Posts Tagged ‘Brexit’

Notes From Underground: Things That Need To Be Watched

July 14, 2016

As I ponder things in the 118 degree heat, it is time for some reflection and perspective:

a. The Bank of England performed beautifully today and took a breath before cutting rates further and/or increasing the BOE’s balance sheet. Now that Prime Minister MAY‘s cabinet is devoid of the idiot George Osborne, it behooved BOE Governor Carney to wait and see if fiscal policy would be the stimulative tool of choice and preserve the monetary policy for future use. I had advised my employers that Carney would be reticent to act because he is a cautious man and his recent plunge into the political realm in cahoots with George Osborne had sullied his reputation. It seems that Carney wants to remove himself from center stage and allow the new cabinet to have a say in just how to provide any stimulus in response to the dire forecasts from the BREXIT outcome.

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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: It’s So Simple … NOW YOU CAN’T LEAVE

July 5, 2016

I am posting today’s story on the Santelli Exchange I taped today. Rick and I were back on the most important topic facing the world: THE ECB’s ROLE IN CREATING A SITUATION THAT MAKES GERMANY LIABLE FOR THE DEBT OF THE ENTIRE EUROPEAN UNION. The world is still abuzz about the BREXIT referendum and its implications for the U.K.. There’s also chatter about what it might mean for other EU nations contemplating STAYING OR GOING in terms of subjecting their citizens to the capriciousness of Eurocratic regulation. The question for me (and will continue to be): WHO GUARANTEES THE ECB, AND, OF COURSE, THE COROLLARY QUESTION, SHOULD ALL SOVEREIGN DEBT BE A ZERO WEIGHTED RISK ASSET CLASS?

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Notes From Underground (Repost): A Celebration to the End of Q2, “A Single Spark To Light a Prairie Fire” (January 11)

June 30, 2016

The world is sitting on piles of tinder. Two of the potential dangers have passed in the last seven days. The Brexit vote has taken place and the Spanish elections have finished without any new disruption to the European political scene. In fact, Spain was interesting as Spanish voters seemed to be afraid of a Brexit-type market reaction and moved more support to the center-right as a vote for the known.

BUT TODAY THE ECB HAS POTENTIALLY IGNITED THE FLAMES OF GERMAN ANGER AS DRAGHI MOVED FOR THE QE PROGRAM TO BUY LOWER GRADE DEBT. THEY HAVE RUN OUT OF HIGH QUALITY BONDS TO BUY. This will not sit well with the AfD supporters in Deutschland. There were massive moves in the European sovereign spreads after the news release and more will certainly follow as the program becomes clearer.

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Notes From Underground: Three Cheers For the Fed (They Kept Out of the Fray)

June 29, 2016

It has become standard operating procedure for the FED to enter the market in an effort to minimize the impact of any low probability event with market disrupting outcomes.The BREXIT vote surprised the markets but the FED allowed investors to absorb the financial pain and stayed in the watchtower.

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Notes From Underground: You Are So Jejune (Love and Death, Woody Allen)

June 27, 2016

Let’s clear about the mess of Brexit. First, the media is awash with so many opinions from those who had no idea that a vote for Brexit was in the realm of possible outcomes. Yet there is no lack of insights into the end of Britain’s role in the EU. Never have so many people been spewing the hogwash of hysteria into the portfolios of public investors. So in a very typical French philosophical format, let’s DECONSTRUCT last week’s outcomes:

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Notes From Underground (REPOST): If I was A Rich Man, They Think You Really Know

June 26, 2016

While we’re waiting for the outcome of the Spanish election, I am setting the stage for a larger piece on the market reaction to a high frequency political event. There is a continuing rebuff to the global elites that only reside in their own echo chamber, much of it promoted by the established media. It’s amazing how the policy makers want to believe that the people cannot see behind the curtain. BREXIT was first and foremost a Dorothy/Wizard of Oz result.

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Notes From Underground: The Answer to Brexit is 23 Skidoo

June 21, 2016

In the early days of the 20th century there was a colloquialism: 23 Skidoo. Wikipedia’s definition: A slang American term popularized during the early parts of the last century. It generally refers to leaving quickly, being forced to leave quickly by someone else, or taking advantage of a propitious opportunity to leave, that is, “getting out while the getting’s good.” If I was a British voter I would adhere to the wonderful thought of the Spectator article published last week (h/t OB).

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Notes From Underground: We are IN the Marcusian ONE DIMENSIONAL World

June 20, 2016

It takes a BOURGEOIS APOLOGIST to point out the limitations of our thought processes. The current financial world is seen through the prism of BREXIT. Every nuance from the pollsters result in magnified market reactions. Last week’s political assassination of a sitting member of Parliament brought the political establishment to halt campaigning and caused a national contemplation as to where England was headed. The look into the British psyche, according to the “new” polls, has brought the voters to find favor in the status quo–exactly what Geoffrey Gundlach had predicted several weeks ago (SEE NOTES POST, IF I WAS A RICH MAN). Yra’s first law: Money is fascist and always seeks the highest return in a hoped for stable regime. Political assassination leans the ship of state toward the LEEWARD side, but there are three days left and many new polls to provide volatility to the markets. But I caution there are other events in the world that are of more than of a passing interest.

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Notes From Underground: The Hokey POLLkey

June 14, 2016

You put your left poll in, you take your left poll out, you put your right poll in and you shake it all about … and that is how you get the hokey POLLKEY. The markets are moved by the cacophony of polls, both private and public. Couple that with the ability to broadcast any and all results via social media in an immediate fashion, the markets get high frequency volatility. This is why I keep advising to trade with FERVOR, invest with FEAR. Brexit is keeping everyone on edge but the most confusing variable is the BETTING LINES at the London bookmakers. Always deemed the smart money, the odds are favoring a REMAIN vote while the markets are pricing in a higher probability of BREXIT. It’s a great arbitrage opportunity. Global equity markets are certainly fearful as investors are leery of being caught in the downdraft of a BREXIT vote.

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