Posts Tagged ‘trade’

Notes From Underground: Not Such Benign Neglect for the Payrolls Report

December 9, 2018

In what appeared to be a “soft” unemployment report, the equity markets discarded theĀ  traditional Goldilocks response to weaker data and spent the entire session in sell mode. That sent the S&Ps to a 4.5% LOSS for the week. The BULLS are in trouble for the market rejected what was regarded as POSITIVE news and continued the 11-week long correction. The G-20, “dovish” FED and softer data were cast aside as new negative stories, like the arrest of a significant Chinese business leader and the Mueller investigation closing in on the president. OPEC’s agreed cut in oil production sent crude oil prices moderately higher on Friday, which would have given a boost to the S&Ps as energy stocks would have been bid in past occasions.

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Notes From Underground: A Riddle, Wrapped In a Mystery, Inside an Enigma

December 4, 2018

I’ve been thinking about the Churchill quote referring to Russia. Rather than referencing Russia my thoughts turn to the flattening yield curves that began on Monday. As commodity, global equities markets, the Chinese yuan and the precious metals all staged strong rallies, the long-end of the yield curve also rallied, especially the 10-YEAR. As a result, the 2/10 curve flattened to a 10-year low of 15 basis points. On Tuesday, the curves flattened even more as the 2/10 closed at 10.7 basis points. As Vizzini from the Princess Bride would say, “INCONCEIVABLE!” To support the rally in the long-end of the curve there was a retracement of the recent rally in global equity markets (the NIKKEI, DAX and S&Ps were all down substantially). This suggests that the positive news from the G-20 meeting has now been cast asunder because investors are struggling to comprehend what actually took place in Buenos Aires between the U.S. and Chinese delegations.

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Notes From Underground: Powell Seeks to Reestablish the Authority of Markets … Maybe?

October 7, 2018

I am positing this idea because I think it’s critical to current valuations of various asset classes. The nine-year rally in the U.S. (and to some extent the global equity markets) has stretched valuations as ultra-cheap money has pushed investors into taking risks larger than what many money managers and retail investors would do “normal” circumstances. This was ultimately the Bernanke plan the former chairman laid out at Jackson Hole in 2010 (simplified in Bernanke’s Washington Post op-ed as the PORTFOLIO BALANCE CHANNEL). The long-term problem for investors is that Bernanke and Janet Yellen were terrified of market reactions whenever they desired to halt the massive QE programs and their beloved use of FORWARD GUIDANCE.

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Notes From Underground: More Perspective In the Time Of Reflection

September 12, 2018

First, to all of those in the NOTES community who celebrate the Jewish New Year, I wish you a year of health, peace and prosperity. To those who celebrate other spiritual endeavors I offer you a wish for health, peace and prosperity. Now, to the markets. In the past month I have spent time putting issues we’ve been discussing for the last nine years into perspective. Lately, the airwaves are filled with the accolades laid upon the policy makers who SAVED CAPITALISM. ListeningĀ  to Paulson, Geithner and Bernanke pontificate on how they acted to save the system is enough to send me into fits of rage as the culprits who failed to act to halt the housing bubble praise themselves for the “Courage To Act.”

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Notes From Underground: But National Security IS Trade Policy

June 7, 2018

Tonight I am LINKING to the March 1 post about the White House discussed invoking Section 232 of the Trade Expansion Act of 1962. In an effort to justify the idea of placing tariffs on U.S. allies to curb steel and aluminum imports, Commerce Secretary Wilbur Ross noted that a strong steel sector is essential for U.S. national security. Section 232 is so broad that it is organic and can used to justify any action the U.S. deems necessary in regards to trade. In a CNBC interview on Thursday, Ross cited Section 232 again and wrapped it into the tariff discussion by maintaining that we must be strong economically to be strong militarily. Later in the interview he pressed that there can be no military security without economic strength.

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Notes From Underground: The Importance of Being Lighthizer

May 24, 2018

The plot thickens as the media is filled with one leak after another in regards to tariffs or threats to embark on a road to perfidy by invoking section 232 of the 1962 Trade Act: Using the broad cover of national security to justify increased import duties on autos. [In a hat tip to A. Limey] It is time to acknowledge that the “brain” of President Trump’s trade team is Robert Lighthizer.

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Notes From Underground: The 10-Year Finally Hits 3% and It is Meaningless

April 24, 2018

The concentration of the media on round numbers is going to drive me to drink that bottle of Pappy Van Winkle. In true philosophical inquiry, round numbers never fit in the square pegs of the unbalanced thinking at Notes From Underground. In Tuesday’s post I am going to run through several points that I’ve mentioned over the past several months. All of these issues will have some relation to the developing narrative that we are experiencing in the markets:

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Notes From Underground: Flattening Curves — All Action and No Talk

April 11, 2018

In the political realm, the concern about tariffs has been lessened as Chinese President Xi took the high road with some silky conversation. It is not in the Chinese interest to raise the level of shouting/tweeting, nor to allow the YUAN to depreciate. The last blog post weighed the harm China would do to itself if the YUAN were to depreciate for it would then have to face the acrimony of many nations it is trying to placate. From a TECHNICAL perspective, it appears that the YUAN is going to test three-year lows between 6.11/6.20 to the dollar. As the Chinese tensions eased, the world now turns its eyes to Syria.

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Notes From Underground: The Week That Was …?

March 26, 2018

What a week last week turned out to be (and that was if you just followed the headlines). Tariffs are taxing the global financial markets as they try to guesstimate the economic impact from the effect of tit-for-tat responses to the initial U.S. measures efforts to gain support for dealing with Chinese trade violations. The FOMC added to market volatility as the suspense over three or four rate hikes still impacts the DOT PLOTS. The Bank of England confused markets as they voted 7-2 to sustain the current interest rate policy, even though consensus assumed a 25 basis point increase. By week’s end the confusion reverberating around the globe did serious damage to equity markets as the S&PS were down almost 6 percent on the week and the European stock indices continued their continued their selloff, making them the weakest of all regions (in contravention to the punditry’s call for the buying of European stocks).

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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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