Archive for the ‘Debt Market’ Category

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?

(more…)

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.

(more…)

Notes From Underground: Be Vigilant, Very Vigilant

February 26, 2019

Today, I am writing this for all traders and investors. For many years I have been concerned that the market is sometimes plagued by headlines that create volatility as algos react to six words crossing the wire, only to be completely out of context when the article is published. But the damage is done. Most actors in the investment arena are unaware that MOST data releases and FED documents are provided to the media roughly 30 minutes early so that they can get their headlines and stories written for the scheduled time. My problem is that this antiquated methodology OUGHT to be extinguished because trades and information move in nano seconds rather than on Telex rollers as financial news was reported when this policy was enacted. When high frequency trading groups are spending millions of dollars to get edges in micro seconds it is certainly time to say goodbye to long-held operations.

(more…)

Notes From Underground: Time To Tidy Up a Few Issues

February 20, 2019

While the markets are busy digesting the January FOMC minutes it is a splendid opportunity to muse on recent events.

(more…)

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.

(more…)

Notes From Underground: Why So Much Weight on Italy and Its Gold?

February 14, 2019

There has been much discussion this week about how the current Italian government wants the nation’s GOLD to be the “property of the state” instead of on the Bank of Italy’s balance sheet. The coalition of Five Star and League have thought to gain control over the gold and some pundits have raised the idea of Italy selling its gold holdings, the world’s third largest, in an effort to plug holes in the budget. (NOTE: The Italian government is actually the fourth largest when the IMF is included.) Italian Prime Minister Matteo Salvini maintains that the government has no plans to sell any of the people’s GOLD. Maybe the Salvini Government is deciding to take the advice offered for the last eight years here at NOTES and monetize the GOLD by issuing GOLD-BACKED BONDS. (Securitizing the gold by selling bonds backed by one-fifth of an ounce of gold.)

(more…)

Notes From Underground: Things Are On the Boil

February 7, 2019

There are so many things causing angst in the global markets. There was news out of France on Thursday that the government was recalling its envoy to Rome because Italian politicians met with the yellow vest movement. To President Macron I offer this history lesson: In 2011-12 French President Nicolas Sarkozy–with the cooperation of German Chancellor Angela Merkel–crushed the Italian bond market in an effort to remove Prime Minister Berlusconi. The Eurocrats in Brussels parachuted in a preferred bureaucrat, Mario Monti, in an effort to get Italian politicians to halt the fiscal bleeding. The French have a great deal of audacity in complaining about Italian meddling, especially as Salvini/Maio have a legitimate reason: the upcoming European Parliamentary elections.

(more…)

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.

(more…)

Notes From Underground: And To All a Good Year

December 23, 2018

We are heading into the last trading week of the year and it’s setting up to be volatile, to say the least. The FED is in motion. Equity investors are harvesting profits from a long-run bull market. Bond markets are uncertain as how to react to the end of QE since the central banks are now beginning to shrink global reserves (at least the Fed is). Commodity prices are struggling due to the fear of a global economic slowdown. And the political backdrop adds great uncertainty as the Trump administration never misses an opportunity to open its mouth and detract from any policy success it may experience. China, Russia, Turkey, Iran and even Saudi Arabia are watching the Western Democracies to see how they respond to Trump’s efforts to disrupt the current trading system and, more importantly, the rollback of PAX AMERICANA.

(more…)

Notes From Underground: The Umpire Strikes Back

December 19, 2018

The Fed chairman is situated as the key arbiter of the economy and rules via its DUAL MANDATE. Given that it has a research staff of at least 500 economists the FED positions itself as ALL KNOWING, which is certainly okay as long as it accepts the consequences and lays aside the use of counterfactuals when its policies may turn out to be very misguided.

(more…)