Posts Tagged ‘metals’

Notes From Underground: A Riddle, Wrapped In a Mystery, Inside an Enigma

December 4, 2018

I’ve been thinking about the Churchill quote referring to Russia. Rather than referencing Russia my thoughts turn to the flattening yield curves that began on Monday. As commodity, global equities markets, the Chinese yuan and the precious metals all staged strong rallies, the long-end of the yield curve also rallied, especially the 10-YEAR. As a result, the 2/10 curve flattened to a 10-year low of 15 basis points. On Tuesday, the curves flattened even more as the 2/10 closed at 10.7 basis points. As Vizzini from the Princess Bride would say, “INCONCEIVABLE!” To support the rally in the long-end of the curve there was a retracement of the recent rally in global equity markets (the NIKKEI, DAX and S&Ps were all down substantially). This suggests that the positive news from the G-20 meeting has now been cast asunder because investors are struggling to comprehend what actually took place in Buenos Aires between the U.S. and Chinese delegations.

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Notes From Underground: The Loudest Sound In the Universe Is a Habit Breaking

October 6, 2016

The markets have been in a lock-step since easy central banks have been pushing bond yields lower and equity prices higher. (Currencies are a mixed bag depending on safe haven status, high yields or commodity-tied.) The correlation is still in play as now previously profitable trades are hearing the clarion call of higher yields leading to lower precious metals, lower bond futures, some softening in commodity prices (oil excluded), a rally in the U.S. dollar and stable equity prices. Those shifting out of some long-held bonds are searching for returns in high quality stocks with a reasonable dividend. Earlier this week, global equity markets were sold as a ridiculous rumor ran through the markets that the ECB was contemplating tapering its QE program, a la the Bernanke Fed. Today, ECB Board member Vitor Constancio ( and vice president from Portugal) denied that the ECB had any inclination to curb its QE program. This led to an immediate rally in equity markets and brought the bond yields lower. Of course a Portuguese central banker on the ECB would be opposed to any tapering of QE as Portuguese 10-year note yields are at 3.51%, a significant premium to the other European sovereign debt markets (except Greece).

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Notes From Underground: DSK HAS BAILED OUT THE PIIGS BUT CANNOT MAKE BAIL FOR HIMSELF (IRONY)

May 18, 2011

The main story in the financial world is still about the indiscretions of Dominique Strauss-Kahn. Many are making a great deal out of the fact that a major player in the European debt scene is now missing from the table. Yes, because of French domestic political considerations DSK has thrown himself into the Greece et. al. debt resolution scheme of which he is deemed a significant actor. Though, it’s highly doubtful that he is the only person with enough clout to bring the financial weight of the IMF to bear. Europe’s leaders will not allow this situation to further deteriorate because of one person being removed from negotiations for there is far too much at risk.

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Notes From Underground: I’M BERNANKE THE SAILOR MAN (OR WHAT HAPPENS WHEN FED CREDIBILITY BECOMES UNMOORED)

April 27, 2011

First things first. The FED released its FOMC statement at 11:30 a.m. CST and, as expected, there was no change in the FED‘s policy and the “extended period” language remained as did the use of “transitory” to describe the recent run up in fuel and food costs. The markets initially showed little reaction as the “big event” was to be 90 minutes later. In fact, the U.S. DOLLAR actually remained a little bid and the precious METALS were on the offer as it appeared the market was HOPING for some strong words from the chairman of the FED. The most hyped event since Geraldo’s look into Capone’s vault, Bernanke’s press conference did nothing to assuage the fears that the FED was losing its credibility. The more Bernanke talked, the more GOLD and SILVER rallied and the harder the DOLLAR dropped.

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Notes From Underground: Bill Dudley refills the PUNCHBOWL (or why New York bankers shouldn’t Head the NY FED)

April 3, 2011

All was right with the markets as the unemployment data was released and for one of the few times in recent memory, the Wall Street analysts, ADP and others were right on target. Private sector job growth continued to improve, and the state and local governments were continuing layoffs to try to balance its budgets. The softest part of the employment data was the average hourly earnings, which were FLAT. This implies that employers are under no stress to lift wages with the unemployment rate at 8.8 percent. The markets took the data in stride as the DOLLAR was rallying on the positive data. With the previous day’s comments from various FED presidents, there appeared some need to lift some of the SHORT DOLLAR positions. The short-end of the yield curve was under pressure, aiding the DOLLAR RALLY and the selloff in the precious METALS. The equities seemed to be basking in the perfect storm for no WAGE GAINS, a mere threat of 1 percent FED FUNDS with an improving JOBS PICTURE doesn’t get any better for the EQUITIES.

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Notes From Underground: Is April EMPLOYMENT GOING TO BE A LION OR A LAMB?

March 31, 2011

The U.S. unemployment report will be issued on Friday  at the regular time: 7:30 CST. It seems that the consensus is for 210,000 nonfarm payroll, a rate of 8.9 percent and an increase in hourly wages of 0.2 percent. It seems that a 300,000-plus number is in the cards which is why the FED Presidents that are not of the perma-dove camp are ramping up the anti-inflationary rhetoric. Today, Minneapolis FED President KOCHERLAKOTA caused a late move in the DOLLAR, METALS and SHORT-DATED interest rates as he raised the possibility of the FED raising rates by 75 BASIS POINTS. The DOLLAR had been lower all day as month- and quarter-end positioning allowed the power trend funds to push their profitable positions in the desired direction, but KOCHERLAKOTA did cause a late reversal with his aggressive comments.

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Notes From Underground: Bernanke sings with Huey Lewis–Your Cash Ain’t Nothing But Trash

November 4, 2010

In day one of the world held hostage, the FED‘s QE2 program proved a great success. The dollar declined. Commodities soared. Metals shined. The equity markets took its newfound wealth effect in full stride. And the Treasury market rallied. Even though the 30-year bond is not a major component of the FED‘s purchasing program, it too rallied strongly as the sub 2.5 percent yield on the 10-year note sent investors further down the curve looking for a little more yield. The FED got all the bang out of the “wealth effect” that it could as investors around the world have realized that their  “cash was nothing but trash”–exactly the outcome the FED is looking to achieve.

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