Posts Tagged ‘Footsie’

Notes From Underground: Things That Need To Be Watched

July 14, 2016

As I ponder things in the 118 degree heat, it is time for some reflection and perspective:

a. The Bank of England performed beautifully today and took a breath before cutting rates further and/or increasing the BOE’s balance sheet. Now that Prime Minister MAY‘s cabinet is devoid of the idiot George Osborne, it behooved BOE Governor Carney to wait and see if fiscal policy would be the stimulative tool of choice and preserve the monetary policy for future use. I had advised my employers that Carney would be reticent to act because he is a cautious man and his recent plunge into the political realm in cahoots with George Osborne had sullied his reputation. It seems that Carney wants to remove himself from center stage and allow the new cabinet to have a say in just how to provide any stimulus in response to the dire forecasts from the BREXIT outcome.

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Notes From Underground: A Desultory Philippic on the Markets, the Fed and World Finances

August 17, 2015

One of my favorite songs by Simon and Garfunkel is “A Simple Desultory Philippic” in which the duo takes the time to mock and criticize the world of culture and politics that surround them. Desultory means lacking a style or plan, while Philippic connotes a word for a tirade or rant. Will my readers entertain my desire to craft my own simple desultory philippic?

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Notes From Underground: At the End of Q1, Global Equity Markets Are Floating on a Sea of Liquidity

April 1, 2012

The tale of the first quarter tape is in and evidenced by the large gains of the equity markets, global investors have benefited from the sea of liquidity provided by the CENTRAL BANKS OF THE DEVELOPED WORLD. Global stock markets have been calmed by the massive liquidity injections provided by the BOJ, ECB, FED and BOE.The German DAX closed the quarter up more than 15%. The long dormant NIKKEI was up almost 20% powered, by the new inflation mandate of the BOJ/MOF; and, of course, the S&Ps were up almost 12%, while the tech-ladened NASDAQ climbed more than 20%.

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Notes From Underground: Putin, you wily rascal?

December 29, 2009

Last week we wrote about the need for Russia to create some mischief in the world. Lo and behold, we have two stories out of Moscow that could be unsettling to the politics and thus economics of the global economy.

First, Russia is still threatening to cut off of oil supplies that are delivered to Europe through the Ukrainian pipeline. This action is brought to the fore as Russia is unhappy with the Ukraine’s demands for higher transit fees on oil shipped from Russia to Europe via pipeline. The threat is not nearly as great as the disruption of natural gas, as the amount of oil is much less relative to natural gas. It seems that the Russians are only getting Europe’s attention as next month’s Ukrainian elections will limit Gazprom’s ability to act. The Kremlin is trying to prevent the election of Viktor Yuschenko, who the KGB poisoned in London, while supporting the present Ukrainian ruler, Yulia¬†Tymoshenko. It seems that little action will take place as they don’t wish to provoke an anti-Russian vote, which would go to Yuschenko.

After the election, in the midst of the coldest part of winter, we will see how Russian energy demands are put in to action. If Tymoshenko loses, we can be sure that Russian belligerence to the Ukraine and Europe will increase. The primary concern for the Ukraine is the need for higher transit fees on energy to support a government budget that is in severe imbalance. Similar to the rest of Eastern Europe, the global downturn left the Ukrainian economy in tatters and they have already turned to the IMF for help. The Russians will remind Europe and the Ukraine that they are still a strong voice and their ability to disrupt the European economy is very great.

Second, out of Russia comes word that Prime Minister Putin raised the issue about restraining hot capital inflows into Russia.The vast amount of money that has flowed in has put upward pressure on the ROUBLE, which the Russian Central bank has attempted to stem by lowering interest rates several times this year.¬†These rate cuts have not been successful in halting the ROUBLE‘s rise, forcing the central bank to buy dollars and adding to Moscow’s burgeoning foreign reserves. Putin hinted that the restrictions would not be like Brazil’s but would act to inhibit the inflow of funds. The potential action has not been implemented yet, but this is another move to restrain the flow of international capital at a time of great financial fragility.

In addition, the U.S. moved to create more trade friction as it announced tariffs on the imports of Chinese steel grating. The amount of steel affected is minimal, but it is one more action that is causing friction in the global system. We get the feeling that after the Copenhagen Summit, relations between the western powers and China are severely strained. Global equity markets,presently riding a wave of nirvana, are not prepared for events like exchange controls and other trade impediments. These uncertainties that continue to arise justifies our desire to maintain a bullish GOLD bias against all FIAT currencies.We are one misstep away from a major crisis.

Interestingly, we report that the FOOTSIE index closed above the Lehman debacle highs from September 15-22, 2008. It is the first major equity market able to do so. We are not sure why but it may be that the flexibility of the POUND has lent some support to the British economy. The depreciation of the POUND since the Lehman bankruptcy has been substantial. It has also given the BRITS a pricing advantage versus its European trading partners. Also, it has meant that British assets have become cheap on a relative currency based valuation. It supports our view that equity markets are riding high even as the threats to the global financial system continue to grow.

Just food for thought as we enter the new year.