Posts Tagged ‘Bank of England’

Notes From Underground: Euthanize the Rentiers

December 22, 2019

As we head into the global macro uncertainty of 2020, equity markets continue to elevate due to central bank liquidity additions. One year ago, U.S. equities suffered large losses, which some attributed to the FED firing its DOUBLE SHOTGUN of interest rate increases with QUANTITATIVE TIGHTENING (Druckenmiller/Boockvar).


Notes From Underground: A Hard Brexit Is Going To Fall?

February 10, 2019

The economic fallout from a “hard” Brexit has been debated in the media for the last few months. When I say “hard Brexit,” I mean that the U.K. leaves the European Union without any deal about trade rules, movement of people or any other binding treaty rules concerning the contemporary EU/U.K. relationship. I have refrained from forecasting outcomes because they are beyond the scope of economic analysis since it requires using models built of questionable assumptions. The British have a long history of economic intercourse intertwined with the lines of commerce from its empire.


Notes From Underground: The Bank of England Reveals Its Decision

September 13, 2017

Thursday, the Bank of England will reveal its most recent interest rate decision. The consensus is for the BOE to leave its overnight interest rate at 0.25%. There is interest in this meeting because the British inflation data has risen and is now above Governor Mark Carney’s desired target. The most recent inflation data released on Tuesday sent GILT yields higher and put a strong bid to the British pound, pushing it to levels against the U.S. dollar unseen since the BREXIT vote. The EURO even lost ground to the British currency as the market NOW ASSUMES that the BOE will have to move to raise rates in response to rising price pressures.


Notes From Underground: The FED Is on the Horns Of a Bullish Dilemma

September 17, 2013

If the FED deems the market to be healthier than conventional wisdom it will TAPER to the high-end of market expectations–$20 billion and probably in Treasuries, not MBS as of now. A supposition must be made: If the FED were to do nothing, would the stock market first rally and then break as investors fear that the FED is afraid of a weaker economy in the months ahead? The FED therefore has to TAPER so as not upset the positive spin that has helped the stock market and other assets rally. Because the FED HAS TO TAPER the emphasis will be on academia’s newest catch phrase: FORWARD GUIDANCE. This phrase has been all the rage in the ECB, Bank of England and the BOJ press conferences. Its main thrust is that the central bank can DIRECT market behavior by talking the global economy into a glide path of growth by promising the continued supply of easy money and low interest rates.


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:


Notes From Underground: The FED Feeds the Liquidity Machine

June 20, 2012

In the very anticipated FOMC release, the FED announced that the Operation Twist would be extended from the June expiration until the end of the year. No surprise as Bernanke seemed to believe  that the FED had to do something about the lethargic growth in the economy. Listening to the press conference held after the FOMC release, it seems that Ben Bernanke is the most troubled man in America. All of the FED‘s actions during the last two years have failed to generate the robust growth that TEXTBOOK MODELS HAVE PREDICTED. Europe continues to be the main theme as to why the GLOBAL ECONOMY IS FAILING TO GAIN ANY REAL TRACTION. Europe continues to plague the world as capital investment languishes in fear of European debt problems causing a massive new round of deleveraging.


Notes From Underground: From the Eve Of Destruction to Days of Exhaustion

August 11, 2011

Yesterday the screen watching and the trading became so exhaustive that my eyes glazed over and all of the quote boxes began melting together as if Salvador Dali was painting what I was analyzing and trading. Trading fatigue has definitely set in as the world moves from crisis to crisis and back again. The amount of news that gathers on my screen every hour reminds me of being back in graduate school, except that the tension now and the speed at which it arises overwhelms the mind. Not complaining as this is the way I have chosen to make my living.


Notes From Underground: Spanish MISSTEPS lead to MOODY’s downgrade

March 11, 2011

The ratings agencies are awakening to the idea that there are major problems in the European sovereign debt markets. Moody’s downgrade is insignificant as Spain still holds a comfortable investment grade, Aa2, so from a financial viewpoint the demerit is a mere mark on its transcript. Rather than affecting Spain, the move by Moody’s raises the question: where have you been?


