Archive for the ‘Fed’ Category

Notes From Underground: The Darkness of Foreign Exchange

December 10, 2020

There were two central bank meetings in the past two days: The Bank of Canada and the European Central Bank. The BOC stayed its current course with no change in policy. Several analysts were looking for more dovish action because of the appreciation of the Canadian dollar but the BOC was wise in noting that a “broad-based decline” in the U.S. exchange rate has contributed to a “further appreciation of the Canadian dollar.” As a result, the BOC has ZERO concerns about its currency appreciating as long as it is BROAD-BASED.

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Notes From Underground: Return of the Bond Vigilantes?

December 6, 2020

After the performance of the 30-year yield on Friday, we must ask this question. The overall release was on the weak side as jobs created were far less than expected, even though the RATE dropped to 6.7% and average hourly earnings increased by 0.3%, higher than forecasted. The AHE are difficult to measure as it can reflect lower wage earners being left out of the job market, as well as bonuses paid out to middle- and upper-level management.

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Notes From Underground: A Tumultuous Year

December 1, 2020

Sorry to state the obvious but 2020 has been a tumultuous year. Between covid-19 and U.S. politics — and the politics of covid — interest rates have returned to the zero lower bound after the second-quarter disaster. The FEDERAL RESERVE has declared that it’s on hold until the wages and jobs lost to the most vulnerable have been recovered.

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Notes From Underground: Too Little Is Worse Than Too Much

October 6, 2020

Following Federal Reserve Chairman Jerome Powell’s speech Tuesday at the National Association for Business Economics, the media (financial and mainstream) ran with the idea that Powell would rather have the government err on the side of TOO MUCH STIMULUS instead of failing to provide the needed boost to an economy that’s beginning to stall after a robust third quarter.

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Notes From Underground: Narcissism Has Consequences

October 1, 2020

On Friday, there’s a new dose of unemployment data. While these blog posts have been infrequent, my view remains the same: The Federal Open Market Committee may be keen on promoting inflation while returning to the pre-Covid employment levels, but no amount of robust jobs growth will move the FEDERAL RESERVE off its current policy of lower for longer.

In regards to the year-end data, I want to know: If unemployment is below 9% while the annualized inflation levels were to rise to 6%, would the FED raise rates? If your answer is no then you agree that the data outcomes are benign. At this juncture much more concerned with the next phase of fiscal stimulus and the DOLLAR.

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Notes From Underground: Waiting for Godot, or Waiting for Jerome?

September 15, 2020

President Donald Trump has had his issues with his own hand-picked Federal Reserve Chairman Jerome Powell. At one point there were even discussions about Trump attempting to demote the chairman if not “firing” him for failure to keep interest rates low enough to finance the massive budget deficits. The Covid pandemic, coupled with 2019’s Powell pivot, seems to have satisfied the President’s lust for negative REAL YIELDS as Powell is no longer the object of Twitter derision. (more…)

Notes From Underground: Venturing Into the Global Morass

August 25, 2020

As we get back up to speed, here is another FRA podcast, with Barry Ritholz, David Rosenberg and myself. Enjoy the discussion as we prepare for the the coming volatility of the election season. Pandemics, recessions, elections, oh my.

Click the link to listen to the podcast.

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Notes From Underground: A Podcast for the Road

June 10, 2020

There were no surprises from the FEDERAL RESERVE on Wednesday. There was no discussion of yield curve control but there was plenty of confirmation about the FED‘s concern surrounding the damage done to the lowest on the employment ladder.

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Notes From Underground: “Hoist With His Own Petard”

June 9, 2020

This quote from Shakespeare explains the position that the Jerome Powell-led Federal Reserve has created for itself. The U.S. central bank has been captured by its massive monetary stimulus in addition to its willingness of aiding and abetting the Mnuchin Treasury by purchasing of hundreds of billions of Treasuries. The FED has maintained that its dual mandate provides the theoretical and practical approach to keeping interest rates lower for longer.

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Notes From Underground: Policy Trumps Data

June 6, 2020

The MISS by the economic analysts of Friday’s unemployment data has rendered all data as tertiary relative to the policy that has been enacted to counteract the malicious effects of the Covid-19 shutdown. Global stock markets have rallied as if normalization has occurred and UNEMPLOYMENT has returned to its historic lows of 3.5%.

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