Posts Tagged ‘Turkey’

Notes From Underground: A Conversation With Bonugli and Ronni Stoeferle

June 10, 2018

On June 6, I had a discussion with the Financial Repression Authority host Richard Bonugli and the highly respected Ronni Stoeferle. We covered myriad of global financial and political concerns as we tried to provide the foundation for profitable opportunities via in-depth analysis of these fragilities.

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Notes From Underground: It’s Good News Week (Hedgehoppers Anonymous)

December 20, 2016

The world is fraught with troubling news of assassinations, terrorist atrocities and confrontation between China and the U.S. But in the financial news it is all about the DOW PUSHING 20,000. To quote Mr. Natural: “What does the Dow 20,000 mean? It don’t mean SH*T.” We become enamored with numbers but in real financial terms 20,000 is meaningless on its own. The U.S. equity markets are enthralled with the possibilities that a Trump presidency will present. Three weeks ago Rick Santelli laid it out very well. He noted if trump was successful in reforming the ACA, realizing genuine corporate and personal tax simplification and reform, and rolling back some of the regulations burdening small and medium businesses the Trump administration would be an unmitigated success. If the Dow is the barometer, then Mr.Trump should declare victory and spend the next four years writing his autobiography.

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Notes From Underground: Is Nato Over? The Answer Lies In Turkey

December 12, 2016

The question for the political uncertainty confronting global markets will be the rollback of the U.S. influence via the reduction of its presence in various regional treaty agreements. Trump’s “faux pas” over Taiwan should cause the entire NATO structure to be reviewed. The ONE CHINA issue was pledged by the Nixon/Kissinger framework forged during the détente with China. The People’s Republic of China maintained that Taiwan’s independence was a domestic affair and should be resolved by the Chinese people. But the bottom line for the U.S. was: Would Washington risk a thermonuclear war to maintain Taiwan’s independence? Well, a similar question is relevant today in regards to Turkey. Would the U.S. risk war with Russia if Vladimir the Magnificent attacked Turkey in an effort to further destabilize the Middle East, resulting in a greater Iranian presence and further strengthening the KURDS?

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Notes From Underground: Brexit … You Ain’t Seen Nothin’ Yet

July 18, 2016

Indeed, the world doth have many piles of prairie grass to be LIT. After the NYSE closed for the weekend but while CME‘s electronic markets were still trading news broke about a COUP in Turkey. To readers of NOTES, this possibility was forecast in a post from October 15, 2015. The coup was not a surprise but the execution of the COUP was a comedy of errors (except for the deaths) as the leaders failed to prevent any communication from President Erdogan. In the world of social media the first action OUGHT to have been the jamming of all radar and wireless communication so that the overthrowers of the elected government would have a monopoly over all messages. It seems that George Friedman of Stratfor was the first to doubt the ability of the military conspirators and announced that the coup had failed.

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Notes From Underground: Low Probability, High Impact Events

April 11, 2016

When Alan Greenspan was Fed Chairman he would regularly orate on the concept of low probability events that could create disruption in the global financial system. These events are not BLACK SWANS because by definition a black swan is unknowable nor foreseeable. So it is time to take a survey of what Greenie called low probability:

1. Paul Ryan being parachuted into the candidacy for the Republican Party. There is a possibility but is a potential problem, which could rip apart the GOP. What would the fallout be for financial markets if the U.S. was splintered into a three- or four-party system? The same could be said for the Democratic Party if there was a revolt by the left-wing in response to the super delegates. The issue for the Democrats will rise to the fore if Hilary Clinton were to lose New York. Bernie Sanders is a low probability bet but his impact would be great.

2. The probability of Russia attacking Turkey, which could result in the break-up of NATO. If Putin attempts to seek revenge against President Erdogan by providing support to the Kurds against Turkey, the U.S. and its NATO allies would be forced to decide if they were willing to risk war with Russia to honor its commitment to a friend. Imagine what happens to the political situation in Europe if NATO were demolished because of its failure to honor Article 5, which asserts that an attack on one is an attack on all.

