With 45 minutes left to go, only one thing matters: what does Goldman think (the other issue of whether Jan Hatzius shared a meal with Bill Dudley at the Pound and Pence will remain unknown until the next batch of Dudley daily "minutes" are released in a few months). So for all those scrambling for an edge in a centrally-planned world, here it is, via Goldman's Francesco Garzarelli : "Turning to today’s FOMC announcement and press conference, our US Economics team expect Chairman Bernanke to stick to the same message on ‘tapering’ of bond purchases used in previous pronouncements on the matter, but also emphasize that reducing the expansion of the balance sheet does not imply that the Fed is anywhere close to hiking rates. We think this is broadly what bondholders are also expecting to hear."
It seems yet another conspiracy theory has become conspiracy fact thanks to a Chinese whistleblower. While the shrodinger-like nature of Chinese data has been keeping the market guessing for the last few years, the disconnects between hard-data (e.g. electricity production) and government-supplied surveys have been, at times, ridiculous (leaving aside the un-manipulated craziness of arbitrage-driven trade data). As the WSJ's China Real-time reports, in an unusual move, the National Bureau of Statistics – clearly frustrated with the lies, damn lies – has recently outed a local government it says was involved in a particularly egregious case of number fudging, providing rare insight into just how we’re being deceived.
Three years ago we wrote "On The New York Fed's Editorial Influence Over The WSJ" in which we observed, courtesy of declassified documents by the Sigtarp exposing the involvement of then-Goldman and New York Fed director Stephen Friedman in relation to his infamous purchase of Goldman Stock so well memorialized by none other than Jon Hilsenrath (a story which made him a Loeb award finalist when he actually did investigative work instead of merely convey messages from the Fed), just how extensive the relationship between Jon Hilsenrath, the WSJ and the New York Fed was. But instead of regurgitating all the minutae covered in the original post (read it here), we will cut to the chase and present the declassified emails between the WSJ team in April/May 2009, and the NY Fed's Calvin Mitchell, then-EVP of the Communications Group, as well as the Fed's internal involvement of the FRBNY's General Counsel Thomas Baxter. We have highlighted the NY Fed "suggestions" - they are self-explanatory.
The following three minutes of absolute perfection uttered by CNBC's Rick Santelli is dangerous for anyone living in Kyle Bass' "intellectually dishonest" alter-world of denial and "unicorns and rainbows" as the Chicagoan goes off on the ignorance of everyone in these so-called markets. When every talking head is bullish and the world is going so great that we should all "buy stocks," Santelli demands we ask Bernanke - "what are you scared of," that keeps you pumping this much money into the system for this long? Simply put, Santelli's epic rant is the filter that every investor (or member of the public) should be viewing financial media and the Fed today (or in fact every day).
The latest casualty of Europe's berserk pursuit of tax evaders everywhere: not some Russian oligarch with a $1 billion Cypriot bank account but famous Italian designers, Dolce and Gabbana. WSJ reports that a Milan court has convicted the designers Domenico Dolce and Stefano Gabbana of tax evasion. The pair were found guilty Wednesday of failing to declare €1 billion ($1.3 billion) in income tax to authorities. The court sentenced them both to one year and eight months in jail.
Not sure if this one fits with the "fairness doctrine" or the "inconvenience" paradigm (where the government is here to protect you in exchange for ceding all those pesky constitutional amendments), but moments ago yet another "conspiracy theory" become fact when the FBI director Robert Mueller admitted to the domestic use of drones for surveillance purposes.
Since the only topic on everyone's mind until 1:59:59:9999 pm today (excluding those who have been leaked the FOMC decision in advance of course) will be what the Fed will do, here are some additional perspectives from former FOMC secretary and economist Vince Reinhart (currently at Morgan Stanley), who believes nothing happens today as the Fed has "boxed" itself in, and his Fed Statement Probability Matrix.
