Archive for the ‘Brazil’ Category

Notes From Underground: Larry Kudlow, White House Eunuch

September 17, 2018

Make no mistake, Larry Kudlow is worthless as a source of financial wisdom because he wishes to be everybody’s friend. That prevents him from having a discussion about serious financial concerns. The Kudlow mantra is: Pay attention to the growth coming from the tax and regulatory reforms put in place by the Trump administration. I agree with the great need for regulatory reform, but the Kudlow mantra of “don’t worry about budget deficits because growth will take care of it” is RUBBISH. The Trump administration has increased spending while cutting taxes, which in my opinion has merely resulted in INTERTEMPORAL MISALLOCATION. The TRUMP White House has merely brought forth demand from the near future with no genuine way to pay for it. This is of course right out of the Nixon play book in which “we are all Keynesians now.”

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Notes From Underground: Does the Central Bank of Brazil Get “REAL”?

August 29, 2013

Yes, the pendulum of market prices is a cruel mistress. Two  years ago, Brazilian Finance Minister Guido Mantega was voicing concerns about the developed economies declaring a currency war on the emerging markets through the use of its quantitative easing programs. The Brazilians reacted by imposing various forms of exchange controls to slow the inflow of “hot money,” as well as cutting Brazilian interest rates. Now that the Brazilian Real has depreciated by 50% since August 2011, the Brazilians believe that they have had enough and want to stem the depreciation because of the inflationary effects of a rapid depreciation. The Brazilian Central Bank (BCB) raised interest rates again last night by 0.5% to 9% in an act to help end the REAL‘s recent downward move. Last week, the BCB announced a large currency intervention package of $60 billion involving swaps and loans to the markets. This program ensures that the Brazilian financial markets will have a steady stream of dollars  and will prevent a fear among investors that Brazil will not be able to meet investor demands for currency redemptions.

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Notes From Underground: Global Macro In a World of Rising Big Data

August 12, 2013

The new buzz word from the realm of the “talking heads” is BIG DATA. When we mention FACEBOOK and the other social media companies, the discussion leads to big data. The issue of Snowden and the NSA is the U.S. Government’s collection of vast amounts of personal data on U.S. citizens in the name of national security and preventing possible acts of terror. Ultimately, the discussion is about the ability of computers to search through ginormous amounts of data and find patterns that will reveal threatening behavior. In the May/June issue of Foreign Affairs, Kenneth Cukier and Viktor Mayer-Schoenberger wrote an article, “The Rise of Big Data.” It is an essay adapted from a book they wrote. Three key points are outlined:

1.Collect a lot of data rather than rely on small samples;

2. Not be concerned about how pristine the data may be and through algorithms sort through vast amounts of data regardless how messy it may be because quantity is more important than quality;

3. (THIS IS KEY FOR THE REALM OF GLOBAL MACRO FINANCIAL WORLD) “IN MANY INSTANCES,WE WILL NEED TO GIVE UP OUR QUEST TO DISCOVER THE CAUSE OF THINGS,IN RETURN FOR ACCEPTING CORRELATIONS.”

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Notes From Underground:Just A Few Quick Hitters After Last Night’s Deluge

March 11, 2013

Today was a very slow news day and thus little news to slow the steady rise of equities and the sell off in other asset classes. There was a story in the Financial Times about the Brazilian government cutting the tax on ethanol producers. The government is going to cut the tax on sugar-based ethanol producers by 80%–from 120 REALS per cubic meter to 25 REALS. It is an effort “… to support ethanol producers, many of whom are facing bankruptcy because of heavy debts and DIFFICULTIES COMPETING WITH SUBSIDISED PETROL PRICES IN BRAZIL.” There has been a global sugar surplus, which has kept pressure on sugar prices, but this move may help lift sugar prices and allow Brazilian growers to grab some of the agricultural profits that have supported the Brazilian economy. The U.S. economy is a corn-based ethanol producer and this has helped put upward pressure on global grain prices which has benefited Brazil’s farmers.

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Notes From Underground: The Markets Are Wrong (Or Draghi Lets Us Know Who Is In Charge)

October 25, 2012

Following up last night’s post, Arthur left a note on the blog linking an article from Bloomberg Businessweek, written by Brendan Greeley. The language of the article is crystal clear and provides another example of a Euro policy maker claiming far more insight than the collective wisdom of Mr. Market. “Investors ,he told the Bundestag, are ‘charging interest rates to countries they perceived to be the most vulnerable that [go] beyond levels warranted by economic fundamentals and justified risk premia. This fear is “unfounded. The market is wrong.'”

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Notes From Underground: Nothing New On the Financial Front

October 10, 2012

It seems that we have covered the major themes ad nauseam–European debt, U.S. fiscal cliff, Japanese lethargy in confronting an overvalued currency, Chinese slowdown–and the list goes on and on. Today, the IMF let loose a report that detailed the need for Europe to deleverage its banks to the tune of a possible 4.5 TRILLION EUROS. This is not the aid and comfort that a financially stressed European economy needed. The pains of austerity will be minimal compared to the massive selloff of what ever assets will be dumped on the market. Government retrenchment coupled with private sector rebalancing will undoubtedly lead to a new thrust downward in the adverse feedback loop. The significance of the yield curves will be a critical indicator as the quarter begins to reveal all of the potential hazards with which the global financial system has to contend.

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Notes From Underground: Draghi … Could’ve, Should’ve, Would’ve

August 8, 2012

The interest rate variable is alive, well and affecting global markets. Mario Draghi has played the “WIZARD OF FRANKFURT” as he has sought to forestall a financial implosion of Europe. Draghi’s comments in London on July 26, in that the ECB would stem the crisis at end with the tools at its disposal, markets had to believe that ECB policy would be “SUFFICIENT.” As we all know by now, President Draghi has been successful as the Spanish and Italian yield curves have steepened and the 2-YEAR NOTES have seen its yields dramatically drop–the Spanish went from 7% to 3.73%.

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Notes From Underground: All My Words Come Back to Me in Shades of Mediocrity (Homeward Bound)

April 9, 2012

Friday’s weaker than expected JOBS REPORT caused AGITA in the BOND and EQUITY MARKETS. Early in the week, the markets had punished the BONDS and EQUITIES as the FOMC MINUTES caused the purveyors of QE3 as a SURE THING to stop, look and listen. The sounds that they had listened to were from the previous speech by Chairman Bernanke as he voiced his deep concerns about the persistent drag of unemployment on GDP. The rush of FED governors and District presidents to any microphone to undermine the chairman’s views caused the market to pause and reconsider its stance on possible FED normalizing rates quicker than the “extended period” language presumed. Stocks were under pressure and U.S. Treasuries were offered as hints of FED buying grabbed traders attention.

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Notes From Underground: Brazil Shaves Their Rates Unexpectedly

September 1, 2011

First of all, NOTES will be on HIATUS for a well deserved rest from the turmoil of global events and the chaotic impact they have had on markets.

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Notes From Underground: Last Week Was The Year That Was

March 20, 2011

This weekend brought mixed news about the lessening of RISK in Japan, and possibly Bahrain, while increasing the sense of risk in Libya and other parts of the Middle East. It appears that the threat of nuclear catastrophe has been diminished as some power has been restored to the nuclear plants under stress and the needed cooling is proceeding. The Japanese equity market will be a good source to monitor investor sentiment as weekend news publications were filled with articles about the values abound in the Nikkei and other Japan-based indexes. The YEN will be a much more difficult barometer because of the impact of YEAR END and its ability to cause disruptive volatility in currency markets.

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