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.
Posts Tagged ‘Spain’
Notes From Underground: The Swedes Plumb the Interest Rate Depths
October 29, 2014Notes From Underground: Are the French Kicking the Hornet’s Nest?
May 6, 2013First, 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.
Notes From Underground: May Day! May Day! May Day!
April 30, 2013The international distress call is going out from Europe as the overall eurozone unemployment rate reached 12.1%. Germany had a low rate of 5.4% while Spain was more than 27%. So how is the ECB to do deal with the huge discrepancy between the economic performance of its 17 members? If the austerians are being relegated to economic purgatory then the pressure on the ECB to act will be diminished. Cutting rates for the sake of a show of action will be a detraction from the bigger political issue. Why irritate the Bundesbank and Chancellor Merkel by moving the ECB lending rate by a measly 25 basis points?
Notes From Underground: A Day of Disconnects In Global Markets, Or a Ball of Confusion
April 22, 2013First, I need to clear the air on an issue that is cited over and over, of which causes me great discomfort. In last Thursday’s Financial Times, Robert Pollin and Michael Ash, the two professors who sponsored graduate student Thomas Herndon of UMass-Amherst–and of recent fame for finding the flaws in Rogoff/Reinhart–published the article heard round the world: “Why Reinhart and Rogoff are wrong about austerity.” I am not disputing the results of their work but I am questioning a causal relationship that they note:
Notes From Underground: #Irony … Carmen Reinhart Says “Do Not Take Size As An Indicator of Importance”; Harry Rheems Dies
March 21, 2013Okay, you must have some fun amongst the idiocy of the Eurocrats. It seems that the best intentions of last Friday night’s decision to sacrifice the pawns in the game have done exactly what I thought the ill-conceived plans would accomplish. For 10 billion euros of bailout capital the fallout has been large drops in equity values. The capital losses are small compared to embarrassment facing the European policy makers. In a Bloomberg article by James Neuger, “Europe Plays I-Didn’t-Do-It Blame Game on Cypriot Deposit Levy,” it seems that German FM Schaeuble, France’s FM Moscovici, Spain’s FM Guidnos and even Finland’s FM Urpilainen all claim that they were opposed to taxing the guaranteed deposits of under a 100,000 euros. They all seem to point to the ECB and IMF as wanting the “bail-in.” This is a classic example of what my friend Andy Schreiber used to say: “Success Has Many Fathers, Failure Is But An Orphan.” The Cypriot situation is a situation that punches way above its weight. Carmen Reinhart, an economist I cite regularly on financial repression, silenced the talking heads on CNBCÂ when she claimed that, “Do not take size as an indicator of importance.”
Notes From Underground: CNBC — “I Could Listen to You Two Guys Talk All Day Long”
December 6, 2012
Click on the image to watch Rick Santelli and I discuss why the Fed will be the biggest fiscal cliff loser.
Notes From Underground: Four Central Bank Meetings, and, Oh Yeah, the Fiscal Cliff
December 2, 2012The weekend news was rather sparse as the Greeks got their trust fund check from the overlords in Brussels. The Greeks need to be leery of Eurocrats bearing gifts. The Sunday news shows in the U.S. highlighted the vast chasm between Speaker Boehner and Secretary Geithner. There was finger-pointing all around about as to which group was holding up the negotiations as to affect genuine compromise and a resolution to the fiscal cliff. As the rhetoric heats up, the S&Ps and global stock indices all closed higher on the week, showing that the price action speaks louder than words. The market has fears that failure to resolve the fiscal crisis will result in a new U.S. recession and will also undermine the global economic recovery, but yet the COPPER closed above the 200-day moving average for the first time in many weeks. Other industrial metals also performed well last week making me wonder if all the fiscal cliff rhetoric is missing some larger picture. We will watch to see if the COPPER can sustain its recent strength or whether we are in the midst of a short covering rally.
Notes From Underground: Looking Backwards One Week
November 27, 2012On November 19, 2012 I wrote a blog post about France getting a yellow card from Moody’s. In that post was another item about a Reuters story, “Germany Floats Idea of Greek 25-cent -on Euro Debt Buy Back.” Well, the importance of looking back is because that Reuters LEAK from Germany was virtually the agreement that was reached by the European policymakers in a short-term resolution to assuage the IMF and other Greek creditors. It is another example of the necessity of paying attention to official sources and leaks. I will re-post that NFU in its entirety with the link to the Reuters article. Preparation is the key to successful trading and investing.
Notes From Underground: A Quick Look at Spain’s Catalonia Elections
November 25, 2012The Greek debt issue will be resolved for the moment–as we have maintained for months. What is 31 BILLION EUROS among friends? Now that the Catalan independence parties have won a resounding victory in the Spanish region of Catalonia, the political waters of Europe have become murkier. It will be doubtful that Catalonia will actually secede from the Spanish polity but the mere threat will mean that Brussels will have to become more involved in pushing billions of more euros into the Spanish coffers. The Catalans are angry because they send far more euros to Madrid than they receive back in Barcelona. According to the most recent data from 2009, Catalonia had sent 16.4 billion euros more to the Spanish Treasury than flowed back to the region.
Notes From Underground: Reposting the IMF Piece From October 14, 2012
November 22, 2012First and foremost, a happy Thanksgiving to all the readers of NOTES FROM UNDERGROUND. The growth in readership and the high level of discourse is something I am very grateful and certainly thankful for in full measure. As much energy as I expend in formulating the blog, it is worth the effort because it helps anchor my thoughts about the impact of the global political economy. It is certainly the definition of a give-get. So again, thanks to all my readers.