Archive for the ‘ECB’ Category

Notes From Underground: Further Into the Fray

February 20, 2018

On Tuesday the news was filled with the release of an analysis by the research combine at Goldman Sachs warning about the negative outcomes from the increasing amount of debt as interest rates rise, lifting the negative percentage of interest payments relative to GDP. (See the CNBC story, “Goldman Sachs Sees Red Ink Everywhere,Warns U.S. Spending Could Push Up Rates and Debt Levels.”) This is another voice warning about the ill-timed fiscal stimulus and budget deficit increase late in the economic cycle. In an interesting juxtaposition, the WSJ had an article published last week titled, “Cohn Downplays Concerns Over Rising Inflation, Bond Yields.” Speaking in his position as Trump’s top economic advisor, Cohn maintained that the White House is not worried about an overheating economy. Cohn emphasized, “We know how to deal with inflation. We don’t know how to deal with deflation in this country.”

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Notes From Underground: How I Learned to Stop Worrying and Love the Donald?

January 25, 2018

It seems that the White House emptied and traveled to Davos in an effort to gain control at ground zero for access journalism. The fawning media has been the epicenter for President Trump’s assault of the airwaves. The anti-globalist, drainer-of-the-swamp has become the story emanating from the Alps in an effort to destroy the memory of Chinese leader XI at last year’s conclave. President Donald was the perfect foil for the globalist masquerade party just after his inauguration but in 12 months he has hijacked the entire soiree. On Wednesday it was Trump’s minions, Mnuchin and Ross, threatening the world’s money lords with the commencement of a global trade/currency war as the U.S. Commerce Secretary was sending soldiers to the ramparts with threats of throwing dead green presidents to their doom.

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Notes From Underground: Europe Takes Center Stage (Again)

January 15, 2018

It is always a pleasure to talk with the Richard Bonugli at the Financial Repression Authority. Like Anthony Cruedele of Futures Radio, Richard is a very astute financial mind, which allows for deep discussions in a longer format. We cover several issues discussed in Notes From Underground so I’m sorry if it seems redundant, but I will say that we take a deeper dive on the issues. The segment taped on Wednesday, January 10 so from a trading perspective the information may be stale. But from an investors’ perspective it will still be relevant as the markets begin to unravel the mysteries of a new year. We dive deeper into Europe as I am certain the continent will provide much of the tinder for market volatility in 2018. This weekend proved the case as several stories from Europe propelled the DOLLAR lower as U.S. markets were on holiday for Martin Luther King Jr.’s birthday.

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Notes From Underground: The Same Old Song, With a different Beat (Since 2017 Be Gone)

January 4, 2018
After a sharp selloff late on December 29 the market has regained its mojo and rallied 2%. While the first two days of trading for the European markets were not confirming the S&P rally, the DAX and Euro Stoxx 50 rallied with the EURO STOXX 50 closing back above its 200-day moving average on Thursday. The consensus from Wall Street analysts is for emerging markets and Europe to be better alternatives to U.S. investment prospects. Many quality strategists believe the U.S. equity markets are stretched in its valuation while Europe’s recovery is gaining momentum and emerging economies should be the major beneficiary of a synchronized global expansion.

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Notes From Underground: Beginning Of the End?

December 28, 2017

Happy and healthy New Year to all of my readers! Thank you for another GREAT year of contributions to make this BLOG a voice of reason in an effort to undermine the accepted NARRATIVE of conventional media investment pabulum. Today, one of the more astute anchors sustained the nonsense that the ECB and Mario Draghi have a SINGLE MANDATE (inflation), which renders the ECB policy easier to decipher as the FED has its self-defined DUAL MANDATE. This narrative as opined by the mainstream analysts is JUST DEAD WRONG. When Mario Draghi seized control of European fiscal and monetary policy in 2012, he said, “WE will do whatever it takes to preserve the EURO ….” and there would be no TABOOS. The ECB’s MANDATE is UNLIMITED and OPEN-ENDED whiles Draghi works to sustain QE and NEGATIVE INTEREST RATES. Economic data has no weight in thwarting the WILL of the ECB.This is going to be a major story in global finance 2018 as the Italians head to the polls.

