Posts Tagged ‘FOMC’

Notes From Underground: Powell Seeks to Reestablish the Authority of Markets … Maybe?

October 7, 2018

I am positing this idea because I think it’s critical to current valuations of various asset classes. The nine-year rally in the U.S. (and to some extent the global equity markets) has stretched valuations as ultra-cheap money has pushed investors into taking risks larger than what many money managers and retail investors would do “normal” circumstances. This was ultimately the Bernanke plan the former chairman laid out at Jackson Hole in 2010 (simplified in Bernanke’s Washington Post op-ed as the PORTFOLIO BALANCE CHANNEL). The long-term problem for investors is that Bernanke and Janet Yellen were terrified of market reactions whenever they desired to halt the massive QE programs and their beloved use of FORWARD GUIDANCE.

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Notes From Underground: Powell Confirms It Ain’t Rocket Science

September 26, 2018

Over the last nine years, a major theme from the wit and wisdom of Notes From Underground has been that FED policy is not rocket science, the premise being that no matter how much math is applied the forecasting ability of the FOMC has been less than stellar because of the use of flawed models. Unlike genuine rocket science in which astrophysicists can land a vehicle on the moon and return the capsule to a pre-programmed landing site, the FED cannot predict the economy with any sense of proximity. Yet the FED built a massive balance sheet depending on those flawed models. The financial media was awed by the high maths of the FED‘s models so mainstream pundits offered little to no pushback, genuflecting at the altar of academia.

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Notes From Underground: Fed Forecast — 100% Chance of a 0.25% Rate Hike

September 25, 2018

The market is absolutely, positively certain that the FOMC will increase the FED funds rate by its Greenspanian 25 basis points, although there are some Wall Street pundits suggesting the possibility of a 50 basis point hike because of the recent return of robust data. I have suggested that the FED would have done well by raising rates in a more aggressive fashion. But with the November elections within polling range, Trump’s trade policy causing angst in the emerging markets and several of U.S. trading partners, it’s looking very unlikely (less than 5 percent chance).

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Notes From Underground: Chairman Powell, Ask the Wizard for Some Courage

August 1, 2018

The FOMC issued a very bland statement on Wednesday after its two-day meeting. Why did they bother convening for two days to deliver a policy statement that they phoned in last month. In my opinion, Jerome Powell missed a perfect opportunity to flex the FED‘s independent muscles by NOT RAISING RATES. The recent GDP data, inflation measures and robust jobs market provided ample evidence that the market is in need of another interest rate hike.

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Notes From Underground: Central Bank Palooza

July 30, 2018

Coming on the heels of my first Kenny Chesney concert I am viewing the synchronicity of central banks as a reflection of the rhythms of global financial repression. Last Thursday, the ECB issued its last statement before the summer recess, while this week we have the Bank of Japan tonight, the FED on Wednesday and the Bank of England on Thursday.

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Notes From Underground: Are We Reliving 1930?

June 25, 2018

Upon taking some time to reflect on the current state of the global macro world it seems that the most relevant are the years between 1928 and 1933. This was when the U.S. Congress was debating the famed Smoot-Hawley tariffs while the Treasury was reining in spending, and the FED was tightening liquidity and credit. While we don’t have a restricted Treasury (quite the opposite, actually), the Fed seems intent on raising rates to curtail the impact from an ill-advised fiscal stimulus at a time of 3.8% unemployment.

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Notes From Underground: Headlines Drive the Algos and the Circle Remains Unbroken

June 12, 2018

I’m going to be off for a few days, even if this Fed meeting proves to be the most market-moving week in many years.

The news from North Korea proves to be a non-event (as suspected). On Wednesday, we get the FOMC statement, which OUGHT to meet market expectations with a 25 basis point increase and some sense of the interest on excess reserve (IOER) rate in reference to fed funds. There is much discussion about the FED reaching “normal” interest rates, meaning neither too weak nor too strong to reach its dual mandate.

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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: 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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