Posts Tagged ‘Jens Weidmann’

Notes From Underground: Him Or Me, What’s It Gonna Be?

October 24, 2017

President Trump is the ultimate drama queen. The president is drawing out his FED selection as he titillates the markets with the drips and drabs as to who is the most probable choice. Here is my best guess: Because this president reminds the nation how great he is doing using the stock markets as the barometer it would follow that his choice would be the best one for keeping equity prices elevated. Kevin Warsh and John Taylor would be a problem as the equity markets would become cautious for fear of short-term interest rates rising at a quicker pace. It seems that Jerome Powell and Janet Yellen would be the ones to sustain the current stock rally as they are known entities to the Wall street contingent. Of course the ultimate booster of all asset classes would be Neel Kashkari, the latest dissenter to the previous rate increases in 2017.

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Notes From Underground: German Elections. The Sound of Complacency Shattering?

September 24, 2017

I will start tonight’s BLOG with two very good comments from a long time reader and contributor GREEN AB who hails from Germany. Green has always provided great insight and though we don’t always agree I have great respect for his perspective. On Thursday he posted a very prescient forecast about today’s election and Sunday he followed with a post-election thoughts.

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Notes From Underground: What a Long Strange Trip It’s Been

December 22, 2016

This year has been a year of surprises as conventional wisdom-based forecasts have proven to be like oral agreements: not worth the paper on which they are written. The coming year promises to bring more confusion and volatility as the markets are preparing for the U.S. to be a Trumpian utopia of wealth creation. I caution against blindly accepting this narrative for it will not be a U.S.-centric year. Attention will turn to Europe as the political cycle brings elections in the main players. France and Germany are the EU and the rest just the trimmings (so stated Charles De Gaulle). The EU is fraught with problems, so the more uncertainty raises the profile of the ECB President Mario Draghi. Senator Charles Schumer once said to Fed Chair Ben Bernanke, “You are the only game in town.” Well, an ECB with a printing press and no political accountability provides a central bank on steroids. Mario Draghi perceives himself as the savior of the EU project so expect him to be hyperactive in response to any major political changes in France. Greece, Italy and Spain still remain an economic issue so the entire EU financial system will be subject to paroxysms within its debt and equity markets.

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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: Draghi Fires a Water Pistol at Global Liquidity

March 10, 2016

After the smoke had cleared from ECB’s announcement to cut the deposit rate another 10 BASIS POINTS to NEGATIVE FORTY, the central bank ADDED MORE MONEY TO THE SYSTEM VIA AN INCREASE IN QE TO EIGHTY BILLION EUROS A MONTH. The press called this a BAZOOKA but I THINK IT IS A WATER PISTOL. The most significant piece of the press release on monetary policy decisions was item six, “A NEW SERIES OF FOUR TARGETED LONGER-TERM REFINANCING OPERATIONS (TLTRO 2), EACH WITH A MATURITY OF FOUR YEARS, WILL BE LAUNCHED, STARTING IN JUNE 2016. BORROWING CONDITIONS IN THESE OPERATIONS CAN BE AS LOW AS THE INTEREST RATE ON THE DEPOSIT FACILITY.”

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Notes From Underground: Goldman Ought to Learn 2+2=5

January 20, 2016

Open question to Goldman Sachs: ARE YOU ARROGANT OR DEAF? There’s a story in tomorrow’s Financial Times there is a story titled, “Goldman Sachs Makes Large Donation to Pro-EU Campaign.” It is being reported that Goldman has made a large six-figure donation to Britain Stronger in Europe. Whoever thought this up needs their head examined. There is nothing in the world more TOXIC than the big investment banks. In a potentially existential issue for British democracy, the idea of a large U.S. investment bank playing in the U.K. referendum will stir the anti-EU forces to push harder for a NO vote. The anti-euro camp has many strong, legitimate former officials working hard to push England further from the restrictions of an overzealous group of Brussels eurocrats.

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Notes From Underground: All Quiet On The Western Front … Not

December 22, 2015

As the markets are settling into the holiday mood of eggnog and the decorating of Tannenbaums, Germany’s EU partners were castigating Berlin for its continued emphasis on fiscal austerity. The ECB’s chief-economist and executive board member Peter Praet was maintaining that ECB policy would be accommodative for a very long time. This was a shot fired at Bundesbank President Jens Weidmann. Make no mistake about it, Mr. Praet was speaking on behalf of President Draghi who didn’t enjoy being “bested” by Weidmann at the December 3 meeting. The German “block” had raised its concern about more QE and prevented Draghi from delivering what he had previously promised.

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Notes From Underground: Tomorrow’s Unemployment Release Is a Meaningless Event, UNLESS …

December 3, 2015

After today’s violent market reaction to a wounded Mario Draghi (more on that later),the consensus numbers for tomorrow’s U.S. jobs data will render the December interest rate rise by the FED a certainty. The STREET is estimating  around a 205,000 increase in nonfarm payrolls and a 0.2% increase in the very important average hourly earnings (AHE). IF PAYROLLS ARE BELOW 100,000 or IF AHE IS FLAT OR NEGATIVE THEN THE FOMC MAY BE RETICENT TO RAISE RATES AT THE DECEMBER MEETING. A gigantic upside number of more than 300,000 would not be big enough to increase the possible rate rise or even change the Fed’s sense of raising faster than the market already anticipates. It is definitely a one and done until some of the present uncertainty in the global financial system clears. This is a very reluctant move by the FED, especially now that the Germans have increased the pressure on Mario Draghi and the ECB.

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Notes From Underground: Mario Draghi Declares War On German Economic Policy

October 22, 2015

In the ECB press conference held today in Malta, the market heard what they wanted to hear and settled in on the idea that Draghi was all set to increase the QE program and/or use the tool of negative interest rates to bring inflation up to its mandated level of 2 percent. The EURO dropped more than two percent after the Draghi press conference began as investors believed that the ECB was intent on increasing its asset purchases by the December meeting. I listened to the entire press conference but was reticent to draw that conclusion. The markets’ response to the possibility of any enhanced ECB actions poses more questions than the pricing action resolved:

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Notes From Underground: Is Tomorrow’s Number a Meaningless Statement?

February 5, 2015

Yes, except if the nonfarm payroll numbers comes in above 300,000 jobs created and/or average hourly earnings rise above 0.4%, reversing last month’s -0.2 %. Consensus is for payrolls to grow by 235,000 but that is in line with the average of the last six months so it will have to be a strong number to give some substance to the more hawkish voices on the FOMC Board. More importantly for Chair Yellen will be the wage growth for if wages lag job growth the Fed will be reticent to raise rates, especially in the face of a strong dollar or the euphemism of” international developments.” In my humble opinion, global financial conditions in the light of European instability will play a larger role in the Fed’s decision to raise rates, which is why I maintain it will take a large number to give voice to those Fed voters wishing to raise rates.

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