December 17th, 2013
[12:47:34 pm]: CALLER
So, if I pay the fee, then I can wait until someone gets sick to apply, and I cannot be turned down?
By now it is a well-known fact that the Fed's monetary policies over the past 5 years (and really ever since Greenspan unleashed the Great Moderation) have been very successful at one thing: transferring wealth from the US (and global) middle class and handing it over to the already wealthiest strata of society, either through financial repression, zero savings rates, or generally boosting financial asset values, which as we showed hit a record $63.9 trillion in Q3, or over 70% of total. However, just like the general public's attention is focused on the quantitative components of the monthly payroll number and completely ignores the qualitative gains or losses in the US labor force, so the broad definition of "middle class" leaves quite a bit to be desired. So what happens if one quantizes society instead of by class with wealth of income cutoff ranges but instead by age? In that case, one gets the following chart prepared by the Urban Institute showing the change in net worth in the period 1983-2010 by age group.
Following Joerg Asmusen's somewhat surprisingly short 2-year stay at the ECB, stepping down as board member to become Germany's secretary of state for labor, the voice of economic reason in Europe has proposed 49-year-old female Sabine Lautenschlaeger to the ECB. Filling Asmussen's shoes among the ECB's "whatever it takes" crowd will be hard and while little is known of Lautenschlaeger's policy perspective, Reuters notes, she has been among those who have warned about potential conflicts of interest when the ECB has responsibility for both monetary policy and banking supervision, and argued against treating government bonds as risk-free assets in bank books.
Neofeudal financialization and unproductive State/corporate vested interests have bled the middle class dry. Yet we accept the officially sanctioned narratives as authentic and meaningful. Why? Perhaps the truth is simply too painful to accept, so we will reject it until we have no other alternative.
There’s a lot of chatter out there that the Fed will hold off on a taper announcement, but will put some sort of limit on the overall size of this latest round of QE launched in September 2012. In other words, monthly purchases will continue at the current rate, but this will no longer be a QE-forever program. From a CK game perspective, placing a limit on the QE program is a more market-negative statement than a taper. This is what I’m going to be watching for tomorrow, along with whatever dovish (market-positive) language is inserted around forward guidance on rates. And then the battle for meaning and interpretation will be joined …
In last month's 2 Year bond auction we highlighted that the end of the declining Bids to Cover trend has arrived for good, after the 3.54 BTC priced at the second highest since February. Today's just concluded 2 Year slammed the door shut on any fears that there may be declining broad bid side demand, after the Bid to Cover of 3.767 printed at nearly the same level as January's 3.675, but well higher, making it the highest BTC since last November's 4.07. The market demand at the time of auction confirmed this, with the When Issued trading at 0.352% at 1 PM, only to see the final yield on the $30 billion auction cross at a very strong 0.345%. Finally, the internals were just as strong, with Direct bidders taking down 30.24%, well above the November 27.3% and the TTM average of 23.5%, while Indirects took a slightly softer 21.55%, leaving Dealers with their usual fare of just around half, or 48.21% to be precise. Bottom line: if there was some concern in the recent 3 Year auction, the complete lack of market jitteryness today showed that the market is certainly not worried about any Fed rate hikes until after 2015.
Current price levels and related trends are similar today, Bloomberg's Rich Yamarone warns, to recent periods when deflation fears forced the Federal Reserve to ease policy. To determine the course of monetary policy, the Fed, Yamarone notes, looks at a number of indicators. What is worrying today is that several of them – production and employment – are moving in a somewhat softer direction (despite MSM propaganda). For those optimists leaning toward the potential for a more vibrant economic recovery, a word of caution: Comparisons to month-ago or even year-ago levels may be deceiving. However, given the fragility of the economy and the Fed’s unprecedented policy actions, a renewed threat of deflation leaves policy makers with few options.
