Notes From Underground: The Ball of Confusion Keeps On Rolling

Tonight I am posting a PODCAST I recorded Wednesday with Richard Bonugli just after new Fed Chairman Jerome Powell’s press conference. Richard and I covered a great deal of ground in discussing the most pertinent issues confronting the world of global macro. Pour yourself a libation and enjoy the interview. I look forward to hearing thoughts from the readers of Notes From Underground.

***The world is running wild tonight with news of a major shake-up in the Trump National Security Team as McMaster is out and John Bolton is expected to replace the highly decorated General. I don’t know enough to comment at this time.

After the FED raised rates yesterday, the Reserve Bank of New Zealand kept interest rates at 1.75% (same as the United States). The most interesting part of the release is that for the first time in quite a while there was no mention of the value of the KIWI currency. This means that the RBNZ is content to let the market establish a fair value for the currency versus direction from the central bank. The statement did confirm that “monetary policy remains easy in the advanced economies but is gradually becoming less stimulatory.”

Early Thursday morning the Bank of England surprised the markets by leaving the rate unchanged at 0.50%, citing the uncertainty of the impact from Brexit. Even though the consensus was for a rate increase the POUND STERLING held well against most currencies. The vast amount of uncertainty in the Trump administration is keeping the DOLLAR soft even as the interest rate differential continues to favor the U.S. currency. The metals tried to rally as yield fell in response to a 3% drop in the U.S. equity markets. Friday is setting up to be a very volatile day as uncertainty keeps people from buying U.S. stocks even as the narrative is that the global economy is so buoyant and profits set to rise. It is tough to overcome rising interest rates and intense political uncertainty.

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6 Responses to “Notes From Underground: The Ball of Confusion Keeps On Rolling”

  1. Bob Zimmerman Says:

    Wonderful and informative! Thank you for sharing. The cable financial networks need to give you your own show. My question is when and where do you see the next Lehman moment?

    • yra harris Says:

      Bob—–you think highway ’08 revisited?It won’t happen that way as that was as much a collateral issue as anything which roared through the credit markets.The issue will arise from debt –over leveraged entities but with the rise of the shadow banking world yet again it is hard to see on a global basis—but ultra low interest rates have hidden the problems of many,many borrowers

  2. Arthur Says:

    Great podcast.

    • Arthur Says:

      5% of global fund managers regard a trade war between America and China as the biggest risk facing the markets, compared with 45% who worried about a return of inflation or a crash in the bond markets. Bank of America Merrill Lynch.

  3. Chicken Says:

    Again, thanks for sharing your thoughts, Yra.

    In DC, money truly grows on trees.

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