Notes From Underground: The Summer Doldrums

July 10, 2018

There are storms brewing but for the moment markets are stuck in the Doldrums waiting for the winds to increase in velocity. The issues confronting the market are all too familiar as NOTES FROM UNDERGROUND has been categorizing for the previous months.

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Notes From Underground: The Tweets Controlling the Market Gyrations

July 1, 2018

Now that the first six months of the year have come and gone, the markets have a cacophony of events to look forward to as algos react to price, and fundamental macro analysts are trapped between WHAT OUGHT TO BE. The current concerns over tariffs, trade wars, strife between friends/allies, political uncertainty in Europe, Middle East conflagrations, the Russia/Saudi alliance on energy, Chinese growth concerns, RISING U.S. INTEREST RATES AND INCREASED QUANTITATIVE TIGHTENING (along with elevated TREASURY FUNDING NEEDS), decrease in capital inflows into emerging market economies leading to potential dollar funding concerns and U.S. Congressional elections. Yet, the markets remain are not pricing in the relevance of such concerns. Wise traders and investors do not fight markets but profit from the opportunities presented. To do otherwise is mere commentary. So to paraphrase John Maynard Keynes: When the facts change so do I, what do you do madam?

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Notes From Underground: Are We Reliving 1930?

June 25, 2018

Upon taking some time to reflect on the current state of the global macro world it seems that the most relevant are the years between 1928 and 1933. This was when the U.S. Congress was debating the famed Smoot-Hawley tariffs while the Treasury was reining in spending, and the FED was tightening liquidity and credit. While we don’t have a restricted Treasury (quite the opposite, actually), the Fed seems intent on raising rates to curtail the impact from an ill-advised fiscal stimulus at a time of 3.8% unemployment.

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Notes From Underground: Headlines Drive the Algos and the Circle Remains Unbroken

June 12, 2018

I’m going to be off for a few days, even if this Fed meeting proves to be the most market-moving week in many years.

The news from North Korea proves to be a non-event (as suspected). On Wednesday, we get the FOMC statement, which OUGHT to meet market expectations with a 25 basis point increase and some sense of the interest on excess reserve (IOER) rate in reference to fed funds. There is much discussion about the FED reaching “normal” interest rates, meaning neither too weak nor too strong to reach its dual mandate.

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Notes From Underground: A Conversation With Bonugli and Ronni Stoeferle

June 10, 2018

On June 6, I had a discussion with the Financial Repression Authority host Richard Bonugli and the highly respected Ronni Stoeferle. We covered myriad of global financial and political concerns as we tried to provide the foundation for profitable opportunities via in-depth analysis of these fragilities.

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Notes From Underground: But National Security IS Trade Policy

June 7, 2018

Tonight I am LINKING to the March 1 post about the White House discussed invoking Section 232 of the Trade Expansion Act of 1962. In an effort to justify the idea of placing tariffs on U.S. allies to curb steel and aluminum imports, Commerce Secretary Wilbur Ross noted that a strong steel sector is essential for U.S. national security. Section 232 is so broad that it is organic and can used to justify any action the U.S. deems necessary in regards to trade. In a CNBC interview on Thursday, Ross cited Section 232 again and wrapped it into the tariff discussion by maintaining that we must be strong economically to be strong militarily. Later in the interview he pressed that there can be no military security without economic strength.

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Notes From Underground: Bored By Italy, But I Digress

June 5, 2018

Sorry. The current situation in the European Union has been well forecasted by NOTES FROM UNDERGROUND so until the storm clouds clear and the Italian ruling coalition begins to initiate some of its campaign proposals I treat everything in Europe as a trade and not an investment. Even the talking heads are waking up to the potential financial damage that bank balance sheets loaded with ZERO RISK-WEIGHTED sovereign bonds can cause a healthy bank’s bloated balance sheet.

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Notes From Underground: An Efficient Way to Access Notes From Underground

May 30, 2018
On Tuesday I had the pleasure of chatting with Adam Johnson, a former trader and Bloomberg TV anchor, who is currently the founder and author of the Bullseye Brief. We covered a great deal of the world and Adam, in the manner of Anthony Crudele and Richard Bonugli, was a great interlocutor as all previous investment professionals tend to be.
The podcasts provide an ability to cover issues in a very in-depth manner. Remember though, I don’t TOUT but merely offers a focus on the issues that are pertinent to traders and investors. As I always caution, do your own work to establish risk parameters you are comfortable with in order to achieve the greatest returns for the least amount of risk. I will expound upon some of the themes of from the podcast in the coming days and weeks. But something you OUGHT to be cognizant of: A theme I am developing is to measure the most significant or dangerous persons to the global or domestic investment environments. The top of my list is Vladimir Putin, Mario Draghi and Recep Erdogan. More to follow but pour that needed libation and enjoy the BLOG from BULLSEYE.

Notes From Underground: Like Holden Caulfield, I Digress

May 29, 2018

As the Italian political situation maintains a boil, the elites of the Davos clique are out in full force trying to calm markets. The only problem is that established elites are so removed from reality that every move they make results in more turmoil. The airwaves were full of establishmentarians portraying themselves as conciliatory but their analysis of the economic consequences of the Italian election outcomes are similar to Ben Bernanke’s claim that the housing crisis was contained in early 2007. Let’s review some of today’s inane comments and analysis:

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Notes From Underground: Back On the Floor

May 28, 2018

On Friday, Rick Santelli and I discussed the situation in Europe, especially the FRAGILE situation in Italy. An important metric that needs to be watched is the huge amount of sovereign debt that is “comfortably” sitting on the Italian banks’ balance sheets. Under BIS rules (and other global financial regulations) sovereign debt carries a ZERO RISK WEIGHTING, meaning that commercial banks can hold sovereign bonds and hold no reserves against such an asset class.The Italian banks have been the repository of their sovereign bonds, which makes them vulnerable to a rise in BTP yields as the price drops due to the political concerns involving the inability of FIVE STAR/LEGA to come to an agreement on an acceptable cabinet.

(Click on the image to watch me and Rick discuss the Italian situation)

 

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