Posts Tagged ‘G-20’

Notes From Underground: FRA Podcast Replay (January 29)

March 19, 2017

It has been a month since I last wrote. My hiatus was inadvertently extended as Ecclesiastes certainly entered my personal life. My sister Joyce suddenly passed away, which caused me to slow my mind and reflect on many things. Losing your baby sister will  cause one to ponder, or as it was said in Cool Hand Luke: “When a man’s mother dies and he gets to thinking rabbit and running, a night in the box.” So I have put myself in a mental box. However, I have also experienced the birth of my second grandson, thus to every season a time and purpose.

During the seven-plus years I have been writing Notes From Underground I have shared many life-changing moments with my extended family of readers. So it is with a renewed spirit and laser focus thoughts that I embark on analyzing the global-macro world in search of profitable trades and investments. The FRA podcast I posted January 29 (click the highlighted text) is a renewal of this year’s focus on crafting the NOTES narrative. There has been much in the way of global political events during my hiatus but I will refer to some as significant in various aspects as we proceed.

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Notes From Underground: After the G-20 and Nonfarm Payrolls, There’s Laborious Trading Ahead

September 5, 2016

As we bid farewell to the dog days of summer, here are some issues that will set the agenda for the month ahead:

1. Friday’s employment data made the picture murkier for the FOMC meeting later this month. The nonfarm payrolls were on the weak side, and, as Art Cashin correctly pointed out on CNBC, the bigger issue was a drop in the hours of the work week, which when measured in terms of jobs gained/loss resulted in a loss of 300,000 jobs. The FED jaw flappers keep orally pushing for a rate hike on September 21 but this jobs report clouds the issue.

The talking heads report ad nauseam that several Fed members believe a rate hike possible but as I wrote last week, if the fed funds rate is not raised the critical component of the FOMC release will be the outcome of the vote. If Stanley Fischer doesn’t vote for a RATE HIKE then HE SHOULD RESIGN FROM THE FOMC. It is that simple for if Chair Yellen prevails in achieving another 9-1 vote then it is without question Yellen’s FOMC and all other ivory tower mouthpieces should remain silent. The Federal Reserve Board is under mounting criticism due the inconsistency of its members’ public pronouncements. The FED‘s credibility is being called into question, a potentially disastrous  situation in a FIAT CURRENCY SYSTEM.

2. The G-20 meeting presented great selfies and photo-ops but little else. THIS MEETING REFLECTED THE STRAINS IN THE GLOBAL ORDER WHICH HAVE BEEN “PAPERED OVER” BY THE CENTRAL BANKS. Japan set the tone of the meeting by releasing a paper to the G-20 warning the world and especially Europe about the negative fallout from an acrimonious end to the BREXIT negotiations. Japanese corporations have massive investments in British capital projects and if British exports are to be penalized then Japan threatened to remove production and jobs from the U.K. and other European centers. I THINK THE JAPANESE WANTED TO SEND A MESSAGE TO ALL THE PARTIES IN THE BREXIT DISCUSSION, BUT MORE IMPORTANTLY, THIS WAS JAPANESE OFFICIALS RETALIATING FOR BEING SINGLED OUT AS A CURRENCY MANIPULATOR AT THE PREVIOUS G-20 MEETING. Japan prevented the Chinese from making them the focal point … yet again.

Before the release of the G-20 Communique, the U.S. and China held a bi-lateral meeting and one of the main issues discussed between Presidents Obama and XI was foreign currency movements. A fact sheet released after the meeting said, “China and U.S. Agree to Refrain From Competitive Currency Devaluations.” It may be a major political victory for the Chinese if the U.S. Treasury was deemed to be a serial currency manipulator in a similar vein of the PBOC. And this would be a serious blow to U.S. prestige. The actual language of the final communique was generic and sanitized: “We affirm our previous exchange rate commitments, including that we will refrain  from competitive devaluations and we will not target our exchange rates for competitive purposes.” This is nonsense of the first order for as many critics of the Fed and ECB have argued over the previous six years: QE POLICY is a domestic monetary program with a weakened currency as a desired outcome. The G-20 reference is mere political posturing for the domestic constituency.

3. The Reserve Bank of Australia and the ECB have scheduled meetings this week. Tonight at 11:30 CDT the RBA will announce its interest rate intentions. The consensus is for no change from its current 1.5% overnight cash rate. The Aussie dollar is very weak against the Kiwi dollar, its main trading partner, so I’m in agreement with consensus. The important point is that it’s Governor Stevens’s last meeting and what he says about the Chinese economy should be of interest. THURSDAY will be an important day as Mario Draghi will hold a press conference following the ECB’s meeting. President Draghi has been very quiet of late and has allowed his underlings to speak about policy. Draghi didn’t even attend the Jackson Hole Conference. The European economy is sputtering. Italy is facing a November referendum. And, more importantly, German Chancellor Merkel’s CDU party suffered a miserable election result on Sunday with the anti-Euro AfD party garnering the largest increase in support.

The media paints the AfD success as a response to an anti-immigrant agenda. There may be an element of fact in that but the German middle class is raising its voice against the FINANCIAL REPRESSION  foisted upon German savers as a product of ECB policies. If President Draghi is threatened by German domestic politics look for an increase in the ECB QE program to 90/100 billion euros a month from 80 billion in an effort to build the ECB balance sheet, weakening the euro and simultaneously pushing borrowing costs lower. Draghi is a man in a hurry as the political winds turn against the ECB. The problem for Draghi is that the  massive QE programs promoted by Bernanke and the BOJ have failed to have the desired effects. Bloated balance sheets for the sake of bailing out debt-stressed nations provide political fodder for the anti-euro political tide rising across the EU. Mario Draghi has grabbed unlimited power for the ECB, BUT FOR HOW LONG? Yes, our work has just begun.

