There were two central bank meetings in the past two days: The Bank of Canada and the European Central Bank. The BOC stayed its current course with no change in policy. Several analysts were looking for more dovish action because of the appreciation of the Canadian dollar but the BOC was wise in noting that a “broad-based decline” in the U.S. exchange rate has contributed to a “further appreciation of the Canadian dollar.” As a result, the BOC has ZERO concerns about its currency appreciating as long as it is BROAD-BASED.
Archive for the ‘Currency’ Category
Notes From Underground: The Darkness of Foreign Exchange
December 10, 2020Notes From Underground: Closing In On Critical Levels
December 3, 2020In the past six months, NOTES FROM UNDERGROUND has always been more podcast than blog posts so it’s a very good time to review and put the markets into perspective are as we approach 2021. NOTES has been on the bearish side of the DOLLAR trade since Wolfgang Schaeuble — the purveyor of the German NEIN and infamous Schwarz NULL (black zero) — pivoted and promoted a large grant program to help the severely impacted European economies suffering from COVID and a massive debt burden. As Schaeuble suggested, giving more loans was similar to giving the debt plagued nations ROCKS, weighing them down ever more, while giving large GRANTS was similar to providing BREAD.
Notes From Underground: Yra and Gary Talk Deflation
November 6, 2020On Wednesday, I had a long discussion over Zoom with the eminent Gary Shilling, courtesy of FRA. There is much we agree on but as my readers are aware, my view on a coming deflationary spiral is measured as a low probability outcome of the current financial and economic situation. If deflation were to take hold it would be deemed a major failure of FEDERAL RESERVE policy aided and abetted by 535 fools on Capitol Hill. Before getting to the PODCAST, I offer up this advice on this week of major macro-economic importance (and NO, NOT THE U.S. ELECTION). There were three central bank meetings this week: The Reserve Bank of Australia; the Bank of England; and the Fed.
Notes From Undergound: Marc Faber, Wow
October 13, 2020It is a pleasure to have sat down with the paradigm of global macro, Dr. Marc Faber. We, alongside Richard Bonugli, talked commodities, currencies and bond markets. Enjoy the podcast and make it a double of your favorite libation. No, it’s not doom and gloom. It’s insights into the current global financial situation presented with potential investment opportunities.
But first, let’s review a few things:
Notes From Underground: Narcissism Has Consequences
October 1, 2020On Friday, there’s a new dose of unemployment data. While these blog posts have been infrequent, my view remains the same: The Federal Open Market Committee may be keen on promoting inflation while returning to the pre-Covid employment levels, but no amount of robust jobs growth will move the FEDERAL RESERVE off its current policy of lower for longer.
In regards to the year-end data, I want to know: If unemployment is below 9% while the annualized inflation levels were to rise to 6%, would the FED raise rates? If your answer is no then you agree that the data outcomes are benign. At this juncture much more concerned with the next phase of fiscal stimulus and the DOLLAR.
Notes From Underground: Waiting for Godot, or Waiting for Jerome?
September 15, 2020President Donald Trump has had his issues with his own hand-picked Federal Reserve Chairman Jerome Powell. At one point there were even discussions about Trump attempting to demote the chairman if not “firing” him for failure to keep interest rates low enough to finance the massive budget deficits. The Covid pandemic, coupled with 2019’s Powell pivot, seems to have satisfied the President’s lust for negative REAL YIELDS as Powell is no longer the object of Twitter derision. (more…)
Notes From Underground: A Long, Long Time Ago
August 23, 2020We are back. This is the first blog post after a 10-week break. It has been a nice hiatus from writing as we took some time to reflect and respect the sanctity of motherhood.
I’m linking to an FRA PODCAST hosted by Richard Bonugli taped on Thursday featuring Barry Ritholtz, David Rosenberg and myself. This will be a solid starting point for NOTES FROM UNDERGROUND as it picks up where we left off on June 12: LONG EUROS, LONG GOLD and looking for some vigor in the commodity markets.
Notes From Underground: Policy Trumps Data
June 6, 2020The MISS by the economic analysts of Friday’s unemployment data has rendered all data as tertiary relative to the policy that has been enacted to counteract the malicious effects of the Covid-19 shutdown. Global stock markets have rallied as if normalization has occurred and UNEMPLOYMENT has returned to its historic lows of 3.5%.
Notes From Underground: Central Bank Policy Peeks
June 2, 2020On Monday night, the Reserve Bank of Australia issued its policy decision and as expected, there was no change in overnight rates at 0.25%. More importantly, the RBA is targeting three-year Aussie government bonds at 0.25%, keeping the yield curve flat or inverted out to that point.
Notes From Underground: The Economic Consequences of President Trump
May 17, 2020(NOTE: The following post is not political in any sense, but just a criticism of a major ill-conceived POLICY.)
This is a story of two pivots.
The first is Federal Reserve Chairman Jerome Powell in January 2019. The second is President Donald Trump in May 2020.
Powell’s pivot away from interest rate increases and balance sheet shrinking created a significant rally in equity and asset prices. Trump’s pivot on the DOLLAR will have disastrous results that are manifested in the GLOBAL DEFLATION that central banks have been trying to prevent. What is the reasoning behind the President’s recent shift away from a weak dollar to promoting the positive outcomes of a strong currency?