Notes From Underground: And a Honey Pot Is Stuck On His Nose

Wow! The Chinese President doesn’t appreciate being caricatured as children’s character Winnie the Pooh so it’s censored from Chinese social media. A Financial Times article noted “attempts to post the Chinese characters for Winnie’s name on Weibo returned the message ‘content is illegal’ although some users appeared able to circumvent the block.” Regardless of whether some of the posts were able to avoid the censors, the point is the same I have been making for eight years on Notes From Underground. A country that does not allow Google to freely operate makes me suspect of all official government data. The greatest comedy was that the financial media was poking at President Xi and the ruling Communist Party Politburo while at the same time citing the most recent economic data as if it was “truth.” The GDP data came in at 6.9%, exceeding guesstimates of 6.8%. Retail sales followed GDP and also beat consensus guesses.

There is no shame in the world of access journalism! Yra’s first law: MONEY IS FASCIST. It holds that global finance global respects economic growth with political stability regardless of the cost to political freedoms. The Davos crowd has applauded President Xi’s free market speeches, a juxtaposition to Donald Trump’s “Make America Great Again.” Participants at the recent G-20 meeting in Hamburg, Germany also sought to portray President Xi as the greater free trader in his efforts to promote the Chinese Government’s “one belt, one road” policy. While I respect China’s economic miracle initiated by Deng Xiaoping, I do not support the political repression of the ruling Communist elite.

The lap-dogs of the global financial media react in a fashion similar to that criticized by Marx in response to Thomas Malthus: shameless sycophants of the ruling classes. President Xi feeds upon the honey pot of free trade but stomps upon the freedoms of political critics. Top down management keeps the money flowing until the next government release.

***Last Wednesday, Richard Bonugli of Financial Repression Authority and I sat down for another PODCAST. I am posting it today as it provides a thorough discussion of many issues previously discussed in NOTES. Enjoy and please feel free to discuss any of the items presented through the efforts of Richard and the FRA.

***European interest rates were lower today as equity markets were soft following upon the selloff of the Chinese markets. Also, because the Italian 10-year notes had the steepest drop in yields it seems that the ECB was intervening. We’re about halfway through July and the ECB has bought EUR27 billion in assets so far so it has 11 days to complete its EUR60 BILLION monthly target. This week we have an ECB meeting but the current policy of QE is not expected to be tapered. The problem for Lael Brainard and other FOMC members is that the fungible nature of global capital prevents the long yields in the U.S. from rising.

In a brief Bloomberg article today, Alexandra Harris (proud papa, here) raises the issue, “Don’t Rule Out Fed Balance Sheet Announcement Next Week: JPM.” She cites JPM analysts Alex Roever and Kimberly Harano argue why it’s possible for the Fed to commence Quantitative Tightening (h/t Boockvar). Read the article to understand why sooner may be better, especially because of the activity of president Draghi’s ECB. Enjoy the PODCAST and TTFN. (Tigger says, “Ta Ta For Now.”)


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10 Responses to “Notes From Underground: And a Honey Pot Is Stuck On His Nose”

  1. David Richards (@djwrichards) Says:

    Even a possibility that the ECB or others might conceivably dial back accommodation slightly sometime in our life apparently trumps any bigger QT to which the Fed may commit. Sentiment speaks and the market mood has changed… Dollar bear market now dude.

    • Yra Says:

      David–definitely shaken the dollar bulls and stirred some movement out of other dollar based assets–but not yet the equities

      • David Richards (@djwrichards) Says:

        I like to chart equities in one currency (pick any one) and as I’m sure y’all know, this shows US equities under-performing many others. IMHO a dollar bear market would likely bleed into US equities, like how the UST tumble spread to USD. Sadly, US politics is dysfunctional like JPM’s Diamond ranted about. If/when confidence is lost, the dollar will fall more and gold should be a benefactor. I’m not a gold bug, as I own no gold but I’m considering exposure to the monetary metal.

      • David Richards (@djwrichards) Says:

        Of course it’s further possible that this new confidence within the Eurozone shall pass (I’d bet on it) and USD will recover eventually. As confidence and currency is relative. But until sentiment shifts back, dollar bear market dude. Let’s see if gold can rise, in terms of *all* currencies.

      • yra harris Says:

        david–really good posts and the points are well taken.Like you,I am not a gold bug but always a relative value investor on a global macro level and you seem to be of the same sense–keep the conversation going

      • yra harris Says:

        David –also as Peter Boockvar wrote this morning and he is dead on the DOLLAR Rallied with the SPOOS for two years as the spoos rallied 20% while the Dollar rallied 30%—sometimes it is about flows

      • Chicken Says:

        “Sadly, US politics is dysfunctional like JPM’s Diamond ranted about.”

        So he finally noticed? I expect he must’ve happened upon “Notes From Underground”.

      • David Richards (@djwrichards) Says:

        lol… But I think by now all market participants have noticed, judging by the global capital flows (aka fascist money) I follow at Princeton Economics. Lately the US has been coloured red (capital outflows) while parts of Europe have been green (capital inflows). It was the opposite in spades throughout the last half of last year. It should flip again as the Eurozone is first in line for the sovereign debt crisis which should erupt with the next recession (well Japan is first in line too but Japan is obviously a more cohesive society than the Eurozone).

  2. Chicken Says:

    In all fairness, Xi has vowed to (selectively?) enforce copyright law.

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