On June 6, I had a discussion with the Financial Repression Authority host Richard Bonugli and the highly respected Ronni Stoeferle. We covered myriad of global financial and political concerns as we tried to provide the foundation for profitable opportunities via in-depth analysis of these fragilities.
Posts Tagged ‘Japan’
Notes From Underground: This Is A Week Filled With …
January 29, 2018This week for global macro traders is packed with data and policy statements that can ignite the volatility fuse. On Tuesday night, President Trump, the conquering hero of Davos, will deliver the State of the Union address. Chair Janet Yellen will oversee her final FOMC meeting this week. There are also several data releases Thursday and Friday, culminating with the unemployment report.
Notes From Underground: Prepping For Draghi
October 23, 2017Another moment in time with Rick Santelli. We reviewed some of today’s early market reactions to the weekend events. A measure of the impact of President Mario Draghi’s ECB policy was reflected in the prices of European sovereign debt. The political news out of Spain and Italy let alone recent elections in Austria and the Czech Republic SHOULD have sent Italian and Spanish yields HIGHER but because of the ECB’s ongoing LARGE ASSET PURCHASES Spanish and Italian yields on 10-year debt actually dropped the most today.
(Click on the image to watch me and Rick discuss the weekend’s events.)
Notes From Underground: Elections In Japan, Czech Republic and Italy
October 22, 2017First: On Oct. 18 I talked with Richard Bonugli from the Financial Repression Authority and financial analyst John Browne, a former member of the British Parliament. I am linking to the transcript of the chat. The conversation was free-flowing and was heavily tilted toward geopolitical concerns and shed light on investment possibilities. But as readers of NOTES well know, many of out best trade outcomes are based on political economy as well as mere yield curves. Last week the 2/10 did challenge the 73.5 basis point level (again) and by Friday the 2/10 had bounced back to 81 basis points.
Notes From Underground: The Chinese Cite Hyman Minsky
October 19, 2017First a few jokes: My sources tell me that the new Fed Chairman will be Marc Faber; second, as Lloyd Blankfein is chirping about Brexit and Goldman moving to Frankfurt, Germany, he opined several years ago that Goldman was doing God’s work. Well, being the cyclical time in the Jewish Torah of the reading of NOAH, I remind Blankfein that Noah was also part of God’s work. (Pour a scotch and laugh).
Notes From Underground: Shelter From the Storm
August 9, 2017Not a word was spoke between us,there was little risk involved
Everything up to that point ,had been left unresolved
Try imagining a place where it’s always safe and warm
Come in, she said, I’ll give you shelter from the storm
When Bob Dylan released this song 42 years ago it was on the album Blood on the Tracks. When the FED embarked on its QE1, QE2 and QE3 it was to respond to the blood coursing through the streets of the U.S. financial system. The U.S. banking system was threatened with insolvency and the FED‘s monetary injections sheltered the banking system from a storm of forced systemic liquidation of assets. QE1 coupled with a questionable TARP program did prevent a systemic liquidation but QE2 and QE3 I always believed were superfluous but in the land of counterfactuals it is an impossible point to prove.
Notes From Underground: G-20 Photo Ops Become Relevant … For a Moment
July 10, 2017All of the words and photos emanating from Hamburg are figments of the media’s confirmation bias. In Monday’s Financial Times, Wolfgang Munchau had a splendid op-ed titled, “From Brexit to Fake Trade Deals–the Curse of Confirmation Bias.” Munchau calls out the Euro-Japan trade deal headlines for as he points out it was announced on the eve of the G-20 summit in order to embarrass President Trump. I laughed when I read the stories about the aforementioned trade agreement because while EUROCRATS presumed a signed agreement, the FACT is each EU state will have to approve the agreement. So the acrimony from the Euro/Canada trade agreement still reverberates.
Notes From Underground: Oh, When Will They Ever Learn?
November 28, 2016This is a tough POST to write for I will criticize a newspaper I have read every day for at least 30 years. (In fact, I still have it delivered on my doorstep and read most of it online in the evening before the hard copy arrives.) The London Financial Times had a front page story, “Troubled Italian Banks Face Fresh Risk of Failing If Renzi Loses Vote.” This is a deplorable headline for it harkens back to the days of the mainstream media warning of dire consequences if Brexit passed and the Trump was elected president. THIS IS SCARE MONGERING. It raises the question: When will the Davos crowd EVER LEARN?
Notes From Underground: Lions and Tigers and Bears, Oh My!
September 11, 2016The Wizard of Oz provides so many appropriate metaphors for dealing with global central bank policy. The failure of the wisdom of those who meet behind the “curtain” enthrall the members of the elite media who genuflect on the altar of access. Provide the necessary backdrop of equations and the media believes everything. It reinforces the sentiment of the Greenspan era: “If you think you understood what I said, I must have misspoken.” The idea of an “all-knowing Fed” is beginning to lose its luster as markets begin to understand that FED policy is not rocket science. There is no predictable outcome for the global experiment of negative interest rates or zero interest rates. Even the growth of supersized central bank sheets is causing doubts among the blind followers of free money forever.
Notes From Underground: After the G-20 and Nonfarm Payrolls, There’s Laborious Trading Ahead
September 5, 2016As 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.
