Blog
12/19/2022 - Louis-Vincent Gave – Investment Themes for 2023
12/19/2022 - Yra Harris – ‘Twas the Week Before Christmas
“For the US the yield curve — notably the 2/10 — going into 2023 will be of interest as concerns are arising everyday about the growing pile of US debt and the rapidly rising financing costs. It twists my brain to figure why investors would desire 10-year notes that yield far less than two-year notes. Yes, if recession sets in, 10s have been a safe haven and rallied into a slowing economy and falling inflation levels. BUT if the economy slow and the FED holds at 4.5%, won’t the budget deficit increase creating even greater financing problems for the US deficit? Remember, not all economic outcomes are the same. The 2/10 US curve had a wide range last week but after inverting by more than 80 basis points it closed close to the week’s lows. That’s something to watch as the budget battles grow.”
12/09/2022 - Felix Zulauf – Bust/Boom Cycle Ahead As “Decade Of The Rollercoasters” Kicks Off
12/09/2022 - Perspectivas Economicas 2023
12/08/2022 - The Roundtable Insight – Swen Lorenz and Yra Harris on Undervalued Opportunity Ideas around the World
11/29/2022 - Santa Mike at Marillac St. Vincent Family Services
From Yra Harris:
“In the spirit of the season I am asking NOTES FROM UNDERGROUND readers to consider a season contribution to one of my favorite charities, which has raised money for feeding the hungry, clothing the naked, and aiding the education of pre-kindegarten inner city children in Chicago. The charity is Santa Mike at Marillac St. Vincent Family Services and has been under the direction of my very dear friend, Mike Sturch, for more than 50 years. The ravages of inflation has led to great needs, especially for food and clothing. No amount is too small and is appreciated. Every dime goes to the intended targets. Contact Mike at mikkees@sbcglobal.net and tell him YRA sent you. These are difficult times and every bit helps those in need. (For more information, see the letter below.)”
11/29/2022 - Yra Harris – Cui Bono? (Who Stands to Gain?)
“The QE program fomented by Ben Bernanke in response to the 2008 financial crisis ran interference for the ECB, BOE, BOJ and others so as to prevent their currencies from rapidly appreciating against a DOLLAR. That is, massive amounts of liquidity were injected into the financial system to “forestall” deflation. The US and Europe experienced a deflation but the FED allowed for all to keep the monetary spigots wide open. The only country that experienced actual deflation was/is Japan. Now that global inflation is the result of massive liquidity infusions the question remains how to extract the liquidity without causing too much stress on a global system awash in QE-fueled debt.
The FED seems to be intent on raising rates ever HIGHER in an effort to break inflation, but maybe it’s time to halt the rate rises and increase the pace of the balance sheet runoff? This is the prevailing question as we head into 2023, but for us we will rely on the wisdom of Louis Gave : We adapt, not forecast.
Last week, Bank of Austria President and ECB Board member Robert Holzmann said in a Financial Times story he favored a 75 basis point increase at the next meeting in December. But Holzmann also warned that it is imperative that the ECB begin shrinking its BOND PORTFOLIO “before it had finished raising rates, adding that it is important to avoid short-term borrowing costs rising above long-term ones.” Holzmann wants to avoid an inverted yield curve because “it would be a challenge for Europe’s banking sector, which relies on being able to borrow cheaply in the short term to make longer-term loans at higher rates.” As Holzmann said, “We have to make sure it doesn’t get to that point.”’
11/28/2022 - Felix Zulauf – Latest Thoughts
11/27/2022 - Daniel Lacalle – COLLAPSE. EUROPE ENERGY CRISIS GETS WORSE
11/21/2022 - Yra Harris – Recapping the Last Two Weeks
“As I have warned, the world needs to be cognizant of the fallout from the Swiss National Bank pulling the PEG on the EUR/CHF back in January 2015, which wreaked havoc on Eastern European citizens with massive Swiss franc liabilities because of the FED and ultra-low interest rates. Since global central banks have been flooding the financial system with liquidity, we are in a new era that cannot be modeled. So it’s interesting that the talk continues of inflation waning but rates still react more to FED jawboning. The US 2/10 yield curve closed at its most inverted level in 40 years, even as the DOLLAR has corrected about 5% from its recent highs.
This is something to watch as the FED continues talking asset prices lower, especially the EQUITY markets. Yet stocks continue to defy Bullard/Kashkari. IF I RAN THE FED, RATE HIKES WOULD STOP AT 4% WHILE DOUBLING THE SIZE OF QT (removing $180 billion a month). The POWELL FED is on the verge of making the same mistake it made in 2018 with what Stanley Druckenmiller called the double-shotgun approach. The inverted curves are telling you Jerome: It’s time to rein in excess liquidity in an effort to bring prices down to the level of fed funds. Market signals are a valuable tool if the policy makers would heed them.”