Notes From Underground: A new foreign exchange: Axel Weber to U of C and Bernanke to Cologne

March 8, 2011

OK, some of it is reality. Axel Weber announced today that he will be teaching at the mecca of monetarism as he heads to the hallowed halls of the University of Chicago. If only Bernanke would head to the Bundesbank, the financial world would have a respite from the bubble blowers that have resided at the helm of the FED. The ECB‘s loss will be the U of C’s gain. As usual, Herr Weber is not going quietly as he was opining how the ECB would raise rates by 75 basis points before the year has ended. The French and Sarkozy are breathing easier as the hard-money German has been sent across the pond to resharpen his “TALONS.”


Notes From Underground: History’s Timeline

December 9, 2009

In a famous exchange between Chou En Lai and Henry Kissinger, the U.S. Secretary of State asked Chou what he thought of the French Revolution. Being 1972, Chou answered it was too early to tell.

The reason we bring this up is as the Greek tragedy unfolds, it will take a German-led bailout to keep the Greek government from defaulting. Today, the German/Greek 10-year-note spread widened to 245  basis points and the German/Irish 10-year-note spread widened out 20 basis points to 200 basis points. Being that the European Union has no statue for a bailout, it will take a massive amount of transfers to show up the Greek economy, let alone the rest of the PIGS. Several pundits have imagined that the Greeks will cut public sector wages to get their debt situation under control,but they seem to forget that this is a democratically elected socialist government. The chances of squeezing the unions has as much chance as going a day without seeing Obama making a speech on television. From a trading perspective, the only way to play in this arena is to use the bund futures and the recently re-listed Italian bond futures, both at the Eurex and denominated in EUROs. Check your system provider for the appropriate symbols–and no this is not a paid advertisement but a public service message. The question facing Europe is what political price the Germans will exact for any aid they may provide. So maybe it is too soon to determine who in fact was victorious in World War II.

The calendar is heavy tomorrow with three central bank meetings. The Kiwi bank has already announced and they stayed at 2.5% but changed some language to suggest that they move earlier to tighten then previously thought. The KIWI went bid against all the crosses but we think that this is an overreaction. The BANK of ENGLAND and The SWISS NATIONAL BANK both meet in the early morning but no change is expected from either. The Brits presented the pre-budget plan and it had to do with raising taxes and few budget cuts. The middle class in Britain will carry the brunt of the hike but some red meat was tossed to the torch and pitchfork crowd by supertaxing bank bonuses more than 25,000 pounds.

We will never defend the pay of bankers but this tax will go a long way toward subverting the role of London as a financial center. French President Nicholas Sarkozy and German Chancellor Angela Merkel are laughing in their Reisling. Europe is a mess and not getting out of this predictament anytime soon, yet the EURO held up fairly well today.

It really makes one wonder where the safe havens are–we know the DOLLAR for lack of any where else but the news from the U.S. today was not helpful. The Obama administration moved to extend TARP until Oct. 3,2010. This cannot be a positive event as this program was meant to be for the insurance of systemic financial solvency. But with the banks rushing to repay TARP funds what can the real purpose be–this is Paulson’s ghost as he jammed this through with little thought and much malice. Remember his three-page missive that demanded there could be no judicial review of Treasury’s actions? Oh,Expediency what has thou wrought! So risk may be declining but where does one go for wealth and capital preservation–the gold/currency crosses seem to be the last bastion of financial rectitude.

Tomorrow morning brings us the jobless claim number–463,000 is the guesstimate and that is followed with the trade number. The trade report was always a centerpiece for the currency world but because markets are dynamic this data has little relevance. If something out of the ordinary is reported, it could have a minor impact but most probably a yawner–just to prepare you negative 36 billion is projected. Tonight the Aussie employment report came out and it was much stronger then estimated putting a bid to the AUSSIE DOLLAR. Also, S&P gave Spain a negative outlook presenting Europe with on more problem–something more to think about.