Posts Tagged ‘Bank of Canada’

Notes From Underground: Putting Things In Perspective

December 5, 2017

Just a few quick points that are relevant to the markets at the end of the year:

1. Tonight I am including charts of the U.S/German two-year yield differentials. The U.S. two-year note is yielding 256 basis points above the German rate. This is relevant because both instruments are high quality assets that play an important role as collateral in the funding markets. I’ve also included a 25-year chart of the U.S. 2/10 yield curve. Note that the last two INVERSIONS occurred before significant equity market corrections. Does this current flattening portend a stock market correction? We can’t be certain because the role of the central banks has certainly created an investment environment where markets suffer from a lack of RISK PREMIA in all asset prices.

 

(more…)

Notes From Underground: Thursday, January 22 … “The Day The Earth Stood Still”

January 21, 2015

In the famous 1951 sci-fi movie, an alien with a ROBOT has the power to threaten the entire Earth and bring human civilization to an end. The only words that can prevent the ROBOT (algorithms) from the total destruction of the world  are: KLAATU BARADA NIKTO. Let’s hope that tomorrow ECB PRESIDENT MARIO DRAGHI has those same words at his command. There is so much riding on tomorrow’s ECB decision and the press conference that Mr. Draghi can bring financial ruin to the global money system. In all prior press conferences Draghi has been able to calm markets with mere promises of future actions. The game of securing time in an effort for improved economic performance is over.

(more…)

Notes From Underground: September, the Potential for An Investment Wasteland

September 4, 2013

Yesterday, I had a global macro session with some of the best users of the Notes From Underground. They are disciplined in pursuit of profit but as most of my readers try to do, pursue causation as a prelude to correlation. Carl had prepared a white board chart of all of the relevant events that are set to play out in September. April may be the cruelest month but September 2013 will certainly give T.S. Eliot’s poem a run for the grand title. The desire to anticipate any of the events may lead to a “wasteland” of capital. So thanks to Carl, let me restate the list of events:

(more…)

Notes From Underground: Rajoy’s Party Retains Power in Galicia

October 21, 2012

In what was a very slow new weekend the most significant story is that Spanish PM Rajoy’s political party held on to power in the PM’s home state of Galicia. This was considered to be an important test for Rajoy for if his support in his traditional support base had turned against him, there would be no chance that the PM would have proceeded down the road of further austerity. Now Señor Rajoy may be emboldened to surrender to the demands of German-imposed CONDITIONALITY so as to receive the proposed bailout from the ESM. This should be short-term bullish for the EURO as it will remove one of the obstacles that was blocking a massive dose of liquidity into the Spanish financial system. The trade-off game of financial support for enacting more austerity should help the markets as near-term fears of a Spanish collapse should be postponed.

(more…)

Notes From Underground: A Genuine Disgust With the Analysis of the FOMC MINUTES

August 22, 2012

OKAY, so the FOMC minutes were released and all the pundits who never trade were kibbitzing about the THIRD coming of QE. Upon several reviews of the MINUTES, I AM OF A FAR DIFFERENT OPINION. AND, UNLIKE THE PUNDITS OF THE GREAT WASTELAND, MY MONEY TALKS WHILE THEIR BULLSHIT WALKS. Yes, it is indeed frustrating to hear opinions morph into facts. As I reread the FOMC MINUTES I fail to see the certainty of a FED ACTION AT THE NEXT FOMC MEETING AND I OPINE THAT BERNANKE WILL NOT OFFER ANY GREAT INSIGHTS AT THE JACKSON HOLE SYMPOSIUM. AGAIN, ANY FED ACTION WOULD BE A REWARD TO THE CONGRESSIONAL DERELICTS WHO CONTINUALLY FAIL TO DO THEIR DUTY AND CONSTRUCT A RATIONAL FISCAL POLICY.

