Ethan Harris

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Jackson Hole Preview: Do Not Expect Policy Shift





Going into this year’s Jackson Hole meeting, it does not appear to BofAML's Ethan Harris that the FOMC is leaning toward a policy change as in 2010, let alone on the verge of a big shift as in 2012. Instead, the Fed is in a bit of a limbo state as it waits for clear evidence that 1Q GDP was a fluke and convincing signs of stronger wages. With significant policy changes a long way off, and with the intense market focus on Jackson Hole, we expect the Fed Chair to try to say nothing interesting about the policy outlook.

 
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"An Unforgettable Winter" - Bank Of America's "Explanation" For The 17th Worst GDP Print In US History





And so the polar bears penguins come out of hibernation, "explaining" today's disastrous GDP print. Randomly selected for your reading pleasure, here is Bank of Frigid America's Ethan Harris spiking the Kool Aid with an above Surgeon General recommended dose of hopium.

 
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Here Are The Funniest Quotes From BofA As It Throws In The Towel On Its "Above-Consensus" GDP Forecast





It is hard not to gloat when reading the latest embarrassing mea culpa from Bank of America's Ethan Harris, who incidentally came out with an "above consensus" forecast late last year, and has been crushed month after month as the hard data has lobbed off percentage from his irrationally exuberant growth forecast for every quarter, and now, the year. As a result, BofA has finally thrown in the towel, and tongue in cheekly admits it was wrong, as follows: "our tracking model now suggests growth of -1.9% in 1Q and 4.0% in 2Q for a first half average of just 1.0%.... Momentum is weak, but fundamentals are strong. We have lowered second half growth to 3.0% from 3.4%."

 
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Bank Of America: "A Slowdown In National Home Prices Is Coming"





The gain in home prices has been widespread, with prices up on an annual basis in all 20 metropolitan areas surveyed. However, as BofAML notes the improvement has been particularly notable in certain markets, which have disproportionately pulled up the national composite. Ethan Harris points out that the trend in home prices in California is particularly important when gauging the risks to national home prices; and prices have peaked. The bottom line, they warn, "if history is a guide, this suggests a slowdown in national prices is coming."

 
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BofA Revises Long-Term GDP Forecast, Sees No US Recession During Next Decade





In what should be the biggest joke of the day, Bank of America has just released its GDP forecast not for the next several quarter, but making a mockery of the IMF's 2022 Greek GDP forecast, it predicts US growth for the next decade! The punchline: after expecting a surge in growth to 3.4% in 2016, the bailed out bank tapers off its forecast which evens off at 2.2%... some time in 2025. And throughout this period its crack economist team headed by Ethan Harris anticipates precisely.... zero recessions. Indeed, in what will be a first time in history, the US is expected to grow for 16 consecutive years since its last official, NBER-defined recession (which "ended" in the summer of 2009) without entering a recession.

 

 
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Bank of America Has Some Words For David Rosenberg: "Don't Hold Your Breath" On Rising Wages





One Wall Street strategist who appears to have thrown in the towel on the entire rising wages debate is none other than BofA's chief economist, Ethan Harris, who in a note released on Friday fires the proverbial shot across the David Rosenberg bow regarding rising wage pressures: "Don't hold your breath."

 
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Bond Bulls Beware - Here's What Happened The Last 18 FOMC Minutes Release Days





Of all the Fed’s communication tools, BofA notes that the minutes seem to be the most confusing to the markets. They should be “old news," Ethan Harris comments, and yet, investors look to the minutes for nuggets of insight. The result, in our view, is a steady stream of “head fakes” and a regular pattern of weakness in the bond market. The results are striking and more consistent than we had expected: the bond market sold off on 18 out of 20 days. Of course, this time could be different but the last 2 years of FOMC Minutes releases have seen bond yields rise on average 3.5bps (bonds are already 3bps higher in yield) and effective Fed watching these days appears mainly a matter of avoiding misleading messages and fading "misinterpretation" of their communications.

 
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Bank Of America Asks "Do Obamacare Costs Exceed The Benefits?"





Few laws cause as much high blood pressure as the Affordable Care Act (ACA). Supporters of the law consider it the signature legislation of the Obama administration. Yet, in 2011 the House of Representatives passed the “Repealing the Job-Killing Health Care Law,” one of more than 40 attempts to scuttle the legislation. Public opinion polls are ambiguous: most Americans are against the law as a whole and yet most support many of its provisions. BofAML tries to slice through the partisan debate and show what serious research says about how the ACA will impact the labor market.

 
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Futures Tumbles Ahead Of US Government Shutdown





European equities trade negatively as political tensions on both sides of the Atlantic dampens risk appetite and a lower than expected HSBC manufacturing PMI figure from China further weighs upon investor sentiment. In the US, government is on the precipice of the first shutdown since 1996 after House Republicans refused to pass a budget unless it involved a delay to Obama’s signature healthcare reforms. If the Republicans follow through with their threat a shutdown will occur at midnight tonight. As a result a fixed income in the US and core Europe benefit with investors wary of the immediate harm a shutdown will do to confidence in the economy.

