recovery

The Final Swindle Of Private American Wealth Has Begun

The taper program distances the bankers from responsibility for crisis in our financial framework, at least in the eyes of the general public. If a market calamity takes place while stimulus measures are still at full speed, this makes the banks look rather guilty, or at least incompetent. People would begin to question the validity of central bank methods, and they might even question the validity of the central bank’s existence. The Fed is creating space between itself and the economy because they know that a trigger event is coming. They want to ensure that they are not blamed and that stimulus itself is not seen as ineffective, or seen as the cause. We all know that the claims of recovery are utter nonsense. The taper is not in response to an improving economic environment. Rather, the taper is a signal for the next stage of collapse. The real reason stocks and other indicators are stumbling is because the effectiveness of stimulus manipulation has a shelf life, and that shelf life is over for the Federal Reserve.

Albert Edwards: The "Freddie Kruger-Like Nightmare" For Stocks Is Coming

"The slump in the recent ISM data may be the ?straw in the wind? of what is to come. Certainly the three-month change of the leading indicator has now turned down sharply ? even before the recent ISM data has been incorporated. We watch the unfolding EM crisis with increasing trepidation because we know how this story ends. We have been here before. And even if the Fed resumes massive QE at some point as the world melts down, and markets desperately attempt their return to the dream trance, they will instead find themselves locked into a Freddie Kruger-like nightmare in which phase 3 of this secular bear market takes equity valuations down to levels not seen for a generation." - Albert Edwards

Putting The Market Mayhem Into Perspective

As the Fed continues to extract liquidity from the financial markets, it is likely that we will continue to see increased volatility in the markets.  However, despite the ever bullish calls by the mainstream analysts, the current market rout has awoken many overly complacent, excessively bullish, investors. The 5-panel chart below really tells you all you need to know about the current market environment.  We are overbought, over extended and exceedingly bullish.  The combination of these metrics has a history of bad outcomes.  Unfortunately, because these measures are generally overrun in the short term by price momentum and sentiment, they are disregarded as "this time is different."

Frontrunning: February 6

  • Draghi as ECB Master of Suspense Keeps Investors on Edge (BBG)
  • Abe lays out detailed plan for expanding defense powers (Nikkei)
  • Inflation Fuels Crises in Two Latin Nations (WSJ)
  • Obama walks into crossfire of Asian tensions (FT)
  • Harvard Makes Professor Disclose More After Blinkx Slides (BBG)
  • Hedge Funds Rework Currency Positions in Market Drop (BBG)
  • Canada, U.S. Strike Tax-Information Sharing Deal (WSJ)
  • Indonesia calls for greater clarity from Fed on tapering (FT)
  • Sony to cut 5,000 jobs, split off PC, TV operations (Reuters)

WTF Chart Of The Day: Spanish "Recovery" Edition

The following chart of Spain's housing market really speaks for itself, and certainly conflicts with Rajoy's promises that not only is the recession in the country over but it is recovering.

 

ISM Services, Immune To Snow And Cold, Beat Expectations

Weather affected jobs; weather affected manufacturing; and weather affected the global outlook for the economy... but weather did not affect the US ISM Services index which modestly beat expectations. However, at 54.0 (vs a 53.7 expectation), ISM Services remain notably below the three-year average and while new orders rose modestly, they remain a smidge above 5 year lows... Today we saw how bad weather is used to explain away the bad January numbers (ADP), but when the number is better than expected, the weather spin is ignored and it is a "reflection of the stronger economy" as was the case with the just released Services ISM number - and that is how you pick and choose the components that fit your narrative... and the tapering trend can continue.

Pivotfarm's picture

Death of the Dollar

We’ve all done it, haven’t we? Chucked something in the wash and turned it on too high, only to see it pop out at the end of the cycle and it ends up the size of your hamster. Well, Obama has been doing the same. Except this time it’s not your winter woollies that he’s shrinking, it’s the greenback.

