Just as in the 1930s the Fed fueled deflation by not making credit available, today the opposite seems to be the case – low rates are fueling deflation and preventing markets from clearing.
You can’t overstate the baleful effects for Americans of living in the tortured landscapes and townscapes we created for ourselves in the past century. This fiasco of cartoon suburbia, overgrown metroplexes, trashed small cities and abandoned small towns, and the gruesome connective tissue of roadways, commercial smarm, and free parking is the toxic medium of everyday life in this country. Its corrosive omnipresence induces a general failure of conscious awareness that it works implacably at every moment to diminish our lives. It is both the expression of our collapsed values and a self-reinforcing malady collapsing our values further. The worse it gets, the worse we become. The citizens who do recognize their own discomfort in this geography of nowhere generally articulate it as a response to “ugliness.” This is only part of the story. The effects actually run much deeper.
Now I was a kid once too, and I liked toys as much as the next child, but over the years, I have grown increasingly aware of the fact of how short-lived the pleasure of Getting Stuff is. Whether it's a toy as a child or a sports car as an adult, once you've actually got whatever it is that you thought you couldn't live without, well, it just sort of blends into normalcy.
Hunting season is off to a good start this week, and I’m not just talking about deer hunting. It seems that former Fed officials declared open season on their ex-colleagues. First, Andrew Huszar, who once ran the Fed’s mortgage buying operation, let loose in yesterday’s Wall Street Journal. Huszar apologized to all Americans for his role in the toxic QE programs. And then today, the WSJ struck again, this time with an op-ed by former FOMC Governor Kevin Warsh. Warsh is a former Morgan Stanley investment banker whose 2006 to 2011 stint on the FOMC spanned the end of the housing boom and the first few years of “unconventional” policy measures. After such a solid grounding in the ways of the Fed and Wall Street, he recently morphed into a critic of the status quo. His criticisms are welcome and we believe accurate, but they’re also oh so carefully expressed. They’re written with the polite wording and between-the-lines meanings that you might expect from such an establishment figure. He seems to be holding back. So, what does he really want to say?
The MSM did their usual spin job on the consumer credit data released earlier this week. They reported a 5.4% increase in consumer debt outstanding to an all-time high of $3.051 trillion. In the Orwellian doublethink world we currently inhabit, the consumer taking on more debt is seen as a constructive sign. The storyline being sold by the corporate MSM propaganda machine, serving the establishment, is that consumers’ taking on debt is a sure sign of economic recovery. They must be confident about the future and rolling in dough from their new part-time jobs as Pizza Hut delivery men. Plus, they are now eligible for free healthcare, compliments of Obama, once they can log-on. Of course, buried at the bottom of the Federal Reserve press release and never mentioned on CNBC or the other dying legacy media outlets is the facts and details behind the all-time high in consumer credit. They count on the high probability the average math challenged American has no clue regarding the distinction between revolving and non-revolving credit or who controls the distribution of such credit. A shocking fact (to historically challenged government educated drones) revealed by the Federal Reserve data is that credit card debt did not exist prior to 1968. How could people live their lives without credit cards? 1968 marked a turning point for America...
And the flies got wise...
Real estate guru Mark Hanson updates his housing view following this week's dismal housing industry data:
Sept. Pending Sales... the largest MoM drop since Sept 2001... not 2011... yes, 2001.
Don't let them tell you 'this is normal for Sept'. The 'oh-crap' moment is now in the can. Going forward, "Existing Sales" volume will disappoint on a YoY basis for several quarters. There is no way around it...
Charts Show that U.S. Policy Has Increased Terror Attacks
Why are we so rich and the poor so poor? Econophile takes a look at Kenya as a laboratory of bad ideas and how to fix it.
It just keeps getting worse and worse for Bill Ackman. A few weeks after the epic humiliation, not to mention even more epic losses, he suffered on his now defunct JCP long position (despite ample warnings by the likes of Zero Hedge who said long ago JCP is merely a melting icecube and fast-track Chapter 11/7 candidate) all those who predicted (such as Zero Hedge back in January) that an epic HLF short squeeze would result in the aftermath of Ackman's Herbalife short announcement leading to Ackman's ultimate capitulation, have been proven correct. Moments ago, in a letter to investors, Bill Ackman just announced that he has covered over 40% of his Herbalife short position, with his forced buy-in explaining the endless move higher in Herbalife stock in recent weeks. The explanation of being forced out of nearly half of his position is amusing: "we minimize the risk of so-called short squeezes or other technical attempts by market manipulators to force us to cover our position." So Ackman is forced out by his Prime Brokers so as not to be forced out by market manipulators? That's an interesting explanation for what is a far simple situation: booking your paper losses.
I have never been fashionable enough to conjure up surely one of the silliest startup ideas with, bar none, the worst name of all time: Fashism. I only know of this site because I read about its demise yesterday. Evidently Ashton Kutcher (who, for reasons wholly alien to me, is heralded as some kind of tech-savant investing genius) put $1 million into this dog.
Another signal for investors around the world to buckle their seatbelts.
Regardless of what I (or you) do throughout the day we're tracked, logged, profiled and otherwise "identified" in a hundred different ways.
One year on from the "whatever it takes" speech and all appearances suggest Draghi's all-in move with the imaginary OMT 'worked. European sovereign spreads have compressed dramatically, European stock indices are near their highs, European financials are doing great. Of course, record unemployment rates, record loan delinquencies, record drops in house prices, and record deposit outflows can all be ignored because no matter what, Draghi will do "whatever it takes." Except, as JPMorgan notes, the excess cash in the Euro area banking system continues to decline reaching EUR230bn, closer to the so-called inflection point at which money market rates, i.e. EONIA and repo rates, are responding more pronouncedly to changes in the excess cash. Bank funding is becoming increasingly volatile since the 2nd LTRO repayment and the trend shows no sign of abating. We suggest Mrs. Merkel will be on the phone telling Mr. Draghi to "get back to work," - at least until September 23rd anyway.
Stocks ended the day at the highs of the day with small gains as the internal anxiety implied (highs vs lows, adv vs dec) by the re-appearance of the Hindenburg Omen battled (Icahn vs Ackman-like) with the one-way-street predictability of a Hilsenrath-inspired 330RAMP Capital appearance. Hilsy's "no July Taper" un-surprise-note added 7 points to the S&P lifting it comfortably green (and knocked 5bps off Treasury yields). Trannies bounced hard after dropping to unchanged from the 6/19 FOMC levels (+1.4% from the lows) and along with the Dow ended the day practically unchanged. The Russell just kept on rising (+1%) as stocks ended the day at their highs. Despite the volatility (and close-to-close stability) in stocks, FX markets were the main movers today (and high-yield bonds) as EURUSD pushed back up to pre-FOMC 'Taper' levels from 6/19.