Archive for the ‘Equity’ Category

Notes From Underground: Angela Merkel Finally Faces Facts

May 22, 2017

Angie Angie

where will it lead us from here

Oh, Angie don’t you wish

Oh your kisses still taste sweet

I hate that sadness in your eyes, but Angie Angie

Ain’t it time we said goodbye  [Richards and Jagger]
Today, German Chancellor Angela Merkel openly admitted that the German trade surplus was large because the ECB‘s monetary policy rendered the EURO to a bout of severe weakness, which helped make “German products cheaper.” It continually amazes me how forthright politicians become once the political storm clouds have lifted. When President Trump noted a similar view he was criticized for trying to force a break-up of the European Union. What was Angie’s angle in challenging the policies of the ECB and Mario Draghi? As I have written for the last six months, the ECB was going to become an issue in the upcoming German national elections. It appears that the Chancellor is getting ahead of the AfD and other challengers about the negative impact of Draghi’s policies that punish and financially repress German savers.

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Notes From Underground: Nothing New to See, Except the Equity Markets Finally Added Some Risk Premium

May 17, 2017

The market did not selloff today. Risk was merely repriced and greater premiums were being offered in an effort to attract buyers. Everything discussed in this blog during the past six months was brought to light and the most important outcome was that the narrative has changed. The Trump agenda of tax and health care reform, and regulatory rollbacks was seen being delayed by the possible legal issues confronting the White House. Notes From Underground is apolitical and is solely vested in understanding the policy impact of any political outcomes, which is why it is geared toward political economy. Or, as Deng Xiaoping would say: “I don’t care if the cat is white or black as long as it catches mice.” Since Trump’s inauguration, the mainstream  media has been relentless in its effort to cast Trump in a negative light and the Tweeter-in-chief has certainly provided the tinder to keep the fires lit.

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Notes From Underground: Santelli and Harris Down By the Schoolyard

May 9, 2017

This is the most recent CNBC hit with Rick Santelli as we try to educate the world in another three-minute segment. This unrehearsed spot attempts to dig deep into the financial issues confronting traders and investors. The discussion about France is a continuation from the Notes From Underground post I wrote last night. I stress that the period ahead for Emmanuel Macron is going to be difficult, especially if the center-right wins the Parliament and thus the prime minister position. This summer will be fraught with street demonstrations as the Left moves to prevent any installation of German-initiated fiscal austerity and labor market reform. In typical French political fashion, labor and student groups are warning against Macron governing by decree and bypassing Parliament.

(Click on the image to watch me and Rick discuss French elections.)

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Notes From Underground: Looking Backwards … Again

February 8, 2016

It is hard to believe that NOTES FROM UNDERGROUND is approaching its 1,000 blog post. Many of the themes touched in my analysis have had an echo effect. Certain themes have continued to provide trading opportunities over and over. 1. The European financial crisis; 2. The Fed’s destruction of the bond market; 3. The ECB‘s destruction of European sovereign debt markets in an effort to preserve the Maastricht strait jacket. 4. Russian geo-political moves on a timely basis to affect Putin’s desire for an increased role for Moscow on the world stage; 5. Japanese desires to fabricate an inflationary backdrop to ease the burden of debt overhang; 6. Too much or too little growth in the emerging market economies; 7. China’s desire too have an enlarged impact on the global financial system in fact and fiction; and oh so many more.

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Notes From Underground: Cramer Unsavory? I Think Not

January 14, 2016

Jim Bullard? Now There Is An Unsavory Chap

Today was not like the other days for the break in the equity markets came early. As all the global markets were in sell mode St. Louis Fed President James Bullard hit the airwaves with thoughts about being wrong in his inflation projections. It appears that the selloff in crude oil is providing the Fed hawk with concerns that the SUMMARY of ECONOMIC PROJECTIONS may be softer than the December FOMC meeting revealed. Bullard sounded as if he would not be in favor of the Fed raising rates because of the inflation rate turning away from the spurious 2 percent mandate. The unsavoriness of Bullard’s comment is not that he fears a downturn in inflation, and maybe lower growth, but that Bullard seemed to find his DOVISH posture as the U.S. markets were heading toward the August lows. Bullard in unsavory because he called out CNBC’s Jim Cramer for “cheerleading for low rates twenty-four hours a day.”

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Notes From Underground: Volatility Into A Holiday Market–Small Boats Stay Close To Shore

December 9, 2015

WARNING: Put on your life lines, foul weather gear and be ready for the boom to come flying about (thanks Whitewave). There are violent winds blowing in the financial seas as equity markets are giving warning that something is amiss. The 200-day moving averages for the DAX, CAC, Nikkei and SPOOS succumbed to selling pressure in synchronized fashion. The Dow Transportation Index looks atrocious, especially when viewed in terms of the steep drop in energy prices. Lower fuel costs are historically a boon to trains, planes and automobiles and most especially trucks. Lower fuel costs lead to increased profits for freight haulers (h/t American Limey and Professor Waspi).

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Notes From Underground: The Stock Market Says, “I Think Icahn, I Think Icahn”

October 15, 2015

One of the great contemporary financiers warned on September 29 that the stock market was “extremely overheated ” and was being “supported by an “unsustainable earnings mirage.” Well, since that video release from Carl Icahn, the SPOOS have rallied more than 7 percent, defying the wisdom of Ichan, as well as many other highly regarded  investors. Today’s equity rally was in the face of what has been a continuing onslaught of negative economic releases. The market has rallied off the August 21-24 lows but has paused when confronted with weak data, such as September’s unemployment report. But today the weak economic releases  failed to dent the powerful rally: a weak Empire State, a weaker-than-expected Philly Fed Manufacturing report.

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Notes From Underground: Weak Unemployment Report Creates A Cacophony of Market Reactions

October 4, 2015

Before we review Friday’s action, I would like to present a quote from Tolstoy sent from a long-time reader and is representative of the 2+2=5 basis of Notes From Underground. While I have respect for the theoretical basis in the continued search for knowledge, I try to write NOTES with a deeper understanding of the fundamentals that drive markets on a short- and long-term time scale.

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Notes From Underground: Things To Do Before Thursday’s FOMC Decision

September 15, 2015

As we head into decision day on U.S. interest rates it is important to note that all the major equity indices remain under their 200-day moving averages, despite recent rallies amid short covering (and bargain hunting remains an active sport). The consensus based on the pricing of FED FUNDS futures contract has the odds in favor of a NO CHANGE in policy by the FOMC. I caution that bargain hunters have been on the prowl as the voices of Summers, Lagarde, World Bank and others have given fortitude to those needing to put cash to work. If the FOMC stays the present course the immediate impact MAY be an initial equity rally but be patient to see how the market is reacting after at least 12 hours.

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Notes From Underground: When China Shakes, the West Rattles and Rolls

August 24, 2015

Mao, Deng and Xi, oh my! It seems whenever China releases economic data, the U.S. markets and its developed market cousins either go into an orgasmic paroxysm or a spasm of pain. Readers of Notes know that I have criticized the Chinese economic releases as fiction and my rational was simple. If the Politburo would not allow GOOGLE to operate without restraint within China why should I trust any “official data.” Many times I have referred to GDP and PMI figures hitting the predicted market consensus as a greater feat of financial engineering than Jack Welch’s record of beating Wall Street’s forecast’s for GE earnings by a penny every quarter while Jack was CEO.

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