Abenomics Disaster: Japan Regular Wages Fall For 19 Consecutive Months; Real Wages Drop To 16 Year Low

For the past year Abenomics has gotten the "get out of a jail free" card because while the plunging yen was crushing Japanese purchasing power, and sending nominal regular wages ever lower, at least the stock market was higher so (some of the) locals could delude themselves they are getting richer, if only on paper. However, following the most recent 10% correction in the Nikkei which may soon become an all out rout if the 101 level in the USDJPY doesn't hold (and then 100, and so on), all Japan suddenly has left, is the shock of soaring food and energy prices, and the hangover of declining wages that refuse to stop dropping. Case in point, last night the Japan labor ministry reported that monthly wages excluding overtime and bonus payments fell 0.2 percent in December from a year earlier to 241,525 yen on average per worker, a series of declines which has now stretched to 19 consecutive months.

Futures Lower? Blame It On The Snow (And The Carry Trade)

It's snowing in New York so the market must be down. Just kidding - everyone know the only thing that matters for the state of global risk is the level of USDJPY and it is this that nearly caused a bump in the night after pushing the Nikkei as low as 13,995, before the Japanese PPT intervened and rammed the carry trade higher, and thus the Japanese index higher by 1.23% before the close of Japan trading. However, since then the USDJPY has failed to levitate as it usually does overnight and at last check was fluctuating within dangerous territory of 101.000, below which there be tigers. The earlier report of European retail sales tumbling by 1.6% on expectations of a modest 0.6% drop from a downward revised 0.9% only confirmed that the last traces of last year's illusionary European recovery have long gone. Then again, it's all the cold weather's fault. In Europe, not in the US that is.

The Most Important Chart To Consider Before Tomorrow's ADP Jobs Report

We are sure that tomorrow's ADP report will be taken as either, a) proof positive that December's miss in NFP was a weather-related artifice hiding the true awesomeness of the US recovery (and this no un-taper); or b) the most recent macro data is indeed weak and job creation have peaked for this cycle (despite a few trillion in balance sheet expansion by the Fed). However, as the following chart shows, any surprise beat (or miss) in ADP is entirely useless as a predictor of payroll surprises...

Bernanke’s Legacy: A Weak and Mediocre Economy

Because the ultimate outcome of this monetary cycle hinges on how, when, or if the Fed can unwind its unwieldy balance sheet, without further damage to the economy; most likely continuing stagnation or a return to stagflation, or less likely, but possible hyper-inflation or even a deflationary depression, the Bernanke legacy will ultimately depend on a Bernanke-Yellen legacy. But what should be the main lesson of a Greenspan-Bernanke legacy? Clearly, if there was no pre-crisis credit boom, there would have been no large financial crisis and thus no need for Bernanke or other human to have done better during and after. While Austrian analysis has often been criticized, incorrectly, for not having policy recommendations on what to do during the crisis and recovery, it should be noted that if Austrian recommendations for eliminating central banks and allowing banking freedom had been followed, no such devastating crisis would have occurred and no heroic policy response would have been necessary in the resulting free and prosperous commonwealth.

The US Economy Is Growing Much Slower Than You Think...

Last week brought two important pieces of news: one deceptive, the other fraudulent.  The deceptive news was that the Fed, in its last Ben Bernanke moment, would stay the course. The fraudulent news was that US economy grew at a 3.2% annualized pace in the last quarter of 2013. We're still in the weakest recovery since the end of World War II. But since 1950, the composition of the US economy has changed so substantially that GDP 'growth' no longer means what it used to mean...

Fed's Lacker Slams Permabulls, Pours Cold Water On The US "Growth Story"

Unlike the other Fed presidents who are all too happy to lie in order to instill some confidence not realizing that by doing so they hurt their own credibility, non-voting member Jeffrey Lacker and president of the Richmond Fed has a different approach - telling the truth. Which is why we read his just released speech this morning with interest since once again, it contains far more truth and honesty than anything else the FOMC releases. Sure enough, it has enough fire and brimstone to put even fringe bloggers to shame.