Posts Tagged ‘Japanese yen’

Notes From Underground: Is the Yield Curve Taunting the Fed?

June 6, 2017

There were many responses to last night’s post regarding one of my favorite topics: the yield curve. The airwaves have been filled with opinions about the impact of the 2/10 curve on bank stocks and other financial asset valuations. Long-time readers know that I often note the significance of the shape of the curve for hinting at possible investment opportunities. Last year the 2/10 curve FLATTENED (a relative term) to long-term support levels at 74.8 basis points and then steepened out to about 150 basis points as the market feared a Trump inflation scenario.

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Notes From Underground: This Is a Vinny Barbarino Market (Or, I Am So Confused)

April 25, 2017

The global reaction to the first round of the French presidential election was not confusing. Capital was sitting on the sidelines as the polls reflected a possibility of a second round Le Pen/Melenchon faceoff, which would have been devastating for global investors because fear of an EU break-up would have led to a massive repricing of risk premia. The avoidance of such an outcome led to a rush of capital into European markets, which provided support to Asia and the U.S. The German/French 10-year spread reacted as expected. The yield differential narrowed by a significant 20 basis points. The BUND yields rose against all European sovereign debt as Berlin’s haven status was rendered null and void for at least another two weeks. The GOLD and YEN also performed as expected as money rushed to purchase a risk on profile in a global zero interest environment. The EURO rallied by 2% as global capital flows into European stocks forced previous short euro positions to the sidelines. There’s nothing confusing about any of these outcomes. But let me throw some confusion onto some of the other geopolitical events making the front pages:

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Notes From Underground: Just a Song Before I Go

February 14, 2017

We had to get back home

And when we opened up the door

 I had to be alone
Notes From Underground will be taking a short break. I will be relaxing unless something major breaks, in which I will chime in with commentary. I will also be reissuing previous blogs related to Greece and the IMF from these dates:
July 20, 2011
November 9, 2011
November 26, 2012
May 26, 2015
Every now and then I like to revisit the 1,200 or so blogs I have written since December 2009 and take a measure of their relevance in today’s world. WordPress has a high quality archive so my readers can scroll back and look to see where we have traveled since the inception of Notes From Underground.
Now, let’s look at Tuesday’s testimony from Fed Chair Janet Yellen before the Senate Banking Committee, as well as other news tidbits.

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Notes From Underground: Will Trump Hustle Abe and Ask for 10 Shots?

February 9, 2017

The main story for the next two days will be Japanese Prime Minister Abe’s visit to the U.S. to meet with President Trump. Abe is coming to mend relations after Trump officially ended the Trans Pacific Partnership (TPP) agreement before Congress could even debate the trade treaty. The Japanese prime minister had expended a great deal of political capital in Japan to get various parties to accept a massive Pacific-based trade agreement. In an effort to forestall any discussion of Japan as a currency manipulator, the Japanese are offering all sorts of investment ideas in the context of getting Trump the negotiator to soften his stance on tariffs for Japanese goods, or sourced material from Asia for assembly in the U.S. Japan is a paramount promoter of the global supply chain paradigm.

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Notes From Underground: FOMC Decision Day Is Upon Us

January 31, 2017

Janet Yellen and the FED take center stage tomorrow and the consensus is for NO CHANGE. The market believes the FED will be on hold until March. BUT I OFFER THIS: If I was the FED chair I WOULD RAISE RATES 50 BASIS POINTS to take some of the risk out of the U.S. equity markets. The S&Ps are virtually unchanged since the December FOMC meeting but the market’s enthusiasm for anticipated tax cuts, regulatory relief, and possible currency intervention means the FED cannot wait to let the economy run “hotter for longer,” especially because of the 4.7% U3 unemployment level. If Chair Yellen wishes to burst the TRUMP exuberance it is time to move aggressively to stem the rise of a potential inflationary threat.

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Notes From Underground: Putting Perspective To Our Narrative

January 24, 2017

Let’s be clear about the unfolding political and economic landscape: It is the desire of the Trumpians and the anti-Trumps to control the political dialogue. The media is putting President trump and his appointees under a microscope, which is what the press should always be doing. (My apolitical belief for the fourth estate is that a free press should be responsible in pursuit of the “facts,” but if they have a bias it should be “to afflict the comforted and comfort the afflicted.”) In my opinion, during the past 20 years the U.S. press has devolved into a sycophantic mob as everything becomes about access to those with the greatest celebrity status, which usually means wealthy. The financial media especially bows to the rich because if you are a billionaire your views go unchallenged for fear of being shunned as it  undermines the concept of, “if you’re rich, they think you really know.”

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Notes From Underground: Yet Again, It’s a Ball Of Confusion

August 2, 2016

Was today risk on or risk off? The U.S. dollar continued its recent weakness as the world’s major currencies all rallied against the “safe haven” greenback. The Reserve Bank of Australia cut its interest rate last night but even the Aussie dollar gained against its sister fiat currency. Global equity markets were down as the Japanese Nikkei was weak as the inverse correlated Yen was higher by one-and-a-half percent. Yes, equity markets failed to send the U.S. currency higher.

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Notes From Underground: FOMC,BOJ, GDP … It’s All Alphabet Soup to Me

July 28, 2016

On Wednesday, the FOMC left its interest rate policy in tact as it awaits more data before deciding to change interest rates. The FOMC statement wanted to reflect some underlying hawkishness but the market is reticent to accept the veracity of Fed releases. The DOLLAR initially rallied as the algo deemed the “hawkish” language a positive for the dollar and bearish for the precious metals but upon a very quick review the market reversed and now demands that the Fed reveal its Missouri lineage and “SHOW ME.” The yield curve gave the FED some credence by flattening in response to a change in some of the rhetoric, “near-term risks to the economic outlook have diminished.” This provides the FED the flexibility to respond to self-diagnosed headwinds in an effort to keep rates at present levels for as long as the DOVE can fly. The FED is pinned not by U.S. data but by the actions of the ECB and the BOJ.

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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: Japanese Elections, Italian Banks and May Day in the U.K.

July 11, 2016

Just some summary points as this year the summer doldrums will prove to be anything but:

1. The Japanese elections for the upper-house unfolded true to expectations but the impact of the win for P.M. Abe will take time to play out. There are winners and losers in Abe’s victory. One of the losers could well be the prime minister as the final results do not provide enough margin to pursue constitution revision because the LDP does not have enough votes without the support of its partner Komeito. More importantly, the TPP (TransPacific Partnership) may not pass because of several opposition victories in the rural prefectures. As Tobias Harris maintains, the “bleak outlook for ratification in the U.S. … the {Japanese} government will have to decide whether it is worth expending political capital on an agreement that may not come into force.”

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