Archive - Jun 5, 2015

Presented with no comment...

Although we solved the "mystery" of America's missing wage growth some three months ago, the central planner/ Ivory Tower crowd is still confused. WSJ has taken the time to lay out nine prevailing theories from some of the country’s ‘finest’ economic minds...

“Volatility and repricing,” euphemism for losses, are the New Normal.

Central bankers have promised ad nauseum to keep rates low for long periods of time. And they have delivered. Their claim is that this helps the economy recover, but that is just a silly idea. What it does do is help create the illusion of a recovering economy. What we have is the financial system posing as the economy. And a vast majority of people falling for that sleight of hand. Now the central bankers come face to face with Hyman Minsky’s credo that ‘Stability Breeds Instability’. Ultra low rates (ZIRP) are not a natural phenomenon, and that must of necessity mean that they distort economies in ways that are inherently unpredictable. For central bankers, investors, politicians, everyone. That is the essence of what is being consistently denied, all the time.

Citing an ongoing OIG and DoJ probe, Janet Yellen says the Fed is currently unable to comply with a Congressional subpoena requesting information regarding a 2012 incident in which the minutes from the FOMC's September meeting were leaked to consulting firm Medley Global Advisors.

By now it should be clear, without the flow of Federal Reserve funny money, the wedge between the reality of collapsing macro- and micro-fundamentals and ever-expanding valuation hope-based stock prices is bound to close... and that is why the following 2 charts must be terrifying for Janet (and every asset-gathering commission-taking talking head out there.. oh and Steve Liesman).

Two weeks ago, Citigroup presented what it thinks is the biggest nightmare for the Fed: it said that the FOMC’s "biggest worry is not lift off and its market and economic implications, but what happens if the economic recovery dies of old age without the Fed having done anything to tighten." And, according to Citi's FX strategists, "if this were to occur, the USD would probably fall faster than it rose from July-March." A precursor to loss of faith in the Dollar's reserve currency status perhaps. Today, Citi's Steven Englander lays out what is the Fed's second biggest nightmare: a rebound which is so fast, the Fed's entire carefully planned renormalization schedule collapses.

On a long enough time line the liklihood of yet another Greek EURO bailout drops to gyro... 

Just in case there was some confusion how to read today's blistering jobs data, here comes NY Fed's head and former Goldmanite with the explanation:

DUDLEY SAYS FED STILL LIKELY TO START RAISING RATES THIS YEAR

His comments initially pushed futures to the lowest since this mornings furious ramp to green  but since then ES has managed to rebound modestly and is now unchanged since the speech because it is clear that the Fed is just as clueless as everyone else what to do.

If Rick Perry wants to mark a successful comeback in 2016 and spoil Hillary Clinton's inauguration, he'll need to be a bit more efficient with his campaign dollars. Despite spending less in his 2012 bid than nearly every other 'serious' candidate in the last three elections, Perry paid 27 times more per vote in 2012 than did Clinton in 2008.

Greek PM Alexis Tsipras is set to address the Greek parliament after a tense week of negotiations with creditors that ended with no agreement and a missed IMF payment.

Currently, there are things occurring that are very troublesome, and in more normal times, would likely already have investors heading for cover. However, in today's liquidity fueled, Central Bank supported environment, that has yet to be the case. The reason was best described recently by Dr. Robert Shiller "I call this the 'new normal' boom ó it's a funny boom in asset prices because it's driven not by the usual exuberance but by an anxiety." What happens next is only a guess. However, historically, it hasn't been the outcome that investors were hoping for. But then again, maybe "bearish bull" isn't as much of an oxymoron as it is just a warning.

When the "better than expected" jobs data came in, equity futures (alongside crude, precious metals, and bunds) promptly tumbled on fears the Fed rate hike, which many had expected would take place in September was pushed forward to July, or even the current month. However, starting with the market open, the E-mini has seen a relentless bid higher, and as of moments ago, it finally ticked into the green, covering nearly 17 points from the lows in less than an hour.

This would suggest that the bull market in stocks is ending. It’s quite possible that a significant top, and possibly THE top is in for stocks.