3. The June 23rd vote by the U.K. on Brexit results in a vote to leave. Not sure this is a low probability event but it will certainly have a HIGH IMPACT. The greatest outcome will be that others in the EU will request a referendum for this was certainly articulated in the recent Dutch vote on the EU’s agreement with the Ukraine. The most volatile result of a Brexit would be the pursuit of a referendum by German voters. The myriad articles on German unhappiness with the ECB are a mere prelude to what a vote in favor of Brexit would result in for the rest of EU. If you want a good sense of the arrogance of the European elite, watch Mario Monti’s CNBC appearance from today. Mr. Monti decried the outbreak of democracy in Europe and was very critical of David Cameron for falling in the trap and calling a referendum.

The critical assessment by Monti is an infamia for Mr. Monti was appointed Prime Minister of Italy by a “coup” orchestrated by the Brussels elite. Berlusconi was forced from office by threats of Italian debt downgrade and the Brussels eurocrats’ rejection of the Italian budget. When Prime Minister Monti had to call elections in 2013 after the Berlusconi term expired, Monti and his allies received a mere 11% of the vote. So Mario Monti’s views of popular democracy are subject to further review.

4. A failure of a major European bank, something on the order of Deutsche Bank or a major French institution. The cracks in the Italian financial system are well known. It is the exposure of other EU domestic banks that can cause a blind side hit to the financial system. Part of this issue is the BIS view of how sovereign debt is rated. Currently, all EU sovereign debt carries a zero risk weighting. If this were to change, EU banks would be forced to raise a great amount of capital, a total that would dwarf the amount that was recently raised to support the purchase of non-performing loans from Italian financial institutions. The European nations are struggling even with zero interest rates. Imagine what the budget deficits of Spain, Italy and France would be if borrowing rates were to dramatically increase.

This is just the beginning of analyzing low probability, high impact events. The landscape of the global macro system are rife with such possibilities. Now a black swan in an uncertain event this focus will be on those with a probability of occurring. The floor is open to all suggestions.

Notes From Underground: Four Central Bank Meetings, and, Oh Yeah, the Fiscal Cliff

December 2, 2012

The 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.

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Notes From Underground: Weekend news is predominantly positive for the risk-on crowd

September 12, 2010

A quick overview of the weekend: The Chinese growth story is proceeding at a much stronger rate than previously expected and Chinese inflation levels seem well contained. The global equity markets have opened higher as the China’s surging growth has given a boost to the risk-on crowd. We are not big fans of the Chinese data releases. We are and will be suspect of official data from a country that seeks to harness what its populace can read. We also are not surprised by Chinese strength as the copper and energy and grain markets have been telling us for months that the Asian upturn is real. The slack demand in the the developed world has be more then replaced by emerging global boom.

The Turkish elections have added more power to tonight’s risk-on profile. The elections went better than expected for Turkish Prime Minster Recep Tayyip Erdogan and gave him even more latitude for reforming the Turkish polity to further meet European legal standards. Turkey’s equity and bond markets viewed this a positive as the consistency of reforms is what the markets are most desirous of pursuing.

There is also news from Basel that the Basel Committee on Banking Supervision agreed to the provisions of Basel III and though is means higher capital requirements, the new standards will not be phased in until 2013 to 2018, which gives the markets some breathing room. One of the more positive aspects will be based on what Bill White has called leaning into asset prices and acting in a countercyclical manner.  As economies heat up capital ratios will rise for banks, thus acting to curtail out of control asset appreciation. This is a very good regulation and will act to head off future “irrational exuberance.” It will be awhile before its full effect is felt but it is an acknowledgement that BUBBLES need to be deflated in the incipient stages.

We will also be watching the DPJ election that takes place Tuesday in Japan. The intra-party battle between Ozawa and Kan can have a very big outcome for YEN valuation. If the old warhorse OZAWA were to gain the party leadership–and the Prime Minister post–the YEN will weaken in the initial anticipation that Ozawa would move to weaken the YEN. We will certainly report more about this as events unfold, but there were several stories written about the Japanese unhappiness in regards to the Chinese purchases of JGBs putting unwanted bid to the YEN. Some Japanese are even suggesting that China has ulterior motives and wishes to keep the YEN unduly strong to further its own trade advantage. This is merely “speculation,” but it certainly adds to the heat on possible intervention. We don’t know the outcome but pay attention as Ozawa ‘s victory could move him to action.

Notes From Underground: Let’s talk Turkey

June 3, 2010

We at notes will sometimes put an issue on the radar screen that may not have present value for trading, but may well have significance in the near future and ultimately have an effect on global money flows that we hold dear. Turkey fits that profile.

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