Posts Tagged ‘Spain’

Notes From Underground (Repost): A Celebration to the End of Q2, “A Single Spark To Light a Prairie Fire” (January 11)

June 30, 2016

The world is sitting on piles of tinder. Two of the potential dangers have passed in the last seven days. The Brexit vote has taken place and the Spanish elections have finished without any new disruption to the European political scene. In fact, Spain was interesting as Spanish voters seemed to be afraid of a Brexit-type market reaction and moved more support to the center-right as a vote for the known.

BUT TODAY THE ECB HAS POTENTIALLY IGNITED THE FLAMES OF GERMAN ANGER AS DRAGHI MOVED FOR THE QE PROGRAM TO BUY LOWER GRADE DEBT. THEY HAVE RUN OUT OF HIGH QUALITY BONDS TO BUY. This will not sit well with the AfD supporters in Deutschland. There were massive moves in the European sovereign spreads after the news release and more will certainly follow as the program becomes clearer.

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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: More Proof of Algo-Driven Volatility

December 20, 2015
Dateline Japan: When the BOJ released its policy decision in the wee hours of December 18, the algos interpreted the news as an expansion of monetary stimulus and assumed it was the QQE program. In the press conference, BOJ Governor Kuroda explained that the extension was not an additional easing but merely an extension of bond duration that the BOJ would buy. Because there’s a dearth of bonds available for purchase, the BOJ is extending purchases to include those of 12 years in length.

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Notes From Underground: A Few Things Before the Financial Ship Sails

October 12, 2015

When holiday markets quash volume and new items repetitive, it provides an opportunity to catch up with some general concepts in a style I like to call “Quick Hitters.”

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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: Reissue–August 15, 2012

July 13, 2015

Earlier I was rereading a blog post from almost three years ago. I believe it still has great relevancy and gives us all perspective from where we have been to what the next three years may bring. Perspective for a global macro trader is very important for without it traders rush in where investors dare to tread.

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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: Are the French Kicking the Hornet’s Nest?

May 6, 2013

First, the unemployment report offered no surprises as the market was close to the actual release. The real surprise was in the upward revisions to the February and March numbers. The negative surprise was the average work week shrinking by 0.2% of an hour. The shorter work week may be an aberration but it may mean that employers are cutting workers hours so as to keep under the Affordable Care Act mandates, but I caution it is far too early to say that this is definitely occurring. The BOND markets reacted negatively to the “stronger” jobs data and the 10-year note future fell as yields rose by 10 basis points. Investors bought stocks and seemingly sold bonds in a performance of risk-on/risk-off. Again, one day’s action does not a trend make. The pure risk-on/risk-off paradigm has been dormant for quite a while and let’s hope it stays that way.

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