A couple of weeks ago I had the pleasure of recording a Financial Repression Authority (FRA) podcast–hosted by Richard Bonugli–with one of the world’s foremost Austrian economic analysts, Ronald-Peter Stoeferle. Mr. Stoeferle had just returned from a GOLD conference in China so he was bringing a fresh perspective on the global demand for precious metals. This podcast provides the view from Asia, a region from which we don’t receive enough information. Enjoy and I will return in full next week.
***As a follow-up to Sunday’s blog post, the DOLLAR has weakened since the Powell PIVOT empowered DOLLAR bears across a spectrum of currencies. On Tuesday it is important to note that the YEN has retraced the entire move from the night of the ASIAN flash crash. It is important for those trading futures to note that the flash crash took place when GLOBEX was refreshing from 4 p.m. to 5 p.m. CDT, so that the futures range was not as high as the cash YEN rate. If you are trading futures and wish to be long YEN it is important for the January 2 low of 9166 to hold. (Yen futures are currently trading 9241.) The EURO and SWISS have held their post-YEN rallies so DOLLAR bears are beginning to feel emboldened.
A side note: Fritz Zurbruegg was speaking Monday about Swiss National Bank policy. He maintained that the SNB is ready to sustain negative interest rates and is well prepared to intervene in foreign exchange markets. Zurbruegg maintained that the SNB‘s balance sheet is large but can grow further. This is the language that the SWISS used in 2015 just before it ended its sacrosanct EUR/CHF PEG of 1.20.
The issue of the strong Swiss at present is far different from January 2015 because four years ago the SWISS were tactically trying to sustain a PEG. This time the Swiss are not PEGGING the currency but merely performing ALCHEMY as they print unlimited amounts of Swiss francs and use them to purchase a massive basket of global equities. For example, they’re selling francs into the market and using the proceeds to buy stocks such as APPLE.
Of course everything the SNB does is in contravention of the G-20 agreements about foreign exchange intervention. I really like the LONG GOLD/SHORT SWISS play but the SNB jawboning has my attention. For the record, I told readers three weeks before the Swiss abandoned the peg that the 1.20 level was unsustainable. Several had the correct position on January 15, 2015 when the Swiss removed the peg. Again, current conditions aren’t the same since there is no PEG but beware that the Swiss are concerned about the most recent predicament.
Also, take a look at the comments on Sunday’s blog post as there’s a hearty discussion about the SNB, which is a publicly traded entity. Enjoy the podcast.
Tags: currency peg, Gold, Japanese yen, SNB, Swiss Franc, U.S. Dollar
January 8, 2019 at 11:28 pm |
Sorry but the opinion of Mr. Ronald-Peter Stoeferle is rather shallow and I think he’s fallen to the trap of the Chinese diplomatic hand swing. he’s seeing the surface but as a foreigner he just isn’t qualified to the seat on the inside. This underscores the problem with the analysis of the West into the complication in the current PRC. On the one hand, unity under one party is increasingly being challenged on all fronts, without a financial infrastructure to unite, how does a dated ideology stay in power? On the other hand, what good is economic expansion when you can’t sell debt in your own printing machine? The sole purpose of China and Russia accumulating gold is to issue debts in its currencies. I am afraid both Yra and Ronald-Peter are out of their depth on this topic.While there are lots of financial problems local governments are facing, the party and Chinese central bank is cash-rich. I believe as the US-led quantitative tightening takes place, China is ready to ease. Within the coming decade, I am expecting a shift from US denominated debt to Yuan-denominated debt on a global scale. In this respect, the quantitative tightening in the West will not be as detrimental as most think because there’s another powerhouse to provide liquidity.
January 10, 2019 at 7:35 am |
Cpy—I agree that the accumulation of GOLD by China and Russia is to enable a hard currency baked bond ability.This is the reason i actually see China going into bi-metalism and utilizing silver also—unlike the traditional use of Gold the rise of derivatives provides many ways to utilize metals and still create enough liquidity.I have raised the issue many times that no more funds should be provided to the IMF but rather they ought to use its gold hoard to issue IMF backed bonds on a ratio of 5-1 or some variation—that would be the beginning of the influence of China to use its gold
January 8, 2019 at 11:34 pm |
One note on the Xi’s view on environment 13 minutes in, boy, Ronald you really don’t understand how the PRC work. You’re taking propanda speech as doctrine.
