Posts Tagged ‘NAFTA’

Notes From Underground: Feeding the Ducks (Part Two)

January 10, 2018

Tonight, I’d like to expound on the recent musings from Chris Whalen, titled, “Bank Earnings &Volatility.” Whalen stresses that the FED will not be selling assets but merely ending “its reinvestment of cash when securities are REDEEMED,” (emphasis mine). In what I consider a key point raised, Whalen said, “Yet as we and a growing number of investors seems to appreciate, the FED cannot force up long-term rates so long as it is sitting on $4 trillion worth of securities THAT IT DOES NOT HEDGE. More given that the Treasury intends to concentrate future debt issuance on short-term maturities, downward pressure on long-term bonds yields is likely to intensify.” Whalen also said, “What the FOMC has done to the markets via QE is essentially reduce potential volatility by holding securities and not hedging these securities.” The key point is enhanced by the fact that both the ECB and BOJ do not hedge their security exposure either so volatility has been diminished by the reduced hedging.


Notes From Underground: Quackser Fortune + Horse Manure

December 26, 2017

In the famous Gene Wilder movie, “Quackser Fortune and His Cousin In the Bronx,” Wilder plays a character who picks up horse manure in the street and sells it for its rich nutrients. As horses are outlawed in the Dublin streets Quackser finds himself an unemployed manure sweeper, a negative outcome from Schumpeterian creative destruction. However, it seems Quackser resurrected his business and is now packaging horse excrement as an item of political discourse. Treasury Secretary Steven Mnuchin was the recipient of the newest symbol of public disdain for the recent tax “reform.”


Notes From Underground: The Second Quarter Begins

April 2, 2017

First, let me apologize to my readers. I erred when I said Marine Le Pen made it to the second round of the 2012 French presidential election. Reader Al 13 corrected me. It was her father Jean-Marie Le Pen who made it to the second round in 2002 and got trounced, garnering 18% of the vote to Jacque Chirac’s 82%. But read Al 13’s comment on the previous post because he notes that if the second round were to be a choice between Le Pen and one of the two far-left candidates–Melenchon or Hamon–the impact would be highly volatile for European markets.


Notes From Underground: Another FRA Podcast

January 29, 2017

Tonight I am posting the latest episode from the Financial Repression Authority (click on the blue link to listen). I do these for no remuneration as I think the information flowing out of this group creates great conversation and can generate some very profitable investment opportunities. Yes, it’s 34 minutes long but it is more LEARNATIVE than the network news. So pour a stiff whisky and listen while doing other reading. I share this with, you readers because I am honored to be a part of this great dialectical process. One of the key points in tonight’s post is the development of a narrative in which to analyze the world of Trump. It is not a partisan narrative but one I am developing as I attempt to discern the unfolding global dialogue being put forward by Team Trump.


Notes From Underground: The Yen Will Not Be the Sacrificial Lamb

September 19, 2012

And by the end of trading the YEN had reversed its initial weakness and wound up stronger–the 24-hour trading range was 79.20-78.25, with the settlement at 4:00 p.m. CST, 78.37. It seems that the market will not allow the BOJ (Bank of Japan) to do less than the ECB or the FED. BOJ Governor Shirakawa raised the asset purchase program to 80 trillion YEN from 70 trillion and removed its 0.1% bidding floor for Japanese Bonds (JGB). It is now possible that the BANK will go to negative bids on its JGB buying program so the move was aggressive for what has been a very conservative policy-oriented institution. Even Japanese FINANCE MINISTER Jun Azumi said, “The BOJ took more action than we anticipated.” And again although the YEN weakened on the initial news, by day’s end it reversed and closed strong. Mama, don’t let your children grow up to be currency traders.


Notes From Underground: Europe … The Circle Be Unbroken

October 18, 2011

Round and round the EU goes as it searches for a way to resolve its self-made crisis. As predicted, the Germans and French leaked news to the press–via the Guardian–that a deal had been struck, which would provide the EFSF and the ECB with an equivalent of 2 TRILLION Euros for aiding and abetting the bailout and support of the European financial system. The early afternoon news story gave impetus for the equities to RALLY as well as a SELLOFF in the DOLLAR. The precious metals staged a late recovery after a very severe correction in the morning–GOLD was down almost $50 at its lows.



July 7, 2011

Yes, the ECB raised rates today and Trichet failed to listen to the wisdom offered by NOTES FROM UNDERGROUND. That means I have overestimated the wisdom of Trichet while underestimating the size of his ego. The rate rise to 1.5% was widely anticipated so the EURO was immediately sold but regained some strength after the ECB announced that it was WAVING THE MINIMUM CREDIT RATING FOR PORTUGUESE BONDS USED AS COLLATERAL FOR REPOS. As the ECB raises rates, it allows for weak collateral to be utilized thus allowing for a large liquidity infusion. This is a fine example of Dostoyevsky’s Grand Inquisitor as bread is taken from the people with one hand and returned to them with the other and the people believe it is a miracle. Europe has become a “ball of confusion.” Why raise rates when you are simultaneously lowering credit standards to prevent a sovereign default?


Notes From Underground: Wen to meet Obama Thursday; Zapatero gives the European debt crisis the boot

September 22, 2010

As the United Nations convenes for its fall meetings, world leaders gather in New York, which creates the opportunity for traffic jams and face-to-face bilateral meetings for heads of state. Chinese Premier Wen Jiabao will take the time to discuss serious issues with President Obama–and, of course the trade issue will take center stage. Premier Wen will make his case that the Chinese trade surplus is not a question of currency value but rather economic structure. Wen will argue that the huge trade surplus will correct as the structure of China’s economy becomes more domestic demand driven. The Chinese believe that capitalist history is replete with trade surpluses as a part of any capitalist society’s development. The U.S. and Great Britain both ran massive surpluses as their economies transitioned from agrarian-based to industrialized nations.


Notes From Underground: Kan shakes off the threat from Ozawa

September 14, 2010

The political turmoil that has roiled the markets has been resolved and Japanese Prime Minister Naoto Kan handily defeated the old warhorse, Ichiro Ozawa. The DOLLAR/YEN was sold off as the markets were attune to the Kan victory. Ozawa was presumed to lead a battle for Japanese intervention to stem the YEN strength. Now it seems that the markets have been resolved and the present regime will allow the markets to set the YEN rate, which is being interpreted as further YEN appreciation.


Notes From Underground: Chinese announce that they will make YUAN more flexible

June 20, 2010

The weekend’s financial news is being dominated by the announcement from the People’s Bank of China, who said it will break the dollar peg and give the Reminbi greater flexibility. The PBC said it would allow greater currency flexibility but will not let the currency move more then 0.5 percent per day in keeping its present bands in place–that is, up or down. Directly from the PBC statement:

“With the Balance of Payments[BOP] accountmoving closer to equilibrium,the basis for large-scale appreciation of the RMB exchange rate does not exist … the People’s Bank of Chinahas decided to proceedfurther with reformof the RMB exchange rate regime and to enhance the RMBexchange rate flexibilty.”