Posts Tagged ‘Jerome Powell’

Notes From Underground: Walking Through the Valley of the Shadow of Death

September 22, 2019

There is no question that the world’s central banks are all living under the shadow of doubt as investors and financial markets are questioning the efficacy of the zero lower bound. The sense of always doing more in an effort to attain a self-conjured 2% level of inflation has led to the continued downward slide in interest rates.

On this note, last week we saw the Powell Fed lower the target range for the fed funds rate by 25 basis points — and its interest on excess reserves rate by 30 basis points — as congestion in the financial plumbing sent overnight rates soaring. (For those who are interested in the nuances, I am linking to one of many splendid pieces from Bloomberg reporters Liz McCormick and Alexandra Harris detailing out the repo market mess.)

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Notes From Underground: Should We Fear the Repo Man?

September 17, 2019

Just as Saudi Arabia was becoming less of a story the NEW YORK FED‘s mishandling of Tuesday’s repo operation has created a new round of angst for traders if not investors. The best coverage on the FED‘s recent efforts to calm the overnight funding markets (and repo turmoil) has been done by Liz Capo McCormick and Alex Harris at Bloomberg News. Now they have another article out discussing another REPO operation tomorrow morning.

Tuesday’s operation injected $53 billion of liquidity, even though $75 billion was on offer. While the FUNDS level went as high as 10% today the repo operation brought the level down to 2.50% to 2.25%, calming fears of any type of solvency/liquidity situation. Even though we’re around the 11th anniversary of the Lehman Brothers collapse, It has been a decade since the markets had to be truly focused on the FUNDING marketsĀ  so many people are left with more questions than answers.

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Notes From Underground: “Where Did I Find This Guy Jerome?”

September 8, 2019

Of all the U.S. president’s tweets (and believe he has a lot), Friday’s tweet about Federal Reserve Chairman was one of the best. Unfortunately, there probably should’ve been a comma between “guy” and “Jerome” since one could ask the question about any member of Trump’s economic team. President Trump could be asking the Fed chairman about Secretary Steven Mnuchin, or Commerce Secretary Wilbur Ross, and certainly of Larry Kudlow or Peter Navarro. NOTES FROM UNDERGROUND has been asking that for many months. In my opinion, the only Trump pick that inspires confidence is Robert Lighthizer.

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Notes From Underground: Woody Hayes’ Advice to Mario Draghi

September 4, 2019

Football season in the U.S. is just beginning. That said, it would be appropriate for President Mario Draghi to refrain from any type of new QE program or cut in interest rates at next week’s meeting. There have been several comments from ECB members during the past week advising against more QE or additional interest rate cuts.

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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: When the Paradox Of Thrift Doesn’t Apply

August 25, 2019

John Maynard Keynes’ critical theory said in times of uncertainty economic actors tend to save more, which leads to a negative feedback loop that slows the economy as demand shrinks. This is why governments need to increase fiscal stimulus to boost demand. It’s too bad that President Trump doesn’t exercise the paradox of thrift when it comes to WORDS. Let there be no mistake: We at NOTESĀ have been expecting a response from Trump like this.

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Notes From Underground: Bringing Europe to the Fore, Yet Again

August 20, 2019

Whenever I have an appearance on CNBC with Rick Santelli, Europe proves itself as critical to U.S. monetary policy. The past five years have led to dialogue that questions the efficacy of ECB policy and the slight of hand moves by President Mario Draghi. As BUND yields drag all sovereign debt yields even lower, the central bank is struggling to find policies that will keep LOWER FOR LONGER going. It seems that the last play in the book is to provoke Jerome Powell to abandon any NORMALIZATION of interest rate policy regardless of the economic data reported by the U.S.

(Click on the image to watch me and Rick discuss Europe and monetary policy.)

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Notes From Underground: Another Fine Mess You Got Us Into, Olli Rehn

August 18, 2019

The Federal Reserve just won’t admit that President Trump and the European Central Bank are holding its policy designs captive. Trump ramps up talk of tariffs in an effort to keep the financial markets uncertain while the ECB wishes to pursue an ever expanding balance sheet in an effort to reach an ambivalent inflation target. There is no doubt that REAL YIELDS throughout the European Union are NEGATIVE. Even the Italian 10-year is trading around 1.35%, which is below the inflation level however dubious it is calculated.

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Notes From Underground: Jerome Powell, Meet Jerome Kerviel

August 14, 2019

The die has been cast as the U.S. 2/10 curve did the unthinkable. It inverted. This cause panic among the talking heads, who scoured the earth for analysts to give purpose to the bogeyman of bullish equity market pundits. The financial television media interviewed analysts all day, who explained ad nauseam why an inverted curve is truly different this time as it mainly reflects the desire for foreign investors to send their savings to the welcoming shores of the United States.

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Notes From Underground: The August of Our Discontent

August 7, 2019

When August rolls in the markets thin as Europe heads to the beaches and New Yorkers head to the Hamptons before Labor Day. This means every tweet President Trump is amplified by the LACK of market liquidity. On Wednesday, the president was back in full confrontation with Federal Reserve Chairman Jerome Powell because three central banks CUT interest rates last night: India,Thailand, and, most importantly, the Reserve Bank of New Zealand, which surprised most market analysts by cutting 50 basis points instead of 25.

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