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Notes From Underground: Klaatu Barada Nikto (Stop The Printing Presses!)

November 19, 2017

In this famous science fiction phrase from the movie “The Day the Earth Stood Still,” I extract my own meaning: Stop the printing before the world’s financial system is destroyed. Sci-fi writer Edmund North never deciphered the English translation of this “alien” phrase but I believe my interpretation applies to these tumultuous times in central banking. The ROBOT GORT is prevented from destroying the world when the words are spoken to him. Thus I say to Mario Draghi: “Mario Barada Nikto.” The continued use of large-scale asset purchases to enhance global liquidity in a period of increased economic growth is preventing the markets from stabilizing. The proof is in the continued mispricing of corporate debt. Last week, the BBB-rated French firm Veolia sold 500 million euros of three-year notes for -0.026%. Yes, a mediocre credit was able to borrow at less than zero. This is the insanity of the financial world to which the central banks continue to provide liquidity.

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Notes From Underground: It’s Halloween and Nothing Scares the Markets

October 31, 2017

It has been a few days since the ECB announced its intentions. There was no surprise as President Draghi met market expectations by beginning a NON-TAPER, cutting QE by 30 billion euros beginning in January 2018. So as we considered the outcome of PACE and DURATION, the ECB cut the pace in half and extended the program by nine months to September 2018. The most significant piece of the Draghi press conference was his persistence on making the composition of future purchases. It seems that the ECB will utilize the European corporate bond market to meet its requirement and stay true to its CAPITAL KEY. By buying more corporate debt the ECB will find enough German assets to buy. The major problem for the European markets is that UNLIKE the U.S. financial system, European banks are a much more important actor as they provide far more corporate loans on a percentage basis of GDP than U.S. banks. The U.S. financial system relied to a far greater extent on issuing bonds. We have previously discussed the absurd chart showing European high yield debt to have a lower interest rate than 10-year U.S. Treasuries.

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Notes From Underground: Him Or Me, What’s It Gonna Be?

October 24, 2017

President Trump is the ultimate drama queen. The president is drawing out his FED selection as he titillates the markets with the drips and drabs as to who is the most probable choice. Here is my best guess: Because this president reminds the nation how great he is doing using the stock markets as the barometer it would follow that his choice would be the best one for keeping equity prices elevated. Kevin Warsh and John Taylor would be a problem as the equity markets would become cautious for fear of short-term interest rates rising at a quicker pace. It seems that Jerome Powell and Janet Yellen would be the ones to sustain the current stock rally as they are known entities to the Wall street contingent. Of course the ultimate booster of all asset classes would be Neel Kashkari, the latest dissenter to the previous rate increases in 2017.

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Notes From Underground: Prepping For Draghi

October 23, 2017

Another moment in time with Rick Santelli. We reviewed some of today’s early market reactions to the weekend events. A measure of the impact of President Mario Draghi’s ECB policy was reflected in the prices of European sovereign debt. The political news out of Spain and Italy let alone recent elections in Austria and the Czech Republic SHOULD have sent Italian and Spanish yields HIGHER but because of the ECB’s ongoing LARGE ASSET PURCHASES Spanish and Italian yields on 10-year debt actually dropped the most today.

(Click on the image to watch me and Rick discuss the weekend’s events.)

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Notes From Underground: Some Areas Of Concern and Importance

October 16, 2017

As the tinder of prairie fires builds, these areas of concern are important because of the potential impact they can have on the market:

1. Sunday’s election results in Austria give rise to concerns about the rise of euroskeptic groups in several European nations. Yes, the anti-immigration sentiment appears to be the dominant variable in bringing a right-wing government to Vienna, but the sparks from xenophobia can manifest into an anti-ECB issue as domestic citizens are asked to foot the bill for bail-outs of Italian banks. Many citizens of various European states have borne the costs of bailing out Italy, Spain, Ireland, Greece and Cyprus through negative interest rates, the ultimate tool of financial repression. German two-year notes are currently -73 basis points, even though German inflation is approaching 1.7%, resulting in a real yield of NEGATIVE 2.5% for the savers in German-based banks. Regardless of what the ECB does in terms of quantitative tightening President Draghi has maintained that negative rates will remain lower for longer. Financial repression will be the next theme for the European right.

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