Notes From Underground: A Financial Repression Authority (FRA) Podcast With Peter Boockvar

It is a great honor to feature another podcast with Peter Boockvar for The Financial Repression Authority. Peter is certainly one of the regular commentators that I watch with great interest whenever he is on Bloomberg, Fox Business or CNBC. I think we cover much of the global financial landscape. While it may run long, it is a lot easier than reading a 20,000-word blog post. Pour the scotch and give it a listen.


***There were two stories out of Europe this weekend, which are indicative of the uneasiness of electorates in developed market economies. France had riots in the outlying areas of Paris as demonstrators took to the streets to protest against police brutality. This plays into the narrative of National Front Presidential candidate Marine Le Pen, which increases the uncertainty of France’s upcoming elections.

In Switzerland, voters rejected a referendum promoted by the established elite that would reform corporate taxes in order to bring Swiss taxes on multinational corporations in-line with global tax policies. Switzerland may face international criticism and some penalties for having a tax code that provides ultra-low taxation, which attracts large foreign corporations so to lower their tax costs. Again, global elites are being rebuffed in one election after another. The POLLS in Switzerland predicted the referendum to be close but the NO vote garnered almost 60%. What the Swiss election showed is that uncertainty is the dominant theme for 2017.

***Recent polls have shown the Social Democrat Policy (SPD) increasing its popularity, which suggests that Chancellor Merkel is no longer deemed unbeatable. The CDU is suffering a drop in its support as Merkel’s stance on immigration, and, more importantly, the rising anger over the ECB’s financial repression policy. This weekend, SPD member Frank-Walter Steinmeier was elected to the largely ceremonial post of President, which is another chink in the support of Angela Merkel. Yes, the German elections pose some uncertainty but the most probable outcome will be another coalition government of the CDU/SPD, which will be status quo. It is this outlook that makes me BULLISH German equities as an investment relative to the rest of the world’s stock markets.

Germany has a weak currency in which to continue its export juggernaut, as well as ultra-low interest rates, and room for a massive fiscal stimulus. The rationale is that for everything Trumponomics provides, Germany has even greater ability to promote. Yes, there are problems in Europe but if QE is based on Ben Bernanke’s theory of portfolio balance channel then Germany OUGHT to outperform relative to Europe and the U.S. The ECB is a dangerous actor and creates uncertainty but Draghi and Merkel will do everything to provide support to the EU, which should promote German assets. Rising inflation in Germany makes the demand for real assets the key component for German investments.

***Fed Chair Janet Yellen will delivery her semi-annual testimony to the Senate and House finance committees on Tuesday and Wednesday. The testimony will be important as the FED has been the subject of President Trump’s criticism so we will listen as partisan questions push Yellen to reveal concerns about the president’s fiscal policy couched in terms of the economy running too hot at full employment. The FED has been reticent to discuss fiscal policy. Bernanke weighed in on the fiscal cliff issue in 2012-2013 and was met with criticism from House and Senate Republicans. If Yellen is strident in her views listen for acrimony from the republicans, which will result in increased concerns about FED independence.

Before the election, Chair Yellen maintained that the economy may need to run “hotter” in an effort to remove some of the slack in measured by the Labor Market Conditions Index. In the December 14 FOMC press conference, the Fed chair changed course and said: “Fiscal policy is not obviously needed to provide stimulus to help us get back to full employment.” It is this statement that will raise the temperature of questions from the legislative branch.

A more import speech for traders and investors is the November 30 speech by FOMC Governor Jerome Powell concerning the issue of Fedspeak. “We appear to enjoy talking to print journalists, and some of us like going on television. With the proliferation of media of all kinds, there is need for content, and we have been willing suppliers. In my view, these public appearances are mostly not about gaining leverage in a negotiation. THERE IS A SINGLE FOMC PARTICIPANT WHO HAS MOST OF THE LEVERAGE IN OUR POLICY DISCUSSIONS. OBSERVERS WOULD BE WELL ADVISED TO LISTEN CAREFULLY TO WHAT SHE SAYS.

