Archive for the ‘ECB’ Category

Notes From Underground: Around the World With Yra + Rick

September 20, 2018

On Thursday Rick Santelli pushed and prodded and as a result, we were able to travel from Japan to Europe in an effort to discuss some of the more pressing issues confronting the global macro world. First, we stopped in Japan to discuss how the BOJ and Governor Kuroda will be able to extricate itself from five years of QQE which has seen the BOJ accumulate Japanese debt and equities. Of course the end game is to reach the self-imposed inflation level of 2 percent that has proved to be an agonizing level to achieve. As a reminder, when a nation is saddled with huge debts the best relief is to be found in inflation, which results in an ultimate money illusion as debts are paid back with an ever-depreciated currency.

Click on the image to watch me and Rick discuss global policy.

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Notes From Underground: More Perspective In the Time Of Reflection

September 12, 2018

First, to all of those in the NOTES community who celebrate the Jewish New Year, I wish you a year of health, peace and prosperity. To those who celebrate other spiritual endeavors I offer you a wish for health, peace and prosperity. Now, to the markets. In the past month I have spent time putting issues we’ve been discussing for the last nine years into perspective. Lately, the airwaves are filled with the accolades laid upon the policy makers who SAVED CAPITALISM. Listening  to Paulson, Geithner and Bernanke pontificate on how they acted to save the system is enough to send me into fits of rage as the culprits who failed to act to halt the housing bubble praise themselves for the “Courage To Act.”

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Notes From Underground: Sympathy For the Devils

September 3, 2018

The world is aflame with the BLOWBACK from policies of the elites who carved a world fit to desired outcomes of a self-established ruling class. The free flow of capital in pursuit of cheap labor has led to the stagnant wages that have given rise to anti-establishment forces, which have upset the Davos crowd’s playbook. As long as capital pursues a maximization of return but is answerable to the Westphalian construct of the nation-state, there will continue to be bouts of conflict that result in less desirable outcomes for global corporations.

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Notes From Underground: Areas of Global Macro Concern

July 24, 2018

President Donald Trump’s continuous tweeting creates volatility in the markets but the impact lessens as participants become hardened to the vagaries of the tweets. An area that does concern me, though, is the amount of insider trading I suspect is taking place.

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Notes From Underground: Headlines Drive the Algos and the Circle Remains Unbroken

June 12, 2018

I’m going to be off for a few days, even if this Fed meeting proves to be the most market-moving week in many years.

The news from North Korea proves to be a non-event (as suspected). On Wednesday, we get the FOMC statement, which OUGHT to meet market expectations with a 25 basis point increase and some sense of the interest on excess reserve (IOER) rate in reference to fed funds. There is much discussion about the FED reaching “normal” interest rates, meaning neither too weak nor too strong to reach its dual mandate.

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Notes From Underground: Bored By Italy, But I Digress

June 5, 2018

Sorry. The current situation in the European Union has been well forecasted by NOTES FROM UNDERGROUND so until the storm clouds clear and the Italian ruling coalition begins to initiate some of its campaign proposals I treat everything in Europe as a trade and not an investment. Even the talking heads are waking up to the potential financial damage that bank balance sheets loaded with ZERO RISK-WEIGHTED sovereign bonds can cause a healthy bank’s bloated balance sheet.

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Notes From Underground: Like Holden Caulfield, I Digress

May 29, 2018

As the Italian political situation maintains a boil, the elites of the Davos clique are out in full force trying to calm markets. The only problem is that established elites are so removed from reality that every move they make results in more turmoil. The airwaves were full of establishmentarians portraying themselves as conciliatory but their analysis of the economic consequences of the Italian election outcomes are similar to Ben Bernanke’s claim that the housing crisis was contained in early 2007. Let’s review some of today’s inane comments and analysis:

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Notes From Underground: Back On the Floor

May 28, 2018

On Friday, Rick Santelli and I discussed the situation in Europe, especially the FRAGILE situation in Italy. An important metric that needs to be watched is the huge amount of sovereign debt that is “comfortably” sitting on the Italian banks’ balance sheets. Under BIS rules (and other global financial regulations) sovereign debt carries a ZERO RISK WEIGHTING, meaning that commercial banks can hold sovereign bonds and hold no reserves against such an asset class.The Italian banks have been the repository of their sovereign bonds, which makes them vulnerable to a rise in BTP yields as the price drops due to the political concerns involving the inability of FIVE STAR/LEGA to come to an agreement on an acceptable cabinet.

(Click on the image to watch me and Rick discuss the Italian situation)

 

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Notes From Underground: The Magician of Frankfurt Will Be Called to Answer

May 22, 2018

We’ve been discussing the problems in the Italian debt market at NOTES FROM UNDERGROUND for many years but with the Five Star/Lega coalition coming into government many of the issues that were once theoretical are now an increasing possibility. The Five Star group is openly proposing a debt restructuring for Italy in the hopes of spurring growth and improving the Italian unemployment situation. Economic growth in Italy has lagged the developed world economies and none more so then its neighbor, Germany.

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Notes From Underground: The Mother of All Debt Crises

May 14, 2018

Everything in global financial crisis emanates from too much debt being unable to be serviced. The current situation in Argentina is that the state and private sector borrowers won’t be able to pay the INTEREST on its dollar-based loans as the PESO weakens. It takes more domestic currency to purchase the needed dollars to pay creditors, resulting in a NEGATIVE FEEDBACK LOOP that brings the economy to a crawl as all the economic actors have to find ways to pay the interest costs or go bankrupt. The Argentinian government won’t go bankrupt. But it will force a debt restructuring if its borrowing costs move higher (yet another burden for a debt-plagued economy).

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