Archive for the ‘Spain’ Category

Notes From Underground: Trading Strategies For An Automated World

October 10, 2017

Yesterday, I sat down with the group TOPSTEP TRADER to discuss ways I prepare to trade. Topstep is a private group that educates/prepares potential traders for a profitable existence. As the fourth quarter has begun, I thought this video would be beneficial as a review for my readers. Reviewing rules and concepts are important, especially as I BELIEVE WE ARE HEADING INTO A PERIOD OF INCREASED VOLATILITY. A rise in market volatility can be a time of great profit but it comes with a major increase in risk. The complacency of the market because of the central banks continued intervention coupled with the risk selling of the risk-parity crowd. I say crowd because it is not just AQR and Bridgewater involved in risk parity but there are many volatility sellers piggy backing on the power of the largest market players. Remember, when George Soros/Druckenmiller broke the Bank of England in September 1992, it wasn’t just Soros but many of the banks servicing Soros were tailcoating the Quantum Fund. But when the elephants leave the drinking hole many denizens of the jungle get crushed (Niederhoffer).

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Notes From Underground (Repost): A Celebration to the End of Q2, “A Single Spark To Light a Prairie Fire” (January 11)

June 30, 2016

The world is sitting on piles of tinder. Two of the potential dangers have passed in the last seven days. The Brexit vote has taken place and the Spanish elections have finished without any new disruption to the European political scene. In fact, Spain was interesting as Spanish voters seemed to be afraid of a Brexit-type market reaction and moved more support to the center-right as a vote for the known.

BUT TODAY THE ECB HAS POTENTIALLY IGNITED THE FLAMES OF GERMAN ANGER AS DRAGHI MOVED FOR THE QE PROGRAM TO BUY LOWER GRADE DEBT. THEY HAVE RUN OUT OF HIGH QUALITY BONDS TO BUY. This will not sit well with the AfD supporters in Deutschland. There were massive moves in the European sovereign spreads after the news release and more will certainly follow as the program becomes clearer.

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Notes From Underground: More Proof of Algo-Driven Volatility

December 20, 2015
Dateline Japan: When the BOJ released its policy decision in the wee hours of December 18, the algos interpreted the news as an expansion of monetary stimulus and assumed it was the QQE program. In the press conference, BOJ Governor Kuroda explained that the extension was not an additional easing but merely an extension of bond duration that the BOJ would buy. Because there’s a dearth of bonds available for purchase, the BOJ is extending purchases to include those of 12 years in length.

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Notes From Underground: Are the 23.7% of Unemployed Spaniards Concerned About Portfolio Balance Channels?

January 22, 2015

Well, the Earth did not stand still and markets were relatively rational as President Draghi unveiled a “genuine” QE program. It was a variation of yesterday’s leaks except the final amount was larger than what was rumored. The ECB will be financing the purchases of a mix of asset-backed securities and sovereign bonds to the tune of 60 BILLION EUROS every month from March at least until September 2016. The QE program is open-ended in that the ECB will reserve the right to continue purchasing more assets with printed euros if the inflation target is failing to rise to the 2 percent target level. The European equity markets were unchanged and the BUNDS and French oats fell until President Draghi assured the markets that the ECB would even purchase credit instruments with a NEGATIVE YIELD.

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Notes From Underground: A Few Bits of Information In Support of Some Previous Notes

August 20, 2013

First, Bloomberg News [BN] ran a story yesterday, “Spain Lenders’ Bad Loan Ratio Reached Record 11.61%.” This is up from 9.65% a year earlier. All we continue to read and hear from the press and financial pundits is how the Spanish economy has turned the corner and it is time to buy the Spanish banks and Spanish sovereign debt. The non-performing loans are a problem in any economy, but the 25%-plus unemployment rate makes the NPL data a much greater problem. Again, I’d rather miss the first part of a European rally than get caught when the perceptions fail to become reality.

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Notes From Underground: Touring Europe With Rose Colored Glasses

May 29, 2013

The Bank of Canada left interest rates unchanged and even maintained its “tightening bias” in the announced released this morning. It cited strengthening in the U.S. economy and the Japanese stimulus as positive global signs but noted that, “Europe, in contrast, remains in recession.” It is amazing that every central bank notes the weakness in Europe as a drag on global growth, but investors maintain a positive outlook on the European investment picture.” My glasses do not have a rose-colored tint and therefore I remain very skeptical about the ability of Europe to achieve any economic growth.

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Notes From Underground: A Quick Look at Spain’s Catalonia Elections

November 25, 2012

The Greek debt issue will be resolved for the moment–as we have maintained for months. What is 31 BILLION EUROS among friends? Now that the Catalan independence parties have won a resounding victory in the Spanish region of Catalonia, the political waters of Europe have become murkier. It will be doubtful that Catalonia will actually secede from the Spanish polity but the mere threat will mean that Brussels will have to become more involved in pushing billions of more euros into the Spanish coffers. The Catalans are angry because they send far more euros to Madrid than they receive back in Barcelona. According to the most recent data from 2009, Catalonia had sent 16.4 billion euros more to the Spanish Treasury than flowed back to the region.

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Notes From Underground: Rajoy’s Party Retains Power in Galicia

October 21, 2012

In what was a very slow new weekend the most significant story is that Spanish PM Rajoy’s political party held on to power in the PM’s home state of Galicia. This was considered to be an important test for Rajoy for if his support in his traditional support base had turned against him, there would be no chance that the PM would have proceeded down the road of further austerity. Now Señor Rajoy may be emboldened to surrender to the demands of German-imposed CONDITIONALITY so as to receive the proposed bailout from the ESM. This should be short-term bullish for the EURO as it will remove one of the obstacles that was blocking a massive dose of liquidity into the Spanish financial system. The trade-off game of financial support for enacting more austerity should help the markets as near-term fears of a Spanish collapse should be postponed.

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Notes From Underground: A Question On Spanish Unemployment

October 3, 2012

A long time reader of the BLOG (hat tip, SM) called and posed an interesting question about the 25% unemployment rate to which the markets seem to continually refer. The reader has a friend whose son is living in Spain and maintains that the unemployment situation in Spain is not nearly as bad as economists say because of the large underground labor pool. While I do not doubt that many people work in the “shadows” so as to avoid the TAX MAN, it seems that Spanish authorities would want to be very open about the positive impact of the underground economy on its citizens purchasing power. If the underground economy is so large in Spain, statisticians should be able to account for it and thus reduce the nation’s overall unemployment situation.

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Notes From Underground: Devil With The Blue Suit On

September 24, 2012

In his regular Monday Financial Times column, Wolfgang Munchau takes full aim at Bundesbank President Jens Weidmann for trying to make ECB President Draghi the devil incarnate. Because Weidmann invoked the Faustian character, Mephistopheles, from German hero Goethe’s play Dr. Faustus, Munchau accuses the Bundesbank President of undermining the policies of the ECB. Weidmann is going directly to the German public to plead his case that the ECB is taking the EU down the road of inflationary hell and monetary debasement. Munchau takes up the Draghi/Bernanke/Woodford argument that “the debate about nominal income targeting, where a central bank no longer stabilizes the inflation rate directly but focuses instead on stabilizing NOMINAL GDP (emphasis mine).” Munchau assumes that the central banks would be vigilante in controlling inflation but offers no view about what happens if NGDP rises with a significant rise in inflation but unemployment has not met the desired target.

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