Posts Tagged ‘QE’

Notes From Underground: Jobs Report Gives the Fed the OK to QT

August 6, 2017

Friday’s unemployment report was on the strong side, although certainly not much stronger than market consensus. Yes, nonfarm payrolls were on the high-end but average hourly earnings were right on target, hours worked remained the same at 34.5 and the unemployment rate dropped to 4.3%, but that could be due to a slight rounding error. The markets traded as if the FED could possibly raise rates in September, but I believe the jobs report provides the impetus for the FED to commence with QT. The U.S. yield curves reacted in such a manner as the 2/10 curve actually rose 3.5 basis points, closing at 91.5.

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Notes From Underground: Mario the Magnificent Keeps the Crowd Enthralled

July 23, 2017

Let me be perfectly clear: THE ECB’s THURSDAY PRESS CONFERENCE WAS DOVISH.

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Notes From Underground: The BOJ and the ECB Provide the Recipe For … ?????

July 19, 2017

Before I preview the BOJ and ECB I want to expound on the piece that I mentioned in the previous post written by Bloomberg reporter Alexandra Harris, who cites the thoughts of JPMorgan strategists Alex Roever and Kim Harano. The piece lists four arguments for bringing forward the FOMC‘s announcement to shrink its balance sheet:

  1. Economic conditions are supportive of balance sheet run-off;
  2. The vast amount of discussion has already prepared the market and September won’t make it any clearer;
  3. Starting NOW buys a “few extra months” of the measurement of the market impact of normalization;
  4. Finally,September is an “awkward time” because of the murky outlook for addressing the debt limit before funding runs out in October.

I agree with all these arguments and would HOPE the FED announces its intention to start shrinking the balance sheet at next week’s meeting, press conference be damned.

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Notes From Underground: And a Honey Pot Is Stuck On His Nose

July 17, 2017

Wow! The Chinese President doesn’t appreciate being caricatured as children’s character Winnie the Pooh so it’s censored from Chinese social media. A Financial Times article noted “attempts to post the Chinese characters for Winnie’s name on Weibo returned the message ‘content is illegal’ although some users appeared able to circumvent the block.” Regardless of whether some of the posts were able to avoid the censors, the point is the same I have been making for eight years on Notes From Underground. A country that does not allow Google to freely operate makes me suspect of all official government data. The greatest comedy was that the financial media was poking at President Xi and the ruling Communist Party Politburo while at the same time citing the most recent economic data as if it was “truth.” The GDP data came in at 6.9%, exceeding guesstimates of 6.8%. Retail sales followed GDP and also beat consensus guesses.

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Notes From Underground: G-20 and Unemployment

July 6, 2017

The data “dependent” FED will have a look at the unemployment report Friday and hope to see VERY ROBUST gains in NONFARM PAYROLLS, but most importantly, to see a 0.4% rise in WAGES in order to deflect from  the recent criticism directed at them. The consensus is for an increase of 175,000 jobs and for an average hourly earnings to rise 0.3%. If the data is tepid, the long-end of the curve will attempt to rally, a reversal of the SIGNIFICANT steepening of yield curves seen during the most recent selloff in developed bond markets.

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Notes From Underground: Time It Was and What a Time It Was

July 5, 2017

I use the wisdom of Simon and Garfunkel’s “Bookends” to discuss the huge risk that pervades the global financial system. This is not Yra crying wolf or pretending to be a prophet of doom. Notes From Underground deals with profit opportunities. It’s not a cult singing Barry McGuire’s, “Eve of Destruction.” I have not been banging the drum of impending financial disaster, but I have been consistent in noting that negative and zero interest rates, coupled with massive QE programs from the world’s central banks have lifted asset prices on a tsunami of liquidity.

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Notes From Underground: Wake Up! Wake Up! For Your Light Has Come

June 11, 2017

This line comes from the Jewish liturgy of welcoming the Sabbath. I use it here to make a note to my readers about a possible signal that the NASDAQ 100 sent on Friday. Now I don’t hold myself out as anything but a third-rate TECHNICIAN (reader of chart formations), but having been taught by one of the greatest technical minds (thanks H.G.), I know to watch certain formations for signals in a POSSIBLE change in sentiment. THE CHART THAT CAUSES CONCERN NASDAQ 100 made ALL TIME HIGHS LAST WEEK BUT CLOSED BELOW THE PREVIOUS WEEK’S LOWS. Do I know when the market will reward a short position?

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Notes From Underground: Mario, Don’t Try to Lay No Boogie Woogie On the King of Rock ‘n’ Roll

April 27, 2017

Mario Draghi’s nonsense is a compost heap as he tries to continue his efforts to build the ECB‘s balance sheet to the point of no escape. The ECB president danced around inflation questions by generally holding to the view that inflation across the entire euro zone would have to rise to the 2% level for the central bank’s mandate to be met. Currently, Draghi holds to the view that the recent elevated levels of inflation are transitory due to higher energy costs. It was noted that there has been a decline in service sector costs, which could put downward pressure on inflation once the energy prices pass through the data. Draghi also emphasized that with the current unemployment levels in some EU countries there was far too much slack which keeps wages from rising. A positive point for the ECB is that it does not follow NAIRU as a major gatekeeper of wage levels. In his typical effort to elevate his position, Draghi applauded the ECB for saving the EU financial system and economy, but until the politicians make the needed structural changes there will be continued “substantial monetary accommodation” so the ECB can meet its inflation mandate.

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Notes From Underground: Today, It Was Europe (Or, a Preview of Things to Come)

February 6, 2017

Notes From Underground has been concerned that 2017 would be the year of Europe as the ECB’s  quantitative easing policy and NEGATIVE interest rates would be an issue for many of the elections taking place this year. The Dutch, French and Germans will hold parliamentary elections. Those following the mass media will be focusing on immigration while NFU will continually seek to underline the importance of the repressive financial policies of the ECB. It is this narrative we will use to take the pulse of potential upheavals to the status quo. There is no doubt that the opposition to President Draghi is growing. In a threat to the Empress of Europe, Angela Merkel, received news that her coalition partner, SPD, has overtaken her party in the polls.

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Notes From Underground: FOMC Decision Day Is Upon Us

January 31, 2017

Janet Yellen and the FED take center stage tomorrow and the consensus is for NO CHANGE. The market believes the FED will be on hold until March. BUT I OFFER THIS: If I was the FED chair I WOULD RAISE RATES 50 BASIS POINTS to take some of the risk out of the U.S. equity markets. The S&Ps are virtually unchanged since the December FOMC meeting but the market’s enthusiasm for anticipated tax cuts, regulatory relief, and possible currency intervention means the FED cannot wait to let the economy run “hotter for longer,” especially because of the 4.7% U3 unemployment level. If Chair Yellen wishes to burst the TRUMP exuberance it is time to move aggressively to stem the rise of a potential inflationary threat.

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