Posts Tagged ‘Portugal’

Notes From Underground: People Get Ready, There’s a Train (Chambers Brothers & Curtis Mayfield)

May 11, 2016

“There ain’t no room for the hopeless sinners,

who’s hurt all mankind just to save his own,

have  pity on those whose chances grow thinner

’cause there’s no hiding place from the kingdom’s throne.”

The sentiment is aptly described in this song but also in Niall Ferguson’s book, “War of the World.” In the book, Ferguson explains that European bond markets were initially unfazed at the start of World War I. They traded at a steady valuation, even as the troop trains were heading for the front.

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Notes From Underground: Making Sense Of the Treasury’s Guide to Currency Manipulation

May 2, 2016

While attempting to enjoy Pittsburgh (and hopefully a Cubs game), the markets buzzing about the U.S. Treasury’s report about the “Trade facilitation and trade Enforcement Act of 2015.” In a Bloomberg News article published late Friday afternoon, “U.S. Places China, Japan, Germany on New FX Monitoring List,” it seems that the Treasury and Jack Lew are raising the threat of retaliation against nations that meet the Congressional crafted criterion of currency manipulation. These include: 1. Significant bilateral trade surplus with U.S.; 2. Material current-account surplus; and 3. Engaged in persistent one-sided FX intervention. The issue of “one-sided intervention” is defined as only weakening a currency by conducting repetitive net purchases of FX amounting to more than 2% of its GDP.”

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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: In Honor of French Independence, Europe Imprisons the Greeks

July 14, 2015

And so it goes. As the light lifts off the European “bailout” it appears that most analysts agree that the “Agreement” was a lose-lose for the European Project. The Germans stood firm and placed unduly harsh demands upon the Greek electorate that had the temerity to openly reject the terms of debt resolution. Merkel had favored a real compromise until Alexis Tspiras deployed the nuclear option and went to referendum in an effort to better be able to negotiate with an intransigent Djisselbloehm and his ECOFIN council of Grand Inquisitors (see the Brothers Karamazov). The punishment meted out to the Greek nation is a loss for them but ultimately the real loss will be on Spain, Italy, and, of course France. The Germans have revealed that the use of Berlin’s money to support the EU is going to come at a price and it is the acceptance of an economic model for Europe that is German, its backdrop of course being sound money. Not the strong dollar mantra of the U.S. Treasury Secretary but an actual strong currency, at least until the German financial system enters a fragile state.

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Notes From Underground: The Swedes Plumb the Interest Rate Depths

October 29, 2014

First, I will say it again. QE3 is over and the Fed will maintain its “forward guidance” and be data dependent. The next bout of important data will be the U.S. unemployment release on November 7, which buys the Fed one more month of doing nothing. James Bullard painted the FED into a tight corner when he PANICKED and said the FED may want to refrain from removing QE3 while the SPOOs and other equity markets were at a 10 percent correction low. Bullard revealed that the Fed’s REACTION FUNCTION is the equity markets and of course Chairman Yellen’s concern about the lag in wages. The two key variables for the Fed have both been steady since the last meeting. The spoos are lower by 0.75 percent while the September unemployment report showed wage gains had no increase.

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Notes From Underground: Does the Central Bank of Brazil Get “REAL”?

August 29, 2013

Yes, the pendulum of market prices is a cruel mistress. Two  years ago, Brazilian Finance Minister Guido Mantega was voicing concerns about the developed economies declaring a currency war on the emerging markets through the use of its quantitative easing programs. The Brazilians reacted by imposing various forms of exchange controls to slow the inflow of “hot money,” as well as cutting Brazilian interest rates. Now that the Brazilian Real has depreciated by 50% since August 2011, the Brazilians believe that they have had enough and want to stem the depreciation because of the inflationary effects of a rapid depreciation. The Brazilian Central Bank (BCB) raised interest rates again last night by 0.5% to 9% in an act to help end the REAL‘s recent downward move. Last week, the BCB announced a large currency intervention package of $60 billion involving swaps and loans to the markets. This program ensures that the Brazilian financial markets will have a steady stream of dollars  and will prevent a fear among investors that Brazil will not be able to meet investor demands for currency redemptions.

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Notes From Underground: There Will Be No Independen​ce From the ECB or BOE

July 3, 2013

Ah, July 4 and the living is easy but the trading is difficult. The algo trading models make data releases perilous but the influence of geopolitical events results in more variables in motion, thus the yellow flag is waved and caution is advised. Brazil, Turkey and certainly Egypt are in crisis mode. The military has seemingly taken control of the Egyptian government and as I write it is uncertain as to what the response will be from the supporters of President Morsi. The markets will at first blush will support the imposition of military rule for Notes From Underground‘s first law is MONEY IS FASCIST, meaning it craves POLITICAL STABILITY as a prerequisite. (more…)

Notes From Underground: Christine Lagarde Is Quietly Raising Her Voice

October 14, 2012

The IMF took center stage during the last four days as its meeting in Tokyo became the central focus of the global macro world. As usual, the IMF communique promised much via the usual platitudes but as investors and traders we are left in the lurch as much is promised but no real substance is revealed. Probably the most important element in the communique is the line, “WE NEED TO ACT DECISIVELY TO BREAK NEGATIVE FEEDBACK LOOPS AND RESTORE THE GLOBAL ECONOMY TO A PATH OF STRONG,SUSTAINABLE AND BALANCED GROWTH.” Why is this simple statement so critical? In last week’s IMF-produced “World Economic Outlook,” it revealed that the IMF‘s model is probably flawed when measuring the impact of fiscal policy on economic growth.

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Notes From Underground: Devil With The Blue Suit On

September 24, 2012

In his regular Monday Financial Times column, Wolfgang Munchau takes full aim at Bundesbank President Jens Weidmann for trying to make ECB President Draghi the devil incarnate. Because Weidmann invoked the Faustian character, Mephistopheles, from German hero Goethe’s play Dr. Faustus, Munchau accuses the Bundesbank President of undermining the policies of the ECB. Weidmann is going directly to the German public to plead his case that the ECB is taking the EU down the road of inflationary hell and monetary debasement. Munchau takes up the Draghi/Bernanke/Woodford argument that “the debate about nominal income targeting, where a central bank no longer stabilizes the inflation rate directly but focuses instead on stabilizing NOMINAL GDP (emphasis mine).” Munchau assumes that the central banks would be vigilante in controlling inflation but offers no view about what happens if NGDP rises with a significant rise in inflation but unemployment has not met the desired target.

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Notes From Underground: Let’s Assume We Have A Can Opener…

April 15, 2012

As regular readers of NOTES are well aware, I have been very critical of market participants like George Soros and their sanguine views of the European DEBT CRISIS. Many analysts like Jim Cramer have spent the last years waving the debt problem away. First, it was Greece was too small to have an impact on Europe. Ireland was too small and besides was ring-fenced by a bad bank structure. Portugal was smaller than Greece, thus nothing to be concerned about. Italy and Spain were possible problems but many were listening to the flirtations of the Chinese, who, time after time, made solicitations about purchasing European Debt. (By the way, we still haven’t seen the Chinese Sovereign Wealth Fund enter the fray.) If all else failed, European financial leaders were too exposed to the EURO to allow the European Monetary Structure to collapse. Germany would not allow the work of Helmut Kohl and others to be just another failed attempt at a unified Europe.

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