(CNBC)
That was the take of the MSM of Ben Bernanke’s words over the past few
days. To some extent Ben’s soft talk has had a beneficial impact. “Soothing”
was how Paul Mccully from PIMCO described it. But the market overall
does not seem to be listening. The NY close stank. Currencies, bonds and
stocks moved to risk off mode again.
I heard different words from Bernanke. I heard him say:
or raise taxes.”
We have been in an environment of crisis/emergency monetary
and fiscal policy for two years. We have ZIRP, QE, stimulus, 10%
deficits and total debt exploding.
Bernanke said again today that these emergency responses must be
continued far into the future. This high-octane life support is
essential to keep the patient alive. Never before in history has so much
gas been thrown on a financial fire. And if you believe Ben, we have to
continue doing that or we die.
The reason the markets are punky in spite of the all pro MSM cheer
leading and those "soothing" words from the Chairman is that the markets
are not buying Ben’s words. They shouldn’t. Ben should take note of the
reaction. At least he would better understand what he is up against.
My read and apparently the market’s is:
definition not well.
When Ben can stand before the cameras and put his policies where his
mouth is by ending the emergency monetary steps and work with other
leaders toward a more balanced fiscal approach the markets will listen
and respond. In the meantime he is not going to fool the audience that
really matters. That audience is the capital markets, they are not
buying what Bernanke’s selling.
If the government falls make sure you have all the supplies to take care of them as well as they take care of you. Now how much mercury goes in their corn syrup?
What is Ben selling?
Hot air? I guess you could call it that I suppose.
I would call it lying. He is lying through his teeth, it's his job. It's the same with the media, the politicians, the political parties, the corporations, the ratings agencies.... and on and on and on...
I've just about had it. I'm not listening anymore. I just don't care what they say anymore. I've done my homework, and I know where this is all heading. Minutae is fun and entertaining, but it's meaningless. The time for research has just about ended people.
Thanks Bruce ;
why don't you add to the list what he said today " I don't understand why the gold price is going up ?" that was a classic for archives...
He's selling beachfront property in LA.
Am I correct in thinking that, as the months and years go by, Bernanke's soothings provide less and less of a kick to the markets?
None of us seasoned economy bears listen to the guy anyway.
Whee!! This investing stuff is easy...ABC: a)buy (already should have) a stash of physical gold and never sell; b)buy commodities & paper gold on dips and sell repeatedly on highs; and c)short ETFs on dips ONLY.
Otherwise, Bernanke reminds me of Winston's Telescreen, always on, in 1984, in the background. Or a silent Max Headroom...
Ben's trying to sell inflation. Or rather crowbar it into the system....
But however hard he works the printing presses now, the savers and earners (rather than the debtors) of the world are against him. The G20, and China, have given the US approach (and what was until recently the UK approach) a bloody nose in the last few days. Austerity drives do not equal inflation, they re-assert the primacy of cash. And in this over-arching mess that equals deflation.
Or put another way - the only (real world) scoopers of freshly printed dollars are the debtors (new home owners, new car owners, any other beneficiary of the short term "prop"). Whether they can *really* stand those debts - however goaded they are - is basically a bet on the degree of future inflation/deflation. If it's deflation from here on most of them won't (IMO).
UK - Europe - China - are starting to sound the austerity drums.... Good luck, Ben - in knackering the $ just to make the books balance - when petrol is > $4 / gallon.
In the finest american tradition, Ben says "Mission Accomplished"! And then proceed straight to add a zero to both sides of the Fed's balance sheet; just like Bush jnr and Iraq.
When Ben can stand before the cameras and put his policies where his mouth is by ending the emergency monetary steps and work with other leaders toward a more balanced fiscal approach the markets will listen and respond. In the meantime he is not going to fool the audience that really matters. That audience is the capital markets, they are not buying what Bernanke’s selling.
You can fool all of the people some of the time and some of the people all of the time...and as long as that's still working, it's good enough!
close enough for government work; as we used to say where we built the missiles to deliver the city-destroying thermo-nuclear devices.
I think we all know that Goldman is going down. Just remember the arrogance there. The attitude of "If we are going down we will take the market with us" will be dangerous for many asset classes.
I don't know how accurate body language is, but Ben looks terrible. I'd say he knows this whole thing is going to blow and the stress is getting to him.
I think his fidgeting and discomfort may have had something to do with what he's been eating for breakfast lately:
http://2.bp.blogspot.com/_qA8QmxrSIpk/Sb-P68aVQsI/AAAAAAAAAEE/5Y0Wsqn7l4...
