Archive for the ‘Europe’ Category

Notes From Underground: I Am Not Your Beast of Burden

October 29, 2019

In the global financial system, the central banks are indeed the are system’s beasts of burden. With the November FED FUNDS contract pricing in 93% chance of a rate cut, Federal Reserve Chairman Jerome Powell will attach himself to the plow and till the soil, spreading more fertilizer for equity purchases and further financial repression of creditors. As we discussed Monday, the week is filled with central bank meetings of importance and further impacted by unemployment and GDP data. But there is so much more in the political realm that we haven’t even entertained:

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Notes From Underground: For The Sin Of …

October 7, 2019

Let me wish all those celebrating the Jewish New Year a Healthy and Happy New Year (and I wish the same for those who don’t celebrate the Jewish calendar). Tuesday night begins the Day of Atonement in which the individual is obligated to acknowledge any shortcomings, ask GOD for forgiveness and announce the desire to rise to a higher level in the coming year. There is a list of 44 sins confessed publicly, which covers the entire litany of transgressions the individual/community has most probably engaged in. (I’ve linked a list here.)

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Notes From Underground: Time It Was, What a Time It Was

August 27, 2019

These Simon and Garfunkel lyrics could apply to the events of this past weekend, the bookends of Jackson Hole and the G-7 meeting. The meaning was best summed up i a Financial Times story that quoted St. Louis Fed President James Bullard, who said, “Something is going on ,and that’s causing I think a total rethink of central banking  and all our cherished notions about what we think we’re doing. We just have to stop thinking that next year things are going to be normal.”

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Notes From Underground: The August of Our Discontent

August 7, 2019

When August rolls in the markets thin as Europe heads to the beaches and New Yorkers head to the Hamptons before Labor Day. This means every tweet President Trump is amplified by the LACK of market liquidity. On Wednesday, the president was back in full confrontation with Federal Reserve Chairman Jerome Powell because three central banks CUT interest rates last night: India,Thailand, and, most importantly, the Reserve Bank of New Zealand, which surprised most market analysts by cutting 50 basis points instead of 25.

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Notes From Underground: It’s a Drag For Draghi Getting Old

July 24, 2019

On Thursday morning we will hear from the ECB about its desires to raise inflation to its self-imposed 2% target. But on Wednesday we received more tepid economic data from the EU. Then couple that with the ascent of Boris Johnson to the position of British Prime Minister. The rise of Boris Johnson is a problem for Draghi as the possibility of a HARD BREXIT increases dramatically. The market and its DAVOS media sycophants have sold the narrative of a hard Brexit as being devastating for the U.K. economy, the British GILTS, the British pound and the Footsie 100. President Draghi has to be careful that a severe rally in the EUR/GBP cross doesn’t damage the European exporters, especially Germany, who runs a 50 billion-plus surplus with Britain.

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Notes From Underground: Welcome Back, Rick

May 28, 2019

On Tuesday, Rick Santelli and I dissected the European Parliamentary elections. The results weren’t far off the projections as the GREEN PARTY was able to siphon off voters from the established left-leaning parties as they attracted more young voters than in previous EU-wide elections. There will be much to discuss as we head into the “horse trading” of Brussels politics but I stick to my insistence that the ECB needs the leadership of Jens Weidmann.

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Notes From Underground: Relevant Issues for Today’s Global Macro Environment

May 13, 2019

As the latest drama of the U.S./China trade negotiations unfolds, there are several that continue to boil. The president is tweeting less about stock market valuations and more about the revenue impact from the fresh tariffs On Sunday, Fox News’ Chris Wallace disrobed Larry Kudlow. The economic adviser epitomized the age-old adage: “An honest person sent abroad to lie for their country.” Yes, Mr. President. A tariff is a tax on your populace. If tariffs are great for the U.S. economy, then raise them 1000% and balance the budget without inflicting any harm on Americans’ pocket books. [Yes, that’s sarcasm.]

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Notes From Underground: Back to What’s Driving Markets

May 8, 2019

We have all been bogged down with tweets coming from the White House about China. Because high-speed traders force us to parse the messages and assess the immediate impact on the markets, we’re hostage to President Trump’s tariff policy. The bottom line is that Robert Lighthizer is left to inform the world when China will acquiesce to the U.S.’s demand for reliable and hardened enforcement mechanisms to solidify any genuine agreement. From my perspective, the critical point on global markets is that once China/U.S. trade agreement is done the president will set his sights on targeting the ENORMOUS TRADE IMBALANCE that favors Germany.

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Notes From Underground: Prairie Fires On the Global Landscape

April 14, 2019

Let me put introduce areas of great concern that markets acknowledge but do not price for as they are too difficult to weigh. The Chinese/U.S. trade negotiations are simple relative to the potential impact from Turkey, Venezuela, Europe, and, of course the final decision on Brexit.

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Notes From Underground: Wednesday, 6:45 CST … Our Day Begins

April 9, 2019

There are so many issues plaguing Europe right now, and surprisingly, Brexit is not the most significant. On Wednesday morning — yes, Wednesday — the ECB announces its rate decision and it is expected that rates will remain unchanged,  with the main refinancing rate at zero. The only possible news will be that the ECB actually engages in a tiered financing. This would mean that some banks would get relief from the -0.40% rate that the ECB charges banks to deposit cash at the central bank. There have been rumors that the ECB was planning on raising interest rates in the hope that boost for some European domestic rates would help lift the equity valuations of some profit-stressed financial institutions.

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