation.

Critical to the discussion was what I am calling the two doctrines: Paul Volcker and Ben Bernanke. The Volcker Doctrine is based on wringing inflation out of the economy when it begins to boil, while the Bernanke Doctrine is focused on preventing deflation from gaining a foothold. In the last five decades the US and Europe have not experienced DEFLATION as the central banks and fiscal authorities have PREEMPTED the onset of such an outcome. In DEBT-PLAGUED economies DEFLATION is the worst potential outcome. Remember, Volcker confronted a 39% DEBT-TO-GDP ratio while today Jerome Powell confronts a 106% ratio and even much greater private/corporate debt. Enjoy the PODCAST with a strong libation or sugar-free drink for too much stimulant will not be advised.

Click here to listen to the podcast.

Notes From Underground: ‘Twas the Week Before Christmas

December 18, 2022

Last week, the leaders of the world’s central banks were attempting to regain their souls. FEDERAL RESERVE Chair Jerome Powell told tales of woe as workers were suffering as inflation rose. Crush the evil inflation out of the system is the battle cry¬† in an effort to recreate the melodrama of Andrew Mellon in 1931: liquidate, liquidate, liquidate in an effort to Calvinize the evil from the economy by crushing demand. Powell did note that housing had weakened SIGNIFICANTLY and financial conditions HAVE TIGHTENED CONSIDERABLY but will have to be patient because monetary policy acts with a lag.

Read the rest of this entry »

Notes From Underground: US Debt, Never A Problem?

December 13, 2022

As we head into the end of 2022 we are reminded yet again of the sagacious wisdom of Louis Gave: Our investors pay us to ADAPT, NOT FORECAST. WALL STREET pundits have released a cacophony of 2023 predictions, and there’s always a race to ramp up all types of forecasts in an effort to make it to draw attention. The hills are alive with the echoes of Joseph Granville for the more outrageous the forecast the greater the chance for being elevated into the Pantheon of Oracles. If your off-the-chart predictions remain off the chart no one will ever remember, except SBF/FTX. The only certainty in 2023 is that the wisdom of MAO will be brought forward as IT TAKES A SINGLE SPARK TO START A PRAIRIE FIRE. There are several piles of dry tinder waiting to be lit. One of the most critical is the growing debt in the US that needs to be financed.

Read the rest of this entry »

Notes From Underground: Wow, My Sweet November

December 1, 2022

First and foremost, I apologize for any confusion with the efforts to get some money flow to Santa Mike at Marillac St. Vincent Family Services. I put in the wrong contact/email for Mike Sturch (mikees@sbcglobal.net). Mike has been raising money to feed the hungry, clothe the naked and educate the inner city youth in Chicago providing pre-school programs to raise the level of learning for those suffering at the lower rung of the socioeconomic ladder. Every dime goes to meet the needs and my friend Mike has been doing this for more than 50 years. Today’s inflation is situation is creating extra stress for those in need. Thanks for your indulgence.

On Wednesday, Jerome Powell spoke at Brookings and his speech, plus a strong Q&A session, was comforting enough for Wall Street that the FED would be moving to slow the pace of interest rate rises. THIS IS NOT A PIVOT BUT A POTENTIAL PAUSE. If the FED slows the pace of hikes while real interest rates on short-term money are still NEGATIVE, well then myriad asset classes are deemed investable.

Notes From Underground: Cui Bono? (Who Stands to Gain?)

November 28, 2022

When it comes to making sense of the global financial system I always have to ask the question who is benefitting from monetary policy? The recent podcasts from the Financial Repression Authority has provided a good backdrop to understanding the importance of debt markets — and by default the significance of the US DOLLAR as the bulwark of the financial system. The mobility of money or what serves the process of globalization has revealed many of the fragilities of the DOLLAR as a funding vehicle because of the FEDERAL RESERVE’S policies, which allowed all the other world’s central banks to sustain a prolonged period of zero and even NEGATIVE NOMINAL RATES.

Read the rest of this entry »

Notes From Underground: Recapping the Last Two Weeks

November 20, 2022

The day after the FED meeting I sat down with the FINANCIAL REPRESSION AUTHORITY and did a podcast with David Rosenberg and Peter Boockvar. The discussion is still relevant as it speaks a great deal about bond, equity and, in particular, currency valuations. Then on Monday, November 7 Richard Bonugli hosted an hourlong discussion with Brent Johnson and myself, which was also about currency valuations and the precarious global situation of massive debt overhang. Finally, I recorded a third podcast with FRA and Eric Peters about crypto and the possible fallout from the collapse of FTX. There’s lots to digest here but as always I remind readers that the only relevance for traders/investors is to find meaningful trades or investments. Otherwise we are just talking to hear ourselves talk, which is in the very real sense meaningless. Also, it is not always what you make through relevant ideas but the capital preserved by not following the herd.

Click to listen to the Nov. 4 podcast with David Rosenberg and Peter Boockvar.

Click to listen to the Nov. 7 podcast with Brent Johnson.

Click to listen to the latest podcast with Eric Peters.

Read the rest of this entry »

Notes From Underground: Hu’s Out First, Li’s Out Second, and Xi, I don’t Know

October 25, 2022

There is a great deal of political noise reverberating out of the Chinese political system as President Xi has asserted his Mao-like vice grip over China’s political, social and military reins of power. The rule of the DENG XIAO PING HIDE AND BIDE — is officially closed. China, through XI, has revealed it will no longer HIDE its wealth/power or bide its time. The newest threat to the Bretton Woods HEGEMON has stepped to the fore to directly compete with the US Empire. The outcomes of Xi’s newest maneuvers will not be revealed for a time period but be assured that changes are afoot in the Pacific Region. How the wealth outcomes are determined will take a long time but if the competition is violent the destruction will be vast. Hopefully, the world — including the US — will engage in firm but friendly competition rising the standards of construction to new and enhanced levels for the entire globe.

Read the rest of this entry »

Notes From Underground: Returning to the Turmoil

October 20, 2022

After a period of personal introspection it’s time to return to the turmoil of the world. What better way to reenter than with a couple of podcasts.

Read the rest of this entry »