And eventually he will be eating this one instead:
http://olliandersblog.files.wordpress.com/2010/02/kaboom_cereal.jpg
Leo, the slope of your forehead indicates to me that the probability that YOU are a double-dip is quite high.
Ben finally admitted that there is possiblility of 2nd dip. Because he needs 2nd dip to sell trillions of bonds on his balance sheet.
The 3 month T-Bill hovering near zero speaks volumes. If things are so good, then why is venture capital in hiding?
The monstrous debt roll requires fear of massive, unstoppable asset deflation. Risk assets will continue to sink and the banks will continue to hoard cash. We crash before we feel the true pain the fed has wrought.
john been reading articles here an their goldseek etc,
excellent .. there spot on in my opinion
the Fed is sitting on a powder keg, all that MBS. Goldman and JPM only need to put a fat finger on the short sell button to break the back of the Fed Treasury, and the political pretenders who are themselves hanging on barely. The point of Bernankes testimony, NO MORE FISCAL STIMULUS, is well taken. Government stimulating government is doing nothing for the economy. Obama has proven more protective of the Washington insider establishment than Bush. The marriage Bush made with Bernanke on behalf of the WH, is now officially on the rocks. Congress is the drunken brother in law, Obama is the enabler. Call it partisan sniping but it goes a lot deeper. Playing fiscal hawk and monetary dove suggests he will end up eating his own tail, but before that happens Wall Street has a few surprises. et tu Goldman?
"if [this] patient needs life support" then it's "Zombified". Along with the Zombie banks and Ponzi economy. Welcome to Lloyd's 'night of the living dead' nightmare! Yo? Engine room. Give me more power! The presses can't keep up!
Leo's gonna cry when he finds out that the robustly bearded chairman is in fact NOT Santa Claus... (whether or not he gets off his lap is another story).
OMFG. You win. Funniest today.
Good commentary.
What Ben is not saying too clearly is that life as we know it is likely over and we are hanging by a thread and he (Ben) is really hoping that somehow, someway, magic becomes real.
But it can't. The sovereign debt is not repayable and ANY attempt to do so by raising taxes is going to crash the system.
Ben's praying that deficits really don't matter.
But when the citizens of the world understand that's what is really happening here, than the citizens of the world will not want to be repaying their debts either.
They can kick "come to Jesus" day down the road for a while, but the stresses are increasing exponentially.
Think about it from Ben's point of view. Either he has to live and breathe his own bullcrap to keep his job a little longer, or throw in the towel and say his multi-trillion dollar reflation experiment is failing. When this house of cards comes tumbling down, he will be the most hated man in the world, but at least he'll be able to pull a million a year staring out the window from his GS corner office.
DP, do really think he is doing this to keep his job?
Any rational person would of quit or got themselves fired by now.
If anything, he is deranged.
The mere fact that he campaigned for his job in front of Congressmen suggests to me that he's (at least) one card short of a full deck.
How do they expect to restart the economy while the treasury keeps deflating it with massive debt issuances?
Me thinks Ben is right on the money:
U.S. Watch
The Economic Cycle Research Institute (ECRI) weekly leading index (WLI) of GDP growth in the U.S. registered a fourth decline in a row at the end of May, reaching a 43-week low. Some market participants have argued that this greatly increases the likelihood of a “double dip” scenario in the U.S. We do not agree. First, the growth rate of the WLI on a three month basis is volatile and often leads to false signals even in an expansion phase. Second, the institute is also far from drawing this conclusion: “There is no strict meaning for each value of the growth rate of the WLI…what is important is whether the move is significant according to the « 3 Ps » criteria (how pronounced, persistent and pervasive is the rise/fall compared to past cyclical moves)’’. As today’s Hot Chart shows, the growth in the smoothed WLI has decelerated to zero but this phenomenon has been observed in each of the past recoveries without any exception (green arrows). Therefore, the recent trend in the WLI does not necessarily reflect an imminent weakness in activity. In order to call a recession, the smoothed WLI needs to be negative and for a long period of time. Needless to say we prefer the slope of the yield curve as a leading indicator of a possible downturn. At +240 basis points, the odds of a double dip scenario are very low. Before crying wolf, at least give the Fed a chance to start normalizing monetary policy. Right now, real rates are still in the abyss.
Leo...love your work. Share your trades...please.
"Needless to say we prefer the slope of the yield curve as a leading indicator of a possible downturn."
If it is "needless to say," why say it? Is it perhaps because it agrees with one's priors and the other non-conforming data do not? If a steeply sloped yield curve unerringly leads to recoveries, why not just have the Fed engineer a permanently steep yield curve? And if it is not unerring, then what?
Until and unless the bad assets are cleaned up, the slope of the yield curve is as pointless as considering how many angels can dance on the head of a pin.
