Posts Tagged ‘Yuan’

Notes From Underground: Your Cash Ain’t Nothin’ But Trash, Take 36

January 31, 2016

Here we go again. Bank of Japan Governor Kuroda “shocked and awed” the markets by taking BOJ deposit rates into negative territory in a HYBRID sort of way as it is a three-tiered methodology that does not apply to money already being held at the BOJ in reserve. Also, money that is deemed regulatory-type capital will receive ZERO interest and won’t be punished with a surcharge, but any new funds making it onto the reserve balance sheet of the BOJ will receive NEGATIVE INTEREST RATES. Kuroda-san delivered this shock after promising last week that the BOJ would not go negative on its deposit rate. Kuroda will learn hat if you keep intentionally pumping the markets with disinformation the markets will have their time when the BOJ needs it the most, like maybe selling off the massive JGB portfolio on its balance sheet. But through the power of negative compounding of interest earnings Kuroda has brought Stevie “Guitar” Miller’s words to life:

(more…)

Notes From Underground: As the Fires Burn

January 12, 2016

Last night’s blog contained some of the key sparks to watch this year, but I left some for today so as not to overwhelm. While we slept, the Chinese borrowed a page from the French National Bank. In an effort to curb the arbitrage of trading the YUAN in Hong Kong versus the mainland levels under the direct auspices of the PBOC, the Chinese Government raised overnight borrowing rates for those short the yuan in Hong Kong. The rate is only on overnight borrowings so it is intended to make being short against the PBOC cost prohibitive.

(more…)

Notes From Underground: The Shot Heard Round the World

October 26, 2015

It was ECB President Mario Draghi who declared war on the German economic model of GROWTH THROUGH AUSTERITY, but it was the Chinese central bank that fired the first real shot in response to the “intervention” by Super Mario. As usual, Draghi proposed an increase in the ECB QE program (possibly in December) and also mentioned taking deposit interest rate even more negative. The EURO, of course, depreciated by as much as 3 percent while Draghi stoked the fires of a possible liquidity increase.

(more…)

Notes From Underground: A Few Things Before the Financial Ship Sails

October 12, 2015

When holiday markets quash volume and new items repetitive, it provides an opportunity to catch up with some general concepts in a style I like to call “Quick Hitters.”

(more…)

Notes From Underground: Looking Back to December 24, 2014

September 1, 2015

There is now rampant talk about a revived FED QE4 program, most powerfully talked about by Bridgewater’s Ray Dalio and Larry Summers (from the genetically powered economics family of Samuelson and Arrow). On December 24, Santelli and I considered the possibility of QE4 (see clip below). I posed this question to all investors: How would the equity markets react if the FED had to reignite its large asset purchases?

Yra on CNBC December 24, 2014

(more…)

Notes From Underground: When China Shakes, the West Rattles and Rolls

August 24, 2015

Mao, Deng and Xi, oh my! It seems whenever China releases economic data, the U.S. markets and its developed market cousins either go into an orgasmic paroxysm or a spasm of pain. Readers of Notes know that I have criticized the Chinese economic releases as fiction and my rational was simple. If the Politburo would not allow GOOGLE to operate without restraint within China why should I trust any “official data.” Many times I have referred to GDP and PMI figures hitting the predicted market consensus as a greater feat of financial engineering than Jack Welch’s record of beating Wall Street’s forecast’s for GE earnings by a penny every quarter while Jack was CEO.

(more…)

Notes From Underground: A Desultory Philippic on the Markets, the Fed and World Finances

August 17, 2015

One of my favorite songs by Simon and Garfunkel is “A Simple Desultory Philippic” in which the duo takes the time to mock and criticize the world of culture and politics that surround them. Desultory means lacking a style or plan, while Philippic connotes a word for a tirade or rant. Will my readers entertain my desire to craft my own simple desultory philippic?

(more…)

Notes From Underground: Reissue, April 24, 2014

August 13, 2015

Almost 18 months ago I wrote a blog in response to an Ambrose Evans-Pritchard piece in the London Telegraph. I think readers of NOTES will find it more than a passing interest. More importantly, Mr. Evans-Pritchard wrote a new piece in yesterday’s London Telegraph, “China Cannot Risk the Global Chaos of Currency Devaluation.” Evans-Pritchard stresses the deflationary shock from a significant Chinese yuan devaluation in response to the Chinese plague of overcapacity from an excess of capital investment for a Chinese effort to increase exports to ease the burden of excess production would weight heavily on an over indebted world struggling with falling prices.

This is the greatest fear for the world ‘s central bankers and why I always referred to Bernanke and Yellen as the ultimate 1937ers for Bernanke promised Milton Friedman that the FED would not repeat the errors of 1937 and allow deflation to become the major dynamic in the world economy and certainly not the U.S. Evans-Pritchard is hopeful that the recent weakness of the YUAN is not really a new policy:

“The slowdown in China is not yet serious enough to justify such a risk. True, the trade-weighted exchange rate has soared 22% since-mid-2012,the result of being strapped to a rocketing dollar at the wrong moment.The YUAN is up 60% against the Japanese Yen.”

Read the article and be aware that the Chinese are not targeting the dollar but are very concerned about the YUAN strength versus the rest of the world.

(more…)

Notes From Underground: The Chinese Send a Message

August 11, 2015

There is much to talk about after the Chinese sent a shot across the bow of the U.S.S. Financial Complacency. If we glance at the currency charts of various global currencies versus the Chinese YUAN it is easy to see what the authorities setting policy in Beijing are so very concerned about. The YUAN may be very stable against the U.S. dollar but in terms of Brazilian real, Turkish lira, Mexican peso, Aussie dollar, euro, British pound, Japanese yen and Korean won, the YUAN has undergone a MASSIVE appreciation during the last three years. While the Chinese were announcing their intentions to attempt a pivot to a more domestic-consumption economy, a strong YUAN favored a structural change of such magnitude.

(more…)

Notes From Underground: Santelli Exchange–Yuan falls after Chinese intervention

August 11, 2015

Yra & Rick, Aug. 11, 2015Click on the image to watch me and Rick discuss China’s intervention and what this means for the global economy.