Notes From Underground:

On July 11, I discussed many of the current issues confronting the financial markets with FRA’s Richard Bonugli and Peter Boockvar of the Bleakley Group. These podcasts are an important way for me to communicate with some of the brightest minds in the global financial world. It allows me to express ideas and have true discourse to help clarify ideas for the readership of NOTES FROM UNDERGROUND. Pour your favorite libation and drink deep from the efforts of some of the best minds in the financial industry.

The Financial Repression Authority provides a great service for serious investors and traders, especially during these tumultuous times when the global savers have been repressed. Remember, the key is to strive for discourse and no validation for if the analysis is correct the validation is your P&L. Pay close attention to the discussions about tariffs, Russia and the “mystery” of the yield curve. As always, questions and comments are welcomed and (usually) highly respected.

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7 Responses to “Notes From Underground:”

  1. Stefan Jovanovich Says:

    Our host does accept Professor Fama’s view that QE was a neutral event – that it represented only a shift in the maturities of the Fed’s own assets from excess reserves to bonds. Neither he nor Mr. Boockvar see the end of QE as a being nothing more than a shift back to the front end of the curve. But what if the increase in the discount rate is simply the only sensible way to get the Fed out of being the Treasury’s permanent bitch? If the funds to be collected from the run-off of QE were simply to be invested in short-term obligations of the Treasury, without any increases in the discount rate, Mr. Powell would be making the very mistake that Greenspan made – keeping short rates artifically low in the midst of an economic expansion.

    What are the greater probabilities for the future? That the Europeans, with their currency being borrowed and lent at nearly zero nominal rates throughout the curve, will avoid the FX effects of the world’s being offered too many Euros? Or, that the U.S. economic growth will continue as Trump pushes for permanent reductions in individual tax rates and 1-year CD rates increase to the point that people think they are worth having as savings?

    What that will mean for common stocks depends entirely on which ones we are talking about. As our host notes, the companies that have used low rates to fund their buy-backs will have some bad news; but the companies with cash and little or no debt may find themselves in the paradoxical position of being able to buy out their over-leveraged competitors.

    The rate curve may be the signal; but, then again, it may – this time – be the noise.

  2. Stefan Jovanovich Says:

    Mea culpa. “Our host does NOT accept……

    • Stefan Jovanovich Says:

      I should also have added that I do not disagree with our host and his clever friends about the seriousness of the world’s and the United States’ own leverage. But, I think the present business cycle bears little comparison with the one that ended in 2008/9. What the markets – both stock and bond – seem to be saying is that this time the balance sheet ain’t nearly so bad. And, indeed, it is not.

  3. Gregg Slutsky Says:

    If the global world shifted today, not my quote. Does this mean that the entire basis for capitalism is flawed?
    How can ANY financial analysis be legit if the data is phony? ( as you constantly remind readers about China) the reason the data is phony is because the law is the only true ref in business. Everything is rules based in capitalism. Right? Each individual will make decisions based on honest and accurate info, because it’s ones fear of the law that keeps the system honest.However under this new “axis “ the law is optional. ( see Wilbur Ross, Jerad Kushner ) please explain how this is wrong?

  4. Rob Syp Says:

    With how the news conference went yesterday and know this blog is not political but like real estate everything is local local local isn’t everything politics? With the President carelessly revealing more than he should can he be tried for TREASON for what seems like he’s putting the Trump Organization before the people of the United States. If that begins to fester then how does it not effect the markets?

    • Joe Stoutenburgh Says:

      Knowing this blog is not political, please stop trying to make is so with inflammatory comments. There are *many* left-leaning political blogs sympathetic to your views. Please out-gas there.

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