Market Conditions

In case anyone should ask you to explain Fed reflexivity in under 100 words, here is the answer...

While the Federal Reserve has chosen to keep the Federal Funds rate near zero, it is merely delaying the inescapable and inevitable result of its own monetary policy – another needed economic correction that its actions will have generated but which it will, no doubt, blame on the supposed “failures” of the market economy.

The following censorship instructions, issued to the media by government authorities, have been leaked and distributed online. As China Digital Times reports, propaganda directives issued by the Xinhua News Agency and the Central Propaganda Department show that Chinese media are being instructed to "properly interpret economic data," and "promote discourse on China’s bright economic future."

With the SEC moving to head off the risk of a bond market meltdown triggered by a dangerous combination of illiquidity and bond fund proliferation, WSJ decided to see which fund providers are the most at risk in a crisis. The list may surprise you...

Why Coca-Cola's business model is sexier than Heidi Klum in a bikini!

Non-bombasitc overview of the investment climate.  No, the sky is not falling.  This is not the end of days.  

For those of you who don’t want to take the time reading through the ponderous 7000-word transcript of yesterday’s FOMC press conference, we bring you the shorter Janet Yellen, translated from Fedspeak into plain English. Enjoy!

What the Fed really decided Thursday was to ride the zero-bound right smack into the next recession. When that calamity happens not too many months from now, the 28-year experiment in monetary central planning inaugurated by a desperate Alan Greenspan after Black Monday in October 1987 will come to an abrupt and merciful halt. Yellen and Co should be so lucky as to only face torches and pitch forks.

Perception is everything in contemporary economics and the Fed is the center of perception; the medium has become the message. The truth is more this: the Fed no longer reacts to the waxing and waning of animal spirit-led demand. In the current monetary regime it exists to create and maintain animal spirits with a secular policy centered on ever-expanding credit, but it is very aware that admitting it’s centrality would defeat its purpose.

"Our Investor Desk would comply with a weekly request from (a client) for details of Central Bank activity that Citi had transacted."

Despite some strangely optimistic expectation of a -0.5 print, September Empire Manufacturing printed -14.67, showing absolutely no hockeynesian dead-cat bounce mean-reversion. Hovering at the worst levels since April 2009, the underlying data is a total disaster. New Orders remain firmly negative and inventories collapse (who could have seen that coming?), and even more concerningly, employment and average workweek plunged into negative territory for the first time in over a year. Simply put, this report suggests total carnage in the manufacturing sector and, just as we have pointed out (most recently here and here), the exuberant inventory over-accumulation of the past few years - from Fed-deluded malinvestment - is about to come crashing down.

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.

The title does give it away: the only event that everyone will be focusing on this week will be the Fed's announcement and Yellen's press conference on Thursday. Here is what else is on deck.

A review of the technical condition of the dollar in the days leading up to the FOMC meeting announcement.

"The shale sector is now being financially stress-tested, exposing shale’s dirty secret: many shale producers depend on capital market injections to fund ongoing activity because they have thus far greatly outspent cash flow."