Double dip recession is unlikely?
Leo... I... unlike several of my fellow hooligans here... respect what you bring to ZH... namely an alternative viewpoint to keep us on our toes! Thanks for taking the bullets from the 'firing squad' for us and please continue to keep us advised of positive developments.
That said... there is plenty of evidence to indicate that what we are currently experiencing is not a recovery at all but a reset to a lower level of economic activity that is likely to continue for the foreseeable future.
Any thoughts on the DOE's industrial energy consumption statistics below?
(Both fossil fuel and electricity consumption are still 10% off of the 2008 stats for the months of Jan and Feb of 2010... and I see little sign of recovery from the 2009 numbers...)
http://www.eia.doe.gov/emeu/mer/pdf/pages/sec2_9.pdf
Oh right before I forget... we (at ClownCo Inc.) picked up another White Elephant last week... 160,000 sqft mixed use commercial/residential/institutional... the price this time?
$1
It's currently got a million dollar/yr operating loss... so damn I hope you are right about a recovery!
Leo, you're the blogosphere's version of Steve Liesman, Joe Pisani and Jim Cramer all rolled into one....but with half their credibility. And since they lost what little they had in 07/08.......
Leo, You are like Bernanke. You talk on both sides of your mouths. You have been trying to sell the upside story on this site for weeks. But now you point to very good evidence that the economy is decelerating to make a point. Which is it Leo?
Ben B says "all's well" while ON Fed Funds at 0? Oxymoron.
It seems to me that Leo is in fact belonging to Bloomberg et al:
Bruce, slope of yield curve tells you the odds of a double-dip are low. You're a smart guy, but fail to see this.
No, Leo, the yield curve is flattening at the long end (the short end can't get much lower) and risk spreads are widening. Did you even notice that the yield curve was steep in 2008?
The ECRI is telling you that the economy is about to slow down, though I give you credit for obscuring the subject and focusing your efforts on the "double dip" scenario.
As long as the trend on the ECRI Leading Index is heading down and below zero-- the chances of a double dip increase (both conditions exist now). Perhaps you can pat yourself on the back about the "double dip" if we get a trend reversal within the next 4 weeks. But as it stands right now, the chances of you being right are increasingly slim. Just like Ben Bernanke is "right" in forecasting 3.5%-4.0% GDP growth in 2011.
There are times I read your stuff and think "I sure wish I were smoking what Leo's smoking". There are other times where I just shake my head in disbelief.
This is one of those times.
this is where wis disagree. You see a historically steep yild curve and say, "Hah, this must be good news!"
I just see ZIRP. What your yield curve be telling you if the Funds rate as normalized to a historically low level of just 3%? Don't look at the yield curve as a predictor of the future. It has been bastardized. You are smart guy but fail to see this.....
I agree with Leo on this one.
Up until April, the PPT was in action and the market was overbought. After April 1, it would be reasonable for both the PPT/Short Sellers to test the market to get a sense of where Price Discovery is. The WH wants to know how resilient the market truly is and the short sellers want to see that the market is returning to it's senses.
I suspect the PPT let the market coast and the Short Sellers eased into the drivers seat. During this time Europe had to come clean and unwind the euro. Greece played their part and I believe there is agreement on the euro glidepath. I suspect the euro glidepath is basically done. There may be some more descent but the cost could well be Swiss and Eastern European problems. Take a look at the following website and compare the euro to any number of currencies. In many cases the descent looks managed (aka glidepath).
http://www.exchange-rates.org/history/RUB/EUR/G
That being said, with the mid-term election coming to the fore, the WH won't have much time to spike the market to extract the maximum benefit for the Democrats. They need good news stories during the summer months. Expect jobs numbers to look better, economic activity to look better. In short I think we will have an assisted bungy-cord bounce off the bottom.
With the current light volume compounded by seasonal light volume, it won't take much to move markets up. As Leo mentioned a couple of days ago... where are you going to get the "juice"?
Bonds aren't going to generate big returns. A renewed invisible hand combined with QE2 will increase corporate profits which can in turn be taxed. Employment increases going into the autumn will lift many spirits. Hope and Change will call for all to get on board. Sitting in cash will be seen as a losing proposition. Risk will be on. Maybe the worst is past.
I believe we are seeing two phases of the market: Short Sellers looking for price discovery which in turn would be followed by the invisible hand looking for wealth preservation. Everything is lost if the market tanks again.
Short the market to Zero and collect all the Dollars in the world. What are you going to buy with those pieces of paper? Piece of mind? Serenity now? A whole bunch of problems?