January 9, 2019 at 10:24 am |
Yra,
This is not a “prediction” question but rather to get a sense of how much damage you think could be done to the economy trying to get this $Trillion Deficit funded:
What kind of rates do you think it will take to find a bid for all these treasuries that will have be issued?
January 9, 2019 at 6:10 pm |
Trader—this is an impossible question to answer because so much of the recent borrowings have been in the front end.That is part of the reason that the curve has flattened and even in today’s FOMC minutes there is concerned raised about the powerful rise in the fed funds rate relative to IOER—I believe that Peter Boockvar and Alexandra Harris of Bloomberg both cite the huge front loaded borrowing in the t-bil market—next time i write I will post the Bloomberg article by Alexandra
January 10, 2019 at 11:29 pm |
Sheila Bair not impressed with current bank capitalization.
January 11, 2019 at 7:26 am |
Chicken–you know i recommended her for Fed Chair–she is one of my favorites and I sat on her Financial Product advisory group whne she chaired CFTC–very good leader and knows more about financialsystem then 99.9% in Washington
January 11, 2019 at 8:49 am
Yes Yra. I respect her opinion by association, based on your observations.
January 11, 2019 at 10:51 am |
Very impressive person Fun watching herschool the talking magpies on CNBC.
January 12, 2019 at 6:02 pm |
Yeah, lol, the term “underpriced” confused me briefly as if current price is too low. Obviously the opposite was her message.
January 13, 2019 at 12:42 pm |
What sorts of institutions own all of this at risk leveraged corporate debt, that Sheila Bair is referring to?
January 14, 2019 at 11:28 am |
Trader B–many .Because as Sir Alan Greenspan was so proud of in the last years of his cult of personality—the dissemination of risk into so many diversified hands made the the global system so much safer—-we saw how well that worked.Many of those sitting at the FED still fail to comprehend the shadow banking system and the role of private equity money to leverage up the system.Powell certainly understands this and I have a sense Sheila was speaking directly to him.As long time readers know I have great respect for Sheila Bair and Brooksley Born as they tried to get ahead of regualting the derivative markets in the 1990s but Brooksley was crushed by Rubin,Summers and Greenspan–I know this intimately as I sat on an CFTC advisory committee and helped provide insight to Born’s key aids,Mike Greenberger and told her they would derail her efforts.If you read Sheila Bair’s book Bull By The Horns,you will gain insight into the politics of Wall Street—Larry Summers especially should be embarrassed by his efforts to do the bidding of Wall Street for his efforts to rescind Glass-Steagall and if he wants to debate the issue publicly i would relish the opportunity–along with Greepsan and Rubin–leverage and systemic risk—paging Hyman Minsky
January 14, 2019 at 4:37 pm |
G30 – Managing the Next Financial Crisis: An Assessment of Emergency Arrangements in the Major Economies
http://group30.org/images/uploads/publications/G30_Managing_the_Next_Financial_Crisis.pdf
January 15, 2019 at 5:56 am |
Yra & Co., 3 Geopolitical Risks Global Macro Traders Should Watch in 2019??? Thanks
January 15, 2019 at 4:17 pm |
Arthur —i find this piece so sanitized as to be worthless.Tim Geithner as co-chair undermines whatever credibility they pretend to have.My disdain for geithner is great as he saved wall street while throing main street to the wolves.I have great respect for Paul Volcker except for his views and involvement with the G30.There is too much public/private here that it surpasses Davos.When little timmy goes back to his paymasters at Warburg/Pincus what does he deliver from what was discussed—this is more bullshit then Trump’s two hours with Putin in Helsinki–what goes on in private we will never know and I believe it constitutes a massive bought of insider trading—I will publish my high risks soon and the key one may be—-???