Archive for February, 2018

Notes From Underground: Overheated to Overrated

February 27, 2018

In his first Congressional testimony as Fed Chairman Jerome Powell didn’t surprise as he was measured and succinct in presenting a more market-based approach to monetary policy. The equity, currency, precious metals and debt markets were all in sell mode as the prepared statement gave rise to a renewed sense that the FED will lean toward FOUR rate hikes in 2018. The key paragraph was:

“In gauging the appropriate path for monetary policy over the next few years, the FOMC will continue to strike a balance between avoiding an OVERHEATED [emphasis mine] economy and bringing PCE price inflation to 2 percent on a sustained basis. While many factors shape the economic outlook, some of the headwinds the U.S. economy faced in previous years have turned into tailwinds: In particular, fiscal policy has become more stimulative and foreign demand for U.S. exports is on a firmer trajectory. Despite the recent volatility, financial conditions remain accommodative.”


Notes From Underground: Jay Powell’s Coming Out Party

February 26, 2018

There are several important areas for discussion but first I wanted to post a podcast from the Financial Repression Authority that I participated in last Wednesday with Jim Bianco and Peter Boockvar. Pour your libation of choice and have a listen. Please post any questions or points on information on the blog in order to stimulate a discussion that creates potential profitable trading ideas.The moderator Richard Bonugli does a great job of provoking discourse but allows the conversation to freely flow in search for high quality dialectic. Enjoy.


Notes From Underground: Further Into the Fray

February 20, 2018

On Tuesday the news was filled with the release of an analysis by the research combine at Goldman Sachs warning about the negative outcomes from the increasing amount of debt as interest rates rise, lifting the negative percentage of interest payments relative to GDP. (See the CNBC story, “Goldman Sachs Sees Red Ink Everywhere,Warns U.S. Spending Could Push Up Rates and Debt Levels.”) This is another voice warning about the ill-timed fiscal stimulus and budget deficit increase late in the economic cycle. In an interesting juxtaposition, the WSJ had an article published last week titled, “Cohn Downplays Concerns Over Rising Inflation, Bond Yields.” Speaking in his position as Trump’s top economic advisor, Cohn maintained that the White House is not worried about an overheating economy. Cohn emphasized, “We know how to deal with inflation. We don’t know how to deal with deflation in this country.”


Notes From Underground: Let’s Enter the Fray

February 19, 2018

First, thank you to all the readers and friends who posted condolences and sent private notes on the passing of my dear brother Ralph. If you want to see his creativity, search for Dwight Ralphy on YouTube. They have provided me a laugh and reminder of how forward Ralph was as this work was created in the ’80s and ’90s.

For the past couple of days I have been reviewing market action and news stories that purportedly raised the volatility levels of equity, bond and currency markets. In my February 5 post I mentioned that the synchronized key reversals of the three major U.S. indices–Dow, Nasdaq and S&Ps–provided a backdrop that we have not experienced in many, many years. In June and August 2017, the Nasdaq 100 futures put in a weekly key reversal. An outside key reversal is when a market makes all-time highs and closes below the previous week’s low. This technical indicator has been a mainstay of the week of high quality technicians and last year’s failure of this long trusted indicator drove market seers crazy.


Notes From Underground: Synchronicity

February 5, 2018

We have had many false key technical signals over the last 12 months. BUT LAST WEEK there have been THREE KEY REVERSALS. The DOW, S&Ps AND NASDAQ all made all-time highs and closed below the previous week’s low. SYNCHRONICITY indeed. Pay close attention as the world is all aflutter with fears of higher interest weeks forcing a reassessment of equity values. I believe Monday’s massive selloff IS A RESULT OF THE MASSIVE EFFECT OF THE RISK PARITY PARADIGM. I have warned that all the synthetic mimics of DALIO’s risk parity profiles were going to create a small door in which to exit. I am posting a podcast I recorded with Anthony Crudele on January 30, but just released this morning. Learn from actual traders, CHI GIRL and YRA HARRIS.