Notes From Underground: German PMI Was Lower …. Did NSA Have The Number Early?

It wouldn’t be Notes From Underground if we didn’t ask the most obvious and ridiculous question. It may be the subject of global comedians but the NSA‘s overreach is not a laughing matter for what it really shows is that in the guise of National Security, even a democratic republic leans toward political repression. This is similar to the McCarthyism that grew from what Michael Parenti called “the Anti-Communist Impulse.” Everything becomes an excuse for the government to pry  and the danger for all lovers of freedom is that once governments delve into every nook and cranny of life, the end result is always disastrous. It is not about Democrat or Republican for the Democrats will not always be in office.

From a global macro perspective, the U.S. has lost the moral high ground and will find it difficult to lecture others on various areas of global concern. Last month, Treasury Secretary Jack Lew was preaching to the Germans on the need to ease up on austerity. Last week, President Obama was giving a speech at the Brandenburg Gate. How would that speech be received today? If the G-8 wasn’t a joke before, doesn’t the extensive invasion of privacy make those ultra-expensive photo-ops become meaningless when you already know everybody’s pre-conference policies? In the Der Spiegel article, “The documents show that the NSA is more active in Germany than any other country.”

And to make matters more pertinent to the global macro perspective, one of my favorite European Parliament members, and a French icon from May 1968, laid it out: “The EU must immediately suspend negotiations with the U.S. over a free-trade agreement.”Last month, the U.S. administration was pointing to the U.S.-European Free Trade Agreement as a corner-post of its growth agenda. There are real costs to the abuse of power. It sends a message of arrogance, whether or not everyone is doing it.

***The Thursday BLOG called the shift in silver/gold and a possible low in GOLD based on the analysis of the GOLD/YUAN cross and its relevance to the important level of the IMF gold sale to India. I had looked at the IMF GOLD sale at $1048 as important but realized that maybe the price in terms of the Chinese that price may be more critical. The price level was 7150 YUAN and on Thursday night  we hit a low of 7220 YUAN to an ounce of GOLD and it provided momentary support. This will be an important level in my opinion–we will keep a close watch on this.

At the same time, the silver held and set the course for the Friday rally, which was followed upon today. Can’t say that this is the end of the GOLD selloff but it is certainly something to watch. The other GOLD/CURRENCY crosses look terrible on the charts but better technicians may find longer term support levels on the GOLD/SWISS, GOLD/EURO and certainly the GOLD/YEN.

***Jeremy Stein’s speech to the Council on Foreign Relations was much anticipated as it seems that it was Governor Stein whose work provided the impetus for the Bernanke Fed to begin the conversation about “tapering ” the large-scale asset purchases (QE). But the Stein speech proved to be somewhat of a Michael Jackson moonwalk (h/t KM) as Stein was walking back his more strident views on the FED laying the groundwork for financial instability. While I believe that the FED is relieved to see some liquidation in the amount of risk that investors hold, the velocity of the delevearging and the velocity of the rise in YIELDS frightened some FOMC members.

In a very telling statement, Stein reveals some of the FED‘s thinking: “… how we will make decisions about the policy fundamentals that the FOMC controls–the path of future short-term policy rates and total stock of long-term securities that we ultimately plan to accumulate via our assets purchases. Yet as research has repeatedly demonstrated, these sorts of fundamentals only explain a small part of the variation in the prices of assets such as equities, long-term Treasury securities, and corporate bonds.

“THE BULK OF THE VARIATION COMES FROM WHAT FINANCE ACADEMICS CALL ‘CHANGES IN DISCOUNT RATES,’ WHICH IS A FANCY WAY OF SAYING NON-FUNDAMENTAL STUFF THAT WE DON’T UNDERSTAND VERY WELL–AND WHICH CAN INCLUDE CHANGES IN EITHER INVESTOR SENTIMENT OR RISK AVERSION,PRICE MOVEMENTS DUE TO FORCED SELLING BY LEVERED INVESTORS OR CONVEXITY HEDGERS …” (EMPHASIS MINE).

The FED doesn’t understand this stuff very well … so much for the deification of the cult of the Fed.

***At 11:30 p.m. CST, the Reserve Bank of Australia will announce its interest rate decision. The consensus calls for the overnight rate to remain at 2.75%. No argument here as the continued weakness in the Aussie dollar and the dynamic steepening of the 2/10 yield curve during the last month means the RBA can allow the dynamics of a weakening currency to help aid the slowing economy. In addition, the recent replacement of PM Gillard with previous PM Kevin Rudd the bank may not wish to be seen in an overt political action … no change.

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10 Responses to “Notes From Underground: German PMI Was Lower …. Did NSA Have The Number Early?”

  1. silverbug2155 Says:

    Speaking on the NSA. Just watched a movie called “Mercury Rising” dated 1998. It was about the NSA. The question begs to ask what did they prevent in the name of national security? Is this really their job?

  2. raymack1999 Says:

    Great analysis as usual Yra. You are spot on
    About the US and NSA. Another Michael Jackson song was “I Want You Back”. The US may be singing this tune to the Sovereign
    Funds. Stay tuned for “Thriller”

  3. yra harris Says:

    Ray–thanks for the appropos post—very good and right in rhythm with the mood —we may poke in good nature but the dmage is real and is in excusable no matter who the commander -in-chief—anything for the sake of national security reminds me of my Jeffersonian leanings

  4. rohrintl Says:

    Loved the Chinese Gold psych… only you!!
    …and Happy Birthday.
    -AR

  5. Dustin L. Says:

    Yra- Great post, I particularly appreciated your analysis of the macro implications of the Snowden NSA exposure. I do wonder the significance of Gold/Yuan as compared to Gold/USD for the Chinese if you are viewing it as hedging their USD exposure which I do. I am not saying it is not a possible low, just wondering if the Gold/USD cross isn’t China’s main determinant of their market actions with respect to the yellow metal? But always good to watch the price of everything in various currencies.

    Cheers,
    Dustin

  6. yra harris Says:

    Dustin–I don’t know if the low was made but just wated to raise the issue and take us out of a very prochial and dollar oriented analysis–there were articles the next day tlking about China needing to acquire Gold to bolster its non-Dollar reserves—at the same time the Gold/YEN chart looks like the Seinfeld Pig Man–hideous.But if some were looking for Gold support it seems to be in the Gold/Yuan relative to the IMF sale to India—of 11/2/09

  7. Chicken Says:

    The NSA is much further up everyone’s poop shoot than you might imagine. They were actually losing grip pre twin-towers, which marked a huge reversal to the upside.

  8. Jim’s Mailbox :: Jim Sinclair's Mineset Says:

    […] More… […]

  9. bob D. Says:

    it is uppity for usgovt to believe they can snoop on more than 6%
    of the USA-Folk, during the entire life of the usgovt,,,,,

    similarly
    obama-health-care will never be able to do better than the today
    providers who at best can deal with a max of 6% of the Folk because
    a max of 6% of the Folk is all that need any medical care, ever

    thus
    all the bold stuff by congress, dumping their dreams onto obama
    and his obamacare is huff and puff, a Folk does not change nor does
    its max of 6% who need health care, ever, in total for the lifetime
    of the Folk,

    thus congress legislated an
    abundance of loot for the insurance cos and some rub-off for some
    of the heavy handed providers such as brain surgeons…. ho ho ho

  10. DiMentia Says:

    If the NSA had a hedge fund it’s track record would correlate well with SAC!

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