The tagline of this blog has always been “where 2+2=5 is also a wonderful thing.” If you believe that the world is balanced and rational in all things financial then this BLOG is not for you. Unlike Fyodor Dostoyevsky’s character, I am not a sick man, nor a spiteful man. I use my deep knowledge of political and economic history to analyze financial markets from myriad angles. This allows for a belief that context is supreme. In this context I posit that President Trump’s decision Monday to name China a “currency manipulator” is a way out for the U.S. from the dissension that has arisen within Trump’s team of advisers as reported over the weekend. If Bob Lighthizer was opposed then indeed President Trump is in a more difficult position than previously thought.
Posts Tagged ‘Canada’
Notes From Underground: Mexico Tariffs Suffer From the Three Ills
June 2, 2019And what might those be, you ask? Ill-conceived. Ill-timed. Ill-advised.
Notes From Underground: Quick Note on Friday’s Jobs Report
April 4, 2019Notes From Underground: Feeding the Ducks When They Quack
January 9, 2018Since the unemployment data, I have tried to write an appropriate blog but “all my words came back to me in shades of mediocrity” so I refrained from adding to the stream of vapid commentary that fills the Internet. But let’s proceed as the markets provided movement based on some sense of heightened inflation expectations. There is certainly money flowing into commodity based investments as OIL, COPPER, GOLD, and a litany of other natural resources have become a repository for money concerned with investments other than crypto currencies. The U.S. employment data was well within the range of expectations. The important average hourly earnings and the average work week were close to the consensus forecasts. The Canadian data beat estimates for the second consecutive month. The consensus was for an unemployment rate of 6% and addition of 2,000 jobs. The actual data was 5.7% unemployed and almost 80,000 new jobs, with two-thirds being part-time.
Notes From Underground: This Is a Vinny Barbarino Market (Or, I Am So Confused)
April 25, 2017The global reaction to the first round of the French presidential election was not confusing. Capital was sitting on the sidelines as the polls reflected a possibility of a second round Le Pen/Melenchon faceoff, which would have been devastating for global investors because fear of an EU break-up would have led to a massive repricing of risk premia. The avoidance of such an outcome led to a rush of capital into European markets, which provided support to Asia and the U.S. The German/French 10-year spread reacted as expected. The yield differential narrowed by a significant 20 basis points. The BUND yields rose against all European sovereign debt as Berlin’s haven status was rendered null and void for at least another two weeks. The GOLD and YEN also performed as expected as money rushed to purchase a risk on profile in a global zero interest environment. The EURO rallied by 2% as global capital flows into European stocks forced previous short euro positions to the sidelines. There’s nothing confusing about any of these outcomes. But let me throw some confusion onto some of the other geopolitical events making the front pages:
Notes From Underground: Oh Canada…
January 19, 2016(Will the Collapse In Energy Prices Grease a Cut In Rates Or the Introduction of QE?)
Just some tidying up and refocus on things besides China, Iran and the debt of ingratitude to the fracking revolution. Tomorrow at 9:00 a.m. CST the Bank of Canada announces its overnight interest rate. The bank rate in Canada is currently 0.5% and consensus is calling for a rate cut of 25 basis points to 0.25%. Other market participants are suggesting that BOC Governor Poloz will announce a large-scale asset purchase program (better known as QE). I doubt the BOC will change policy at this time even as the Canadian economy suffers from the severe drop in fossil fuel prices and other commodities.
As Poloz articulated in a speech in Ottawa at a BIS BREAKFAST SERIES January 7 (regarding monetary policy divergence): “It is very important that we understand the reasons for these policy divergences. On one level, they simply reflect actions taken by central banks tailored to their own economies. But the underlying forces acting on the global economy are powerful, slow-moving and affect various economies differently. This means that the theme of divergence – both financial and economic – is likely to remain with us for some time to come.”
The Canadian real-estate market has run hot for too long and even though Canadian banks are not of the sub-prime model lenders, Mr. Poloz will not wish to just continue to inflate property values. It would behoove the BOC Governor to wait to see what the newly elected Prime Minister Trudeau puts on offer from a fiscal stimulus perspective before racing down the monetary stimulus track that many other central banks have followed with no proven success (except for counter-factual arguments).
Notes From Underground: Indulge Me During Times of Quiet Markets
October 20, 2015In yesterday’s Financial Times, one of the giants of the economics profession, Luigi Zingales, wrote an op-ed, “A Strong Free Press Is Our Best Defence Against Crony Capitalism.” Zingales takes the financial media to task for failing to be a watchdog against the corruption that exists in global capital markets.He poignantly states:”While nowadays almost all the world professes itself to be capitalist,not everybody experiences the same type of capitalism.In fact,the form of capitalism prevailing in most of the world is very distant from the ideal competitive and meritocratic system we economists theorise in our analyses and most of us aspire to. It is a corrupt form, in which incumbents and special-interest groups shape the rules of the game to their advantage, at the expense of everybody else: it is crony capitalism.”
Notes From Underground: The Stock Market Says, “I Think Icahn, I Think Icahn”
October 15, 2015One of the great contemporary financiers warned on September 29 that the stock market was “extremely overheated ” and was being “supported by an “unsustainable earnings mirage.” Well, since that video release from Carl Icahn, the SPOOS have rallied more than 7 percent, defying the wisdom of Ichan, as well as many other highly regarded investors. Today’s equity rally was in the face of what has been a continuing onslaught of negative economic releases. The market has rallied off the August 21-24 lows but has paused when confronted with weak data, such as September’s unemployment report. But today the weak economic releases failed to dent the powerful rally: a weak Empire State, a weaker-than-expected Philly Fed Manufacturing report.
Notes From Underground: Dear Mr. Fantasy, Or, a Tribute to Mario Draghi
February 6, 2014The ECB and The Bank of England delivered their interest rate announcements, and, as I expected on Tuesday, the result was absolutely no change to current policy. The FED had paved the way for maintaining the present course and the Europeans were certainly not willing to risk upsetting the markets. What surprised me was the fact that the EURO CURRENCY rallied strongly as President Draghi presided over a press conference in which he put on an act of stonewalling and obfuscation that made Alan Greenspan look like a freshman debater. Wow, Mr. Draghi can evade the best of questions and believe me I listened to the entire press conference and the questions were of a very high caliber. Mr. Draghi did invoke a new strategy and that was lengthening his answers so no one could remember what he had really said in the beginning. The bottom line is this:
Note From Underground: Mr. Bernanke Meets the House Budgeteers
February 2, 2012Sound bites from the left. Sound bites to the right; here I am, stuck in the middle with you (STEALERS WHEEL). The House Budget Committee was in full political regalia as posturing for the home folks and November’s election was in full force. Most of the questions are redundant or ridiculous and in some cases, both. An exception was Committee Chairman Paul Ryan, who asked Mr.Bernanke if the FED‘s policies had corrupted the BOND markets that they stopped sending a credible signal. It has been a consistent theme of NOTES that the BOND market is broken as an indicator of inflation expectations because the FED‘s large scale asset program has created an artificial support to LONG-TERM BOND PRICES.