Posts Tagged ‘Christine Lagarde’

Notes From Underground: And So It Goes

March 26, 2020

Everything we’ve discussed at NOTES FROM UNDERGROUND has come to fruition in a very real time. This is not predicting year-end levels or quarter-end levels but very critical calls in real time. My inbox has been inundated with pieces from analysts well after the fact. Last Thursday. I warned about the need to weaken the DOLLAR. Any reader long dollars is desirous of losing money.

(more…)

Notes From Underground: Three Cheers for Christine Lagarde

March 19, 2020

While the rate cutters were busy dumping on ECB President Christine Lagarde for not cutting and only announcing an increase in bond purchases I opined that Lagarde was getting more by doing less. Lagarde did not go down the Draghi route and lock up with Jens Weidmann and the Fiscal Austerians in the Hanseatic League. The ECB president played for a bigger prize and tonight she delivered with an announced 750 billion euro bond buying program of both public and private issues.

(more…)

Notes From Underground: We Walked Off to Look For America

March 15, 2020

These are challenging times is the understatement of the decade.

The fear of pandemic has arrived and is causing great distress for families and the nation at large as we are tending to the sick and those forced into a change of everyday patterns. Since the beginning of February, we at NOTES FROM UNDERGROUND have been discussing the onset of the DEMAND SHOCK which would cause problems in the financial system because of the massive build-up of debt on a global scale. If businesses cannot operate as people hunker down in an effort to slow the spread of the virus then it goes without saying that DEMAND would suffer. If demand suffers on a global basis borrowers without cash reserves will struggle to sustain their businesses.

(more…)

Notes From Underground: It’s Time For the Owl

March 8, 2020

Well things are on the bubble as the Russians and Saudis had a “falling out” as lovers often because the OPEC talks resulted in an ostensible all-out war to break oil prices. The consensus loser will be the U.S. oil patch as the FRACKERS are carrying huge amounts of debt, which will not be paid while prices sharply decline.

There will be talks about a credit crisis as banks and other oil creditors will have to absorb losses and probably restrict lending to other borrowers. Those with private equity investments in the Bakken, Permian and others will be taking inventory on how battered their portfolios will be. The wily Putin will finally have his way as the sanctimonious Americans will have to rescind the ill-devised/ill-advised SANCTIONS that have had little impact.

(more…)

Notes From Underground:

February 11, 2020

In the 1960 classic film The Time Machine a traveler visits a future civilization in which a group of people is enslaved as a source of food. The food source are zombie-like and kept in comfortable captivity in an effort to control their protein source. After violence is done a siren sounds. When the time traveler questions the meaning of the siren the answer is it is ALL CLEAR but we never know what is all clear. Well, it seems the Coronavirus has been given the all clear signal based on the value of equity markets.

(more…)

Notes From Underground: Ho Hum, Time For Another Unemployment Number

February 6, 2020

It has been an interesting first month of trading as markets have gone from searching for inflation fueled by a rise in commodity prices and a weakening dollar, especially in regards to emerging market currencies. The commodity rally coupled with an upward thrust in emerging markets ran into the headwind of the spread of the Coronavirus from Wuhan, China to several other nations. The whiff of inflation was subsumed by the onset of fears of global deflation as investors continue to be concerned about China economic activity grinding to a halt as quarantines are the prescribed remedy for preventing a genuine pandemic.

(more…)

Notes From Underground: The Market Has Much to Consider

December 16, 2019

Last week was filled with the culmination of many issues as we had the FEDECB, trade agreement, UK election, impeachment hearings, and even an attempt at resolving the USMCA trade deal with Mexico and Canada.

(more…)

Notes From Underground: “It’s Good News Week”

December 10, 2019

What an appropriate song for the band Hedgehoppers Anonymous. This week is loaded with potential market-moving outcomes. On Wednesday we have the final FOMC statement of the year followed by Chairman Jerome Powell’s press conference. The CONSENSUS is for no change in the current fed funds target range of 1.5% to 1.75%. The real key will hopefully be Powell’s press conference as market participants are hoping for any sort of dialogue about the Fed’s role in the repo market.

(more…)

Notes From Underground: Same Old Song With a Different Beat

December 1, 2019

There are few questions about the one-dimensional nature of the driving force of markets around the world. Cheap money sustains equity markets as the vast amounts of central bank liquidity continues to provide support for low-cost borrowing and a lack of alternatives for investors. A subset of the cheap cost of capital has been the “hoped” for resolution to the China/U.S. trade conflict which without question has disrupted global trade. South Korea’s recent economic performance is a reflection of the impact suffered by key components of the global supply chain driven export-oriented economy.

(more…)

Notes From Underground: So Long, Mario

October 24, 2019

A quick summation of ECB President Mario Draghi’s final press conference:

1. The Draghi Era is ending and I have to say that this was one of his best press conferences. Draghi exited, stage left, not PURSUED BY A BEAR and he did it with grace and aplomb. He took a BOW for his self-imposed mandate of PRESERVING THE EURO BY DOING WHATEVER IT TAKES. The desire to keep on keeping on by sustaining QE, TLTRO, MTO and most significantly, NEGATIVE INTEREST RATES will be a testament to the judges at the COUNTERFACTUAL HALL OF FAME. How much QE was enough? What was the political damage that resulted from the bond buying program? This will be an issue that the cheerleaders of lower for longer will never entertain.

2. Again, Draghi stressed the need for greater synthesis of the EU in monetary, fiscal and political harmonization. He was laying the groundwork for Christine Lagarde and what I have maintained is Lagarde’s dual mandate of the creation of the true EUROBOND with a massive EUROWIDE fiscal stimulus program. Drahi urged those with budget room should ramp up spending while the deficit stressed OUGHT to get their fiscal houses in order. This is nonsense for once Germany capitulates to an infrastructure program fiscal stimulus will bloom all around the European Union. As an aside, the Financial Times had a story about how that the progenitor of the SCHWARZE NULL came out in favor of German fiscal stimulus in an effort to replace worn infrastructure. Spend while money is cheap.

3. Draghi still made a statement that the limits on each country’s bond purchases are self-imposed by the ECB so there may be room for the central bank to play with the amount of bonds purchased on any given day. The relevance of the CAPITAL KEY is in the stock of BONDS, not the FLOWS. This is important when trading any individual sovereign under duress. (I think Draghi is on thin ice here but something he failed to note as self-imposed by the ECB is the 2% inflation target.) Lagarde’s task is not to build the balance sheet. It is fiscal. Maybe President Lagarde could dispense with the new round of QE if Germany would ramp up fiscal stimulus.This seems to play to Jens Weidmann.

4. In response to a question about any mistakes the ECB made under the Draghi regime, the outgoing president said there was an overstretched commercial property market in Europe but felt that was a result of foreign investors seeking to be involved in EURO investments. Mario doesn’t see any BUBBLES. He did suggest the  SHADOW BANKING SECTOR was a blindspot because of the lack of transparency. But Draghi said the corporate bonds and leverage markets were not as significant in Europe as in the U.S. because of the structure of capital markets so he was not overly concerned. Enter Christine Lagarde and we will prepare for the change of leadership.