(more…)

Notes From Underground: Bernanke, Act I

July 18, 2012

Today’s SEMIANNUAL MONETARY POLICY REPORT TO THE SENATE: All posturing and no substance. In the usual scene of playing for the folks back home, Chairman Bernanke was lectured to about the need to do his job and feed the system with so much liquidity that “job growth” would have to take place. (Mr. Schumer, to you a copy of the work of Richard Koo and the concept of a balance sheet recession). Some Senators were berating Bernanke for the LIBOR scandal in an effort to show that the U.S. Congress was serious about banking abuses. For the record: When the banking sector is under stress the FED’s only concern is the repair of banking balance sheets and if the profits come from manipulating the setting of a short-term bank rate, the means justifies the ends.

(more…)

Notes From Underground: Bank Of Canada Holds Rates Steady at 1% (No Surprise There)

April 17, 2012

The BOC announced that rates will remain on hold and the Canadians will watch to see what happens in Europe as an important indicator of bank policy. It is unanimous that all central banks are concerned about the economic situation in Europe. Even the Chinese have noted the deterioration in Europe as a reason to be cautious about trying to slow the economy too quickly. However, in a confusing headline, “IMF PREDICTS MODEST GROWTH AS EUROPE STARTS TO EXIT RECESSION,” the Washington Post seems to think the worst is over for Europe. This headline is off base as the body of the article reveals, but such is the crap that drives the markets. IMF Managing Director Christine Lagarde is begging for increased funding for a bigger firewall for Europe and then this headline appears. Which is it: Crisis averted or further vigilance and action necessary to calm the European debt markets?

(more…)

Notes From Underground: The Bank of Canada Holds Rates Steady, Or, Anything But European Debt

January 17, 2012

This morning the Bank of Canada (BOC) voted to keep rates steady as 1% as Governor Mark Carney voiced concern over the troubling situation in Europe. The BOC noted that weakness in the EUROPEAN ECONOMY could spread as more austerity is applied to the profligate peripheries. The Canadians are in a difficult situation as the growth in household debt is growing because of continued low rates and this is causing angst with economic policy makers. Finance Minister Flaherty noted that the Canadian government may have to find other ways to halt the increase in household borrowing. I am not a fan of Mr. Flaherty but it is nice to see a government actually thinking ahead of the problem and looking for ways to “LEAN AGAINST THE WIND.”

(more…)

Notes From Underground: A Little Austerity Goes a Long Way

December 5, 2011

The new autocratic regime in Italy has agreed to a ramped up AUSTERITY BUDGET in which an extra 30 BILLION EUROS will have to be found and then cut from the public arena. Being that Mario Monti was the Eurocrats’ choice to head the Italian government, it seems that PM MONTI is only concerned about meeting the desires of the powers that insisted on his taking the reins of governance. ITALIAN BOND FUTURES staged a very impressive rally as the BTP (10-year note) dropped 71 basis points to close under 6%. Also, the 2/10 year curve in Italy also steepened to +52 basis points from Friday’s close of +38 points. Spain and the other PERIPHERALS also performed well and the FRENCH/GERMAN 10-year differential closed at a mere 92 basis points. As the BTP futures rallied 500+ points, the EURO actually underperformed and by the close the EURO currency was basically unchanged .

(more…)

Notes From Underground: The Reign of Terror is Over as Maximilien Robespierre TRICHET is Slain

November 3, 2011

Today the new President of the ECB, Mario Draghi, established himself as a true leader and moved to undo the damage of the über arrogant Jean Claude Trichet. The two rate increases in the last six months by the European bank were an overshoot of mammoth proportions as the peripherals were in the midst of a severe credit crisis and moving toward austerity budgets. Spain, which maybe in the worst condition of all–21.5% unemployment and a deflating housing market–was not in need of a EURIBOR increase as its mortgage rates float in reference to the bank rate. If Trichet did not understand the depths of the credit crisis then he should have never been the ECB president. It was always reported that the ECB decisions were unanimous, but today’s move by Draghi indicates that Mr. Trichet rode roughshod over the bank’s policy making for it was reported that it was a 25 basis point decision by unanimous consent.

(more…)