Monetary Policy

Futures Slide On Apple Disappointment, Oil Slumps Ahead Of Fed Decision

"Nobody is really sure where we go from here, and nobody is brave enough to make the call,” Peter Dixon, Commerzbank AG’s global equities economist in London told Bloomberg. “Corporate earnings season won’t provide much of a support - markets may find a floor if the Fed is extremely dovish tonight. At least investors will have time to think and reassess valuations."

Peter Schiff On The End Of The Illusion Of Recovery

The financial engineering that has been made possible by zero percent interest rates is no longer available to paper over weak corporate results in the U.S. Our economy is addicted to QE and zero rates, and without those supports, we will spiral back into recession. This is the reality that the mainstream tried mightily to ignore the past several years. But the chickens are coming home to roost, and they have a great many eggs to lay. In the end, stimulus does not create actual growth, but merely the illusion of it.

China Warns Soros Against Starting A Currency War: "You Cannot Possibly Succeed, Ha, Ha"

Soros’s war on the renminbi and the Hong Kong dollar cannot possibly succeed — about this there can be no doubt. Reckless speculations and vicious shorting will face higher trading costs and possibly severe legal consequences. And just as proved in the yuan exchange rate case, the Chinese government has sufficient resources and policy tools to keep the overall economic situation under control and cope with any external challenges.”

Why A Former Fed Official Fears A Global Meltdown

"The Fed’s monetary policy of extraordinarily low interest rates helped create the asset bubbles in stock and commodity prices that are now bursting. In retrospect, the Fed’s rate hike last month will likely be viewed as monetary malpractice. None of this is likely to forestall turmoil in credit markets. Investors are wise to be worried..."

"The Risk Of An Earnings Recession" And Six Other Reasons Why JPM Just Cut Its S&P Target To 2000

"The risk-reward for equities is deteriorating. There is increasing risk that elevated volatility starts incurring enough technical damage to market psychology and spills over, negatively impacting investor, consumer and business sentiment, resulting in a lack of risk taking, and eventually creating a negative feedback loop into the real economy. Going forward we see equity risk remaining asymmetric to the downside given the following seven reasons:"

Offshore Yuan Drops To 3-Week Lows As China Injects Another $70 Billion Liquidity

Following the afternoon weakness in US equities, Offshore Yuan has been limping lower into the fix, not helped by comments from a MOFCOM researcher that "China is able to withstand currency fluctuations" implicitly warning carry traders to stay away and suggesting the dollar's dominance would not last long. CNH is now at 3-week lows against CNY, over 300pips cheap - which prompted the major short squeeze last time. Chinese stocks are modestly lower but more worrying is the 7-day slide in Chinese corporate bond yields - the most in 2 months - hinting perhaps that the last bubble standing is bursting.

The Fed Passes The Buck: Blame Oil And China

Contrary to those blaming the Fed for causing stocks to fall by “raising rates” (which Joe Salerno reflects on here) we want to stress the fact that, in raising rates, the most that the Fed could do is unravel previously made mistakes. In other words, there is nothing praiseworthy in the first place about artificially propped up stock market levels. We have no interest in lauding the longevity of the bubble, because the bubble is the enemy of the healthy economy. The collapsing equity markets reveal where bubbles were formed and that our alleged prosperity is an illusion. And this is precisely what former Dallas Fed Chairman Richard Fisher stated in a conversation on CNBC last week when he confessed: “We frontloaded a tremendous market rally to create a wealth effect.”

With EMs And SWFs Pushing Markets Lower, Here Are The Three Dramatic Conclusions

Earlier today we showed an amazing schematic courtesy of Citi's Matt King: if one includes the reserve liquidation by various EMs and SWF, and nets it against liquidity injections by DM central banks (and the PBOC), one gets a perfect quantitative, not just qualitative, walk thru on how to trade markets: in other words one can measure, using high frequency data in real-time, just where markets should trade based on liquidity flows and promptly profit from any arbitrage opportunities. But aside from the potential for substantial profits, there are more profound implications. Matt King lays them out as follows..

Exposing The Fiction Of Mainstream Macroeconomics (In 9 Simple Questions)

The game is simple: we know that macroeconomics is a fiction from top to bottom, the challenge is to expose it as such. Here are some apparently innocent questions to ask of economists, journalists, financial commentators and central bankers, which are designed to expose the contradictions in their economic beliefs. A pretence of economic ignorance by the questioner is best, because it is most disarming.

Leaked Document Reveals Why China Will Not Unleash Any Major Monetary Stimulus

The People’s Bank of China is reluctant to further reduce the required reserve ratio for fear of such a move resulting in the weakening of the yuan, according to a leaked document. The information, reportedly leaked from minutes of Tuesday’s meeting between the central bank and commercial lenders, was shared widely after it was published on major mainland online portals including Sina.com and Netease.com.

Wrong For The Right Reasons: And Why It Matters

What is currently transpiring in the markets today is exactly what the "everything is awesome" crowd stated wouldn’t happen – and exactly what many others argued – was inevitable. And, suddenly it is they who are finding out the rarefied air of "brilliance" The Fed enabled them to breathe has indeed been shut off – and all that’s left to inhale is their own exhaust fumes.

"A Historic Wealth Illusion Built On A Foundation Of False Promises"

What began with Greenspan’s early-nineties covert bank recapitalization evolved into Bernanke’s foolish policy to openly inflate risk markets with new central bank Credit. Amazingly, U.S. inflationism took the world by storm. The issue today goes much beyond a stock market correction, a bear market or even global financial crisis. Contemporary central banking has failed. Theories have failed. Doctrine has failed. The inability to spur self-sustaining economic recovery has been a major issue.

The Real Enemy Of Investors

The real enemy of investors is not these fairly routine 10 or 20% downturns. The real enemy is the bear market that is associated with a recession or crisis, the one that knocks your equity block down by 40 or 50%. And actually it isn’t even the depth that is the real enemy. For most investors the enemy is time.