 
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The Government Shutdown Looms: A Q&A On What Happens Next (And Who Stays At Home)





With a government's October 1 shut down - temporary of course - now seemingly inevitable, and more importantly with the peak debt ceiling negotiations due in just about a week after which point the Treasury will run out of money, many wonder what comes next. That this is happening just two short years after the dramatic August 2011 debt ceiling impasse, when the market tumbled 20% and likely slowed economic growth is still fresh in everyone's mind, is hardly helping matters. Add a potential political crisis in Greece and Italy, and suddenly a whole lot of unexpected variables have to be "priced in."

 
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7 Reasons To Delay The Taper (And 4 Reasons Why They Can't)





With the FOMC set to announce the decision to taper or not taper, forward guide or not forward guide, cut thresholds or not cut thresholds, we thought a reminder of the seven reasons to delay the taper (following what BAML's Ethan Harris calls the recent "punch in the stomach for the economic recovery story") and the four crucial reasons why the Fed can't (or won't) delay the Taper.

 
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Bank Of America: "We Hope None Of These Three Shocks Reaches A Crisis Level"





"In the spring, the risks to growth seemed to be fading. The economy was weathering the fiscal shock. Politicians decided to delay battles over the budget and the debt ceiling, passing a continuing resolution to fund the budget through September and postponing the debt ceiling drop-dead date to some time in the fall. Meanwhile, financial markets in Europe had settled down, the European economy showed signs of improvement, and commodity prices were stable. In their June directive the FOMC made it official: “The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall.” Unfortunately, we seem to be entering another of those periods of elevated risk. Three concerns are emerging."

- Bank of America

 
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Bank Of America: "Today’s Stock Market Has Lost Some Of Its Ability To Reflect Underlying Economic Trends"





With Greenspan emerging from his crypt to confirm that he is now as clueless about everything as he was 15 years ago (although the absolutely zero reaction out of "stocks" to his statement that stocks are "very undervalued" is perhaps indicative that SkyNet may just be learning), it is appropriate to remind readers that this thing known as the "market" died some four years ago. What we have now is a vehicle with a "role in the policy fight to support spending" while "today’s stock market has arguably lost some of its ability to reflect underlying economic trends." Not our words - those of Bank of America's Ethan Harris, who, four years after the fringe blogs, finally "gets it."

 
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Guest Post: Corporatism - State-Controlled Capitalism





The Dow is at a record high and so are corporate profits - so why does it feel like most of the country is deeply suffering right now?  Real household income is the lowest that it has been in a decade, poverty is absolutely soaring, 47 million Americans are on food stamps and the middle class is being systematically destroyed.  How can big corporations be doing so well while most American families are having such a hard time?  Isn't their wealth supposed to "trickle down" to the rest of us?  Unfortunately, that is not how the real world works. But now we have replaced capitalism with something that we like to call "corporatism".  In many ways, it shares a lot of characteristics with communism, and that is why nations such as communist China have embraced it so readily. Today, most big corporations are trying to minimize the number of "expensive" American workers on their payrolls as much as they can. Right now, the system is designed to continually funnel more money and more power to the very top of the pyramid.  The global elite are becoming more dominant with each passing day. The idea of a very tiny elite completely dominating all the rest of us goes against everything that America is supposed to stand for.  In the end, it will result in absolute tyranny if it is not stopped.

 
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Bank Of America On The "Trillion Dollar Tooth Fairy" Straight "From The Land Of Fiscal Make Believe"





A year ago, out of nowhere, the grotesque suggestion to "resolve" the US debt ceiling with a platinum dollar coin came, and like a bad dream, mercifully disappeared even as the debt ceiling negotiations dragged until the last minute, without this idea being remotely considered for implementation, for one simple reason: it is sheer political, monetary and financial lunacy. And yet there are those, supposedly intelligent people, who one year later, continue dragging this ridiculous farce, as a cheap parlor trick which is nothing but a transparent attempt for media trolling and exposure, which only distracts from America's unsustainable spending problem and does nothing to address the real crisis the US welfare state finds itself in. And while numerous respected people have taken the time to explain the stupidity of the trillion dollar coin, few have done so as an integral part of the statist mainstream for one simple reason - it might provide a loophole opportunity, however tiny, to perpetuate the broken American model even for a day or two, if "everyone is in on it." Luckily, that is no longer the case and as even Ethan Harris from Bank of America (a firm that would be significantly impaired if America was forced to suddenly live within its means), the whole idea is nothing more than "the latest bad idea" straight "from the land of fiscal make believe." We can only hope that this finally puts this whole farce to bed.

 
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