Archive for the ‘United States’ Category

Notes From Underground: Lighthizer, Always At the Ramparts Of Trade Battles

April 8, 2019

As the second quarter begins, the financial markets seem fixated on China/U.S. trade frictions, or lack thereof. This narrative is old and stale. For those new to the realm of international relations, be aware that China will slow-walk these negotiations. There will be many attempts to “agree to disagree.” For example, in Monday morning’s SOUTH CHINA MORNING POST, there was an article titled, “China Refuses to Give Up ‘Developing Country’ Status At WTO Despite US Demands,” about China’s “privileged position” at the World Trade Organization. In the simplest terms, the WTO allows for countries to self-define as developing country status. This brings certain rights that allow for longer transition periods before they have to be in full compliance with WTO rules and regulations. This is described as “Special and Differential Treatment.”

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

April 4, 2019
On Friday we have U.S. and Canadian employment. The Canadian report is important because Canada is an important trading partner of the U.S. so any slowing in Canadian employment may reflect of slowing cross-border trade. The consensus is for Canada to have a DECLINE of 10,000 jobs with the unemployment rate holding at 5.8 percent. From a global perspective, Canada is a good look at the continuing narrative about slowing global economy, which is significant as the New Zealand, Australian, European and Japanese central banks have used the slowing global economy as the reason for maintaining their current accommodative monetary policies. The Canadian dollar has been weak versus many of the key currencies so weak jobs should put more pressure on the Canadian dollar.

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Notes From Underground: Fitch Rates U.S. AAA (An Ode to the Printing Press)

April 2, 2019

On Tuesday afternoon the Fitch Ratings assigned a AAA rating for U.S. sovereign debt. This is about as good as rating subprime mortgages AAA up until the housing market crashed, giving way to the financial crisis. The statement acknowledged that the U.S. deficit was 4 percent of GDP this year based on IMF measures, with general government debt reaching 98.9 percent of GDP. Fitch also said by 2028 general government debt could reach 120 percent of GDP.

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Notes From Underground: No Moore. No Kudlow. No MMT

March 31, 2019

In the previous blog post, I suggested that if the FED was afraid of flat yield curves then they OUGHT to CUT overnight rates immediately by 50 basis points in an effort to steepen the curves to a more NORMAL slope. On Friday, in a nod to Notes From Underground, President Trump’s latest Fed nominee Steve Moore and White House advisor Larry Kudlow said that the central bank should slash interest rates by 50 basis points. Unlike my suggestion, the avid supply-siders offered no context for the rate cuts. There was no discussion of yield curves, dollar strength or the problems confronting global growth.

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Notes From Underground: When Doves Coo

March 20, 2019

Wednesday’s FOMC statement and press conference was as dovish as we have heard in many moons. More importantly, the VOTE WAS UNANIMOUS. Even Kansas City Fed President Esther George voted with the group. Why was this dovish?

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Notes From Underground: MMT Is Gaining Velocity

March 5, 2019

We at NOTES FROM UNDERGROUND have discussed the issue of MODERN MONETARY THEORY. Now, the battle lines are drawn over the possibilities of a benign outcome to the practical basis of the so-called printing press. Yes, the simplification of MMT bothers its disciples, but the printing press is in essence what the theory purports to avow: Don’t worry about debt, because enough money flooding the system will not push interest rates higher but rather lower as banks take on massive reserves to put out the bid that’s pushing interest rates persistently lower.

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Notes From Underground: The Politics of Money

March 3, 2019

Over the weekend, President Trump blasted a high note from the Conservative Political Action Conference. Again, the president put pressure on the Federal Reserve as he pointed his finger at Powell. He said, “I want a dollar that does great for our country, but not a dollar that’s so strong that it makes it prohibitive for us to do business with other nations and take their business.” He didn’t mention Powell by name but added noted that the U.S. has “a gentleman that likes raising interest rates in the Fed, we have a gentleman that loves quantitative tightening in the Fed, we have a gentleman that likes a very strong dollar in the Fed.”

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Notes From Underground: Though I Walk Through the Valley of Debt, I Fear No Evil

February 18, 2019

On Friday, U.S. 30-YEAR BONDS were the best performer as the 5/30 yield curve flattened in the face of several divergent asset movements. The GOLD rallied even as the stock markets rose around the world, so no need for haven status. The DOLLAR had actually been strong in the morning but as global stock markets rallied the DOLLAR was actually lower by late afternoon. So why was the 30-YEAR BOND the premier asset? I have no idea. Over the weekend there was a Yahoo Finance story in which Jeffrey Gundlach is quoted as speculating that long-end U.S. Treasuries will see 4 percent yields later this year.

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Notes From Underground: Let’s Not Mince Words, Pepper Spray Davos

January 20, 2019

Let me begin by reiterating that this is NOT a political blog but a place for the exchange of ideas dedicated to those who desire to improve trading and investing in order to increase profits. My STRENGTH is bringing an in-depth knowledge of political economy and 40-plus years of trading my own funds (while also managing other people’s money via hedge funds).

My personal political views OUGHT not to be relevant for when it comes to generating ideas. I adhere to the wisdom of Deng Xiaoping: “I don’t care if the cat is black or white as long as it catches mice.” While I might criticize certain persons in any political administration it is merely to criticize actions as a way of comprehending policy outcomes. (For example, my disdain for Steven Mnuchin is solely based on what I deem to be his incompetence, a similar contempt that I held for Tim Geithner.)

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Notes From Underground: The Government Shutdown, Or Lots of Media Drama

January 16, 2019

While I was off visiting my children and grandchildren, the government took its own hiatus. However, while I am back at it, the government is still shuttered (partially, at least). For years the pundits have ranted about the negative effects on the economy (and some even singled out the markets). For all of the noise, the bond market is stable and stocks have rallied 8 percent since the shutdown began on December 22.

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