Archive for the ‘United States’ Category

Notes From Underground: In An Algo-Driven World Headlines Matter

December 3, 2017

Friday: Dateline. INACCURATE NEWS.

There is GOLD to be found in the digital world where headlines can move financial markets faster than your eyes can blink or your brain can separate fact from fiction. ABC investigative journalist Brian Ross published a report that said President Trump asked Michael Flynn to reach out to Russia during the campaign. The network was forced to correct the story, clarifying that the request was carried out during the transition period, and suspended Ross. President Trump tweeted that investors harmed by ABC’s action should sue for damages. Trump may actually have a legitimate opinion but I believe the President’s Tweets carry the same litmus test.

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Notes From Underground: But Subjectivity Is Objective (Woody Allen, Love and Death)

November 15, 2017

The airwaves fill with the narrative of the coming corporate tax cut benefiting profits, growth and higher wages. Each side argues that their data is closer to reality: one being static analysis the other dynamic scoring of increased growth. My view continues to be, REAL TAX REFORM, NOT A TAX CUT. Genuine tax reform would provide tax relief for the middle-income earners and most probably result in a tax increase for the high-income earners. Congress has mucked up TAX REFORM as the starting point OUGHT to have been a return to BOWLES/SIMPSON. The problem with the Bowles plan is that it meant spending cuts as well as an effort to broaden the tax base by closing many tax loopholes. Also, Alan Simpson was in favor of defense cuts so it was a genuine tax restructuring as all “OXES WOULD BE GORED.”

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Notes From Underground: Quick Note on the BOE and Friday’s Jobs Report

November 2, 2017

Today, the BOE raised interest rates (as expected). But the market deemed it to be dovish and the EUR/GBP rallied 2 percent as the British pound tumbled and the euro strengthened versus the pound and dollar. On Wednesday I cautioned that the EUR/GBP failed to hold below its 200-day moving average and this provided a good technical level. As expected, the FOOTSIE index rallied more than 1 percent as investors appreciated a weaker POUND as beneficial to British corporations regardless of Brexit. The initial release of the statement revealed a 7-2 vote, which on first read was not the expected 6-3 vote so could have been a bit hawkish. But the eight paragraph statement clarified the soft-side of Governor Carney:

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Notes From Underground: Elections In Japan, Czech Republic and Italy

October 22, 2017

First: On Oct. 18 I talked with Richard Bonugli from the Financial Repression Authority and financial analyst John Browne, a former member of the British Parliament. I am linking to the transcript of the chat. The conversation was free-flowing and was heavily tilted toward geopolitical concerns and shed light on investment possibilities. But as readers of NOTES well know, many of out best trade outcomes are based on political economy as well as mere yield curves. Last week the 2/10 did challenge the 73.5 basis point level (again) and by Friday the 2/10 had bounced back to 81 basis points.

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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: Be Very Afraid Of Jerome Powell and His Printing Press

October 3, 2017

Over the past 15 months, I have made light of Fed Governor Jerome (Jay) Powell because of his answer to a question I had asked him at a symposium presented by the Chicago Global Initiative. I asked Governor Powell, “Who guarantees the balance sheet of the ECB?” Without hesitating, Powell said, “THEY HAVE A PRINTING PRESS.” If this is his answer to issues of debt overhang I will be closely watching the precious metals if Powell actually became Fed Chairman. Janet Yellen has proven far more competent than Jerome Powell would be under any top of stressful central bank situation.

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Notes From Underground: Laboring to Comprehend Gary Cohn’s CNBC Interview

September 3, 2017

CNBC promoted its interview with Gary Cohn for a couple of days so the head of the White House Economic Council could not have been caught off guard by any questions from the interviewers. Cohn was giving the recent unemployment data a positive spin, but that’s part of his job description. MY PROBLEM WITH COHN’S INTERVIEW WAS HIS PUSH TO CUT CORPORATE TAX RATES AS AN ANSWER TO FLAT WAGE GROWTH. His analysis that lower tax rates equals higher wages is preposterous and reflects the thought process of a Wall Street account executive. In response to David Faber’s query about the tax cut benefiting middle class workers COHN replied: “How does it not benefit the worker?” Cohn answers his own question by building the straw man argument: Any repatriation of foreign profits would boost equity prices as would any cut in domestic corporate taxes. For who owns most of the equity in the world today (another Straw Man by Cohn)? We know the biggest pool of owned equity are the pension funds, especially the public pension funds (fire, police, teachers municipal workers], “… thus we are helping Americans by delivering returns back to them.”

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Notes From Underground: The Unemployment Data? I Suppose It’s Meaningless

August 31, 2017

It’s the first Friday of the month so that means we will have the jobs report at 7:30 CDT and 7:29:59 if you are a high frequency trading operation you do the math. Consensus is for 180,000 non-farm payrolls and the overall rate remaining unchanged at 4.3%. The most important piece is the average hourly earnings (AHE), which is predicted to be 0.2% which is lower than the July data. Regardless, with the economic impact from Hurricane Harvey still an unknown the FED will be kept from raising interest rates at its September meeting. But if the AHE is strong the FED may move to commence shrinking its balance sheet because Lael Brainard has already informed us that the FED analysts theorize that QT has far less economic impact then a RISE in the fed funds rate.

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Notes From Underground: Missiles Over Hokkaido

August 29, 2017

First of all, no matter what analysis we do it always pales in light of the human suffering that natural disasters bring upon people around the world. I am fortunate to be in a dry room, with warm clothes, food and, of course, an internet connection. It is often said that water is far worse than wind when it comes to the impact of hurricanes and typhoons. The human misery that deals with 40 inches of rain in a three-day period makes our prayers go out to all those affected by the devastation. Stop and take an inventory of the blessings we have on a daily basis. Houston, we can hear you.

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Notes From Underground: Its Was a Great Week for S&Ps

August 20, 2017

The news was extremely positive for the equity markets last week. FOUR key points:

  1. Retail Sales proved to be much stronger than consensus;
  2. The FOMC minutes were very DOVISH as the FED was concerned about the inability of upward inflation to gain traction;
  3. The demise of anti-globalist Steve Bannon was greeted with cheers on the floor of the New York Stock Exchange. News of the removal resulted in a rally in the S&Ps on Friday, but it was short-lived; and
  4. The bobble heads of the access media reported the dismissal as an elevation of the Davos-inspired crowd, represented by the Gary Cohn wing of the Trump administration.

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