Global Economy

"Asia banks indicate in coming weeks markets at early stage of crisis; Q3 EPS shows recessionary global economy. Crowded Discretionary, Banks, Tech & Eurozone most at risk should peak liquidity coincide with EPS recession, SPX<1870, GT30<2.8%, DXY<93...at least until new extreme policies introduced (Fed QE4, China QE1 or a G7 shift toward fiscal policy stimulus)."

Yellen was more dovish than expected which is bullish for gold and suggests that the long awaited for bottom for gold may have occurred in early August prior to recent market volatility.

What was one "one and done", just became "none and done" as the Fed will no longer hike in 2015 and will certainly think twice before hiking ahead of the presidential election in 2016. By then the inventory liquidation-driven recession will be upon the US and the Fed will be looking at either NIRP or QE4. Worse, the Fed just admitted it is as, if not more concerned, with the market than with the economy. Worst, suddenly the market no longer wants a... dovish Fed?

"What scares me, or what worries me, is what the next downturn in the economy looks like, with asset prices where they are and a lesser ability of central banks to ease monetary policy."

We advise investors to fade out the short term noise emanating from the Fed today and from Janet Yellen and focus on the reality

The data, according to many analysts, have been broadly supportive, with stronger growth and a tightening in the labor market that should allow the Fed to be "reasonably confident" that inflation will gradually return to target. That said, heightened global risks could lead to a tactical delay. Economisseds remain evenly split on the prospect of the first rate increase in 9 years.

The simple fact that the Fed is struggling to increase interest rates from near 0% after seven long years should give pause for concern. It underlines the vulnerability of the U.S. economy and means that another recession is very likely. Indeed, the huge levels of debt at all levels of U.S. society and the significant increase in global debt levels during the last seven years mean that another recession is almost certain.

• Wall Street Has Doubts About Fed Lifting Interest Rates (WSJ)
• Global stocks at three-week highs as Fed decision looms (Reuters)
• Charting the Markets: The World Awaits the Fed (BBG)
• Powerful quake off Chile slams waves into coastal towns; eight killed (Reuters)
• As Fed Storm Brews, Europe Stocks Seen Weathering Turmoil Best (BBG)
• Fiorina's rise adds another insurgent to U.S. election fray (Reuters)

"Every day brings another reason why the Federal Reserve should hold off before raising interest rates... First and foremost there was the recent plunge in stock prices."

The party is over for tight oil. Despite brash statements by U.S. producers and misleading analysis by Raymond James, low oil prices are killing tight oil companies. Reports this week from IEA and EIA paint a bleak picture for oil prices as the world production surplus continues. EIA said that U.S. production will fall by 1 million barrels per day over the next year and that, “expected crude oil production declines from May 2015 through mid-2016 are largely attributable to unattractive economic returns.” IEA made the point more strongly. “..the latest price rout could stop US growth in its tracks.”

Let's hope Dr. Yellen has the right medication this Thursday to cure the paranoid investing world of its latest Fed-induced psychosis.

News That Matters

One of these days, the people of main street will rediscover their torches and pitchforks. But until they do, Goldman has apparently invented still another ruse to keep the Fed doing Wall Street’s bidding, and to thereby keep its wretched jihad against savers fully in force.

48 hours - that's how long it took Citi's chief economist Willem Buiter to issue a report which was just as dire as Daiwa's, but because Citigroup is much more reliant on keeping it traditionally bullish clients as happy as possible, one had to read between the lines to get to the bottom line.  This is Citi's punchline: "A global recession starting in 2016, led by China is now our Global Economics team's main scenario. Uncertainty remains, but the likelihood of a timely and effective policy response seems to be diminishing."