Pay attention, for in a political realm filled with acrimony and vitriol chief policymakers are important. And the S&Ps continue to rally.

Tags: , , , , , , ,

11 Responses to “Notes From Underground: A Financial Repression Authority (FRA) Podcast With Peter Boockvar”

  1. Trader 1 Says:


    I’m a bit confused about your current assessment of the global landscape.

    1) Feb 7 – Let’s Look at Global Yield Curves – “Patience is required, but I warn that the fallout from a European crisis will be GLOBAL and not regional. And yet, U.S. equities are stable. Don’t be deaf to the rising global uncertainty.”

    2) Feb 8 – Things That Go Trump In the Night – you discuss the potential of ~ $4.2 trillion euros of bonds that could be redenominated if some countries leave EU. ( I understand the deflationary forces this would unleash – HUGE)

    3 Feb 12 – “The ECB is a dangerous actor and creates uncertainty but Draghi and Merkel will do everything to provide support to the EU, which should promote German assets.”

    I absolutely understand you points on the EU Debt.. But on Feb 12 you seem less concerned than previous posts and that Draghi & Merkle will keep the EU patched together.

    Are you concerned about a near term EU debt crisis or do you think the EU will continued to be kept together by Draghi/Merkle??

  2. yra Says:

    Trader–sorry for the confusion.My point was that Draghi amd Merkel would do everything to forestall the outcome I believe is on the horizon—if Le Pen were to win the risk to Merkel would become unsurmountable and Draghi will do everything and anything to prevent that,for if Merkel were defeated it would blow up the EU and certainly cause a calamitous outcome for the ECB and would make Lehman look like a non-event.This is critical for readers and investors to understand.Draghi has made an all in bet and it hinges on the support of Merkel,for without German support the ECB balance sheet is merely a construct of a printing press and it is not one that will be made in Germany

    • Trader 1 Says:


      Thanks for the clarification!

      If countries do leave the EU and ~ $4.2 EU Debt is redenominated whats the end game to this mess? Is there even a policy solution out there??

      To put it another way, did Germany bring all its gold back home because there is no solution???

      • yra Says:

        Trader—many people are asking themselves that question.But you are building on my thesis of the ECB and Draghi capturing the Germans by insidiously trapping them within the bounds of the global financial system.As the political economic crisis deepens the voices around the world will be to Berlin—you must act because the failure to do so will be calamitous for the global financial system—-“the line it is drawn,the curse it is cast,the slowest now ,will later be fast”—Robert Dylan and put into action by the Draghi and his mentor,George Soros–but that is just speculation on my part but you may want to see the G30 group to increase the impact on Draghi

  3. Arthur Says:

    Euro. It is difficult to forecast how long this will continue for, but it cannot go on endlessly.

  4. Rob Syp Says:

    Here’s a 5 year note chart with commentary it’s been great being long the the 5 year futures but all this stuff is so very confusing (higher rates? full employment, Yellen speaking, potential fiscal stimulus) guess it always go back to you get what you can in any particular trade and move on to the next.

  5. the bigman Says:

    Draghi’s chickens coming home to roost:

    Ladbrokes has Merkel even money to be replaced as chancellor:

  6. Arthur Says:

    Can the ruble recover from losing almost 50% of its value since July 2014?

  7. frank c. Says:

    Here is the new wild card from the Greeks.
    Leave the Euro and tie itself to US Dollar.
    This eliminates the printing of new Drachmas and the collapse
    of the new Drachma exchange rate.

    This should give Draghi, EU and IMF some angina.

    • yra Says:

      Frank C.—-i guess they are learning the art of the deal.Tspiras has made one giant mistake after another as he has been suffering from stockholm syndrome

Leave a Reply

%d bloggers like this: