Posts Tagged ‘Abe’

Notes From Underground: The FOMC, BOJ and German Elections Lead the Way to Quarter-End

September 18, 2017

As the earth rock keeps spinning we continue to monitor global events that could make investors/traders dizzy. This week the FOMC is EXPECTED to announce that it will begin its quantitative tightening (QT) by revealing the date of its plan to shrink its balance sheet by a net $10 BILLION of assets a month ($6 billion of Treasuries, $4 billion of MBS) and increasing the amounts quarterly so the program results in little market disruption. Remember, Chair Yellen has said she believes that it will be “like watching paint dry.” The world’s equity markets — especially the U.S. — are reflecting little concern about the Fed withdrawing “small” amounts of liquidity.

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Notes From Underground: Will Trump Hustle Abe and Ask for 10 Shots?

February 9, 2017

The main story for the next two days will be Japanese Prime Minister Abe’s visit to the U.S. to meet with President Trump. Abe is coming to mend relations after Trump officially ended the Trans Pacific Partnership (TPP) agreement before Congress could even debate the trade treaty. The Japanese prime minister had expended a great deal of political capital in Japan to get various parties to accept a massive Pacific-based trade agreement. In an effort to forestall any discussion of Japan as a currency manipulator, the Japanese are offering all sorts of investment ideas in the context of getting Trump the negotiator to soften his stance on tariffs for Japanese goods, or sourced material from Asia for assembly in the U.S. Japan is a paramount promoter of the global supply chain paradigm.

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Notes From Underground: Lions and Tigers and Bears, Oh My!

September 11, 2016

The Wizard of Oz provides so many appropriate metaphors for dealing with global central bank policy. The failure of the wisdom of those who meet behind the “curtain” enthrall  the members of the elite media who genuflect on the altar of access. Provide the necessary backdrop of equations and the media believes everything. It reinforces the sentiment of the Greenspan era: “If you think you understood what I said, I must have misspoken.” The idea of an “all-knowing Fed” is beginning to lose its luster as markets begin to understand that FED policy is not rocket science. There is no predictable outcome for the global experiment of negative interest rates or zero interest rates. Even the growth of supersized central bank sheets is causing doubts among the blind followers of free money forever.

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Notes From Underground: Clearing Up Some Odds and Ends

August 1, 2016

This week brings Prime Minister Abe’s fiscal plan, the Reserve Bank of Australia’s rate decision, the Bank of England’s monetary results and U.S. nonfarm payrolls on Friday. So let’s put some perspective to tonight’s main events. The RBA will announce its overnight interest rate and consensus is calling for a 25 basis point CUT to 1.5%. Analysts believe that the weakness in the natural resource sector is aiding the reduction in capital expenditure. Also, Aussie inflation is at the bottom of the RBA‘s target range, which provides rationale for the RBA. I am not so sure of a CUT for this is coming at the end of Governor Stevens’s term at the RBA. Dr. Phillip Lowe will take over September 16 so this is the penultimate meeting for Mr. Stevens.

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Notes From Underground: FOMC,BOJ, GDP … It’s All Alphabet Soup to Me

July 28, 2016

On Wednesday, the FOMC left its interest rate policy in tact as it awaits more data before deciding to change interest rates. The FOMC statement wanted to reflect some underlying hawkishness but the market is reticent to accept the veracity of Fed releases. The DOLLAR initially rallied as the algo deemed the “hawkish” language a positive for the dollar and bearish for the precious metals but upon a very quick review the market reversed and now demands that the Fed reveal its Missouri lineage and “SHOW ME.” The yield curve gave the FED some credence by flattening in response to a change in some of the rhetoric, “near-term risks to the economic outlook have diminished.” This provides the FED the flexibility to respond to self-diagnosed headwinds in an effort to keep rates at present levels for as long as the DOVE can fly. The FED is pinned not by U.S. data but by the actions of the ECB and the BOJ.

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Notes From Underground: Japanese Elections, Italian Banks and May Day in the U.K.

July 11, 2016

Just some summary points as this year the summer doldrums will prove to be anything but:

1. The Japanese elections for the upper-house unfolded true to expectations but the impact of the win for P.M. Abe will take time to play out. There are winners and losers in Abe’s victory. One of the losers could well be the prime minister as the final results do not provide enough margin to pursue constitution revision because the LDP does not have enough votes without the support of its partner Komeito. More importantly, the TPP (TransPacific Partnership) may not pass because of several opposition victories in the rural prefectures. As Tobias Harris maintains, the “bleak outlook for ratification in the U.S. … the {Japanese} government will have to decide whether it is worth expending political capital on an agreement that may not come into force.”

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Notes From Underground: Will Janet Be Wearing Her High School Nehru? Or Her PHD Graduation Nairu?

April 26, 2016

Wednesday brings the results of the FOMC meeting and the official policy statement laying out Fed insights into the domestic and of recent concern the fragile state of the global economy. There will be no press conference so the “kremlinologists” of fedspeak will be busy parsing every nuanced word. I WILL BE WATCHING WHAT OUTFIT THE FED CHAIR IS WEARING. IF SHE IS WEARING A NEHRU JACKET I WILL ASSUME THE FED IS MORE CONCERNED ABOUT THE EFFECT OF GLOBAL MARKETS KEEPING DOWNWARD PRESSURE ON AMERICAN WAGES. Domestic-oriented analysts focus on the U.S. unemployment rate of 5.0% as the key factor for the need for the FED to raise rates. The flawed models of the FED fail to take into account the pressures on the U.S. economy from capital and labor situations worldwide.

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Notes From Underground: Another Day When Everything is a Trade, Not A Position … Until?

April 6, 2016

On Monday, the yield curves tried to confuse us and the result was that the 2/10 provided the impetus for flattening across the board. The yield differentials are rangebound, creating a grind trade as the market looks for some clarification for longer term direction. The Wisconsin Primary will probably add more confusion to the Republican Presidential race. The situation in Europe is confused as the refugee issue has now become a negotiating chip for debt relief and Mario Draghi prays every night for an economic slowdown in Germany so as to get some support for some fiscal stimulus. ECB Chief Economist Peter Praet is quoted in a story from MNI Group, saying, “The need for a superior policy mix is no excuse for central banks to be passive when their mandates are under threat. The ECB has demonstrated through its actions  that it does not wait for others to move first.”

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Notes From Underground: More Proof of Algo-Driven Volatility

December 20, 2015
Dateline Japan: When the BOJ released its policy decision in the wee hours of December 18, the algos interpreted the news as an expansion of monetary stimulus and assumed it was the QQE program. In the press conference, BOJ Governor Kuroda explained that the extension was not an additional easing but merely an extension of bond duration that the BOJ would buy. Because there’s a dearth of bonds available for purchase, the BOJ is extending purchases to include those of 12 years in length.

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Notes From Underground: Hey CNBC, New York Is Not the Most Powerful City In the World

August 27, 2015

At 8:00 a.m. EST, CNBC‘s announcer says, “From The Most Powerful City In the World, This Is Squawk Box.” What bothers me is the squawking about your importance. What irritates me even more is that Beijing has been the most powerful city when it comes to moving markets. Every other idea spewed this week has been about the impact of the Chinese authorities and the policy impact from the Politburo that “destroyed” trillions of equity market value. It even appears that the Chinese are dominating the discussion in Jackson Hole, Wyoming where the Kansas City Fed is hosting their annual symposium. Even New York Fed President Bill Dudley, aka Less Compelling, cites the Chinese as the reason to be less compelled to raise rates at the September meeting.

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