Archive for the ‘United States’ Category

Notes From Underground: Could Paul Volcker Find His Inner Volcker In This Environment?

May 22, 2022

Since the Zoltan Pozsar challenged Federal Reserve Chair Jerome Powell to find his inner Paul Volcker and raise interest rates high enough to bring the inflation expectations to heel. (He argued draining liquidity and raising rates to a NEUTRAL level OUGHT to be the medicine needed to truly render the current high inflation levels TRANSITORY.) Last week, Pozsar pushed on the theme again with a piece titled, “Ride of the ‘Volkyries'” in which the issue of financial conditions tightening is discussed in reflection to current FED policy of curbing inflation through the crushing of demand.

(more…)

Notes From Underground: A European Discussion With Professor Polleit

May 3, 2022

Yes, Wednesday is FED day and the markets are expecting a 50 basis point increase in the FED FUNDS RATE to a range of 0.75% to 1%. The most important issue will be the size of the balance sheet unwind and whether Chair Jerome Powell is good to his heightened concerns about headline inflation means a full throttle on balance sheet shrinkage, reaching the full $95 billion a month at a quick pace. So Jerome, let’s have at it and let the markets decide the impact on myriad asset classes. In 2018, this double shotgun of QT and interest rate hikes proved too much for the highly leveraged global markets. Now that the Fed’s balance sheet is twice as large let’s see how it will affect the leverage in the global system.

(more…)

Notes From Underground: Into the Weeds on Yen/Yuan

April 28, 2022

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.

(more…)

Notes From Underground: Time to Escalate and Deescalate the Fed and Putin?

April 10, 2022

There was an article in Foreign Affairs this week by Graham Allison, the dean of American political scientists, titled, “Putin’s Doomsday Threat: How to Prevent a Repeat of the Cuban Missile Crisis in Ukraine.” The piece raises an important tactical question about escalating the violence in an effort to prevent a greater catastrophe similar to what President Kennedy was threatening in 1962. It’s worth a read as it was Allison’s book, “The Essence of Decision,” that provided the understanding of the bureaucratic mindset during the nuclear age. It provoked me to think that the escalate to de-escalate seems to be the paradigm of the FOMC as complacency over zero interest and transitory inflation has given rise to policy makers’ more hawkish jawboning. Uber-doves Charlie Evans, Mary Daly, Jerome Powell, Lael Brainard have been on a mission to find their INNER VOLCKER (at least rhetorically).

(more…)

Notes From Underground: A Quick Hit On the State of Chaos

March 6, 2022

First, our hearts go out to all suffering in the world of insanity brought on by senseless wars that diplomacy OUGHT to have been able to prevent. The world always returns to the insanity that brought us to World War I when nobody could stop the trains once set in motion. As Phil Ochs sang, “It’s always the old who lead us off to war, it’s always to fall, look at all we won with the saber and the gun, tell me is it worth it all?” But here we are and as always the world continues to focus on the minutiae of life, including the financial outcomes responding to the high-speed headlines driven by algorithmic speed machines. There is no context to any news just manufactured volatility fabricators of the latest musings of some “news” outlets’ favorite expert. But as Hyman Roth said so clearly: “Michael this is the profession we have chosen.”

(more…)

Notes From Underground: This Isn’t the Barron’s Roundtable

February 10, 2022

On Tuesday, I sat down with the Financial Repression Authority’s Richard Bonugli and Marc Faber. The last time Dr. Faber and I spoke, there were several profitable investments that evolved from our deep discussion about the global political economy. Give it a listen as we discuss the global central banks and potential profitable areas of investment. Marc has fabulous insights on the global economy and NOTHING is out of bounds. This is a man who finds great opportunities during times of chaos.

Click here to listen to the podcast.

(more…)

Notes From Underground: A Possible Solution to the Central Bank Dilemma

November 14, 2021

It’s been. another week in which headline inflation concerns has jolted markets, particularly in the interest rate space, but not as much as many investors and traders would have expected. The yield curves in the U.S. FLATTENED as markets seem want to believe that the FED will raise rates in an effort to CURB the enthusiasm of the stickiness of recent price increases. As Peter Boockvar pointed out in his piece on Friday’s Michigan Consumer Sentiment Survey, confidence declined due to rising concerns over the “escalating inflation rate and growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation.”

Consumers noted that the time to buy a car fell to the lowest level on record dating back to 1978. Those thinking it is a good time to buy a home was the lowest rate since 1982 when mortgage rates were far different than today’s very low loan rates.

(more…)

Notes From Underground: Are You Ready When Delta Is?

July 19, 2021

I’ve been away minding my two Floridian grandsons (exhausting yet delightful). I did, however, have time to catch up on some reading, particularly W.E.B. Du Bois’s “Suppression of the African Slave Trade,” as recommended by Chris Whalen. Du Bois looks at how the large state-domiciled banks helped finance the importation of African black slaves. This is high quality prose written in 1896, a well documented and enlightening read about the politics of America at its early beginnings. We could all stand to learn from a genuine scholar rather than shouting at each other.

(more…)

Notes From Underground: To Russia With Love (Or Blinken Blinked)

May 23, 2021

Ten days ago, we published a blog post titled, “Sanctions Are Sanctimonious.” And lo and behold, this past week the U.S. moved to remove sanctions on the completion of the NORDSTREAM 2 pipeline, allowing Russian gas to flow freely and readily into Germany without paying the massive transit fees to the Ukraine. This is the culmination of the project promoted by previous German Chancellor Gerhard Schroeder.This story is huge for it shows that the world is — as NOTES portrays it — far more dynamic than the static analysts would have us believe.

(more…)

Notes From Underground: Is the Fed In a War?

May 16, 2021

I pose this question as a challenge to all of those traders and investors, and a call to action. There is so much discussion about the onset of inflation but do the inflationists have the fortitude to attack the FED where it hurts: the long end of the yield curve? The primary focus of the FED has been on the part of the QE purchases has been the shorter end as 80% of the FED‘s balance sheet is five years or less. If the inflation concern is of the magnitude suggested by the mainstream media then market participants OUGHT to be selling the longer duration Treasuries because as we know the Wall Street mantra is DON’T FIGHT THE FED.

(more…)