11/20/2022 - Goodbye G20, hello BRICS+
“It is safe to say that the G20 may have plunged into an irretrievable path toward irrelevancy. Even before the current Southeast Asian summit wave – in Phnom Penh, Bali and Bangkok – Lavrov had already signaled what comes next when he noted that “over a dozen countries” have applied to join BRICS (Brazil, Russia, India, China, South Africa).
Iran, Argentina, and Algeria have formally applied: Iran, alongside Russia, India, and China, is already part of the Eurasian Quad that really matters.
Turkey, Saudi Arabia, Egypt, and Afghanistan are extremely interested in becoming members. Indonesia just applied, in Bali. And then there’s the next wave: Kazakhstan, UAE, Thailand (possibly applying this weekend in Bangkok), Nigeria, Senegal, and Nicaragua.”
11/18/2022 - The Roundtable Insight – Martin Armstrong on the Economy and the Geo-political Trends
11/17/2022 - The Roundtable Insight – Eric Peters and Yra Harris on the Economy, Financial Markets and Cryptos/Blockchain
11/15/2022 - The Roundtable Insight – Victor Adair and Yra Harris on Trading the Financial Markets, Potential Opportunities
11/07/2022 - The Roundtable Insight – Brent Johnson and Yra Harris on the USD, Triffin’s Dilemma, and Financial Repression
11/04/2022 - The Roundtable Insight – David Rosenberg, Peter Boockvar and Yra Harris on the Economy and the Financial Markets
Link to find more info on Peter’s work – https://boockreport.com/
Link to find more info on David’s work – https://www.rosenbergresearch.com/
For a Free 30-day trial to Rosenberg Research click here: https://bit.ly/34crdIK
From Rosenberg Research: “We strive to be investors’ first and most trusted resource for economic research and financial market strategy. President and Chief Economist & Strategist, David Rosenberg, brings decades of experience in analyzing current trends and identifying future shifts in the global economy and financial markets, with an unwavering commitment towards helping his clients navigate their portfolios in an ever-changing, uncertain world. At Rosenberg Research, we provide the information, insights and strategy to enhance your investment decisions, backed by our team’s macroeconomic research capabilities and David’s unique market lens.”
Link to Yra’s blog – https://yragharris.com/
11/01/2022 - Caroline Miller – «We Recommend that Investors Start to Re-Risk»
“Typically, a very strong dollar is catastrophic for emerging markets. And yet, we have seen periods this year where emerging markets have outperformed US equities. That is because EM currencies, particularly in Latam, are already cheap. Moreover, sovereign dollar-denominated credit spreads in the emerging markets universe typically widen with a strong dollar but they have narrowed in a few markets this year. Again, this is evidence that the monetary tightening cycle is very advanced in emerging markets which is attractive from a real yield perspective. Interestingly, Latin America with its commodity export strength has gotten very little credit this year. Earnings in the region have been stronger than in Asia and yet the relative forward multiple has favored the Asian markets. In a nutshell, we prefer Latin America over Asia within Emerging Markets and have a preference for EM over EAFE at the moment.”
10/31/2022 - The Fed Guy – Quantitative Buybacks
“A Treasury Secretary exercising the power of QE would mark a departure in how monetary policy is conducted. Monetary policy has always been in part determined by actions of the Treasury, who influences the shape of the yield curve by deciding the national debt’s maturity profile. However, a sizable buyback program would be a much more overt foray into monetary policy. It would functionally ease financial conditions at a time when the Fed struggling to contain inflation. The concern over Treasury market fragility is legitimate, but so is the perception of monetary policy independence. The option to goose the stock market at will may also be very tempting.”
10/26/2022 - Economist Nouriel Roubini on the Economy and the USD
10/26/2022 - Yra Harris – Hu’s Out First, Li’s Out Second, and Xi, I don’t Know
“In addition to Yellen, Barry Eichengren, the most renowned economist on the DOLLAR since Robert Aliber, had a Foreign Affairs article warning of the “Dangers of a Strong Dollar,” suggesting that central banks “diversify their reserves and for countries to diversify their transactions away from the DOLLAR and towards the currencies of the eurozone, China and smaller economies. Doing so would leave countries less exposed to one bank.” Dollar debt sustainability is a great problem, something the FED/TREASURY needs to be very aware of as it will create the greatest financial breakage.”
