Posts Tagged ‘BOJ’

Notes From Underground: An Answer to a Rohr and Chicken

November 7, 2017

As I noted on Sunday night we FINALLY closed below the 73 basis point level that has held for almost two years after several attempts to flatten through that support. The FED is in a difficult situation. Similar to the central bank openly stating that it doesn’t understand what is going on with the Phillips curve and lack of wage inflation, it doesn’t want to admit that the FLATTENING curve is due to the ECB’s ongoing asset purchases that is compressing yields. Some MOOKS maintain that it is a global savings glut but when you have printing how can you discern what constitutes savings and not just central bank intervention?

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Notes From Underground: A Tale of Three Central Banks

November 1, 2017

The BOJ released its policy statement on Tuesday and it was as expected. The central bank sustained its yield curve control (YCC) policy as the BOJ seeks to ensure that inflation reaches its 2% target. The 8-1 vote by the Governing Committee was a bit dovish as one of the two new members, Goushi Kataoka, voted to extend the purchases further out the curve to prevent 15-year yields from rising. The bank will also have REITS and ETFS to buy if JGB supply runs short. Bottom line is that the NIKKEI made new 27-year highs and the dollar/YEN rallied as the currency gave up some of its recent gains against the U.S. and euro currencies.

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Notes From Underground: Who Gets Eaten and Who Get’s to Eat (Sweeney Todd)

October 15, 2017

As Stephen Sondheim wrote in the dark musical Sweeney Todd, “What’s the sound in the world out there. It’s man devouring man. The history of the world, my sweet, is who gets eaten and who gets to eat.”

I open with this thought in regards to a wonderful op-ed piece in the Barron’s over the weekend by John Curran titled, “The Coming Renaissance of Macro Investing.” Curran has the pedigree of writing this piece as he served his time at one of the greatest global macro funds, Caxton Partners. There are no greater thinker/traders than Stan Druckenmiller or Bruce Kovner. When it came to understanding the role of foreign currencies in creating investment opportunities Kovner is the wisest I have ever had the pressure to read. The last 10 years have been difficult for the global macro discretionary crowd but as John Curran suggests the winds of change are blowing. This is also a theme I have been discussing of late. The big difference in my opinion is that short-term trades will morph into momentum investments.

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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: Arthur’s Song, Lost Between the Moon and New York City

August 28, 2017

A long-time reader of Notes From Underground posted a comment to a previous post promoting long GOLD/short YEN. When I asked him about this trade he noted the onset of currency wars. There is no question, as I have regularly shown that many foreign central banks’ currency’s strength is a reason to maintain very low interest rates and if in place QE programs. I certainly agree with Arthur about this narrative. But from a relative value perspective the Japanese yen has already benefited from its weakening versus the EURO, Aussie, Kiwi, Canada and Swiss franc.

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Notes From Underground: Can Jackson Hole Foster a “Dynamic Global Economy”?

August 22, 2017

This is the topic of discussion for this week’s meeting in Jackson Hole. For the Federal Reserve system, this is a statement, but I raise it as a question. A long-held theme of this BLOG has been that what the Federal Reserve, ECB, BOJ, BOE and other central banks promote as certainty supported by mathematical models I maintain IS NOT ROCKET SCIENCE.

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Notes From Underground: The ECB, FOMC Minutes and Dudley’s Speech

August 17, 2017

On Wednesday, I joined Rick Santelli for a chat, which was centered on the ECB and other central banks’ impact on global equity and debt markets. Just before the appearance, there appeared a Reuters story that said President Draghi would not speak about the ECB’s potential Quantitative Tightening, which my readers know supported what I have been steadfast in my conjecturing about possible ECB actions. IN A NOD TO A READER (hello, AGH), while it appears that all central banks pursue a common policy, THERE’S NO MONETARY EQUIVALENCE. Yes, they all purport to raise inflation the political variables each push for different outcomes.

(Click on the image to watch me and Rick discuss the central banks.)

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Notes From Underground: Recapping a Week of Notes

August 13, 2017

Lately, the primary themes in the media revolve around the bombastic rhetoric from the leaders of the U.S. and North Korea. Again, the key to a genuine possibility of warfare will be the beginning of the evacuations of Americans from Seoul, South Korea. The more important elements for global financial markets seems to be directed at ECB President Mario Draghi’s upcoming Jackson Hole speech. In Thursday’s Financial Times, Mohamed El-Erian asked the paramount question concerning the shrinking of central bank balance sheets: “… how many systemically important central banks can effectuate the policy pivot without undermining the over-all liquidity support that has been critical for decoupling asset prices from fundamentals.”

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Notes From Underground: The BOJ and the ECB Provide the Recipe For … ?????

July 19, 2017

Before I preview the BOJ and ECB I want to expound on the piece that I mentioned in the previous post written by Bloomberg reporter Alexandra Harris, who cites the thoughts of JPMorgan strategists Alex Roever and Kim Harano. The piece lists four arguments for bringing forward the FOMC‘s announcement to shrink its balance sheet:

  1. Economic conditions are supportive of balance sheet run-off;
  2. The vast amount of discussion has already prepared the market and September won’t make it any clearer;
  3. Starting NOW buys a “few extra months” of the measurement of the market impact of normalization;
  4. Finally,September is an “awkward time” because of the murky outlook for addressing the debt limit before funding runs out in October.

I agree with all these arguments and would HOPE the FED announces its intention to start shrinking the balance sheet at next week’s meeting, press conference be damned.

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Notes From Underground: After the FOMC, Do Payrolls Mean Anything?

February 2, 2017

This week has presented us with THREE central bank meetings. The results of the BOJ, FED and BOE meetings were no change to the current policies. So, with inflation on the rise and equity markets close to all-time highs for the U.S. and multi-year highs for Europe, the overseers of credit feel no need to tighten monetary conditions. Chair Yellen and her fellow decision makers are evidently comfortable that the wheels of legislation grind slowly and will wait until there is some evidence of fiscal stimulus and tax reform before applying the brakes to a possibly overstimulated economy. The BOJ was cautious ahead of Prime Minister Abe’s meeting with President Trump. To understand the domestic politics of Abe’s possible bilateral deal with the U.S. I am linking to an article from the Asian edition of the Wall Street Journal by Tobias Harris (my progeny).

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