In 1971, after President Nixon relieved the U.S. of the burden of the gold exchange-standard he paraphrased Milton Friedman by proudly proclaiming, “We are all Keynesians NOW.” In preparing for the 1972 election, Nixon realized that Keynes provided the ability for a sitting president to throw fiscal responsibility to the side and open up the spigots of fiscal stimulus in order to PUMP PRIME the economy. Keynes is focused on demand management.
Archive for the ‘United States’ Category
Notes From Underground: Trump Will Channel His Inner Nixon
November 7, 2018Notes From Underground: Tell Me Why You Are Crying
October 23, 2018The current market temperament is causing angst among investors. A relatively strong earnings season is failing to provide support to the U.S. equity markets that many analysts have been promoting. The media is wondering what will halt the continuing slide in stocks around the globe. We at Notes From Underground have pondered what the primary catalyst would be
Notes From Underground: Powell Seeks to Reestablish the Authority of Markets … Maybe?
October 7, 2018I am positing this idea because I think it’s critical to current valuations of various asset classes. The nine-year rally in the U.S. (and to some extent the global equity markets) has stretched valuations as ultra-cheap money has pushed investors into taking risks larger than what many money managers and retail investors would do “normal” circumstances. This was ultimately the Bernanke plan the former chairman laid out at Jackson Hole in 2010 (simplified in Bernanke’s Washington Post op-ed as the PORTFOLIO BALANCE CHANNEL). The long-term problem for investors is that Bernanke and Janet Yellen were terrified of market reactions whenever they desired to halt the massive QE programs and their beloved use of FORWARD GUIDANCE.
Notes From Underground: Weather Disrupts. Will It Disrupt Financial Flows?
October 4, 2018Based on the recent ADP report and other economic data, logic would dictate that Friday’s jobs report OUGHT to be very strong. If the data is weaker than expected, analysts will look to the impact from Hurricane Florence, ” the storm the authorities came to blame.” There are projections that jobs will be diminished by upwards of 50,000 so the initial algo traders will be thwarted. As usual, the critical component of the jobs number will again be the average hourly earnings (AHE), which are expected to rise 0.3% following August’s increase of 0.4%. If this number were to print 0.5% expect bond futures to come under pressure, even on top of violent increase in yields we have experienced this week.
Notes From Underground: Going Where Others Fear to Tread
October 3, 2018In a surprise visit with Rick Santelli on Wednesday, we picked up where we left off in our discussion about rising interest rates. This time we had live ammunition as the data releases revealed suggested robustness in the U.S. economy. Now that the “accommodative” language was removed from the FOMC statement, Chairman Powell will have the luxury of FLEXIBILITY in reacting to economic signals. The markets responded to Powell’s new policy by sending interest rates higher, taking out long-time technical resistance on the U.S. 10- and 30-year Treasuries. Is the rise in yields sustainable? Friday’s unemployment report will provide a powerful test for the markets because if wages increase more than anticipated there will be renewed selling all along the curve.
Click on the image to watch me and Rick discuss the rise in Treasury yields.
Notes From Underground: Fed Forecast — 100% Chance of a 0.25% Rate Hike
September 25, 2018The market is absolutely, positively certain that the FOMC will increase the FED funds rate by its Greenspanian 25 basis points, although there are some Wall Street pundits suggesting the possibility of a 50 basis point hike because of the recent return of robust data. I have suggested that the FED would have done well by raising rates in a more aggressive fashion. But with the November elections within polling range, Trump’s trade policy causing angst in the emerging markets and several of U.S. trading partners, it’s looking very unlikely (less than 5 percent chance).
Notes From Underground: Larry Kudlow, White House Eunuch
September 17, 2018Make no mistake, Larry Kudlow is worthless as a source of financial wisdom because he wishes to be everybody’s friend. That prevents him from having a discussion about serious financial concerns. The Kudlow mantra is: Pay attention to the growth coming from the tax and regulatory reforms put in place by the Trump administration. I agree with the great need for regulatory reform, but the Kudlow mantra of “don’t worry about budget deficits because growth will take care of it” is RUBBISH. The Trump administration has increased spending while cutting taxes, which in my opinion has merely resulted in INTERTEMPORAL MISALLOCATION. The TRUMP White House has merely brought forth demand from the near future with no genuine way to pay for it. This is of course right out of the Nixon play book in which “we are all Keynesians now.”
Notes From Underground: More Perspective In the Time Of Reflection
September 12, 2018First, to all of those in the NOTES community who celebrate the Jewish New Year, I wish you a year of health, peace and prosperity. To those who celebrate other spiritual endeavors I offer you a wish for health, peace and prosperity. Now, to the markets. In the past month I have spent time putting issues we’ve been discussing for the last nine years into perspective. Lately, the airwaves are filled with the accolades laid upon the policy makers who SAVED CAPITALISM. Listening to Paulson, Geithner and Bernanke pontificate on how they acted to save the system is enough to send me into fits of rage as the culprits who failed to act to halt the housing bubble praise themselves for the “Courage To Act.”
Notes From Underground: Sympathy For the Devils
September 3, 2018The world is aflame with the BLOWBACK from policies of the elites who carved a world fit to desired outcomes of a self-established ruling class. The free flow of capital in pursuit of cheap labor has led to the stagnant wages that have given rise to anti-establishment forces, which have upset the Davos crowd’s playbook. As long as capital pursues a maximization of return but is answerable to the Westphalian construct of the nation-state, there will continue to be bouts of conflict that result in less desirable outcomes for global corporations.
Notes From Underground: Trump Moves Markets Without Moving His Fingers
August 21, 2018The noise just keep on coming and each are disrupting the markets in its own way and the president. Monday’s headlines from the financial press had large impacts on GOLD, COPPER, EQUITIES, and, of course, CURRENCY markets. Let’s look at the substance of the comments.
