Archive for June, 2021

Notes From Underground: Plus ça Change, Plus C’est La Même Chose (An Ode to Jerome)

June 21, 2021

As promised, here is the podcast I recorded with Anthony Crudele. There is a great deal expressed in 52 minutes following the June 16 FOMC meeting. The fact that Chair Jerome Powell kept on keeping-on with full blown asset purchases leaves me in the camp of very little change regardless of the DOT PLOTS. As Powell said about the FED (and Wall Street economists), not a very good record of forecasting.

Click here to listen to the podcast.

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Notes From Underground: From Tweets to Tweaks

June 20, 2021

Happy father’s day to all who are one and have had one. Just nine months ago the markets were experiencing convulsions as the then-U.S. president would unleash tweet after tweet at all hours. We certainly don’t miss the key-word-driven algos creating volatility with the tip of their finger. The markets got a jolt last Wednesday when the Fed tweaked its administered rates — interest on excess reserves and the offering yield on its reverse repo facility — by 5 basis points in an effort to prevent short-term rates such as TREASURY BILLS from pushing into negative territory on a SUSTAINED basis as cash continues to flood the market, a consequence of the central bank’s ongoing QE ($120 billion a month). Adding to the deluge is the U.S. TREASURY, which has been running down its cash balance from an all-time high of $1.8 trillion.

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Notes From Underground: Schauble Pivots, Brainard Postulates

June 6, 2021

The unemployment data was not as robust as expected but not bad since hourly wages rose above consensus, the work week remained elevated and the jobless rate dropped to 5.8%. The headlines are always subject to severe review doing these tumultuous times. The question remains: Why did the BOND market experience a sizable rally even as the DATA was well within range of expectations. There is a great deal of pressure on the U.S. overnight market as vast amounts of liquidity searches for a home.

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Notes From Underground: An Open Letter To the G-7

June 2, 2021

Every G-7 or G-20 meeting homage is paid to the idea of free markets via the market driven value of each nation’s currency. This is hogwash of the highest order in the world of central bank asset purchase programs. The clarion call is that QE is a domestic-based program meant to meet the inflation target set by the nation’s policy makers and any impact on a nation’s currency is just unintended consequences of keeping a country out of a potential disinflationary cycle. Every central bank statement except the U.S. has a sentence or two about the relative value of a nation’s currency and if too strong then concern about a strong currency being a headwind in meeting the illusion and capriciousness of that 2% inflation target.

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