Notes From Underground: On Bondage to the Hallucinations of Global Policy Makers

July 25, 2016

Over the weekend there was a new and improved G-20 communique, which was supposed to offer reassurance that the primary economic decision makers have things under control. It is disconcerting that so much time was spent discussing the global uncertainty posed by BREXIT for the global equity markets have deemed the British vote to Leave the EU as non-event (at least for now) and maybe even a positive for the Davos elite to adjust previous policy decisions. It appears that some G-20 members look forward to dealing with the U.K. on trade issues outside an EU establishment that is reticent to foster trade agreements because of German and French elections scheduled for 2017.

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Notes From Underground: Gee, What’s the G-20 Thinking About?

April 17, 2016

The Japanese leave Washington with no support for alleviating one-sided currency moves. For China it is all about respect for growth, wherever it may be. The Chinese GDP was released on Thursday and it came out exactly as forecast at 6.7% (shocking, I know). There was virtually no criticism of the Chinese as the nations are watching closely while China commences its transition from an export-dominated economy to a more balanced growth model, where domestic consumption takes on increased importance. In contrast to the G-20 view on Japanese currency intervention, SNB President Thomas Jordan announced that the Swiss would increase its balance sheet through currency intervention “… to prevent an already ‘significantly overvalued’ franc from strengthening.”

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Notes From Underground: Prelude, Nothing To Hide (In the Spirit of Stairway to Heaven)

April 12, 2016

First, why was Janet Yellen summoned to the White House to meet with President Obama and Vice President Biden? The most ostensible reason is PROBABLY to get the Fed’s view on the economic impact of Trump and Bernie Sanders. Is the anger in the land a result of stagnant wages and is there any policy impact the White House could pursue without distorting the economy? Is fiscal stimulus a possible positive response and would the Fed be receptive without immediately raising rates? There are no certain answers to why Yellen went only conjecture. But one thing that caught my attention was the headline in today’s Financial Times: “Lew Urges IMF to Get Tough on Exchange Rate Manipulators.”

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Notes From Underground: He Goes Running For the Shelter of His Mother’s Little Helper

February 28, 2016

(Larry Summers had to run to his medicine cabinet to take Prozac (not Diazepam as in the Rolling Stones song) after he read the G-20 communique. The finance ministers and central bank heads meeting in Shanghai failed to come to terms with any of the issues concerning the global economy. There was no PLAZA ACCORD and no  deep discussions about the need for massive fiscal stimulus. The tone of the Communique was TEPID at best and views the present state of the global economy as slow but steady. There was certainly NO URGENCY about a rise in the prospects of a global recession. The finance ministers downplayed the recent volatility and slide in global equity markets, suggesting by those domiciled in ivory towers and model-based rat holes that the MARKETS ARE MISTAKEN AND THE MODELS ARE CORRECT. The arguments among the participants was such that there were some issues that seem in direct contradiction of any policy response.

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Notes From Underground: A Quickie On the G-20, Or the Summers of Enchantment

February 25, 2016

It was nice to be away, playing some golf and visiting with friends. And now it’s back to work. (Confession: I was engrossed in reading for part of my days.) There two key issues before us: BREXIT and this weekend’s G-20. (Side note: I did a radio interview yesterday with Anthony Crudele on #FuturesRadio. Anthony did a great job and we covered a lot of ground. Listen to the piece and it will rehash much of what my blog readers have been reading during the past six years.) Here is my take on the G-20 meeting and it is interesting how the British elites are trying to co-opt part of the G-20 meeting to get support for the British Prime Minister David Cameron and his bumbling sidekick George Osborne.

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Notes From Underground: The Sergeant Krupke Syndrome In Foreign Policy

November 16, 2015

Let me say first off: I agree with President Obama about putting massive boots on the ground in response to the ISIS threat. I felt the same about Afghanistan in that the U.S. ought to have fully utilized the special forces in a tactical manner to determine when and the place of our choosing to do battle with a non-conventional adversary. The U.S. special ops are a potent disruptive force and when supported with the cavalry and other forms of airpower can inflict great harm. The recent acknowledgement that A-10 Warthogs have been dispatched to INCIRLIK Airbase in Turkey signifies the U.S. has the ability to severely damage the mobile capabilities of ISIS and thus limit the scope of the battlefield and enhance the effective use of U.S. Special Forces. The success that this type of operation had in the early part of the battle against the Taliban when the Special Ops allied with the indigenous Northern Alliance.

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Notes From Underground: Looking Back to December 24, 2014

September 1, 2015

There is now rampant talk about a revived FED QE4 program, most powerfully talked about by Bridgewater’s Ray Dalio and Larry Summers (from the genetically powered economics family of Samuelson and Arrow). On December 24, Santelli and I considered the possibility of QE4 (see clip below). I posed this question to all investors: How would the equity markets react if the FED had to reignite its large asset purchases?

Yra on CNBC December 24, 2014

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Notes From Underground: “I’ll Watch Market Action Like A DOVE” (Andrew Haldane)

November 17, 2014

The Bank of England’s chief-economist had the line of the month in his response to the disinflationary forces confronting Europe and the U.K. It seems that the G-20 did yield much more discussion about Europe’s economic malaise than was revealed in the communique. BOE Governor Mark Carney was warning of stagnant Europe being a drag on the global economy and impacting British growth. Even the economically challenged British Prime Minister David Cameron warned of flashing “red lights” on his economic dashboard. The last inflation data from the BOE revealed that inflation has fallen below its target and the lack of growth in its largest trading partner, the EU, threaten to push inflation lower than previously expected.

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