The hullabaloo over the Fed’s communications should be the least of our concerns. It’s outranked by actual policies, which seem to be once again destabilizing markets, encouraging reckless behaviors, perpetuating global imbalances and enriching the parasitic practitioners of so-called financial innovation at the expense of the middle class. On the other hand, Chairman Bernanke claims that clear communications are a key part of his approach, forward guidance being one example of how he manipulates the economy by telling us what to expect. And yet, it sure seems like the more he and his colleagues talk, the less we know about what they’ll do next. In light of this, the best explanation for the Fed’s surprising untaper last week appears to be from Vince Reinhart’s musings and inside information about the Fed. He offers a short but interesting history on the FOMC’s attempts to increase transparency, and then goes on to share some thoughts on how the decision making has evolved and why it tends to confuse us.
Four years after it filed for Chapter 11 bankruptcy protection, and was purchased from the depths of bankruptcy court hell by Fiat S.p.A., the circle (jerk) is complete, and thanks to lead underwriter JPM, the second coming of Chrysler, this time for sale to a whole new batch of gullible ROI chasers, is now a fact with the S-1 statement filing moments ago, in which the only cash transfer will be from the VEBA Trust to new shareholders and no new cash will go to the actual company. In other words, the UAW is selling to the general public.
UPDATE: Kenyan interior ministry tweets that authorities are in control of Westgate mall
As the dreadful Nairobi Mall attack/siege enters its third night with at least 69 dead, the Kenyan foreign minister has clarified one point:
BREAKING: Kenyan foreign minister tells Al Jazeera Nairobi mall attack the work of al-Qaeda, not al-Shabab
— Jared Keller (@jaredbkeller) September 23, 2013
Despite earlier reported condemnations from Al-Qaeda and an assumption that Al-Shabaab (who claimed responsibility), it appears the terrorists who just lost their Syria/Iraq leader are responsible.
Despite the best efforts to squeeze shorts from the European close (end of POMO), the afternoon session punctuated by Fed's Fisher notable comments pushed stocks back lower with the S&P joining the Dow in the all-FOMC-gains-gone club. Financials and Materials (-1.5% from FOMC) are the worst performers since Bernanke did not say "Taper" and while stocks have given it all back, bonds remain at their highs (in price) and lows (in yield) from that un-announcement. Treasury yields dropped 2-3bps more today (still down 15-20bps depending on maturity) as growth hopes fade. JPY strength was trumped by EUR weakness today which pushed the USD higher from overnight opening lows (from China PMI and Merkel) but by the close the USD was unch. Gold and silver were holding positive until Fisher's comments and they slid to -0.5% or so. WTI dropped 1.2% to $103.50. The S&P had its 3rd down day in a row for the first time in 5 weeks (as momo names join the financials among the leaders lagging).
Many well-meaning commentators look back on the era of strong private-sector unions and robust U.S. trade surpluses with longing. The trade surpluses vanished for two reasons: global competition and to protect the dollar as the world's reserve currency. It is impossible for the U.S. to maintain the reserve currency and run trade surpluses. It's Hobson's Choice: if you run trade surpluses, you cannot supply the global economy with the currency flows it needs for trade, reserves, payment of debt denominated in the reserve currency and credit expansion. If you don't possess the reserve currency, you can't print money and have it accepted as payment. In other words, the U.S. must "export" U.S. dollars by running a trade deficit to supply the world with dollars to hold as reserves and to use to pay debt denominated in dollars. Other nations need U.S. dollars in reserve to back their own credit creation.
Democracy has regressed in 15 out of the 17 euro-area countries since 2008, according to the Economist Intelligence Unit’s democracy index, as economic policy was increasingly influenced by the ECB, the EU and the IMF, instead of elected politicians - something Nigel Farage has been vociferously concerned about.
While the commemoration of the 5 year anniversary of the start of the Great Financial Crisis is slowing but surely fading, another just as important anniversary is revealed when one goes back not 5 but 15 years into the past, specifically to September 23, 1998. On that day, the policy that came to define the New Normal more than any other, namely the bailout of those deemed Too Big To Fail, a/k/a throwing good (private or taxpayer) money after bad was enshrined by Wall Street as the official canon when faced with a situation where capitalism, namely failure, is seen as Too Dangerous To Succeed. This was first known as the Greenspan Put, subsequently the Bernanke Put, and its current iteration is best known as the Global Central Banker All-In Systemic Put. We sow the seeds of bailing out insolvent financial corporations to this day, when instead of making them smaller and breaking them up, they are rewarded by becoming even bigger, even more systemics, and even Too Bigger To Fail, and their employees are paid ever greater record bonuses.
Perhaps no sentence sums up the dismal reality investors face with the 'communications' strategy, the credibility, and the actions of the Federal Reserve, better than the following statement from Dallas Fed's Fisher:
- FED'S FISHER SAYS VOTE LAST WEEK NOT TO TAPER DID NOT REFLECT THE DISCUSSION AT THE POLICY-SETTING TABLE
It seems that we should therefore ignore each and every Fed whisperer and President (voting or non-voting) as only man counts... Et Tu Yellen...
