Notes From Underground: All the Rumors Fit to Print in an Algorithmic World

Woke Up Got Out Of Bed, Dragged A Mouse Across My Desk … I read the News Today Oh Boy …

French Official:Obama Said Strong Dollar Is Problem
U.S. Official:Obama Didn’t Say Strong Dollar Was A Problem
White House Denies Obama Said Strong Dollar A Problem
These are the type of fabricated headlines that are meant to create volatility in a world in which algo headline readers react to key words: OBAMA, STRONG DOLLAR, PROBLEM. Did President Obama actually make a passing comment about the U.S. dollar? We don’t know except that the president himself denied making such comments at his G-7 press conference. It is poor journalism for media outlets to cite UNNAMED officials in distributing information that is certain to have market moving impact, but in today’s world of “first move” advantage there is a rush to get any headline to a Twitter feed regardless of validity. Did Obama make such a comment? Maybe in this context.

The G-7 meeting in Germany certainly discussed the two major trade issues currently on the table: the Trans Pacific Partnership and the TransAtlantic Trade and Investment Partnership. President Obama has been fighting a major battle with Democrats and Tea Party Republicans to get Congress to pass a bill providing the president with Trade Promotion Authority (TPA). A sticking point for some legislators is the fact that some countries use currency manipulation as a tool of attaining trade advantages. These concerns about currency manipulation have given some of the opponents to TPA a way to openly block the two trade agreements by attaching currency manipulation amendments to the agreements, knowing that the signatories to the trade pacts will be opposed to any added riders by the U.S. President Obama MAY have commented that the recent strength in the DOLLAR or conversely the weak EURO and YEN were providing opponents to the trade agreements with political ammunition to block passage. So yes, in reference to this, President Obama may have remarked that the DOLLAR was a problem.B ut politics being politics and 2+2=5 in our world of global macro, we just don’t know.

However,  this we do know: The EURO, SWISS, YEN retraced all their losses from the close previous to Friday’s unemployment data. (Even the Dollar Index closed today below Thursday’s close of 95.59.) There is no question that Friday’s jobs numbers were strong and provided a solid reason for the U.S. dollar to rally. Today’s market action is problematic for dollar Bulls because of strong data giving way to political concerns. I will caution that one day does not a trend make but it is important to be aware of price action contrary to market fundamentals. Also, in a breakdown of previous correlative action, a sharp drop in the dollar failed to provide for a SPOO rally as global equities were on the defensive all day. Some analysts believed that the strong rally in the EURO was due to a “positive resolution” on the Greek situation but that is not to be believed but merely to be more gibberish from the talking heads polluting the airwaves and broadbands.

In a story that ran on Sunday, the FT’s Stefan Wagstyl reported that “Germany’s Ruling Coalition Closes ranks on Greek Crisis,” in which it is alleged that even Chancellor Merkel’s Social Democratic coalition partners are tiring of the shenanigans of the Greek leadership. As the reporter notes, “With the opposition Green and far-left Linke parties still backing more aid for Greece, Ms. Merkel would almost certainly win a parliamentary vote on assisting Athens further. But a failure to keep her own troops in order would embarrass the Chancellor.”

It will not happen that Angela Merkel’s CDU members will oppose her for the G-7 Summit in Germany certainly revealed that Chancellor Merkel is the most powerful leader on the world scene. In a comic tragedy though, CDU member Detlef Seif conceded that Athens “could not reasonably repay its debt.” Herr Seif seemed to be adamant that “The EU IS NOT A TRANSFER UNION.”

Please, make note of this quote for it will come to the forefront over the next two years: “IF THE EU IS NOT A TRANSFER UNION ITS ENTIRE REASON FOR BEING IS CALLED INTO QUESTION. GERMANY MAY NOT BELIEVE IT IS THE TRANSFER AGENT BUT THE EU PERIPHERY AND GLOBAL INVESTORS BELIEVE IT IS SO. HOW ELSE CAN THE ULTRA LOW SOVEREIGN BOND YIELD BE EXPLAINED FOR THE ECB IS ONLY AS SOLID AS THE GUARANTEE OF THE GERMAN FINANCIAL SYSTEM. IF THE GERMANS FAIL TO GUARANTEE THE CREDIT STANDING OF THE ENTIRE EU PROJECT THEN THE GLOBAL FINANCIAL SYSTEM WILL BE IN TURMOIL” HERR SEIF

The EU is nothing but a transfer union until the GOOD BAVARIAN BURGHERS SAY OTHERWISE. Oh, about that dollar…

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8 Responses to “Notes From Underground: All the Rumors Fit to Print in an Algorithmic World”

  1. Kevin Says:

    Firstly this and the past few posts, together with the comments, have been of the highest order. Yra thank you for your efforts, they are much appreciated.

    I feel deeply for the “new” Greek government. Whatever you think of their political leanings, they were voted in on a clear mandate, unlike the majority of the Troika they have battled to negotiate with. The abject failure of the past two bailouts (as designed and implemented by the Troika), with debt levels now at all time highs relative to a much diminished economy, is regarded as Greece’s fault, and has nothing to do with their design or the structural failings of the EMU. It appears that market players know they were designed to protect the likes of Deutsche Bank and BNP, not to “bail out” the Greeks, but German voters do not.

    While the majority of Greece’s problems can be explained by EMU-wide related incentives inappropriate for the Greek economy, the matter is complicated by Greece’s “cheating” on government spending in the past, so the Troika’s current position is somehow morally justified. If Syriza buckle and agree to the Troika’s demands to stay in the TRANSFER UNION (with the continued economic disaster that will perpetuate), who will the enraged Greek populace vote for next time, Golden Dawn?

    I fear the popular response to the manipulations by the unelected technocrats of Brussels, the ECB and IMF will be to vote for extremists who will carry out their promises to curb EU powers and exit the EMU – Spain and France watch this space.

  2. arthur Says:

    Visualize the situation 18 months from now…

  3. mikegre2014 Says:

    I’m not sure, Kevin, that Syriza has a clear mandate. They won with less than 37% of the vote.

    • Chicken Says:

      Definitely too much of a majority to have any real authority. Anything greater than 2% has no chance of representing the 90% of special interests getting things done.

  4. Blacklisted Says:

    Since I never underestimate the “creativity” of desperate politicians, my visual 18 months from now is civil war. If the euro goes, so goes the bureaucrat jobs in Brussels. Therefore, expect belated attempts to consolidate the debts, which should have been a mandated step in the original euro plan. However, like all things rejected by the burdensome voters, expect politicians to use the reliable “crisis tactic”, which will control the population more reliably than gloBull warming.

    As far as Grecians are concerned – look east, young man to fulfill your manifest destiny.

  5. SchockedToFindGambling Says:

    Yra- Good post.

    I have noticed that recently, on some days that the USA stock market is weak, the USD is also weak.

    I would guess this is due, in part, to foreign sellers in the USA stock market repatriating the stock proceeds.

  6. Chicken Says:

    Rest assured the powerful and arrogant gods of financial engineering shall not be cast out of Asgard to live amongst mere humans in Midgard (Earth).

  7. arthur Says:

    Key word: Liquidity http://www.ft.com/intl/cms/s/0/24d8c4e8-0b77-11e5-994d-00144feabdc0.html#axzz3cbSMxd8g

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