Posts Tagged ‘volatility’

Notes From Underground: Putting This Week In Perspective

August 10, 2017

Just when the volatility sellers were heading to the beaches to bask in the glow of easy money comes the tweeter-in-chief to crush the complacency. The airwaves were full opiners who warned of a market that is fully valued.Gundlach and Dalio added their two cents for measure, espousing the need to hold GOLD as a hedge against geopolitical uncertainties. Again, it is not political uncertainty but the malfeasance of central banks that should be the concern of global investors. Deflation is the ingredient for central bank panic. As Peter Boockvar reminded his readers today: Gold is a monetary haven.

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Notes From Underground: Global Politics Will Keep Volatility Elevated

October 10, 2016

Increased volatility is not debatable. It will be the outcome of the uneasiness of global politics. It seems that the present state of affairs reflects the vast chasm between those who have benefited from GLOBALIZATION and those who have seen their lives and incomes being disrupted by a world experiencing dynamic change. Brexit was a vote of the nationalists versus the Davos crowd, or those seeking the comfort of the world they know versus those who have profited mightily from the first mover advantage of being prepared for the post Berlin-wall global economy. The central banks’ efforts to prevent a massive liquidation of global assets and harm that would have befallen the global economy as left many participants in a state of financial repression.

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Notes From Underground: You Will Learn To Live With Volatility

June 11, 2015

Last Wednesday, ECB President Mario Draghi warned the traders and investors in sovereign debt and other credit markets that great volatility would be the cornerstone of activity and the market would have to learn to deal with it. The problem with this scenario is, I believe, that the ECB is the progenitor of most of the violent price movement. Remember, the ECB QE program means that the Frankfurt bank has a great deal of fire power to move markets–to the tune of 60 billion euros ($72 billion) a month, which was close to what the FED was purchasing at the height of its QE program. Traders and investors have no heads-up as to when the ECB will be buying and therefore subject to being stopped out of trades at any time.

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Notes From Underground: Is Mark Carney Subverting the Bank of England’s Credibility?

June 24, 2014

It was 12 days ago the BOE’s Mark Carney delivered his Mansion Speech and warned markets that interest rates could rise faster than investors were forecasting, resulting in a strong rally in the British Pound against all currencies. The POUND was especially strong against its largest trading partner the European Union. Today, Governor Carney synchronized his thoughts with Fed Chair Yellen and announced that the BOE may be able to keep rates low for longer because the lack of rise in wages meant that there was still GREAT SLACK IN THE ECONOMY. (It appears that the central bankers have been cheating off each others’ papers.)

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Notes From Underground: It Would’ve Been Enough

April 14, 2014

In an effort to state how badly the markets are ignoring risk, we at Notes From Underground warned about being short volatility. As we head into the Passover and Easter holidays there is much on the table that financials fail to appreciate. A global market focused on the pantheon of central bankers it is the my task to remind of the major issues facing the world’s POLITICAL ECONOMY.

  1. The BOJ and the Abe government have gone to great lengths to create a recovery in Japan and with it a modicum of inflation. At this point economic growth in Japan is stalling. With the initiation of the sales tax increase of 3 percent April 1, Japan’s central bank has a great deal at stake. If growth stalls the BOJ will be hard-pressed for even more radical efforts to jump-start the economy through increased bond purchases both of a domestic and foreign nature. The YEN will be under pressure causing stress throughout the global financial system.
  2. What will happen in China as it tries to stem any debt crisis from too much credit being advanced through  the Chinese shadow banking system?
  3. The problems in the Eurasian land mass as President Putin attempts to undermine the sanction regime of the G7 nations
  4. The potential for  a banking crisis in the European system as the mass of debt becomes a larger burden in a low inflation environment. Compounding the problem is that European banks own a vast amount of sovereign debt of Greece, Spain, Italy, Ireland and Spain,resulting in an adverse feedback loop of monstrous proportions; and
  5. The Federal Reserve has adopted a position of primary concern for a high unemployment/low wage environment and is pretending that a zero interest rate policy can provide the solution. The FED is putting its credibility on the line in pursuing a jobs-at-all-cost position for if the self-imposed jobs threshold can be easily forsaken, why should investors believe that the inflation threshold will be followed? Keep an eye on the 2/10 yield curve for any signs of the market’s concern with regards to the credibility of the Yellen Fed. For now, the SPOOS and NASDAQ are the default mechanism for all investors for when in doubt, buy equities. As Jefferies’ David Zeros said on CNBC Monday afternoon, SPOOS ARE FOR LOVERS AND GOLD IS FOR HATERS, which may well be … for now. But being short volatility is for the clinically insane. Just hope I have a ticket on the volatility train since “YOU DON’T NEED NO BAGGAGE, JUST GET ON BOARD.”

Also in the spirit of the holidays:

If the U.S. Treasury had done only TARP … it would’ve been enough
If the Fed had only provided QE1 … it would’ve been enough
If the Fed had only done QE2 … it would’ve been enough
If the Fed had only done Operation Twist … it would’ve been enough
If the Fed had only done QE Infinity … it would’ve been enough
If Mario Draghi had pledged no taboos … it would’ve been enough
If Mario Draghi had pledged to do whatever it takes … it would’ve been enough
If the BOJ had only doubled the money supply … it would’ve been enough
If the BOJ had only bought massive amounts of JGBs … it would’ve been enough
If the Japanese were only buying foreign bonds … it would’ve  been enough
If  all the world’s central banks had lowered interest rates to zero … it would’ve been enough

AND NOW FOR THE BITTER HERBS!

Wishing all of our readers a happy and healthy Passover and Easter.

Notes From Underground: Double Play Combo; Hilsenrath to Harding to Bernanke

June 18, 2013

The media voices that have plagued the markets for the last few days will have to take their seats as the FOMC delivers its rate decision and then a half hour later Chairman Bernanke will read a prepared statement which the algos will have two seconds earlier and a Q&A will ensue. My first question is why will Hilsenrath and Harding be called on by Bernanke to ask their questions when they purportedly already know the full extent of FED policy. I look for Ben Bernanke to be very measured in his words for he has seen the damage a misplaced adjective or verb can have on the market. Will the FED “taper”? I don’t know but look for the chairman to entertain a few questions about removing part of the present QE project.

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