Persistently Over-Optimistic Fed Admits There Is Persistent Over-Optimism About The US Economy

In a stunningly honest reflection on itself (and its peer group of professional prognosticating panderers), The Federal Reserve's San Francisco research group finds that - just as we have pointed out again and again - that since 2007, FOMC participants have been persistently too optimistic about future U.S. economic growth. Real GDP growth forecasts have typically started high, but then are revised down over time as the incoming data continue to disappoint. Possible explanations for this pattern include missed warning signals about the buildup of imbalances before the crisis, overestimation of the efficacy of monetary policy following a balance-sheet recession, and the natural tendency of forecasters to extrapolate from recent data. The persistent bias in the track records of professional forecasters apply not only to forecasts of growth, but also of inflation and unemployment.

White House Considers Sending Antitank Missiles, Small Arms And Ammo To Ukraine "To Deter Russia"

While the US government has yet to opine on the recently leaked information during Joe Biden's November trip to Ukraine that, contrary to conventional wisdom, the US is already providing lethal aid to Kiev, and certainly has said absolutely nothing about the presence of US soldiers - either taxpayer funded or mercenary - on Ukraine soil, the topic of legitimizing lethal weapons is once again on the front of the White House agenda. According to the WSJ, "The U.S. government is considering providing Javelin antitank missiles, small arms and ammunition to Ukraine, part of an effort to try to deter further aggression by Russia-backed rebels there, according to U.S. officials."

Market Wrap: Futures Attempt Bounce On Sudden Rebound In Crude

The overnight session had been mostly quiet until minutes ago, when unexpectedly WTI, which had traded down as low as the mid $46 range following the weakest Chinese manufacturing data in two years, saw another bout of algo-driven buying momentum which pushed it sharply, if briefly, above $50, and was last trading about 2.6% higher on the day. In today's highly correlated market, this was likely catalyzed by a brief period of dollar weakness as well as the jump of EURCHF above 1.05, within the rumored corridor implemented by the Swiss National Bank, which apparently has not learned its lesson and is a glutton for a second punishment, after its hard Swissy cap was so dramatically breached, it hopes to repeat the experience with a softer one around 1.05. Expect to see even more FX brokers blowing up once the EURCHF 1.05 floor fails to hold next.

'Famous' Bond Investor Turns Out To Be Nothing More Than A Glorified BTFDer

"Michael Hasenstab is all about the big trade," is the 'masters-of-the-universe'-esque introduction by Bloomberg for Franklin Templeton's "famous" bond fund manager. “His success speaks for itself, but he does take bets,” notes one financial planner but it appears Hasenstab has BTFD one time too many - after loading up on more than $7 billion of Ukraine's bonds (equal to almost half of all Ukraine’s foreign bonds) he has seen them almost cut in half to around $4 billion. And it appears clients are seeing the bond guru's BTFD-iness for what it is - extreme risk with OPM - as investors last year pulled a record $14 billion from the U.S. and European versions of the Templeton Global Bond Fund.

Q1 Earnings Are Set For The Biggest Drop Since 2012

On September 30, the estimated earnings growth rate for Q1 2015 was 9.9%. By December 31, the estimated growth rate had declined to 4.2%. Today, it stands at  -1.6%.  Most of the expected decline in the estimated earnings growth rate for the S&P 500 for Q1 2015 is due to reductions in earnings estimates for companies in the Energy sector. On September 30, the estimated earnings growth rate for the Energy sector for Q1 2015 was 3.3%. By December 31, the estimated growth rate fell to -28.9%. Today, it stands at -53.8%.

Swiss National Bank Scraps Hard Franc Ceiling, Replaces With Soft Ceiling Instead Local Press Reports

Three weeks ago, what the SNB really did was be the first developed central bank to admit defeat in the global currency wars, realizing that contrary to "popular" Magic Money Tree opinion, it does not have an infinite balance sheet. And now the time has come to pay the price for delaying reality by over three years. To many this was a welcome move as it means after several years of horrendous monetary policies, Switzerland has finally regained some monetary sense, and while the near-term economic (and stock market) pain may be acute, the long-term will be thankful. And then, earlier today, we read that the SNB didn't learn its lesson after all, and instead of a hard EURCHF 1.20 floor, it is now unofficially targeting an exchange rate of 1.05-1.10 per Euro, aka a "soft", kinda/sorta Swiss Franc cap, according to Schweiz am Sonntag.

The AAPL Effect: Q4 Earnings Growth Without Apple: 0%; With Apple: 2.1%

Yesterday we commented on the outsized macro impact that one company already excerts on the world, when we reported that in the fourth quarter, a whopping 60% of retail sales growth was due to the launch of Apple's iPhone 6 in the fall of 2014, and the surge of Chinese tourists who tok advantage of Hong Kong's lower prices and earlier release. So how about the micro level? For the answer we present the chart below. Behold: the AAPL effect, which demonstrates that what until AAPL's release was shaping up to be a flat Q4 earnings season for the S&P 500, has since transformed into Q4 EPS growth of 2.1%, and made Apple the largest contributor to earnings growth for the S&P 500 at the company level for the fourth quarter. All this, thanks to just one company!

"Obama Is Clueless On Inequality," David Stockman Rages "The Problem Is [The Fed]"

Echoing Elliott's Paul Singer's "greatest irony of politicians railing against inequality," former Reagan OMB Director David Stockman raged that when it comes to inequality, everyone can see the symptom, but "President Obama is clueless as to the cause," blasting that the problem is not capitalism, "the problem is in the Eccles Building and the 12 people sitting there thinking that zero interest rates are some magic elixir that will cause this very toubled economy to revive.! It won't, "these people are dangerous and destructive," Stockman exclaims, and sooner or later the inequality they have created is going to cause a huge political reaction.

5 Things To Ponder: Ascending Contingencies

Recent market actions, the rapid decline in interest rates, earnings deterioration and plunging energy prices have made many less comfortable being long the market. While the "buy and hold" crowd suggests this is all rubbish, it should be worth remembering that every single one of that group never saw the corrections in 2000 or 2008 until it was far too late. Their only excuse was "no one could have seen it coming." The truth is that many did see what was coming. Paying attention to what is happening at the margin leads to an understanding of when the "tides" begin to shift.

Treasury Yields Are Crashing (Again)

US Treasury yields are plunging again this morning. From 4Y maturities out, yields are around 10bps lower with 30Y under 2.30%, 10Y under 1.65%, 7% under 1.5%, and 3Y under 75bps!! Since QE3 ended, 30Y bond yields are 84bps lower, 2Y 3bps lower.

Market Wrap: Treasury-Equity Reallocation Trade Pushes Futures Lower, 10 Year Rises To 1.72%

While the US daytime trading session has lately become a desperate attempt to expand multiples on the declining earnings of the S&P500, thanks to recurring BOJ intervention in the USDJPY, to keep the S&P above the 100 SMA at all costs including generous central banker verbal intervention then it is during the US overnight session when global deflationary reality reasserts itself with a vengeance, and sure enough at last check, the 10 Year has rallied with 10Y yield hitting 1.71% before this morning’s 4Q GDP release, as well as following the latest deflation number of -0.6% out of Europe (worse than the -0.5% expected) which was the biggest price decline on the continent since 2009.  "Treasuries remained well bid overnight due to month-end index adjustments. Some talk of a  reallocation from equities to bonds trade going through in both Asia and continuing in Europe," ED&F Man head of rates and credit trading Tom di Galoma wrote in a note to explain the latest Great Unrotation, if only until the Virtu HFT algos get the full blessing of the Fed to ramp the USDJPY, and thus the stock market.