Posts Tagged ‘Japanese yen’

Notes From Underground: An Open Letter To the G-7

June 2, 2021

Every G-7 or G-20 meeting homage is paid to the idea of free markets via the market driven value of each nation’s currency. This is hogwash of the highest order in the world of central bank asset purchase programs. The clarion call is that QE is a domestic-based program meant to meet the inflation target set by the nation’s policy makers and any impact on a nation’s currency is just unintended consequences of keeping a country out of a potential disinflationary cycle. Every central bank statement except the U.S. has a sentence or two about the relative value of a nation’s currency and if too strong then concern about a strong currency being a headwind in meeting the illusion and capriciousness of that 2% inflation target.

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Notes From Underground: At the Fed, Jobs is Priority Number One

February 7, 2021

There was another round of somewhat positive unemployment data on Friday. The U.S. release was tepid but juxtaposed with the Canada data it would seem robust. The Canadian jobs number was dismal on its face as 213,000 jobs were lost and the unemployment rate jumped to 9.4% from 8.6%, although a slight increase was expected (around 8.9%). The U.S. unemployment rate dropped to 6.3% from 6.7% with a slight gain in nonfarm payroll of 49,000, although much of that was in public sector employment. Average hourly earnings rose 0.2% but of greater interest was the increase in average hours worked, which reached a highest in history according to the Liscio report at 35 hours.

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Notes From Underground: What Constitutes Market Forces?

February 2, 2021

This is a question that plagues NOTES FROM UNDERGROUND, where we believe 2+2=5 is a beautiful thing. The objective force created by markets has always perplexed us? U.S. Treasury Secretary Janet Yellen keeps sounding the alarm that currency values must be established by markets. This is meant to be a threat to nations that attempt to intervene through selling their currencies in the open markets in an effort to keep downward pressure on currency values to support their economies.

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Notes From Underground: Thursday In the Park With Louis Gave

January 10, 2021

I had the pleasure of sitting down with Louis Gave last week and we discussed many of the pressing issues facing the global macro world. In May 2020, Richard Bonugli provided the FRA platform as a place to discuss the global outlook with a little bit of FORESIGHT. We HIT IT OUT OF THE PARK. Hopefully, our most recent analysis will provide similar investment outcomes and maybe succeed in clarifying some important issues facing the investment community as 2021 begins.

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Notes From Underground: A Long, Long Time Ago

August 23, 2020

We are back. This is the first blog post after a 10-week break. It has been a nice hiatus from writing as we took some time to reflect and respect the sanctity of motherhood.

I’m linking to an FRA PODCAST hosted by Richard Bonugli taped on Thursday featuring Barry Ritholtz, David Rosenberg and myself. This will be a solid starting point for NOTES FROM UNDERGROUND as it picks up where we left off on June 12:  LONG EUROS, LONG GOLD and looking for some vigor in the commodity markets.

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Notes From Underground: Dudley Do Right Gives the Markets Snidely Whiplash

August 29, 2019

Ok, I couldn’t resist the obvious joke. It seems that former New York Fed President Bill Dudley penned an op-ed for Bloomberg in which he elevated the Fed into an actor in the U.S. political process. The message that Dudley initially tried to convey is one that NOTES has actually expressed concerns: That President Trump has trapped Chair Powell by using TARIFFS as a mechanism to bludgeon the FOMC into lowering rates to counter any of the negative impact from trade frictions unleashed on the global economy. Dudley admonished Powell to play the role of Bartleby the Scrivner in Melville’s short story, that when it comes to cutting rates in response to financial implications of the China/U.S. trade war, simply say “I choose not to.”

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Notes From Underground: Powell Gets Backup From Clarida and Williams

July 18, 2019

Following Wednesday’s short introduction to the significance of the Powell in Paris speech in Paris, we a digestif in the form of Federal Reserve Vice Chairman Richard Clarida and New York Fed President John Williams providing supporting the chairman. As a result, the dollar sold off, there was a major rally in GOLD, and boost to equities even as earnings proved to be TEPID. But what I’m waiting for is a STEEPENING in the U.S. yield curves when the world’s bond investors contemplate that the FED has ABDICATED any sense of FIDUCIARY RESPONSIBILITY for its status as a reserve currency.

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Notes From Underground: How Many Fed Speakers Does It Take To Make a Greenspan?

February 24, 2019

More than two decades ago, then-Fed Chairman Alan Greenspan said, “I know you think you understand what you thought I said but I’m not sure you realize that what you hear is not what I meant.”

It seems that the cacophony of Fed speakers on Friday accomplished what the so-called Oracle did by his own design .The headlines pulled out the narrative of the FED leaving a larger balance sheet and more reserves thus allowing for more liquidity in the U.S. financial system. Equity markets, bond markets and hard assets all experienced a sigh of relief and rallied in anticipation of removal of what Druckenmiller referred to as the double-barrel approach of FED tightening policy. Fed Vice Chairman Richard Clarida spoke about the FED‘s use of balance sheet and forward guidance dynamics as two exceptional tools the Fed used to combat the Global Financial Crisis. If policy was already at the “effective lower bound” the Fed may invoke a Bank of Japan-type policy of yield curve control (YCC) by capping the rates on longer maturities.

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Notes From Underground: Happy Anniversary Twentieth ZIRPiversary, BOJ!

February 12, 2019

This is the perfect time to discuss the effects of zero interest rates as it has been 20 years since the Bank of Japan embarked upon the path of crushing interest rates in an effort to jump-start inflation in Japan. This is very important as we enter into the discussions about the potential for negative interest rates in the U.S. while also entertaining the idea that the U.S.’s growing debt pile and deficit have no consequence as long as the government borrows in its own currency and optimizes its printing press.

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Notes From Underground: Mario the Magician Has Lost His Assistant

January 23, 2019

The Bank of Japan did not surprise the markets as they remained committed to the lunacy of QQE, even with positive growth for many years. In an effort to make the central bank’s policy ever more relevant the BOJ lowered their inflation expectations, which the markets interpreted as lower for longer, resulting in a flurry of YEN selling of against all of the major traded currencies. There was even movement in the Swiss/yen cross as both central banks battle to keep their currencies in check by keeping interest rates negative.

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