Cronyism Strikes Again: Ex-Microsoftee Married To Democrat Congresswoman Set To Take Over Obamacare ExchangeSubmitted by Tyler Durden on 12/17/2013 13:05 -0400
Having done a bang up job on the Healthcare.gov rollout (after retaining virtually every private sector company with relevant skills to fix the 500 million-lines-of-code monster), Jeff Zients, as we reported previously, is set to become director of the National Economic Council (perhaps he will next roll out a database where America's unemployed sign up). But what is more notable is that his replacement in leading the overhaul of the Obamacare exchanges is a former executive from Microsoft. Kurt DelBene, whose wife just happens to be Democratic Congresswoman Suzan DelBene. What could possibly go wrong as cronyism brings Blue Cross together with the Blue Screen of Death?
We are beginning to see signs of a market top.
If policymakers were gunfighters, they’d be out of bullets: They have run out of effective policy tools to improve the economy.
So the question is simple: If there is a recession in 2014, and policymakers are out of bullets, how will it play out across the American economy?
USD strength, precious metal weakness, long-bond selling, and stocks tanking - all on the back of the ultimate driver of exuberance, the JPY-carry trade's leverage. With VIX pressing higher (over 16.5%) and credit spreads widening further, it seems hedges (or simply reducing exposure) into tomorrow's FOMC is the order of the day...
Over the past month, an interesting conflict emerged between Putin's Russia and, well, some unelected person's Europe. The conflict was over who would be the Ukraine's big brother, and strategic ally for the future, and whether the Ukraine would snub Europe, i.e. the West, and reorient to its Soviet Union roots, by aligning with Russia. Moments ago, the fight over Ukraine ended. Russia won.
- PUTIN SAYS GAZPROM TO SELL GAS TO UKRAINE AT $268.50
- PUTIN: RUSSIA TO USE SOVEREIGN WEALTH FUND TO INVEST IN UKRAINE
- PUTIN SAYS RUSSIA TO INVEST $15B IN UKRAINIAN SECURITIES
- SILUANOV SAYS UKRAINE TO SELL $15B BONDS TO RUSSIA IN 2013-14
Europe, like a jilted lover, was sad but understood it had been bested:
- GERMANY’S STEINMEIER: EU’S OVERTURE TO UKRAINE FELL SHORT
- STEINMEIER: EU MAY HAVE UNDERESTIMATED RUSSIA DETERMINATION
Despite higher rates, collapsing mortgage applications, lower affordability, and fast money exiting the market, the NAR just won't back off their exuberant optimism that it will all end well. With the biggest beat of expectations in 7 months, the NAHB sentiment index re-spiked back to 58 - levels not seens since November 2005. Only the NorthEast saw prospective buyer traffic drop notably (we are sto be blamed on the weather) as the survey saw a surge in the single-family-home-sales sub-index.
Back in November 2011, when the ECB failed to fully sterilize its weekly outstanding amount of bond purchases under its now defunct SMP program (replaced with the even more impotent OMT non-existent "bond buying" program), it caused a plunge in the Euro and sent European stocks reeling over fears what this may mean for European bank liquidity. This happened just as Europe was "turmoiling" and the ECB announced the flooding of the European banking system with hundreds of billions in excess liquidity via the collateral-soaking LTRO 1 and 2. A few hours ago, the very same thing happened after the ECB found only 109 bidders for today's weekly attempt to sterilize €184 billion in outstanding SMP holdings, and instead got bids for only €152.3 billion of the total leading to a €32 billion shortfall. This happened just a month after another failed ECB sterilization on November 26. The market barely noticed.
The fraud that has been the US government and its effects on the Potemkin economy should be obvious by now. Yet our politicians continue to pretend the economy is growing and recovering. It is not. It is in a death spiral that their interventions caused and continue to feed. For years short-run corrections were avoided or mitigated by this falsifying of economic signals. The intent was to send false signals to economic actors, to encourage them to behave in ways that helped short-term results but were harmful long-term. The cost was to make the economy weaker and less efficient. The economy has been wasted. These short-term highs have place it in grave danger.