If nobody is working in one out of every five U.S. families, then how in the world can the unemployment rate be close to 5 percent as the Obama administration keeps insisting? The truth, of course, is that the U.S. economy is in far worse condition than we are being told.
How long will interest rates stay low? We expect the Fed to keep rates very low for a long, long time.
While the market is still enjoying the post-NFP weekly data lull, economic data starts to pick up again in the coming days, alongside the start of the reporting season. Below are this week's key events.
It is commonly assumed that the gold price and interest rates move in opposite directions. Like all assumptions about prices, sometimes it is true and sometimes not. The market today is all about synthetic gold, gold which is referred to but rarely delivered. The current relationship is therefore one of relative interest rates, because positions in synthetic gold are financed from wholesale money markets. This is why a rumour that interest rates might rise sooner than expected, if it is reflected in forward interbank rates, leads to a fall in the gold price. To the extent that this happens, the gold price has been captured by the modern banking system, but it was not always so.
After The Fed jawboned the world into the largest aggregate net short position in Treasuries in Q4 since 2010, its rapid realization that all is not well in the real world - and subsequent talking (and walking) back of rate-hike expectations - has sparked the biggest short-squeeze in 6 years and sent Treasuries up by the most since 2012. With odds collapsing for any more rate-hikes in 2016, as Yellen admits their forecasts are worthless, it seems - just as in 2010 - the bonds shorts have a way to go.
Former Fed President: "Living In Constant Fear Of Market Reaction Is Not How You Manage Central Bank Policy"Submitted by Tyler Durden on 03/30/2016 09:29 -0400
Back in January Fisher said (what even Liesman has now suggested) that "We Frontloaded A Tremendous Market Rally" and there is "No Ammo Left", followed by a second appearance earlier this month when he said that the Fed "Injected Cocaine And Heroin Into The System To Create A Wealth Effect." This morning Fisher was again on CNBC to discuss Yellen's dovish speech at the Economic Club of NY, and said that the Fed is "living in a constant fear of a market reaction. This is not how the way you manage central bank policy."
At the end of the day, it was all about the dollar and the reason for this morning's stock surge around the globe, as we noted last night, is absurdly delightful: Yellen signaled "weakening world growth" and "less confidence in the renormalization process." In other words, the "bad news is good news" mantra is back front and center.
Bottom line – the economy is due for a recession and the indicators suggest that one may already be in the works. But if you listen to SF Fed's Williams (for example), the narrative goes something like this: "Everything's awesome. Stop asking questions." What if The Fed is wrong (again) - Today, interest rates are at 0.25%... next to nothing. That means that even if the next (i.e. current) recession is extremely mild, interest rates are practically guaranteed to go below zero... And from there, it’s a very short road to capital controls.
Even if you take the most forward looking date of 2018…we are on the cusp of a major change. Are you prepared?
Many investors today are not very familiar with market history and tend to live only in the day-to-day mainstream narrative while watching little red and green graphs move up and down. This is not so much an issue in a relatively stable economic environment. The problem is, today we live in the most unstable economic conditions possible.
In recent weeks Chinese stocks remained relatively resilient, levitating quietly day after day. That all changed overnight when the Shanghai Composite plunged by 6.4% with the drop accelerating into the close. This was the biggest drop in over a month and was big enough to almost wipe out the entire 10% rebound from the January lows in one session.
The United States government has abandoned everyone except the rich.
The Fed doesn’t see it coming and would be petrified by the prospect of a Wall Street hissy fit were it actually to express doubts about the sustainability of this so-called recovery. At the same time, Wall Street fails to recognize the obvious truth that the Fed is out of dry powder. If it attempts QE4, it will be a confession of total failure and lack of efficacy. If it actually seeks to launch negative interest rates, it will ignite a political firestorm of untold intensity. So both parties are unprepared for what is coming down the pike, and that makes this time truly different. There will be no massive liquidity injection and quick reflation of risk assets because even the Fed can’t push on a string when it is out of dry powder.
“Better to preserve capital on the downside rather than outperform on the upside”