Posts Tagged ‘Fed’

Notes From Underground: The Importance of Being Lighthizer

May 24, 2018

The plot thickens as the media is filled with one leak after another in regards to tariffs or threats to embark on a road to perfidy by invoking section 232 of the 1962 Trade Act: Using the broad cover of national security to justify increased import duties on autos. [In a hat tip to A. Limey] It is time to acknowledge that the “brain” of President Trump’s trade team is Robert Lighthizer.

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Notes From Underground: Don’t Cry for Me Argentina

May 6, 2018

It is far too early in the situation circling the emerging market debt to make a prognosis. The financial media is filled with stories about the rising U.S. dollar coupled with a FEDERAL RESERVE that is rising short-term rates while simultaneously enacting quantitative tightening (QT). This is certainly having an effect upon global liquidity but at this point I would caution about the CONTAGION and fallout from this process, especially as the ECB and BOJ still are adding liquidity while standing ready to increase their QE if economic growth begins to falter. My phone and internet haven been inundated with questions about the Argentinian central bank raising short term rates to 40 percent. The Argentinians are in the middle of a reform process that is causing major disruptions in their economy, in addition to a severe drought that is having a major impact on the economy, especially for one relying on the agricultural sector.

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Notes From Underground: More FRA Podcast

May 2, 2018

On Wednesday,  I had the great pleasure of talking with David Rosenberg, one of the most prominent financial analysts of the last 30 years. As moderator Richard Bonugli sets the tone, the conversation covered many of the topics discussed in Notes From Underground throughout the past year. The power of podcasts can provide so much information in a condensed format, which would take 100 posts to reproduce. Enjoy the discussion and recognize that this was recorded three hours before the release of the FOMC statement.

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Notes From Underground: Another FRA Podcast

May 1, 2018

While waiting for the FOMC‘s rate decision on Wednesday, I am posting a new PODCAST in which I discuss the global macro situation with a woman who whose work I had not been familiar. Nomi Prins has written a new book called Collusion, in which she investigates the role of central banks in its current predicament. I thoroughly enjoyed the 51-minute podcast as Richard Bonugli does a fine job of allowing the guests to discuss in deep detail. I will certainly be buying the book (it was released Tuesday) as it explains in detail what the central banks have accomplished in destroying the signalling mechanisms of capitalism and markets. The Financial Repression Authority has been an important platform for allowing deep discussion on matters of global investment concerns. Enjoy the discussion as I await my readers feedback on the issues we covered and hope it will lead to profitable trade opportunities.

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Notes From Underground: Is April The Cruelest Month?

April 29, 2018

As T.S. Eliot warned in The Wasteland, April is the cruelest month, as the thaw of winter gives way to hope as the world returns to rejuvenation. April has delivered the first quarter corporate results and it is no exaggeration to state that revenue and earnings have exceeded expectations. However, the equity market results have failed to respond to the robust numbers as the SPOOS have gained a mere 1.25% and remain unchanged on the year. The NASDAQ 100  has been a much better performer as the TECH sector continues to cruise.

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Notes From Underground: The 10-Year Finally Hits 3% and It is Meaningless

April 24, 2018

The concentration of the media on round numbers is going to drive me to drink that bottle of Pappy Van Winkle. In true philosophical inquiry, round numbers never fit in the square pegs of the unbalanced thinking at Notes From Underground. In Tuesday’s post I am going to run through several points that I’ve mentioned over the past several months. All of these issues will have some relation to the developing narrative that we are experiencing in the markets:

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Notes From Underground: Is The Greenspan Put KAPUT?

April 19, 2018

I am borrowing this phrase from a Bloomberg Radio interview Thursday in which bond reporter Alexandra Harris (my daughter) used these phrase to discuss the speech today delivered by FOMC Governor Lael Brainard titled, “Safeguarding Financial Resilience Through the Cycle.” Alex noted that the tone of Brainard’s speech was spattered with references to the concept of LEAN or CLEAN. The binary analysis of monetary policy analyzed by BIS Chief Economist William White, led to White criticizing Chair Greenspan in a speech at Jackson Hole in 2003.

The recent flattening of the yield curves in the U.S. has precipitated discussion that the FED is moving too fast in raising rates with the market action predicting an impending recession. The discussion has been centered around recent FED speeches utilizing the White use of countercyclical capital buffers (CCyB) to slow the increase of leverage in the financial by having banks build up capital ratios to insure increasing financial vulnerabilities.

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Notes From Underground: Strange Days Indeed

April 17, 2018

The market has several themes it is trying to digest, which made Tuesday’s price action interesting. Reported earnings have been as strong as whispered and with the Syrian bombing over the weekend, the markets had time to analyze the outcome (and as usual it was treated as a minimal event with no proliferation).

On Sunday night there was an immediate rally as the SPOOS gained 0.5 percent on the open. Strong earnings kept the rally in gear but what’s interesting that the financials failed to hold their initial rallies. This is important because most analysts were predicting significant growth in bank ROES, especially for the large Wall Street banks. Goldman’s FICC revenue increased by more than 20 percent as trading volatility provided an opportunity for one of the few remaining large prop shops remaining on the Street. The Goldman rallied fizzled and finished 2 percent down on the day.

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Notes From Underground: No Chinese Devaluation or Massive Liquidation of U.S. Treasuries

April 9, 2018

There are many questions swirling around what possible responses President XI can bring forward to counteract the heightened rhetoric from the Trump administration on imposing tariffs on Chinese goods exported to the U.S. Many news agencies have carried stories about the Chinese responding to Trump tariffs by entering into a policy of depreciating the Chinese yuan, which is currently trading at 6.3075 against the DOLLAR.

This is an interesting view but it would force China to act against the G-20 accord of not manipulating one’s currency. The XI-led government is looking for international support in its effort to combat a trade war so alienating the international economic community would be detrimental to the Chinese interest of global support. The narrative some analysts are spinning is to recall China’s 2 percent devaluation of its currency in August 2015, which sent global currency and markets into a frenzy, especially as stocks were reeling from deflationary fears.

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Notes From Underground: Does AnyOne Really Care About Jobs Friday?

April 5, 2018

The first Friday in April brings a key data point: the unemployment report. Of course, what most people are concerned about are THE AVERAGE HOURLY EARNINGS. The consensus is for AHE to increase by 0.3%, which is much better than February’s tepid increase of 0.1% rise. The focus on AHE has rendered the NFP growth a distant concern, especially as the participation rate suggests unemployed are returning to the job market. This calls into question how the FED model measures genuine SLACK in the jobs market. For the U.S., the unemployment rate is expected to be 4.0% with a net gain of 190,000 workers in the nonfarm payrolls.

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