In the first post about the YEN/YUAN, we discussed the current significance of the cross, and with it a rising dollar. Now we will provide CONTEXT and NUANCE as to the backdrop of this cross’s significance. It is easy to forget that the Chinese economic miracle is only 40 years old as it began under the direction of DENG in 1978-79 and his rise as China’s leader. By 1994 China is beginning to feel the positive effects of Deng’s policies of white cat/black cat in pursuing modernity and western-style economic growth.
Archive for the ‘China’ Category
Notes From Underground: Into the Weeds on Yen/Yuan
April 28, 2022Notes From Underground: The Meaning of the Yen/YUAN Cross
April 26, 2022In the past three weeks I have had the pleasure of doing two major podcasts with two of the most highly regarded global macro thinkers and traders: Zoltan Pozsar and Louis Gave. Our discussions led to an attempt to explain the importance of the Chinese yuan during the current period of CAPITAL ANXIETY. During the past two years the Chinese YUAN has rallied from 7.13/dollar to 6.35, where it has sat for the last six months (a gain of 12%). And, as I have argued for the last 18 months, the strengthening YUAN during the pandemic was a signal that the Chinese were shifting to a more domestic-oriented economy using a stronger currency to enrich its nascent middle class.
Notes From Underground: Trade Complications (The Power of the Nation-State)
July 25, 2021That headline is courtesy of Whitewave Trading, an interactive chat room in which high-powered analysis for traders generates some great trades and uses NOTES FROM UNDERGROUND to add a fundamental view. Monday’s Whitwave has this advice: “When and if they ever taper, I’ll turn over the trading card.”
For those never on the trading floor this is in reference to going from the BLUE buy side to the RED sell side. In a follow up to last week’s blog post this makes perfect sense for as it seems that a critical indicator to an equity correction in the U.S. would begin with the FED actually moving to a real TAPERING or in Peter Boockvar’s words, A QUANTITATIVE TIGHTENING.
Notes From Underground: An Open Letter To the G-7
June 2, 2021Every G-7 or G-20 meeting homage is paid to the idea of free markets via the market driven value of each nation’s currency. This is hogwash of the highest order in the world of central bank asset purchase programs. The clarion call is that QE is a domestic-based program meant to meet the inflation target set by the nation’s policy makers and any impact on a nation’s currency is just unintended consequences of keeping a country out of a potential disinflationary cycle. Every central bank statement except the U.S. has a sentence or two about the relative value of a nation’s currency and if too strong then concern about a strong currency being a headwind in meeting the illusion and capriciousness of that 2% inflation target.
Notes From Underground: The Arrogance of Janet Yellen
April 8, 2021Since I last wrote, it has been a time for thought, contemplation and discussion. This week I recorded an FRA podcast with Richard Bonugli and Larry McDonald. It was the equivalent of the “Wide World of Sports” as we traveled around the world looking at profitable investment ideas. Enjoy the best 60 minutes in financial global macro analysis.
Notes From Underground: Was It the Fool On the Hill?
February 23, 2021On Tuesday, Federal Reserve Chairman Jerome Powell testified before the Senate Finance Committee in the semi-annual Humphrey-Hawkins Testimony and Report to Congress, in which the Fed has to answer as to how the U.S. economy is performing in relation to its dual mandate. Senator Sherrod Brown, the chair of the finance committee, is very knowledgeable and in similar fashion provided strong leadership but unfortunately he cannot censor stupid questions as politicians use the microphone for political posturing. There were many types of “when did you stop beating your wife” questions as if the Senators wished to trap Powell instead of an honest assessment.
Notes From Underground: Central Bank Poker
January 21, 2021This week, three G-7 central banks had meetings and all decided to CHECK and leave policy unchanged. This was widely expected as there was little reason to UPSET the incoming Biden administration with any idea of currency manipulation. However, the Bank of Canada, Bank of Japan and European Central Bank all discussed the fear of a further slowdown from an increased spread of covid-19.
Notes From Underground: Coronavirus Trumps Unemployment Data
February 9, 2020Friday’s unemployment report was firm on job creation but soft on average hourly earnings. The work week remained unchanged. Further north, the Canadian jobs report was very robust as jobs increased by 34,500 versus an expected 16,000. The real strength was that all the jobs growth was full-time with hours worked experiencing a healthy gain of 0.5%. The unemployment rate dropped from 5.6% to 5.5%. And yet the Canadian dollar could not sustain a rally for more than five minutes.
Notes From Underground: Man Plans, God Laughs
February 2, 2020It has been three weeks since I have sat down to articulate my thoughts on the global macro financial system in an effort to profit from trade/investment potentials. A lot of the discourse with many readers the focus was on the situation in the Middle East.
Notes From Underground: If You Don’t 2+2=5, Then Read No Further
August 6, 2019The tagline of this blog has always been “where 2+2=5 is also a wonderful thing.” If you believe that the world is balanced and rational in all things financial then this BLOG is not for you. Unlike Fyodor Dostoyevsky’s character, I am not a sick man, nor a spiteful man. I use my deep knowledge of political and economic history to analyze financial markets from myriad angles. This allows for a belief that context is supreme. In this context I posit that President Trump’s decision Monday to name China a “currency manipulator” is a way out for the U.S. from the dissension that has arisen within Trump’s team of advisers as reported over the weekend. If Bob Lighthizer was opposed then indeed President Trump is in a more difficult position than previously thought.