You can ignore and even downplay for a while, but eventually and as sure as the fundamental law of nature that everything has a cost....
Disappasionate overview of what to expect from the 2-day FOMC meeting that begins today
The Fed is now pre-occupied with an unanswerable and fanciful question, according to Jon Hilsenrath’s pre-meeting missive on the Fed’s current monetary policy “debate”. Figuratively estimating the number of angels which can dance on the head of a pin, Fed officials and economists suppose they can specify the the appropriate money market rate down to the decimal place for virtually all time to come... Of course, every one of these three magic numbers are perfectly arbitrary, academic and silly. Due to the structural failures of the US economy owing to decades of destructive Washington policies, the “unemployment rate” today is not remotely comparable to what was being measured in the 1950s and 1960s when today’s Keynesian theology with respect to the Phillips Curve, Okun’s Law and full-employment policy was being formulated.
Back in Feb 2013 we introduced the "Brent Vigilantes" and reminded traders how stock markets (and macro economies) react to shifts in the oil price with the two trading together to a 'tipping point' at which point strocks belief in growth breaks. We further confirmed that this is even more worrisome in the case of an oil price shock which strongly suggests that VIX at 12 is not pricing in the volatility that we have seen in the past when the oil complex starts to shake.
Bad data, don't worry, the central bank's got your back; Good data, don't worry, the central bank promised to stay easier for longer and longer (no matter how good things appear from the data). That's the meme that has driven the short-end of the world's largest bond markets to record lows. And then, just as the world's bond traders think they have the central banks understood, the Bank of England drops a tape-bomb...
Another conspiracy "theory" becomes conspiracy "fact" as The FT reports "a cluster of central banking investors has become major players on world equity markets." The report, to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF), confirms $29.1tn in market investments, held by 400 public sector institutions in 162 countries, which "could potentially contribute to overheated asset prices." China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials, and we suspect the Fed is close behind (courtesy of more levered positions at Citadel), as the world's banks try to diversify themselves and "counters the monopoly power of the dollar." Which leaves us wondering where are the central bank 13Fs?
- Iraq Army Tries to Roll Back Sunni Militants’ Advance (BBG)
- Starbucks to Subsidize Workers' Online Degrees (WSJ)
- ‘Bitcoin Jesus’ Calls Rich to Tax-Free Tropical Paradise (BBG)
- Medtronic Is Biggest Firm Yet to Renounce U.S. Tax Status (BBG), Medtronic to buy Covidien for $42.9 billion, rebase in Ireland (Reuters)
- Oil Topping $116 Seen Possible as Iraq Conflict Widens (BBG)
- Putin Seeks Paris Landmark as Hollande’s Russia Ties Defy Obama (BBG)
- GM Says It Has a Shield From Some Liability (WSJ)
- BOJ’s Bond Paralysis Seen Spreading Across Markets (BBG)
It's one of those days: despite the Iraq conflict spilling out of control and about to involve US drones and warplanes, despite China's naval conflict with Vietnam over an oil rig in disputed territory set to go "kinetic" at any moment, despite the Ukraine civil war having its deadliest day yet this weekend and adding insult to injury Russia halting gas supplies to Ukraine (letting Kiev and Berlin fight for the scraps), despite crude prices rising ever higher and about to unleash a "discretionary income" shockwave on America's summertime motorists, despite yet another massive tax inversion M&A deal in which the buyer has made abundantly clear its stock is overvalued and will be used as the purchasing currency, stocks are inexplicably not at all time highs this morning.
We believe Jeffrey Gundlach, et al. are wrong regarding the 10-Year Bond yield staying below 2.80% over the second half of the year.
In Explosive Scandal, Head Of Polish Central Bank Recorded Promising Assistance To Government If Minister FiredSubmitted by Tyler Durden on 06/15/2014 16:00 -0400
Yesterday, Polish magazine Wprost released a recording of a meeting between Interior Minister Bartlomiej Sienkiewicz and central bank Governor Marek Belka which took place in a Warsaw restaurant in July 2013. In the recording, Belka told the minister he would be willing to help the government out of its economic troubles if the finance minister was fired. And there goes the myth of impartial, apolitical central banks...
Straightforward dispassionate overview of the investment climate
"The government bond markets right now present one of the most one sided trades I've ever seen in my professional life."
From "why did Nixon sever the link between currencies and gold?" to "is war good for the economy?" Mike Maloney's tour de force through 140 years of gold, silver, and monetary farce is indispensable as major parts of the world enter a de-dollarization phase. As Jesse noted here, after listening to this presentation, one can surely understand why the central banks both fear and covet gold. It resists their wills, but has a natural tendency to be seen as money. Money is power, after all, and greed will too often refuse to relinquish any power or claim willingly, even to its own destruction. The American abuse of financial power for political purposes is causing a bifurcation in global finance, along the expected fault lines, and it will be interesting to see how that develops. Maloney's bottom-line, we are overdue for a new monetary system.
The Neofeudal arrangement of credit-capital control is effectively enforced by debt-based consumerism, where everyone who wants to be "cool" (i.e. have a self that is recognized in a Neoliberal order) has to go into debt to be cool for at least one product cycle. When their access to credit runs out, so does their ability to have a recognizable identity in the consumerist social order.
We all knew just how wrong it was as we sat there and listened to the World Bank going on in January about how world economic growth would top 3.2%. Today the World Bank has downgraded economic growth to 2.8%, which some might say is even over the odds