So far we have experienced 7 million foreclosures. Beyond that there are still 9 million homeowners seriously underwater on their mortgages and there are millions more who are stranded in place because they don’t have enough positive equity to cover transactions costs and more stringent down payment requirements. And that’s before the next down-turn in housing prices - a development which will show-up any day. In short, the socio-economic mayhem implicit in the graph below is not the end of the line or a one-time nightmare that has subsided and is now working its way out of the system as the Kool-Aid drinkers would have you believe based on the “incoming data” conveyed in the chart. Instead, the serial bubble makers in the Eccles Building have already laid the ground-work for the next up-welling of busted mortgages, home foreclosures and the related wave of disposed families and social distress.
The proud recipient of today's $250,000 invoice for propaganda rendered by Ben Bernanke will be the Economic Club of Canada...
BERNANKE: FED ACTIONS DIDN'T FAVOR WALL STREET OVER MAIN STREET
Bernanke Says US Economy Is Heading Towards Complete Recovery
Just don't tell Obama (or the Democrats who have been told not to mention the 'recovery'), or the record number of middle-aged people living with their parents, or the almost imperceptible rise in the employed population since QE began...
The Fed’s 5-year campaign to drive the 30-year mortgage rate from 6.5% to 3.3% has accomplished nothing except to touch off another of those pointless “refi” booms which enable homeowners to swap an existing mortgage for a new one carrying a significantly lower interest rate and monthly service cost. Such debt churning exercises have been sponsored repeatedly by the Fed since the S&L debacle of the late 1980s. The overwhelming evidence, however, is that America’s shop-till-they-drop consumers have finally dropped. But while peak debt means that the Fed’s entire 5-year money printing spree was destined to fail, it nevertheless has produced massive impacts - all of them bad or stupid. One of the most crucial is that it generated an artificial refi windfall to the Big Banks which now dominate the home mortgage business. And the profit windfall was a doozy. Now that financial results for Q1 2014 have been posted, the impact on Big Four financial results can actually be quantified. The four charts below on mortgage originations per quarter during the course of the Fed’s balance sheet expansion binge are the smoking gun.
As we reported last night, whether as a result of Snowden revelations and NSA blowback by BRIC nations, or simply because the global economy is contracting far faster than rigged and manipulated markets worldwide will admit, IBM's Q1 revenues not only missed consensus earnings, but dropped to their lowest level since 2009. And yet, IBM stock is just shy off its all time highs and earnings per share have been flat if not rising during this period, leading even such acclaimed investors who never invest in tech companies as Warren Buffett to give IBM the seal of approval. How is that possible? Simple: all that investment grade companies like IBM have done in the New Normal in order to preserve the illusion of growth, is to use cash from operations, or incremental zero-cost leverage, to fund stock buybacks. In essence a balance sheet for income statement tradeoff. However, that "great stock buyback gimmick" as we call it, is finally coming to an end.
Despite Janet Yellen's meet-and-greet with the unemployed and criminal classes, the absence of Ben Bernanke has seemingly empowered several Fed heads to be just a little too frank and honest about their views. The uncomfortable truthsayer this time is none other than Dallas Fed's Fisher:
*FISHER SAYS FED POLICIES HAVE MADE THE RICH 'MUCH RICHER' (but...)
*FISHER: UNCLEAR IF FED POLICIES WILL BENEFIT THE MIDDLE-CLASS
We wonder how President Obama, that crusader for fairness, equality and all time Russell 2000 highs, will feel about that? In the meantime, just like the Herp, QE is the gift that keeps on giving.. and giving... and giving... to the 0.001%.
*YELLEN SAYS FED COMMITTED TO ACCOMMODATION TO SUPPORT RECOVERY
Markets will be hanging on every word of what is likely Janet Yellen's first monetary policy speech and even more so the Q&A afterwards as she suggests that a considerable time is more than 6 months, and the delicate balance she has to play between admitting the economy is ugly while admitting that QE is over no matter what... all the while maintaining some semblance of credibility. One has to wonder if the ripfest rally of the last 24 hours is a buy the rumor ramp ahead of a sell the Yellen news event as once again she is tested...
Yes, this is not meant to be ironic.
In summary: someone, unclear who, operating through Belgium and most likely the Euroclear service (possible but unconfirmed), has added a record $141 billion in Treasurys since December, or the month in which Bernanke announced the start of the Taper, bringing the host's total to an unprecedented $341 billion!
Two rather amusing, and quite opposing views on surging food inflation (recall that as we first reported beef prices are at record high), which was confirmed by this week's PPI and CPI reports: one from Goldman, the other from IHS Global. We let readers decide which one is right... and which one will determine the Fed's "thinking" about soaring good inflation.
It seems the two words "fiduciary duty" are strangely missing from the dictionary of the new normal's asset management community. This morning, shortly before 8:27am ET, someone decide that it was the perfect time to dump thousands of Gold futures contracts worth over half a billion dollars notional. This smashed Gold futures down over $12 instantaneously, breaking below the 200DMA and triggered the futures exchange to halt trading in the precious metal for 10-seconds. Palladium also got clobbered and was also halted. This is gold's worst since Bernanke 'tapered' in December.
On the 'growth' side, Commercial and Industrial loans are rising at a double digit annual rate of change (although it is unclear whether this is an indication of business optimism or stress - after all, we did see a big jump in these loans leading into the last recession). On the flip side, the bond market and the US dollar index seem to be flashing some warning signs about future growth. Simply put, the outlook for the economy is decidedly uncertain right now and we think so is the confidence in Janet Yellen. We think the more dire outcome for stocks would be if Toto fully pulled back the curtain on monetary policy and revealed it to be nothing more than a bunch clueless economists sitting in a conference room with no ability to control the economy or the markets. If US growth disappoints after all the Fed has done, how could anyone continue to view the Fed wizards as omnipotent? That would send the stock market back over the rainbow to the reality of an economy with big structural problems that can only be solved through political negotiation, something that has been notable only by its absence over – at least – the last 6 years. Are we headed back to Kansas?
The bull market in stocks is showing more signs of fatigue. Are we about to witness a change in trend?
Chief Economist Of Central Banks' Central Bank: "It's Extremely Dangerous... I See Speculative Bubbles Like In 2007"Submitted by Tyler Durden on 04/11/2014 18:05 -0400
Yet again, it seems, once senior political or economic figures leave their 'public service' the story changes from one of "you have to lie, when it's serious" to a more truthful reflection on reality. As Finanz und Wirtschaft reports in this great interview, Bill White - former chief economist of the Bank for International Settlements (who admittedly has been quite vocal in the past) - warns of grave adverse effects of the ultra loose monetary policy everywhere in the world... "It all feels like 2007, with equity markets overvalued and spreads in the bond markets extremely thin... central banks are making it up as they go along." Some very uncomfortable truths in this crucial fact-based interview.
A look back at the headlines and market movements of the last month provides some useful color for why markets are weak and why now... As Scotiabank's Guy Haselmann warned early last month, there is a threshold point during the Fed’s attempt to normalize policy where the tide reverses and investors join in a sell-off in a race to avoid being left behind. This is why it's called the greater fool theory.