Posts Tagged ‘Fed’

Notes From Underground: My Fantasy News, “China Swaps U.S. Treasuries For Fort Knox”

March 22, 2020

This headline would have seemed ridiculous eight weeks ago but today it has great relevance. If I ran the PBOC (or rather had the totalitarian impulses of President Xi), the command from above would be trade in the overvalued U.S. debt instruments for a 3,000-year vehicle that’s a reliable store of VALUE. The world’s central banks have confirmed a central theme of NOTES FROM UNDERGROUND: It is not inflation they fear but the onset of a DEFLATIONARY SPIRAL.

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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.

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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.

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Notes From Underground: Man Plans, God Laughs

February 2, 2020

It has been three weeks since I have sat down to articulate my thoughts on the global macro financial system in an effort to profit from trade/investment potentials. A lot of the discourse with many readers the focus was on the situation in the Middle East.

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Notes From Underground: The Jobs Picture Is Robust, But Where Is the Wage Increase?

December 8, 2019

This is a rhetorical question of course, for the lack of wage growth is to be found in the vast amount of money chasing a global labor pool.

It is capital that had benefited from the last 30 years of the unleashing workers after the fall of the Soviet Empire and the black/white cat policies of Deng in pursuing growth in China. Now that other emerging economies are attracting capital in an effort to create jobs, there still remains a great deal of downward pressure on wages. Even the movement of supply chains out of China will act as a drag on global earnings as manufacturers will act to hold down wages as way of remaining attractive to foreign direct investment. The world has been watching as Chinese earnings growth has accelerated over the last 10 years but one of the outcomes from the Trump tariffs will be to force a slowdown in China’s wage inflation.

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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.

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Notes From Underground: The Hills Are Alive With … Sounds?

October 20, 2019

There are so many sounds resonating in the global financial world it has been difficult to discern the impact of any particular tweet or headline. NOTES FROM UNDERGROUND hopes to cut through the babel to provide perspective, context and NUANCE. If we at NOTES cannot accomplish this then we’re just screaming into the chasm that is global macro finance. The impact of Chinese tariffs, Middle East maneuverings, QE programs — from the BOJ to the FEDERAL RESERVE (yes I know what the policy makers are saying — it’s not QE) to the ECB — need to be understood as they drive short-term moves but also have much longer consequences.

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Notes From Underground: Should We Fear the Repo Man?

September 17, 2019

Just as Saudi Arabia was becoming less of a story the NEW YORK FED‘s mishandling of Tuesday’s repo operation has created a new round of angst for traders if not investors. The best coverage on the FED‘s recent efforts to calm the overnight funding markets (and repo turmoil) has been done by Liz Capo McCormick and Alex Harris at Bloomberg News. Now they have another article out discussing another REPO operation tomorrow morning.

Tuesday’s operation injected $53 billion of liquidity, even though $75 billion was on offer. While the FUNDS level went as high as 10% today the repo operation brought the level down to 2.50% to 2.25%, calming fears of any type of solvency/liquidity situation. Even though we’re around the 11th anniversary of the Lehman Brothers collapse, It has been a decade since the markets had to be truly focused on the FUNDING marketsĀ  so many people are left with more questions than answers.

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Notes From Underground: The King of Hearts Searches for Sanity

September 15, 2019

The inmates are running the asylum as policy makers are busy putting out old prairie fires. The European Central Bank’s move on Thursday was a final curtain call for President Draghi as he sought to cement his legacy as the man that would do whatever it takes to “preserve the Euro” and would have no taboos in his efforts. But it seems like the opposition to both the rate cut and new QE was far greater than the magician of Frankfurt let on at his final obfuscation. It is amazing how the dissidents find their voice the day after. Oh well, so it goes in the world of consensus-driven outcomes.

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Notes From Underground: When the Paradox Of Thrift Doesn’t Apply

August 25, 2019

John Maynard Keynes’ critical theory said in times of uncertainty economic actors tend to save more, which leads to a negative feedback loop that slows the economy as demand shrinks. This is why governments need to increase fiscal stimulus to boost demand. It’s too bad that President Trump doesn’t exercise the paradox of thrift when it comes to WORDS. Let there be no mistake: We at NOTESĀ have been expecting a response from Trump like this.

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