Archive for the ‘China’ 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: Sympathy For the Devils

September 3, 2018

The world is aflame with the BLOWBACK from policies of the elites who carved a world fit to desired outcomes of a self-established ruling class. The free flow of capital in pursuit of cheap labor has led to the stagnant wages that have given rise to anti-establishment forces, which have upset the Davos crowd’s playbook. As long as capital pursues a maximization of return but is answerable to the Westphalian construct of the nation-state, there will continue to be bouts of conflict that result in less desirable outcomes for global corporations.

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Notes From Underground: Depending On the Outcome of Rational Actors?

August 19, 2018

So much of social science is dependent on various actors making rational decisions. Economics has regularly proven that “actors” certainly fail to act rationally as manias, crashes and panics in repeated form are proof (see Charles Kindleberger). In the realm of politics, the dependence on nation-states to behave rationally has led to many major policy errors. During the Cold War the balance of nuclear weapons prompted both super powers to remain reticent to embark on direct confrontations and avoid an unthinkable shooting war. The fear of world destruction also meant that the USSR and UNITED STATES would leash their “allies” to prevent any direct conflict between the two major hegemonists.

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Notes From Underground: The Summer Doldrums

July 10, 2018

There are storms brewing but for the moment markets are stuck in the Doldrums waiting for the winds to increase in velocity. The issues confronting the market are all too familiar as NOTES FROM UNDERGROUND has been categorizing for the previous months.

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Notes From Underground: No Chinese Devaluation or Massive Liquidation of U.S. Treasuries

April 9, 2018

There are many questions swirling around what possible responses President XI can bring forward to counteract the heightened rhetoric from the Trump administration on imposing tariffs on Chinese goods exported to the U.S. Many news agencies have carried stories about the Chinese responding to Trump tariffs by entering into a policy of depreciating the Chinese yuan, which is currently trading at 6.3075 against the DOLLAR.

This is an interesting view but it would force China to act against the G-20 accord of not manipulating one’s currency. The XI-led government is looking for international support in its effort to combat a trade war so alienating the international economic community would be detrimental to the Chinese interest of global support. The narrative some analysts are spinning is to recall China’s 2 percent devaluation of its currency in August 2015, which sent global currency and markets into a frenzy, especially as stocks were reeling from deflationary fears.

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Notes From Underground: The Second Quarter Begins (the Resurrection of Volatility)

April 1, 2018

On March 26, me and Rick Santelli Rick Santelli discussed a few key issues on CNBC (the video is posted below).  The final week of the first quarter saw the continuation of increased volatility as the market tried to sort through myriad issues. The influence of budget deficits, peace talks with North Korea, trade issues in the U.S. all creating a sense of uncertainty as global investors are forced to calibrate present positions in regards to regards to potential risk. Chinese growth is meeting expectations even as the XI regime is determined to clamp down on increased debt. The copper market tested the 200-day moving average early in the week but managed to close above it at week’s (even as the metal had a weak quarter).

(Click on the image to watch me and Rick discuss global trade.)

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Notes From Underground: Dear Chairman Powell,

March 20, 2018

Wednesday brings the FOMC‘s interest rate decision. The CONSENSUS is for an increase of 25 basis points to 1.50%-1.75%. Chairman Powell, you will have a chance to explain the Fed’s decision as you engage in your first press conference 30 minutes after the announcement. The financial world will have the opportunity to assess whether you will follow the Yellen/Bernanke path of attempting to control markets or to be more respectful of the collective wisdom and allow price to be determined in the tradition of Western democratic capitalist markets. The FED chairman recently acknowledged that headwinds have become tailwinds, and, even more importantly, supported by Janet Yellen’s confidant, Governor Lael Brainard. The volte face by Brainard shook the markets into the belief that the FED would actually raise rates FOUR times or more in 2018. BUT IF I WERE YOU CHAIR POWELL I WOULD RAISE 50 BASIS POINTS TOMORROW (with this CAVEAT).

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Notes From Underground: The Chinese Cite Hyman Minsky

October 19, 2017

First a few jokes: My sources tell me that the new Fed Chairman will be Marc Faber; second, as Lloyd Blankfein is chirping about Brexit and Goldman moving to Frankfurt, Germany, he opined several years ago that Goldman was doing God’s work. Well, being the cyclical time in the Jewish Torah of the reading of NOAH, I remind Blankfein that Noah was also part of God’s work. (Pour a scotch and laugh).

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Notes From Underground: And a Honey Pot Is Stuck On His Nose

July 17, 2017

Wow! The Chinese President doesn’t appreciate being caricatured as children’s character Winnie the Pooh so it’s censored from Chinese social media. A Financial Times article noted “attempts to post the Chinese characters for Winnie’s name on Weibo returned the message ‘content is illegal’ although some users appeared able to circumvent the block.” Regardless of whether some of the posts were able to avoid the censors, the point is the same I have been making for eight years on Notes From Underground. A country that does not allow Google to freely operate makes me suspect of all official government data. The greatest comedy was that the financial media was poking at President Xi and the ruling Communist Party Politburo while at the same time citing the most recent economic data as if it was “truth.” The GDP data came in at 6.9%, exceeding guesstimates of 6.8%. Retail sales followed GDP and also beat consensus guesses.

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Notes From Underground: The Unemployment Report Revealed Little

April 9, 2017

The headline nonfarm payroll number was much weaker than expected and confused traders because it was so wide of the April 5 ADP release of 263,000, but the rest of the data was tepid though not weak enough to dissuade the FOMC from further efforts to raise rates. The important average hourly earnings was up 0.2%, in line with expectations, but the weekly hours worked slipped 0.1, which may have been in response to the early March storms. The unemployment rate dropped to a recovery low of 4.5% but that may be because of the amount of workers having left the labor force. The markets’ initial reaction to the headline NFP was the bonds rallied, the dollar weakened and the precious metals rose. By day’s end all the moves reversed from early rallies inspired by the U.S. missiles fired at Syria. The market had deemed the cruise missiles fired at the air force base in Syria as a market destabilizing event, spurring a purchase of what are deemed safe haven assets: GOLD, YEN, BONDS. But the end of day reversal nullified Syria as a one-off event. So the market is confused as to the genuine impact of the unemployment report and we will have to wait for more economic data to weigh all the “communication” coming from FED speakers. Chair Yellen will be speaking with a Q&A session on Monday afternoon so late market action should not be discounted.

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