Since I’m 62 years old, my references of social icons goes back to a more simple time. Alfred E. Neuman of Mad Magazine fame would ask, “What, Me Worry?” The other side of the equation would be Arthur Fonzarelli from the television show, “Happy Days.” who would stutter before ever admitting that he was WRONG. The world’s central banks are a reflection of these two icons. It seems that Yellen, Draghi and Kuroda all suffer from both views. They have nothing to worry about and they certainly cannot admit to being wrong. The central banks are under attack from investors and traders for pursuing quantitative easing and negative yields even though the efficacy of such programs is certainly in doubt.
Posts Tagged ‘EUR/CHF’
The four living Fed chairmen have gathered in New York for a panel discussion for International House. News Flash: The discussion was disappointing as the moderator had too much censoring power at his discretion about who would answer the audience questions. Paul Volcker had a great response regarding concerns about the Chinese yuan replacing the dollar as the world’s key reserve currency. Volcker said if the U.S. would qualitatively deal with its responsibilities it was not a concern but would probably represent the Chinese becoming a real open economy. Also, Greenspan let it be known that the dual mandate is a nice talking point but the reality is that the FED does not make decisions in a vacuum. After Greenspan’s answer Yellen basically agreed. The moderator should have allowed Yellen to answer first since she is the sitting Fed Chair. Allowing Greenspan to answer first diminished Yellen’s response. Overall, the discussion was … meh.
It seems that the FOMC meets in Noah’s Ark (Genesis Chapter 8;Verse 8-12): “Then he sent out the DOVE from him to see whether the waters had subsided from the face of the ground. But the DOVE could not find a resting place for the sole of its foot and it returned to him to the ARK, for water was upon the surface of all the earth …. He waited again another seven days, and again sent out the DOVE from the ARK. The DOVE came back to him in the evening and behold! an olive leaf it had plucked with its bill! And Noah knew that the waters had subsided from upon the earth” (Artscroll Translation).
I will be taking a few days of “unwind” before next Wednesday’s Fed meeting and Chair Yellen press conference. Last Friday, Rick Santelli and I talked about the ECB and I am posting that but the last few Christmas Eves Rick has had me on and we discuss predictions about the coming year. There are no safe predictions from this blogger as I will venture far from shore but always try to put my best thoughts forward.
Six months ago the world woke up to learn that the Syriza Party had been elected in Greece. It was a dream for some and a nightmare for the European ruling elite. Yes, there is a ruling elite that is very similar to what C. Wright Mills wrote about America in the 1950s. This is not conspiratorial but rather a sociological commentary and the ruling elite is not beholden to an electorate but operates with a sense of noblesse oblige. The Brussels eurocrats are in the image of Plato’s Philospher King, only there are too many Kings all believing themselves to be the most capable ruler. For two years I have written about that the European leaders feared REFERENDA more than anything for direct democracy was an affront to the wisdom of the self-anointed elite. The European project was too important to be left to the capricious voters.
I’m taking a two-week hiatus as it is time to contemplate the massive volatility we have experienced during the past three months. The rise in vol was no surprise as the world financial and political landscape has been rife with uncertainty for several years. Central bank actions have lulled financial markets into complacency, though turbulence underlies the surface of calm. In the past three weeks we have experienced the Swiss National Bank removing its EUR/CHF PEG and sending currency markets into a whirl of uncertainty. (Plus, the generation of huge losses on long-held short Swiss franc positions.) More importantly, the SNB decision wreaked havoc on European banks that had financed loans in Swiss francs because of the ultra-low interest rates.
We are in a period of great political uncertainty. The Greek election is a wake-up call for all the established elites and their sycophants who drink high-priced alcohol to celebrate every new IPO and record high made in global equity indices. The recent victory of Syriza is a call to arms by citizens that have grown tired of broken promises and inept leadership. Fringe parties achieving electoral success in a very short period of time is a critical sign of electorates moving away from the establishment as record-high unemployment has continued for several years and the continued pain of austerity has rendered the European middle class a group without hope. The leaders of Syriza have promised the Greek people that they would throw off the burden of massive debt payments while being enslaved to a policy of FISCAL CONTRACTION.
I am reissuing a piece from December 21, 2014 as a reminder of just where the SNB has invested the assets bought by the massive printing of Swiss francs. The Swiss authorities have created a perpetual money machine that “coined” unlimited amounts of francs and exchanged them for other paper assets. The question remains: Who was willing to buy all those francs that the SNB kept selling into the market (and yet the EUR/CHF remained at the 1.20 floor/ceiling)?
We at Notes From Underground have been pondering the global macro landscape and waiting for the inevitable ECB meeting January 22, and, of course, the Greek elections on Sunday, January 25. While waiting for some sensibility from the EU, the SNB abruptly ended its ridiculous intervention policy, which I have been criticizing for the past 12 months. My readers are well aware–as are followers of Rick Santelli–that I have questioned the wisdom of SNB support of the 1.20 EUR/CHF level.
First, as the clouds of sadness begin to lift I want to thank all of those who took time to send a note to the blog and to me in emails for the condolences on the passing of my mentor and friend. In a tribute to one of the great traders, the markets provided volatility reminiscent of a 21 gun salute, or maybe just 21% vol levels and a VIX to go with it.