Archive for the ‘Gold’ Category

Notes From Underground: Trump Delivers on Using the Dollar as a Policy Tool

April 12, 2017

In an interview with the Wall Street Journal, the tweeter-in-chief was reported to have said, “The DOLLAR IS GETTING TOO STRONG.” As some pundits discussed, instead of Trump calling China a currency manipulator it seems he wants to use the dollar as a cudgel to pressure others into not embarking on policies to weaken their currencies. As I wrote on April 2:

“The Trump Administration’s efforts to curb the U.S. trade deficit may see the executive branch try to depreciate the U.S. dollar if Secretary Mnuchin and Secretary Ross fail to persuade certain global actors to embark upon policies to adjust their current account and trade surpluses. The Fed’s recent tightening has not rallied the dollar–it actually closed lower on the quarter–so if the political status quo is sustained in Europe and no new political crisis emerges, the DOLLAR will become a barometer of Trump’s policies on trade.”

(more…)

Notes From Underground: We Are All Part of the Same Hypocrisy, Senator

November 29, 2016

The world is all abuzz with the good feelings radiating from the aftermath of the Trump victory. However, no matter how long the U.S. equity market rallies, be certain that Trump is not draining the swamp of Washington, D.C. He is proving to be a caretaker. Today’s pick of Elaine Chao for Transportation Secretary is just more of the same. Ms. Chao is certainly qualified. After all, she has an MBA from Harvard, but being a past member of the Bush Cabinet means we are using old, worn-out tires. The Transportation Secretary will be overseer of many of the INFRASTRUCTURE PROJECTS the Donald has promised to deliver. The pork barrel these projects will be dipped in will be beyond lucrative and the wife of Mitch McConnell ought not to have been given this role.

(more…)

Notes From Underground: For What It’s Worth

November 21, 2016

Everybody has opinions on the recent election outcome but as usual most of the opinions are from the echo chamber and not factual in any way. This blog is dedicated to seeking profitable investment and trading opportunities as I sort through the noise of the financial media. As with Brexit, the punditry found itself trapped in its own rhetoric and every prediction but the weakness of the pound proved to be WRONG, at least in the short to medium-term. British Gilts (10-year notes) rallied substantially in the post-Brexit confusion and most importantly the Footise stock index rallied 15% off its election night bottom. The POUND did weaken substantially against the U.S. dollar and the euro currency but I have argued for a few years that the British current account made the relative strength of the POUND to its key trading partners unsustainable.

(more…)

Notes From Underground: Old Friends

November 20, 2016

Time it was

and what a time it was, it was

a time of innocence

a time of confidences

long ago it must be

i have a photograph

preserve your memories

they’re all that’s left you [Simon & Garfunkel]

(more…)

Notes From Underground: Gee, What’s the G-20 Thinking About?

April 17, 2016

The Japanese leave Washington with no support for alleviating one-sided currency moves. For China it is all about respect for growth, wherever it may be. The Chinese GDP was released on Thursday and it came out exactly as forecast at 6.7% (shocking, I know). There was virtually no criticism of the Chinese as the nations are watching closely while China commences its transition from an export-dominated economy to a more balanced growth model, where domestic consumption takes on increased importance. In contrast to the G-20 view on Japanese currency intervention, SNB President Thomas Jordan announced that the Swiss would increase its balance sheet through currency intervention “… to prevent an already ‘significantly overvalued’ franc from strengthening.”

(more…)

Notes From Underground: Where Are We?

March 28, 2016

First quarter is winding down and after a great deal of volatility it is time to reflect on the markets. The SPOOS are virtually unchanged  while the Nasdaq 100 is down 5%, the Nikkei is down 10% and the German Dax is down 8%. The global equity markets have been riding a wave of liquidity for a long while but with the aggressive QE programs from the ECB and BOJ the first quarter one would expect the German and Japanese stock markets to have been the star performers. Maybe more QE is losing its power to impact the markets? The DOLLAR INDEX is lower by 3.2%, which is also in contravention of conventional wisdom as QE is done to weaken one’s currency in an effort to aid the domestic economy. In examining the individual currencies the euro is +3%, Swiss franc +3%, yen +8%, Canadian dollar +5% and Aussie dollar +3%. Yes, the easing banks have seen their currencies strengthen against the DOLLAR.

(more…)

Notes From Underground: When I Have Something to Say Sir, I’M GOING TO SAY IT NOW (Phil Ochs)

February 3, 2016

The markets are in turmoil and it gets the mind to thinking: What could possibly have caused today’s reversal in the stock market and the long end of the BOND MARKET? The market seemed like it was on the edge of a complete risk capitulation. The dollar was dropping, bonds all over the world were in rally mode and the precious metals were finally finding some technical strength as the GOLD (in pure dollar terms) had finally rallied through its 200-day moving average. Even the SILVER was able to synchronize with the GOLD and break out of three months of resistance. (The silver 200-day is at 15.13, still a bit above its closing price.) The global stock markets were cascading lower as the Nikkei and German DAX took out their lows made the night of the BOJ’s surprise move to a three-tiered negative interest rate policy.

(more…)

Notes From Underground: Your Cash Ain’t Nothin’ But Trash, Take 36

January 31, 2016

Here we go again. Bank of Japan Governor Kuroda “shocked and awed” the markets by taking BOJ deposit rates into negative territory in a HYBRID sort of way as it is a three-tiered methodology that does not apply to money already being held at the BOJ in reserve. Also, money that is deemed regulatory-type capital will receive ZERO interest and won’t be punished with a surcharge, but any new funds making it onto the reserve balance sheet of the BOJ will receive NEGATIVE INTEREST RATES. Kuroda-san delivered this shock after promising last week that the BOJ would not go negative on its deposit rate. Kuroda will learn hat if you keep intentionally pumping the markets with disinformation the markets will have their time when the BOJ needs it the most, like maybe selling off the massive JGB portfolio on its balance sheet. But through the power of negative compounding of interest earnings Kuroda has brought Stevie “Guitar” Miller’s words to life:

(more…)

Notes From Underground: “A Single Spark Can Start A Prairie Fire” (Mao, 1930)

January 11, 2016

You don’t have to be a weather man to know which way the wind is blowing, or so says Bob Dylan. As long as all things are emanating out of China it may be the time to dust off the sayings of Mao for as the talking heads are reminding us daily: “The East Wind Is Prevailing Over the West” in all things financial. THE PROBLEM FOR ME IS I DON’T ACCEPT THAT VIEW AND AM IN THE CAMP OF FORMER DALLAS FED PRESIDENT RICHARD FISHER that all roads lead to the FED and certainly the European Union for providing the tinder for a financial prairie fire. There has been so much volatility during the first six trading days of the year it is difficult to get a handle on what is  algo-driven non-fundamental and what may be the commencement of a change in previous momentum trades. Today I will go through a list of POTENTIAL SPARKS TO IGNITE THE  FLAMES OF A FINANCIAL FIRE so that we can be aware of what constitutes  a genuine change in momentum:

(more…)

Notes From Underground: Unemployment Report Spot-On and Meaningless; Draghi Doesn’t Disappoint

December 6, 2015

The U.S. jobs report was in line with market expectations colored by the Wednesday release of the ADP data. The market’s response was interesting in that BONDS, STOCKS AND THE DOLLAR reversed some of the reaction to ECB President Mario Draghi’s press conference on Thursday. While the jobs report seemed to SOLIDIFY an FOMC rate hike next week, the settlements on Friday raises questions about the Fed’s current strategy. Even though a rate increase is a “certainty” and with the ECB promising more liquidity at lower interest rates, the settlement prices at the week’s end were perplexing:

(more…)