Dubbed as a "game-changer" despite being around on devices for years (Motorola Atrix anyone); a 'paradigm' shift in mobile payment security; and a revolution in handheld devices by any and all investors bullish of the stocks; Appl's fingerprint-scanning TouchID is everything you want it to be - apart from secure. As Der Spiegel reports, the well-respected German hacker group Chaos Computer Club (CCC) has thrown a wrench in the works by bypassing the smartphone's much-heralded fingerprint scanner just two days after launch. The CCC, as the clip below illustrates, successfully bypassed the biometric security system, called TouchID, using "easy everyday means." A CCC spokesperson noted "It is plain stupid to use something that you can't change and that you leave everywhere every day as a security token," So, the question now is - will the NYPD demand everyone downgrade their phones?
As further explained (confounded) by Bill Dudley as part of his speech earlier today, the Fed is pushing on with its Fixed-Rate Reverse Repo test, which while supposedly is meant to assist the Fed in extracting liquidity from the market once the mythical balance sheet unwind begins, what it really does is set a level the playing field for banks and non-banks, by disintermediating their collateral eligibility, and in the process collapsing the spread between the IOER and General Collateral rates. It will likely have many more side effects, now that non-banks can compete with banks for the Fed's IOER, all of which will be largely unexpected and as the impact on collateral bifurcation moves from the purely theoretical to the real world.
BlackBerry Enters LOI With Fairfax Financial To Be Taken Private At $9.00/Share; Deal Subject To Diligence, Financing OutsSubmitted by Tyler Durden on 09/23/2013 - 13:37
Following Friday's stunner of a stock halting press release, moments ago BBRY was halted again, this time however for some "good" (relatively speaking) news. The firm reported that it has entered into a Letter of Intent (so nothing definitive yet) with Fairfax Financial, according to which BBRY shareholders would receive U.S. $9 per share in cash - Transaction valued at approximately U.S. $4.7 billion - Consortium permitted 6 weeks to conduct due diligence - BlackBerry entitled to go-shop during due diligence period, subject to payment of a termination fee in the event alternative offer accepted. In other words an LBO, one which however has not only but many outs: "There can be no assurance that due diligence will be satisfactory, that financing will be obtained, that a definitive agreement will be entered into or that the transaction will be consummated." Which means that once the buyers figure out the potential disaster on the books, expect the final price (if any) to be revised lower as one after another MAC clause is triggered.
We have heard from the doves, now the hawks. Dallas Fed's Fisher (a non-voting member) pulls no punches in his speech this morning. Confirming Esther George's comments last week, and our views on the same:
- *FISHER SAYS HE TRIED LAST WEEK TO PERSUADE FOMC TO TAPER QE
- *FISHER SAYS DECISION NOT TO TAPER QE UNDERMINED FED CREDIBILITY
But that was not it. The well-known hawk went to warn that:
- *FISHER: BIGGEST BANKS ARE `DAGGER POINTED' AT ECONOMY'S HEART
- *FISHER SAYS NO QE TAPER ADDS TO `UNCERTAINTY' ABOUT FED POLICY
None of this should come as a surprise as Fisher told Santelli earlier in the year that "this cannot go on forever!"
A Day In The Life Of Edward Snowden: Under Guard, Secret Address, Learning Russian, And Heavily DisguisedSubmitted by Tyler Durden on 09/23/2013 - 13:07
If Obama's intention with the fast and furious series of geopolitical and domestic distractions over the past three months was to sideline Edward Snowden's revelations of the biggest spying scandal since Nixon, he appears to have largely succeeded: not only has America become largely numb to every successive iteration of shockers emerging from the most important whistleblowing episode in recent US history (and in fact can't wait to get even more in debt to purchase shiny, faux-gold fingerprint scanners), but the person behind these revelations, the 30 year old Snowden himself, has largely faded into the collective subconscious. So what is the Russian asylum-seeker doing now that the fruits of his labor has been largely exposed and the US public is already eager for the next big watercooler scandal, popcorn in hand? As AFP reports, it is all but life as usual for the whistleblower: "US intelligence leaker Edward Snowden is living under guard at a secret address in Russia and sometimes emerges in disguise, although he remains in such danger that even a family visit could endanger his security, his lawyer said Monday."
A funny thing happens when the free-money liquidity-train stops calling... it seems the post-euphoric realization that a taper is inevitable (or at the least lower growth than anyone expects is likely) is wearing on those that could do no wrong until just last week... Last week's dramatic short-squeeze appears to have flushed the (forced) sellers from the market and left the market to auction down to levels at which there is a bargain to be struck... Of course, now that the "most shorted" is underperforming so strongly, there is ammo for yet another squeeze higher.