The Jackson Hole gathering may end up providing at least some clarification, but not even close to the manner in which everyone seems intent on inferring. With Janet Yellen’s notable absence, there isn’t the same sort of celebrity about what would have been the media hanging upon every word; that is, after all, what the Federal Reserve has become, not an organ of stability or even expertise but a public relations effort aimed squarely at trying to convince everyone possible that it is. Given the unique circumstances at the moment, the real issue is not whether they might raise rates but just how much systemic misdirection has already been revealed even to the least attentive of people.
Just when you thought it was safe to listen to the stability-preaching talking heads, crude futures are sliding and US equity futures are tumbling as Asia opens. Worse still XIV (VIX inverse ETF) has tumbled to fresh lows with a 24 handle in the after-hours market, suggesting more downside for stocks. With all eyes on China PMIs - though, there is little need for a weak PMI to be present for China to unleash moar measures, and a strong PMI will be scoffed at - it seems, the end-of-month rip-fest is fading fast...
"In the meantime, in our (un)beloved country, there is something scarier than Freddy Krueger: our growth / fiscal outlook."
In case you aren’t up to speed on your Japanese history, the nation’s post WWII Constitution prohibits military action unless it’s in self-defense. Clearly a sensible approach, which is why the current Japanese government, led by the demonstrably insane and incompetent Prime Minister Shinzo Abe, wants to get rid of it. Not only will this action increase the likelihood of World War III in the Far East, but it’s another important example of a government acting against the will of the people. Democracy is dead. Globally. If we fail to bring it back, history will see us as one of the most inept and spineless generations in history.
China has just cornered the Fed: not just diplomatically, as observed when China's PBOC clearly demanded that Yellen's Fed not start a rate hiking cycle, but also mechanistically, as can be seen by the acute and sudden selloff across all asset classes in the past 3 weeks. Now Yellen has about 365 days or so to find a solution, one which works not only for the US, but also does not leave China a smoldering rubble of three concurrently burst bubbles. Good luck.
Seriously, what the f##k is going on over there?
*BLAST SEEN IN CHEM. IND. ZONE IN SHANDONG, CHINA: PEOPLES DAILY
This is the second explosion in Shandong, which both follow the huge and deadly explosion in Tianjin.
There’s no question that the world economy has been shaky at best since the crash of 2008. Yet, politicians, central banks, et al., have, since then, regularly announced that “things are picking up.” One year, we hear an announcement of “green shoots.” The next year, we hear an announcement of “shovel-ready jobs.” And yet, year after year, we witness the continued economic slump. Few dare call it a depression, but, if a depression can be defined as “a period of time in which most people’s standard of living drops significantly,” a depression it is.
Assuming that after being wrong for 7 years about everything, economists are actually right about the market still having some discounting abilities left, what then is the market telegraphing? The answer, according to the Bank of America: the biggest surge in recessionary odds since 2011, which over the past few days have nearly hit a 50% probability of an economic slowdown.
One of the most curiously persistent surrealisms of Washington, DC is the reflexive deference given the Federal Reserve System. The Washington elite tends to accord more infallibility to the Fed than do Catholics the Pope.
The fundamentals for the US dollar are terrible, but people keep dumping money into it like trained monkeys simply because nothing else in financial markets makes any sense. This perception of 'safety' is based on a complete myth - every credible fundamental suggests that the dollar is dangerously overvalued; but if not the US dollar, then which currency is the safe haven? The euro is garbage, the Chinese are fighting a depression, Japan is a disaster. And that’s precisely the point. When every option in the financial system is grounded in absurdity, the only solution is to start looking for safety outside of it.
Don’t look now, but undergrad economics is rearing its ugly again at Wal-Mart as the retailer cuts workers’ hours in a desperate attempt to offset more than a billion in wage hikes.
With every passing week that money markets rates remain pinned to the zero bound by the Fed, the magnitude of the financial catastrophe hurtling toward main street America intensifies. When the next financial bubble crashes it can only be hoped that this time the people will grab their torches and pitchforks. Stanley Fischer ought to be among the first tarred and feathered for the calamity that he has so arrogantly helped enable.
"A cloudy fiscal policy along with unattractive economic data and oil prices continuing to decline fueled negative sentiment about the market which exaggerated fears among investors."