With better access to credit, housing, jobs and overall standard of living than probably anyone in their family has ever experienced, you would think that the average Brazilian would have little reason to hit the streets. And yet, they are. While the credit-fueled boom has been great and looks likely to continue for at least a little while longer, the reality of a government that has made little real progress improving the overall standard of living is becoming all too obvious. The protestors are frustrated. Frustrated with persistent inflation – that hits them much harder than the upper classes who in many ways benefit from it. Frustrated with corruption – while the Brazilian congress tries to pass a law that would limit the number of corruption cases that can be brought. Frustrated with inefficient government – the infrastructure development for the World Cup and Olympics is already running up against cost overruns with projects of questionable long-term value. But mostly frustrated that due to all of this incompetence, they could lose all of the gains they made since 2002. Changing Brazil’s well-established rich/poor, connected/unconnected, boom/bust political and financial system will be difficult in the extreme.
For the past several years, a firmly entrenched psyche of ‘win-win’ for risk-taking behavior has dominated. The thinking has been that the Fed would either help achieve a sustained recovery (allowing distorted prices to be validated by economic fundamentals), or the FOMC would provide more price-boosting liquidity. Now, faith in this proposition is slowly being eroded. Global central banks have collectively provided $11 trillion in liquidity over the past several years. The initial moves were taken to spark domestic demand, but some recent external actions have been retaliatory in nature, implemented as a means to influence currency levels. These new forms of hostilities are indications that the external ramifications of QE policies may no longer be passively tolerated.
Almost 50 years ago, JFK immortalized the donut with his comment "Ich bin ein Berliner," with pressure from Merkel to come clean on the NSA's efforts, we wonder if the current US President will admit, "Ich bin ein Berlistener," as he delivers a speech from The Brandenburg Gate.
The housing market 'recovery' has provided substantial support to the U.S. economic growth. The housing-related activities, which Guggenheim's Scott Minerd defines as private residential investment, personal expenditures on household durable goods, and utilities, as well as consumption wealth effect from home price appreciation, have positively contributed to real GDP growth for five consecutive quarters. In the first quarter of 2013, housing-related activities contributed more than half of the growth in the real GDP. That seems a significant burden to be carrying for a sector now seeing data disappointing already expectations, mortgage applications plunging, furniture sales plunging, and REIT IPOs being pulled.
If anyone is still not convinced that surging stock bourses in Europe are indicative of anything more than central bank liquidity, carry trade allocation and localized asset bubbles, we present a snapshot of what is actually happening on the ground via Italy's Ansa: "It's a massacre," said Confesercenti President Marco Venturi. "Each day 134 shops, restaurants and bars close in recession-hit Italy, retail association Confesercenti said on Wednesday. Confesercenti, which represents small and medium-sized businesses in the retail and tourism sectors, said 224,000 enterprises had closed their shutters since the start of the global economic crisis in 2008.
While Fed officials are at pains to point out that their two policy tools (asset purchases and rates) the markets continue to link them and the latest increase in Taper chatter has dragged expectations for the first rate hike dramatically forward. Just a month ago, expectations were as late as Jan 2016 but Fed Funds futures have collapsed in recent weeks to imply rate hikes begin in Jan 2015 - a level of 'tightening' not seen since early Summer last year. Bernanke has stated that his communication is aimed at "reducing the risk that market misperceptions of [FOMC] intentions would lead to unnecessary interest rate volatility," but just as with Kuroda, the market seems to not be agreeing and, as we note below, there appears a good, bad, and ugly 'taper' scenario for today.
- China cash crunch deepens as PBOC withholds funding (FT), just a week behind ZH
- Platts in hot manipulated crude again: Traders Try to Game Platts Oil-Price Benchmarks (WSJ)
- Kabul Suspends Security Talks With U.S., jeopardizing plans to maintain a U.S. military presence (WSJ)
- Afghan government irked over U.S. talks with Taliban (Reuters)
- BOJ Kuroda: BOJ to Adjust Policy If Japan Econ Changes (MNI)
- Google Considering Private-Equity Alliances (BBG)
- Korean Air Buying 747-8s to End Boeing’s Sales Drought (BBG)
- Syria's Islamists seize control as moderates dither (Reuters)
- SEC considers policy shift on admissions of wrongdoing (FT)
- U.K. Banker Bonuses Face Decade Delays in Industry Overhaul (BBG)