There are so many things causing angst in the global markets. There was news out of France on Thursday that the government was recalling its envoy to Rome because Italian politicians met with the yellow vest movement. To President Macron I offer this history lesson: In 2011-12 French President Nicolas Sarkozy–with the cooperation of German Chancellor Angela Merkel–crushed the Italian bond market in an effort to remove Prime Minister Berlusconi. The Eurocrats in Brussels parachuted in a preferred bureaucrat, Mario Monti, in an effort to get Italian politicians to halt the fiscal bleeding. The French have a great deal of audacity in complaining about Italian meddling, especially as Salvini/Maio have a legitimate reason: the upcoming European Parliamentary elections.
Posts Tagged ‘Bund’
Notes From Underground: Things Are On the Boil
February 7, 2019Notes From Underground: Trading Strategies For An Automated World
October 10, 2017Yesterday, I sat down with the group TOPSTEP TRADER to discuss ways I prepare to trade. Topstep is a private group that educates/prepares potential traders for a profitable existence. As the fourth quarter has begun, I thought this video would be beneficial as a review for my readers. Reviewing rules and concepts are important, especially as I BELIEVE WE ARE HEADING INTO A PERIOD OF INCREASED VOLATILITY. A rise in market volatility can be a time of great profit but it comes with a major increase in risk. The complacency of the market because of the central banks continued intervention coupled with the risk selling of the risk-parity crowd. I say crowd because it is not just AQR and Bridgewater involved in risk parity but there are many volatility sellers piggy backing on the power of the largest market players. Remember, when George Soros/Druckenmiller broke the Bank of England in September 1992, it wasn’t just Soros but many of the banks servicing Soros were tailcoating the Quantum Fund. But when the elephants leave the drinking hole many denizens of the jungle get crushed (Niederhoffer).
Notes From Underground: German Elections. The Sound of Complacency Shattering?
September 24, 2017I will start tonight’s BLOG with two very good comments from a long time reader and contributor GREEN AB who hails from Germany. Green has always provided great insight and though we don’t always agree I have great respect for his perspective. On Thursday he posted a very prescient forecast about today’s election and Sunday he followed with a post-election thoughts.
Notes From Underground: The Hokey POLLkey
June 14, 2016You 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.
Notes From Underground: He Goes Running For the Shelter of His Mother’s Little Helper
February 28, 2016(Larry Summers had to run to his medicine cabinet to take Prozac (not Diazepam as in the Rolling Stones song) after he read the G-20 communique. The finance ministers and central bank heads meeting in Shanghai failed to come to terms with any of the issues concerning the global economy. There was no PLAZA ACCORD and no deep discussions about the need for massive fiscal stimulus. The tone of the Communique was TEPID at best and views the present state of the global economy as slow but steady. There was certainly NO URGENCY about a rise in the prospects of a global recession. The finance ministers downplayed the recent volatility and slide in global equity markets, suggesting by those domiciled in ivory towers and model-based rat holes that the MARKETS ARE MISTAKEN AND THE MODELS ARE CORRECT. The arguments among the participants was such that there were some issues that seem in direct contradiction of any policy response.
Notes From Underground: Yellen, Draghi and the Markets … Playing Those Mind Games Together
May 6, 2015In the midst of a dramatic seven-day bond selloff, extending from Tokyo to Frankfurt, London, New York and all bond markets in between, Chair Yellen chose today to add verbal fire to stoke the bond rout. In the early hours GLOBAL BONDS had tried to stage a rally from the previous days of endless selling. (It seems that the ECB was in buying European peripheral bonds from Spain and Italy.) Once Yellen began her remarks the BOND onslaught began anew. The key paragraph in the Yellen interview: “We need to be attentive–and are–to the possibility that when the Fed decides it is time to begin raising rates these term premiums could move up and we could see a SHARP JUMP IN LONG-TERM RATES” (emphasis mine). Upon the utterance of those six words the markets took note and the selling of all bonds in Europe and the U.S. accelerated.
Notes From Underground: A Slow Weekend News Cycle
May 18, 2014In a weekend of very little financial news the biggest story becomes the announcement by Deutsche Bank that its plans to raise 8 BILLION EUROS ($11 BILLION) in new capital to shore up its balance sheet. (Deutsche Bank closed near its 50-week on Friday at $42.17.) I have had many calls and e-mails about the impact from this news. My response to all has been to wait to see how Deutsche Bank trades tomorrow to see if this is a buy the fact opportunity. It is no secret that DB is the most highly leveraged of all the major global banks so a capital infusion is not a surprise event as Europe undergoes ECB-mandated stress tests. The bottom line is that the DB news will have little impact upon the EURO currency or the BUND market. If Deutsche Bank had failed the upcoming stress tests that would’ve been a major news event. Eight billion euros to shore up its balance sheet is a mere ounce of prevention.
Notes From Underground: Schaeuble Proves Why 2+2=5
July 25, 2012In the realm of loving and promoting the irrational over the rational expectations of the MODEL BUILDERS, there is no better poster child than German Finance Minister Wolfgang Schaeuble. As I warned Mario Draghi to unpack his speedo, today BLOOMBERG NEWS ran an article, “SCHAEUBLE DECLARES MARKETS WRONG AS EUROPE COASTS INTO VACATION.” This is the German finance minister who has the audacity to proclaim that the markets are wrong and head off for vacation. It seems that the German hierarchy is convinced that all is well because the BUND market is healthy. Is Schaeuble so naive as to think that strong BUNDS reflect the health of Europe? Don’t German policymakers understand that the BUNDS and SCHATZ are at absurdly low levels because many other Europeans are “packing their suitcases” with EUROS so as to transfer their wealth to the perceived safety of the German financial system and thus for its haven status? It is astounding that the EUROCRATS believe that the markets will wait for the decision makers to return before any further market action will take place.
Notes From Underground: S&P, The Insider’s Trading Edge
January 16, 2012It is startling to think that the S&P downgrades could have any sort of effect on the markets. The sovereign debt markets have been telling those who are attentive that not all countries in the European Union are equal. Several of the GIIPS have had interest rate yields far above those of the German benchmark for almost two years. Even the French 10-year note has widened to 150 BASIS POINTS over the German 10-year BUND during the last six months. DO WE REALLY NEED S&P OR OTHER RATING AGENCIES TO CERTIFY WHAT THE MARKETS HAVE BEEN SAYING?
Notes From Underground: In the Battle of the European Balance Sheet Bulges, Cameron Says “NUTS”
December 11, 2011Almost 67 years ago, U.S. General McAuliffe told the German command that the U.S. forces at Bastogne would not surrender and actually said it in a one-word response: NUTS. In a parallel response to German/Franco demands that all European nations surrender their sovereignty by succumbing to a “FISCAL COMPACT”, British Prime Minister David Cameron basically said the same as the U.K. moved to cast a veto vote on the proposals that resulted from the European Summit.