I place my bet with the political masters. The euro will trade in a range at this point. In 6 months or so, Greece will come clean and show that it can't meet it's ambitious austerity targets. The rest of Europe will follow suit. The euro will collapse. That will all occur after the November elections.
Definitely not junk. These are good arguments. But, as you yourself pointed out, it seems time is running out.
"That being said, with the mid-term election coming to the fore, the WH won't have much time to spike the market to extract the maximum benefit for the Democrats."
My bet is a continued glidepath for years, to a controlled landing 10 or 20 years from now.
Bruce, you do agree however that as long as the yield curve is steep, banks will keep printing money. Right? Hard to see double-dip when banks keep printing money.
Mortgages outstanding are dropping. CC dropping. C&I dropping, CRE dropping. The banks are buying Fannie Freddie Ginnie and Treasuries and funding them short. That is good business?
And every moving average is nothing more than a favorable curve or a problematic curve. The problematic curves are pounced on with the manipulation infractructure and attemped to get recurved. Eventually it becomes to hard to recurve against the forces and like a big dude trying to string up a 500 lb recurve bow, something snaps and someone gets a chunk of wood inserted forcefully into a vital organ.
I look at moving average curves just to see the battles.
Actually, the yield curve is simply stating that the economy is not growing faster than average or perhaps another way of saying this would be to say that the curve says there is no inflation on the horizon. Instead, it is hinting at deflation. Now, since not too many people are alive from the last time we had deflation, I think a lot of people are misinterpreting the data. I think you fall into this category.
So, people who are calling for a double dip are calling for a deflationary cycle. Not a double dip in the traditional textbook case of a relapse into recession reminiscent of 1981-82..
This deflationary cycle will look vastly different from anything we have seen in our lifetimes. And the metrics we use on a daily basis are not designed to monitor deflation. This is why we have so many conflicting data points everywhere.
I think the best example was today when BB stated that "I don't understand why gold is behaving differently than other commodities". An example of a 20th century trained economist (like me) who's education was deeply flawed. His training is as a Monetarist, which is a flawed theory based on faulty assumptions tied to a dysfunctional debt based currency.
very good. Excellent, actually. May I ask you what you think the role of precious metals should be in a defensive portfolio at present ?
Leo, I usually restrain from commenting on your comments. Mainly because, what's the point. But you have a lot of nerve trashing Bruce. The man's record speaks for itself, his FX calls are spot on and his analysis is insightful and helpful. Your comments stink of CNBS talking points and other useless MSM crap. WRT your yield curve comment - under normal circumstances i would agree, but with all the market intervention/manipulation to keep rates low I think you bring up a moot point. My two cents. One last thing - when you're wrong (which is most of the time) you disappear from ZH comments....everyone calls you out and you are nowhere to be found.
Bruce - another great piece - thanks!!
Read my comment, i never trashed Bruce. i just disagree with him. By the way, read my Outllook 2010 carefully:
http://pensionpulse.blogspot.com/2010/01/outlook-2010-black-swans-or-black.html
Short Euro was there in black & white. :)
Let's take a view at the rest of your 2010 Outlook:
* Solar stocks: down
* Stocks: down
* Short gold: down
* Jobs report will surprise to the upside: wrong
Typically you only mention 1 trade that is doing well, not mentioning the rest. Now again you come up with the same story 'maybe next months jobs WILL improving' and you are listening to Ben - who has a 100% track record of being wrong.
So give us answer to your bright view on why things are improving, while at the same time:
1. China is in a bear market again
2. Oil is down from $ 86 to $ 72
3. Stocks are down
4. Gold is going up
5. Treasury yields are down from 4% to 3.2%
6. Copper and other commodities are down
And so forth.
Apparently you don't want to see what the markets are doing, but instead you are listening to Ben, who, not surprisingly, confirms your pink glasses view. I can you remind you many famous words of Ben, amongst them 'subprime is contained', 'Fannie and Freddie are adequately capitalised' and 'there willbe no recession in 2008'. If you want to listen to this moron, be my guest. Do it at your own peril and stop using these nonsense Bernanke BS to comment on Bruce.
Thanks for actually listing Leo's predictions. Much better than verbal abuse.
Thanks for your commentary on the ZH resident disinformation troll otherwise known as Leo.
Unlike you, however, I am no longer willing to restrain myself from criticizing Leo's outrageous and absurd "CNBS talking points and other useless MSM crap", as you so aptly put it. He has collectively insulted out intelligence and integrity for the last time, and I am no longer afraid to call him out on it. He is a disingenuous, duplicitous, lying snake who does not deserve any special forum here on ZeroHedge, and to the extent that he continues to post misleading and dissembling pro-establishment propaganda I will continue to junk his comments.
akak
read leo ,, then take a injection of morphine lol