Notes From Underground: “Where Did I Find This Guy Jerome?”

Of all the U.S. president’s tweets (and believe he has a lot), Friday’s tweet about Federal Reserve Chairman was one of the best. Unfortunately, there probably should’ve been a comma between “guy” and “Jerome” since one could ask the question about any member of Trump’s economic team. President Trump could be asking the Fed chairman about Secretary Steven Mnuchin, or Commerce Secretary Wilbur Ross, and certainly of Larry Kudlow or Peter Navarro. NOTES FROM UNDERGROUND has been asking that for many months. In my opinion, the only Trump pick that inspires confidence is Robert Lighthizer.

Trump’s tweet was competing with the unemployment data, which was spun as extremely positive by home team cheerleader Larry Kudlow (that’s part of his job description, don’t you know). However, outside the household survey the data was tepid. Yes, the recapture of average work week lost in the previous release was good but private sector job creation is not as strong as ADP and others have been predicting. Initially, the tepid job numbers promoted a rally in the GOLD and silver, a rally in debt markets and a sustained gain in equities.

However, the rally in the precious metals was erased late in the session as Powell spoke in Zurich in a moderated Q&A forum with Swiss National Bank President Thomas Jordan. Powell’s well crafted responses seemed to remove any hint of a 50 basis point cut at the September 17-18 FOMC meeting, which lent support to the recent correction in GOLD and silver. The U.S. dollar initially sold off on the employment data but following Powell’s comments it regained some strength and closed virtually unchanged (but on its lows for the week).

The DOLLAR lost ground against the euro as some sense of a less aggressive ECB easing has leaked into the market. This sentiment also provided a corrective posture to the precious metals as the GOLD/EURO cross corrected, in addition to other currencies against the metal.

While the financial press was so focused on Powell’s words, it missed a significant point from the SNB’S Jordan. A point that carries additional weight because of this week’s ECB meeting. Jordan was asked about the SNB possibly sending every Swiss voter a check in an effort to elevate the inflation level. (Remember that the Bush White House did this early in his first term with the onset of the recession following the DOTCOM implosion.)

Jordan emphasized that sending a CHECK TO EVERY CITIZEN WOULD VIOLATE THE SWISS CONSTITUTION FOR THAT WOULD BE A GOVERNMENT FISCAL ACTION. This came up because a couple of weeks ago there were EU voices raising the idea of the ECB sending every EU citizen either a check or electronic deposit.

The ECB would be embarking on an act of FISCAL STIMULUS, which would most certainly violate EU rules and send the Germans, Dutch and Austrians to the European Court of Justice. The ECB should refrain from any further monetary stimulus and force each nation to have to begin a fiscal policy of their desire. TO MARIO DRAGHI: Less is certainly more in this environment. Going from negative 40 to negative 50 basis points is a meaningless gesture, especially as it will be offset by devising a more convoluted TIERING to limit bank payouts to the ECB.

Germany is already threatening to prevent commercial depositors from being forced to pay interest on any negative interest rate account. Heed the words of Thomas Jordan as to avoid running afoul of EU law and possible German lawsuits.

***While the U.S. employment data was tepid, Canada had blowout numbers as 81,000 jobs were created versus a consensus +19,000. In addition, the IVEY PMI data came in hot at 60.1 versus an expected 55.5, justifying the Bank of Canada’s decision to keep rates on hold at 1.75%.

The Canadian dollar had a strong day but still cannot take out the 200-week moving average, which has provided stiff resistance. Do your technical work to discern risk levels for your comfort zone. Also, pay attention to the CAD/CHF cross, which is also challenging its 200-week moving average.

If commodity prices were to get any type of general bid the Canadian picture OUGHT to improve along with the improvement in the jobs situation. In a world bereft of yield, Canadian dollar certainly gets a look on a relative basis. For further confirmation do the technicals on the Canadian dollar crosses—sometimes a multifaceted analysis is the best of all.

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11 Responses to “Notes From Underground: “Where Did I Find This Guy Jerome?””


    Thanks again Yra, – I noticed some serious technical damage last week, most notably GOLD to EURO and GBP, key reversal lower, with record positioning long in Gold, and very short GBP positioning. The one that also stands out is the key week reversal In the Bund, leading into ECB meeting. To me, it looks like at the very least the start of some position cleansing, and the first chance to have a chance at selling the long end on a technical basis, any thoughts?

    • yraharris Says:

      Andrew–I agre with your assessment on the BUND—again there is leaking into the common narrative a sense that the ECB will be reticient to be as aggressive as Draghi signaled at Sintra in June—the Gold/currency crosses had gone parabolic and some back and fill is necessary—just one man’s opinion

      • ANDREW PERRY Says:

        My old technical mentor, Howard, would be all over that pattern Yra, that the key reversals, gold GBP gold euro, and Bund:

    • yraharris Says:

      Andrew–you most certainly learned from the best

  2. Don H Says:

    Still valid as the new week begins:
    /ES IF Buyers hold mkt above 2963.50, then 2994 target; IF 63.50 fails before that target trades, then anticipate a deeper pullback.
    /GC IF Sellers hold any bounce below 1547, then 1507 target; A bid back above 1547 wld be Bullish.
    My .02

    • Don H Says:

      /GC has traded the 1507 target this a.m.
      /ES traded 2.5 handles shy of 2994 target before the RTH bell. 2963.50 still line in sand for Buyers to defend to halt the slide & continue higher.
      My .02


    without a doubt Yra,

  4. Trader1 Says:


    To clarify your thinking:

    Are you now of the opinion that Draghi won’t buy stocks/bank stocks at the Sept ECB Meeting??

    • yraharris Says:

      Trader—very good question.If he were to go big I think that would have to be an area he would move to—-what else is there and he would at least get some support from the EU financials who are presently very unhappy —-but I am thinking he is under a great deal of pressure from the more cautious central banks of the EU—but if he goes full I believe QQE which will entail equity buys–but I again say a great question–watch the EU bank index as a sense of the inside view

  5. Chicken Says:

    Aaaannnnd… FNMA rose 43% today…

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