Following Wednesday’s short introduction to the significance of the Powell in Paris speech in Paris, we a digestif in the form of Federal Reserve Vice Chairman Richard Clarida and New York Fed President John Williams providing supporting the chairman. As a result, the dollar sold off, there was a major rally in GOLD, and boost to equities even as earnings proved to be TEPID. But what I’m waiting for is a STEEPENING in the U.S. yield curves when the world’s bond investors contemplate that the FED has ABDICATED any sense of FIDUCIARY RESPONSIBILITY for its status as a reserve currency.
Posts Tagged ‘yield curve’
Notes From Underground: The Umpire Strikes Back
December 19, 2018The Fed chairman is situated as the key arbiter of the economy and rules via its DUAL MANDATE. Given that it has a research staff of at least 500 economists the FED positions itself as ALL KNOWING, which is certainly okay as long as it accepts the consequences and lays aside the use of counterfactuals when its policies may turn out to be very misguided.
Notes From Underground: Seasons Greetings From 1850 K Street
December 18, 2018On Wednesday the most discussed FOMC meeting in years will take place. The FED has put itself into a box through its use of forward guidance and of the DOT PLOTS to direct investor sentiment. By skipping a rate hike at its November 8 meeting Chairman Powell put the burden on December with a heightened sense of a rate rise as it has a scheduled press conference. There is a murderers row of financial heavyweights arguing for the FED to ABSTAIN FROM A RISE IN RATES and wait for more data to ascertain whether the equity markets are signaling a genuine concern on economic problems, or are merely repricing risk that had premiums WAY TOO LOW during the halcyon days of harmonized QE. As the FED shrinks its balance sheet, the ECB is finished with liquidity. Once you add the BOJ dancing to the tune of a decimated bond market, global liquidity is being restrained.
Notes From Underground:
July 16, 2018On July 11, I discussed many of the current issues confronting the financial markets with FRA’s Richard Bonugli and Peter Boockvar of the Bleakley Group. These podcasts are an important way for me to communicate with some of the brightest minds in the global financial world. It allows me to express ideas and have true discourse to help clarify ideas for the readership of NOTES FROM UNDERGROUND. Pour your favorite libation and drink deep from the efforts of some of the best minds in the financial industry.
Notes From Underground: Oh, When Will They Ever Learn?
November 28, 2016This is a tough POST to write for I will criticize a newspaper I have read every day for at least 30 years. (In fact, I still have it delivered on my doorstep and read most of it online in the evening before the hard copy arrives.) The London Financial Times had a front page story, “Troubled Italian Banks Face Fresh Risk of Failing If Renzi Loses Vote.” This is a deplorable headline for it harkens back to the days of the mainstream media warning of dire consequences if Brexit passed and the Trump was elected president. THIS IS SCARE MONGERING. It raises the question: When will the Davos crowd EVER LEARN?
Notes From Underground: Lions and Tigers and Bears, Oh My!
September 11, 2016The Wizard of Oz provides so many appropriate metaphors for dealing with global central bank policy. The failure of the wisdom of those who meet behind the “curtain” enthrall the members of the elite media who genuflect on the altar of access. Provide the necessary backdrop of equations and the media believes everything. It reinforces the sentiment of the Greenspan era: “If you think you understood what I said, I must have misspoken.” The idea of an “all-knowing Fed” is beginning to lose its luster as markets begin to understand that FED policy is not rocket science. There is no predictable outcome for the global experiment of negative interest rates or zero interest rates. Even the growth of supersized central bank sheets is causing doubts among the blind followers of free money forever.
Notes From Underground: *Uncle Charlie Makes the Fed Like Michael Jordan … Can’t Hit the Curve
May 18, 2016*NOTE: Uncle Charlie is baseball slang for curve ball
Today, the markets validated the recent moves in the YIELD CURVES as the April FOMC minutes reflected a desire by MOST participants to raise in interest rates at the JUNE meeting (kudos to Mr. Art Cashin for presciently discussing the importance of “MOST” prior to the FOMC release, or if you prefer LEAKS). It appears that the “data dependent” FED is certainly prepared to raise the FED FUNDS rate (in addition to the lower-bound reverse repo rate, and upper-bound interest on excess reserves rate) as long as the data is robust enough to signal full employment and is having the desired effect on wage and overall price inflation. The minutes certainly reflect the hawkishness of Rosengren, Mester and Lacker but it begs the question: DOES MONEY TALK AND BULLSHIT WALK? For as hawkish as the April minutes have been defined by the previous five days of price action, HOW COULD THE VOTE HAVE BEEN 9-1 in favor of keeping rates unchanged?
Notes From Underground: For What It’s Worth (My View on Tomorrow)
September 16, 2015There’s Something happening here
What It is ain’t exactly clear
there’s a man with a gun over thereTelling me I got to bewareThere’s battle lines being drawnNobody’s right if everybody’s wrongYoung people speaking their mindsGetting so much resistance from behindWhat a field-day for the heatA thousand people in the streetSinging songs and carrying signsMostly say, hooray for our sideParanoia strikes deepInto your life it will creep It starts when you’re always afraidYou step out of line, the man come and take you awayIt’s time we stop ,hey what’s that soundEverybody look what’s going down
Stephen Stills wrote these words almost 50 years ago and it certainly applies to all the noise and opinion filling the media about a possible 25 basis point increase in the FED FUNDS RATE. The financial press has made tomorrow’s FOMC statement and Yellen press conference into a mania almost as great as the FACEBOOK IPO. Everybody who is anybody has an opinion about what the FED OUGHT TO DO.
(more…)
Notes From Underground: Is Charlie Evans a Lonesome Dove?
January 8, 2015Tomorrow is the release of the U.S. and Canadian Employment reports, which are usually days of increased market volatility. Usually, Notes From Underground provide some insight into possible market movement based on attaining a sense of investor consensus and putting that into perspective based on relevant indicators and pre-release price action across a wide variety of variables.
Notes From Underground: On Yellen’s Testimony
July 17, 2014First, as I have been critical of Chair Yellen’s communication efforts prior to this weeks Congressional testimony, I will give the Chairwoman an A+ for her effort this week. She was very forthcoming in her Senate appearance on Tuesday, and, more importantly, she fended off the idiots in the House of Representatives with clarity and the patience of a saint. The problem with the House is too many ex-prosecuting attorney’s who all try to get Yellen in a gotcha moment, but the Fed Chief was not falling for the trap of providing sound bites for the elections back in the home district. The Senate questions were of a substantial nature while the House was fluff of either adulation or criticism.