Posts Tagged ‘SNB’

Notes From Underground: Another FRA Podcast

September 30, 2018

I am posting the latest PODCAST from the Financial Repression Authority (FRA), in which Peter Boockvar and I talk markets with Richard Bonugli. This PODCAST sets out the market issues that financial markets will confront in the fourth quarter.

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Notes From Underground: Is April The Cruelest Month?

April 29, 2018

As T.S. Eliot warned in The Wasteland, April is the cruelest month, as the thaw of winter gives way to hope as the world returns to rejuvenation. April has delivered the first quarter corporate results and it is no exaggeration to state that revenue and earnings have exceeded expectations. However, the equity market results have failed to respond to the robust numbers as the SPOOS have gained a mere 1.25% and remain unchanged on the year. The NASDAQ 100  has been a much better performer as the TECH sector continues to cruise.

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Notes From Underground: Kudlow’s Dilemma, Tariffs Versus King Dollar

March 18, 2018

The newswires were flushed with either praise about the appointment of Larry Kudlow to lead the National Economic Council, or concerns about his past dalliances with drugs and supply-side economics. This BLOG doesn’t care about one’s past human foibles as we all have failings. But the addiction to supply-side economics is and will be an issue of concern as the White House attempts to push forward with a coherent policy. The great showpiece of last week’s media frenzy over Kudlow was the transparency of what I have referred to as the mainstream media’s desire for access versus genuine discourse. CNBC was giddy over the idea that one of the network’s talking heads was going to be a key figure in forthcoming economic discussions and old loyalty OUGHT to provide greater ACCESS. The questions for the consumers of financial news will be who abuses the relationship more. But enough editorializing.

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Notes From Underground: Some Issues to Contemplate

January 16, 2018

On Tuesday, Rick Santelli and I spoke, and, as usual it was way too short as we couldn’t cover anything in the depth we would’ve liked. Regardless, it allows us to get out front of many investment ideas. Rick has a stable of high quality guests: Bianco, Boockvar, Biderman, Trichet, Lazear … the list goes on and sometimes I wish my readers would let CNBC know how important Rick is for a larger discussion about ideas besides the most recent Apple price and latest Trump tweets.

Click on the image to watch me and Rick discuss the euro and the central banks.

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Notes From Underground: Feeding the Ducks When They Quack

January 9, 2018

Since the unemployment data, I have tried to write an appropriate blog but “all my words came back to me in shades of mediocrity” so I refrained from adding to the stream of vapid commentary that fills the Internet. But let’s proceed as the markets provided movement based on some sense of heightened inflation expectations. There is certainly money flowing into commodity based investments as OIL, COPPER, GOLD, and a litany of other natural resources have become a repository for money concerned with investments other than crypto currencies. The U.S. employment data was well within the range of expectations. The important average hourly earnings and the average work week were close to the consensus forecasts. The Canadian data beat estimates for the second consecutive month. The consensus was for an unemployment rate of 6% and addition of 2,000 jobs. The actual data was 5.7% unemployed and almost 80,000 new jobs, with two-thirds being part-time.

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Notes From Underground: Did I Miss Anything?

December 17, 2017

There were myriad central bank meetings last week as the FED, ECB, BOE, SNB, Bank of Mexico and others rendezvoused. With the exception of the Fed, all maintained their current policies. (The U.S. FED raised rates, which was 99% baked in.) The ECB was as dovish (as expected) and President Draghi has a few new issues to confront as Italian elections are scheduled for March 4, 2018. The Italian situation is already impacting sovereign bonds as the Italian 10-year yield rose against the German and French equivalents. BUT I FULLY EXPECT FOR THE ECB TO BREAK THE CAPITAL KEY RULES BY PURCHASING MORE ITALIAN DEBT THAN ALLOWED. POLITICS WILL BE DRAGHI’S MAIN CONCERN.

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Notes From Underground: It’s Halloween and Nothing Scares the Markets

October 31, 2017

It has been a few days since the ECB announced its intentions. There was no surprise as President Draghi met market expectations by beginning a NON-TAPER, cutting QE by 30 billion euros beginning in January 2018. So as we considered the outcome of PACE and DURATION, the ECB cut the pace in half and extended the program by nine months to September 2018. The most significant piece of the Draghi press conference was his persistence on making the composition of future purchases. It seems that the ECB will utilize the European corporate bond market to meet its requirement and stay true to its CAPITAL KEY. By buying more corporate debt the ECB will find enough German assets to buy. The major problem for the European markets is that UNLIKE the U.S. financial system, European banks are a much more important actor as they provide far more corporate loans on a percentage basis of GDP than U.S. banks. The U.S. financial system relied to a far greater extent on issuing bonds. We have previously discussed the absurd chart showing European high yield debt to have a lower interest rate than 10-year U.S. Treasuries.

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Notes From Underground: A Celebration Of The Greatest Act Of Financial Alchemy (Ever)

October 25, 2017

The Swiss National Bank (SNB) has pulled off the greatest act of alchemy by printing copious amounts of Swiss francs (CHF) and turning the currency into real corporate assets. The SNB has grown its balance sheet to CHF800 billion¬† from CHF500 billion in 2015, 85 percent of which is foreign exchange holdings in various forms. As the SNB struggled to weaken the franc to prevent the ultimate safe-haven currency from strengthening and putting the Swiss economy into a DEFLATIONARY SPIRAL. The Swiss experiment began January 15, 2015 as the SNB officially removed the EUR/CHF PEG, which it was attempting to HOLD. Yet the market kept buying the franc despite the SNB’s efforts (the PEG had a 1.20 floor).

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Notes From Underground: Who Gets Eaten and Who Get’s to Eat (Sweeney Todd)

October 15, 2017

As Stephen Sondheim wrote in the dark musical Sweeney Todd, “What’s the sound in the world out there. It’s man devouring man. The history of the world, my sweet, is who gets eaten and who gets to eat.”

I open with this thought in regards to a wonderful op-ed piece in the Barron’s over the weekend by John Curran titled, “The Coming Renaissance of Macro Investing.” Curran has the pedigree of writing this piece as he served his time at one of the greatest global macro funds, Caxton Partners. There are no greater thinker/traders than Stan Druckenmiller or Bruce Kovner. When it came to understanding the role of foreign currencies in creating investment opportunities Kovner is the wisest I have ever had the pressure to read. The last 10 years have been difficult for the global macro discretionary crowd but as John Curran suggests the winds of change are blowing. This is also a theme I have been discussing of late. The big difference in my opinion is that short-term trades will morph into momentum investments.

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Notes From Underground: The More Things Stay the Same, the More the Headlines Change

September 14, 2017

The BOE held true to consensus and kept rates unchanged and maintained its balance sheet at 435 billion pounds, with the votes were exactly the same as the August meeting. The POUND fell on the initial headlines but the algos reversed as it was reported that there MAY be a need to raise rates due to the lessening slack in the economy. Governor Carney is reading from the Mario Draghi book, “Rules For Central Bankers.” He cited Brexit as the cause of a supply shortage because of reduced investment into the U.K. Wow! This is nonsense as stagnant wages are limiting domestic demand but Carney insists the negative fallout is constraining supply. With interest rates at record lows British firms could borrow all the cash they need to finance expansion. Carney needs BREXIT as the cover for his massive error. Remember when he panicked and cut rates following the BREXIT vote?

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