Posts Tagged ‘balance sheet’

Notes From Underground: We Got Our Answer

July 31, 2019

In Sunday’s blog post I asked whether the tariffs trumped U.S. economic data. Well, we got our answer on Wednesday and it’s a resounding YES. Federal Reserve Chairman Jerome Powell’s press conference Wednesday suggested that he has been sucked into the vortex of President Trump’s media manipulation of the tariff narrative. CNBC’s Steve Likesman asked whether the interest rate cut was an insurance cut instead of a DATA cut. Powell cited these reasons for the Fed’s decision: To insure against global risks /trade tensions, which is unusual as there is not much history of monetary policy responding to economic consequences of trade friction; and the cover all of the world’s largest central banks, which is the need for a faster return to inflation.

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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?

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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.)

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Notes From Underground: Chatting With Bill Laggner of Bearing Asset Management

February 4, 2019

On Jan. 30, I had the pleasure of sitting in with Bill Laggner and Richard Bonugli for another Financial Repression Authority podcast. These discussions provide a forum to discuss pertinent issues regarding the efforts of policy makers that impact the creation of wealth, as well as its distribution. I refer to this as POLITICAL ECONOMY. The podcast was recorded four hours before the release of the FOMC statement and Chairman Jerome Powell’s press conference. The FED chairman provided further insight into the walk-back of “automatic pilot” as he addressed concerns about the headwinds building in the global economy.

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Notes From Underground: The Sound Of Complacency Shattering

September 19, 2017

First, for all those in the Notes From Underground community who celebrate Rosh Hashanah, have a happy and healthy New Year. For those who don’t I also wish you a happy and healthy New Year. Thanks for your continued support and if I angered you with my thoughts I have to say it was not done to be hurtful but rather to provoke a high-quality discussion around issues in the realm of global-macro finance. When I listened to the Ray Dalio interview on CNBC today it was comforting to know that the mission of this BLOG is similar to what Dalio tries to accomplish with his employees. NOTES FROM UNDERGROUND is not about PERSONAL VALIDATION but about discourse in the crucible of financial ideas, striving to refine the GOLD from the DROSS. Let’s hope the SHOFAR BLAST shatters the complacency of our static thoughts in all matters of our lives.

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Notes From Underground: She Does It Backwards and In Heels

June 14, 2017

Commentators on dance technique always maintain the Ginger Rogers was a better dancer than Fred Astaire for she performed everything he did but “backwards and in heels.” At today’s press conference the financial markets were left with the sense that Chair Yellen wants to rollback the massive balance sheet promulgated by Ben Bernanke. The most “hawkish” piece from the day was when Yellen said it’s not unhealthy to have a gap between the FED and MARKET EXPECTATIONS.

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Notes From Underground: We Were At It Again

November 22, 2016

Tonight I am posting today’s Santelli and Harris exchange (click on the image at the end of the post). (It is with gratitude that I thank Rick and his wonderful producer Lesley McKeigue for they keep providing me a with a platform to express views that are based on almost 40 of trading experience.) The Santelli Exchange has allowed me to meet and share views with some of the most respected minds in the financial community: Art Cashin, Jim Bianco and the list continues to go on and grow. Thank you my readers for allowing me time to deal in dialectic exchange and be challenged in a constructive method to enhance my knowledge. Remember, it is not validation but dialectic that I strive for in Notes From Underground.

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Notes From Underground: Allow Me To Play Fed Chair

July 12, 2016

Every once in a while I entertain the fantasy of being at the helm of the Federal Reserve. In a moment of megalomania I am proposing this solution to situation that the FED finds itself: The velocity of money is extremely low as zero interest rates have led to a massive buildup of overnight reserves at the FED. Money’s low velocity is compounded (pun intended) by the bloated balance sheet that the Fed has attained through its massive QE program. Certain voices are maintaining that the severe flattening of the yield curve is precluding domestic banks from making greater profits, which results in less lending activity. It is not only the low profits impeding bank lending but also the massive amount of high quality collateral controlled by the FED that diminishes financing activity from the shadow banking sector via the REPO market. IF THE FED WERE TO BEGIN SHRINKING ITS BALANCE SHEET BY SELLING TREASURIES OF A 10-YEAR OR LONGER DURATION, THE YIELD CURVE WOULD STEEPEN AND THE REPO MARKET WOULD SPRING TO LIFE AS MORE HIGH QUALITY COLLATERAL WOULD CIRCULATE IN THE MARKET.

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Notes From Underground: The Fed Meets Market Expectations … So How Was It Unanimous?

December 16, 2015

In the Beatles Album “Let It Be” John Lennon introduces the phrase, “Doris Gets Her Oats.” It’s supposedly just typical Lennon gibberish. But in a nod to the Beatles, Janet Yellen got her oats and the Fed did not LET IT BE. The “oats” that Janet got was that the FED increased its interest on excess reserves (IOER) to 50 basis points and overnight reverse repo (O/N RRP) rate to 25 basis points in order to pull the fed funds into the corridor. The most astounding outcome was that FOMC vote was unanimous, 10-0. With the recent über-dovish comments from Fed Governors Brainard and Tarullo, how could they have voted with the Fed Chair? Some commentators remarked that the “historic” occasion of Yellen presiding over the first Fed hike in almost nine years needed a unanimous vote. Question: What did Chair Yellen have to promise the über-doves in order to garner their votes and suffer the wrath of the Shadow Fed Chairman, Larry Summers? This will be an important question going forward for it may mean that Yellen may have compromised herself to lower for longer.

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