They will try the head-fake taper. They must. It will be backstopped by and saturated in statistical lying, and everyone will have trouble parsing the probable effect because the chronic dishonesty loose in this land will have deformed and impaired all metrics of true value. At the heart of whatever remains of this economy is fire, and the officers of the Federal Reserve are playing with it. Pretty soon, we’ll get the un-taper, the final surrender to the crack-up boom that awaits before the western world has to go medieval.
While much has been said about the benefits of Bernanke's wealth effect to the asset-owning "10%", just as much has been said about the ever deteriorating plight of the remaining debt-owning 90%, who are forced to resort to labor to provide for their families, and more specifically how their living condition has deteriorated over not only the past five years, since the start of the Fed's great experiment, but over the past several decades as well. However, in the case of America's "servant" class, Al Jazeera finds that their plight is now worse than it has been at any time over the past century, going back all the way to 1910!
Tapering may not be tightening, as the Fed will keep repeating until someone actually believes it (the Fed may be right, however it's not what the Fed thinks or does, but the next most levered counterparty who is the risk factor, and whose potential selling is what is keeping everyone on their toes), but the just completed 3 Year auction just priced at a yield of 0.631%, precisely where it priced in August, the month before the last "consensus" taper announcement at the September FOMC, and above the 0.581% where the 3 Year was in June when the Taper Tantrum peaked. The short-end may not be panicking yet, but the enthusiasm for bonds is certainly not where it used to be, especially when one considers 3 Years priced in the mid-0.3% range from September 2011 until May 2013.
If you can't beat 'em, join 'em, copy 'em, and then beat 'em. While everyone's attention has been glued to Bitcoin (and its various smaller and less viable for now alternative digital currencies), JPMorgan has submitted a patent which appears to set the scene for a competing centralized network to Bitcoin. As LetsTalkBitcoin noted first, the "Method and system for processing internet payments using the electronic funds transfer network," states that Chase's technology is a "new paradigm." Moreover that it permits the creation of "virtual cash" (also referred to as "web cash") with a "real-time digital exchange of value." Without naming the virtual currency or any competing payments system by name, the bank takes a swipe at the crytocurrency model, adding that sees “a new marketplace” emerging for “low dollar, high volume, real-time payments with payment surety for both consumers and producers.”
Since fundamentals have been irrelvant for years, the only possible (short-term) guide in a market in which the only thing that does matter is the Fed's balance sheet, are trends (as Hugh Hendry put it so appropriately) here are some technical trade ideas from Bank of America, on the EURUSD, Treasurys, the S&P500 and WTI.
Volcker Rule - Who cares? I know we are supposed to care more about this convoluted rule, but we just can’t. The concept that somehow “prop” trading brought down the banks seems silly. The idea that market making desks were a dangerous part of the equation is ludicrous. They could have fixed this with a few simple changes, but that would have meant some blame would have had to be shifted onto the regulators...
Back in September, courtesy of an unprecedented discrepancy between the JOLTS "net turnovers" (or hires less separations) print, which traditionally has been the equivalent of the NFP's establishment survey monthly job additions, we highlighted just what happens when the BLS has caught itself in a estimation lie, and is forced to adjusted the data set both concurrently and retroactively to correct for cumulative error. We suggested that as a result of this public humiliation, the BLS would have no choice but to ramp up its monthly net turnovers print in order to "catch up" to what the monthly payrolls survey indicated is America's "improving" jobs picture. Sure enough, when moments ago the latest October JOLTS survey was released, the October "net turnovers" number soared from 155K in September to a whopping 260K in October, more than eclipsing the revised NFP print of 200K job gains in October, and leading to the second highest JOLTS turnover print since February's 271K, and before that - going back all the way to the 287K in February of 2012. And yes, this was in the month when the government had shut down and the result was supposedly major, if temporary, job losses.
We can only imagine the upward revisions to 'current' GDP that will occur due to the largest mal-investment-driven wholesale inventory build in over 2 years. The 1.4% MoM gain is over 4x the expectation and biggest beat since Q4 2011, when - just as now - a mid-year plunge was met by a rabid over-stocking only to see the crumble back into mid 2012. As we noted previously, 56% of economic "growth" this year was inventory accumulation (cough auto channel stuffing cough) and this print merely confirms "hollow growth" continues. The problem with inventory hoarding, however, is that at some point it will have to be "unhoarded." Which is why expect many downward revisions to 'future' GDP as this inventory overhang has to be destocked.
And so it is done (as we detailed here)... and due to be put in place as of April1st 2014 (rather ironically). The 100-plus-pages of rules and regulations prohibit two activities of banking entities: (i) engaging in proprietary trading; and (ii) owning, sponsoring, or having certain relationships with a hedge fund or private equity fund. But the kicker...
"requires banking entities to establish an internal compliance program designed to help ensure and monitor compliance with the prohibitions and restrictions of the statute and the final rule."
Great! Because self-regulation worked so well in the past for the financial services industry.
Despite the ratings agencies (Moody's Dec 5th and S&P Nov 22nd) seemingly premature raising of the outlook for the nation's sovereign credit rating (from negative to stable), economic hardship in Spain looks likely to continue as loan defaults surge and the unemployment rate remains the second highest in the EU.
GM has named Mary Barra to succeed Dan Akerson as CEO, making her the first female CEO in global auto industry:
GM SAID TO NAME BARRA AS FIRST FEMALE CEO, SUCCEEDING AKERSON
GM'S AKERSON SAID TO STEP DOWN IN JANUARY
Yesterday, we pointed out that according to the latest Bloomberg survey of economists, roughly 70% of respondents now believe that a taper is coming in either December or January, further accentuated by the recent flipflopping of Fed "bellwether" James Bullard who after holding out for a much delayed reduction in the Fed's monthly flow, admitted that the "probability of a taper had risen ". Today, some additional thoughts on what now seems the consensus from Credit Suisse: "With the labor market looking to be on a more sustained recovery trend following a late summer set-back we think tapering is now virtually inevitable with the decision between a Dec or Jan taper a virtual toss-up that may come down to Fed perceptions of market liquidity in the latter part of December." And just to add fuel to the flame here comes CNBC's own staff "Fed expert" Steve Liesman with "get ready, here it comes: A December taper."
Gold (>$1260) and silver (>$20) are extending yesterday's gains as US markets awake this morning. The crack higher at around 8:07ET caused the futures market to be halted after 3,000 Gold Futures contracts traded in one second at 08:07:45 on December 10, 2013 sending the price up $10 and tripping circuit breakers for 10 seconds. Silver is now +4% on the week and gold +2.5% as Treasuries are also bid. Stocks are stumbling overnight, driven by the "fundamentals" of a drop in EURJPY after it tagged 142 overnight and fell back.