Archive for the ‘United States’ Category

Notes From Underground: A (Wo)man Hears What (S)he Wants to Hear and Disregards the Rest

November 16, 2016

Noise fills the airwaves and so many “pundits” keep the outlets from going dark by providing opinions that are less than ridiculous. These are the same people who failed to identify many of the significant political dynamics during the last few years. There is a viral video of Fox Business anchor Maria Bartiromo interviewing the much-maligned Jonathan Gruber. I have no opinion on the politics of the interview but I do offer this criticism of Gruber’s hypothesis of the positive outcome from the Affordable Care Act (ACA). Gruber raises the counterfactual that insurance costs and medical care would be at the same levels as now and maybe even higher and with the addition of 22 million people on the health insurance rolls, the ACA is a success.

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Notes From Underground: The Answer Is, “We’ll See”

November 10, 2016

The experts are out with more ridiculous forecasts about the Trump victory and what it means for the various aspects of the financial markets. But let me toot my own horn for a moment: The trading outcomes for a Trump victory were on target, except for the dollar rally sustaining itself, but that is something I will be analyzing as we go forward. It amazes me how the media rushes back to the same forecasters who have so badly predicted many of the major political outcomes of the last two years. An important book for my readers is Tetlock’s “Superforecasting,” which makes a very powerful argument about following the experts.

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Notes From Underground: Comey, Comey, Comey, Comey, Take Another Piece of My Wallet, Now Baby

November 7, 2016

FBI director James Comey played the bureaucratic card again when he released yet another pre-election report on the Clinton files. Comey issued an all-clear on any sort of criminal prosecution involving the newest Clinton file leaks. It’s interesting that the FBI director issued the letter three hours before the opening of the U.S. electronic exchanges, but as expected, the global equity experienced a relief rally in anticipation of a Hillary Clinton victory.

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Notes From Underground: Measuring Economic and Political Outcomes; Analytics Yes, Flawed Constructs No

November 6, 2016

We are in the period when financial markets are depending on measurements of human actions to proscribe probabilities for profitable investment. On Friday, the jobs report reflected the measurement of labor statistical data in order to achieve some forward-looking view on the health of the U.S. economy. The jobs data was a mixed result as nonfarm payrolls in the private sector were weaker than consensus but the important average hourly earnings (AHE) increased at a robust 0.4%, which SHOULD give the hawks on the FOMC a push to raise rates. But of course one month’s robust data is certainly not a trend. Chair Yellen has been laying the ground work for the data running hotter for longer so 0.4% is a positive but there is room for further gains in wage increases. Besides, if the wage gains are coming out of corporate profits all the better from the perspective of a career labor economist.

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Notes From Underground: In Preparation For Tomorrow’s FOMC, The Vote Is Key

November 1, 2016

There is a very MINUTE chance of any FED action ahead of the November 8 presidential election. The polls are far too close and as previously stated only if Hillary had an insurmountable lead would the FED raise rates in an effort to regain some of its lost credibility. THE MOST SIGNIFICANT PIECE OF THE FED STATEMENT WILL BE THE FOMC VOTE. The previous meeting saw a shift to 7-3 for maintaining the current policy with all the dissenters being regional Federal Reserve presidents. Stanley Fischer has been–the Governor who speaks loudly but carries a small stick–failed to bring action to his frequent speeches about raising the fed funds rate. If the Fed vice chair were to bolt from the unified group of FOMC Governors and dissent against Yellen and Brainard that would lead to a more hawkish view on FED policy. I THINK THE VOTE WILL BE 8-2 as Boston Fed President Eric Rosengren will move back to supporting Yellen .

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Notes From Underground: The World of 2+2=5 Is Back In Full Swing

October 30, 2016

The mid-day, market-moving announcement from FBI Director Comey resulted in the selloff of the DOLLAR, EQUITIES and RALLIES IN PRECIOUS METALS just after the market had enjoyed the better-than-expected first look at the third quarter GDP. I will try to make sense of both releases from a market stand point and in an APOLITICAL format.

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Notes From Underground: Draghi is Laughing All the Way To the Bank

July 10, 2016

The jobs report on Friday was the antithesis of May’s poor data, which was actually revised downward by 27,000 to a very meager 11,000 NFP gain for May. The June report brought an unexpected increase of 287,000 jobs, although the average hourly earning (AHE) showed a weak 0.1% gain. The market closes revealed a well known fact: ULTRA-LOW INTEREST RATES ARE THE KEY ELEMENT TO THE REACTION FUNCTION OF TRADERS AND INVESTORS.

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Notes From Underground: After the Flood … Of Data

June 2, 2016

It’s that time of the month: first Friday and the jobs data is front and center. Consensus is for 152,000 nonfarm payrolls. In my humble opinion it will take a number above 200,000 to put pressure on the FOMC to actually raise rates at its June meeting, or, more importantly, a headline jobless rate of 4.8%. As always, I am highlighting the AVERAGE HOURLY EARNINGS (AHE) as the most important number because it plays to Chair Yellen’s concern about 20 years of stagnant wages. The market is anticipating a tepid rate of 0.2% following April’s gain of 0.3%. A flat wage number would keep the FOMC on hold.

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Notes From Underground: Making Sense Of the Treasury’s Guide to Currency Manipulation

May 2, 2016

While attempting to enjoy Pittsburgh (and hopefully a Cubs game), the markets buzzing about the U.S. Treasury’s report about the “Trade facilitation and trade Enforcement Act of 2015.” In a Bloomberg News article published late Friday afternoon, “U.S. Places China, Japan, Germany on New FX Monitoring List,” it seems that the Treasury and Jack Lew are raising the threat of retaliation against nations that meet the Congressional crafted criterion of currency manipulation. These include: 1. Significant bilateral trade surplus with U.S.; 2. Material current-account surplus; and 3. Engaged in persistent one-sided FX intervention. The issue of “one-sided intervention” is defined as only weakening a currency by conducting repetitive net purchases of FX amounting to more than 2% of its GDP.”

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Notes From Underground: Prelude, Nothing To Hide (In the Spirit of Stairway to Heaven)

April 12, 2016

First, why was Janet Yellen summoned to the White House to meet with President Obama and Vice President Biden? The most ostensible reason is PROBABLY to get the Fed’s view on the economic impact of Trump and Bernie Sanders. Is the anger in the land a result of stagnant wages and is there any policy impact the White House could pursue without distorting the economy? Is fiscal stimulus a possible positive response and would the Fed be receptive without immediately raising rates? There are no certain answers to why Yellen went only conjecture. But one thing that caught my attention was the headline in today’s Financial Times: “Lew Urges IMF to Get Tough on Exchange Rate Manipulators.”

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