Earlier this week, we followed up the CBO’s publication of its 2013 Long-Term Budget Outlook with a chart that we believe should have been included. But what would Rick Santelli say? Only Rick would think to mix our debt projections with cheeseburgers and a magnifying glass. Here’s his entertaining "I will gladly pay you Tuesday for a cheeseburger today" take on our chart...
As we warned here exactly one month ago, the tapering discussion may be merely a "sideshow to a previously undiscussed main event: the Fed's first forecast of 2016 interest rates." Now, the Fed's mouthpiece-at-large has decided we can handle the truth and the WSJ's John Hilsenrath explains the dilemma - The Fed's updated economic projections could show an economy that appears back to normal by 2016, but their projections of where short-term interest rates will be could show rates still quite low by then. Their challenge: How to justify the low interest-rate plan when their own estimates suggest an economy regaining its health. Crucially, Hilsenrath adds, as the economy improves, the Fed is trying to shift its emphasis from bond buying, which has uncertain costs and benefits, to the low-rate pledge. How will the Fed square an economy near full employment with a federal funds rate that remains historically low? "There is an inconsistency there," said John Taylor - apparently confirming what Rick Santelli asked before - "What is the Fed afraid of?"
The American public is "just too darn stupid to get it." That is the message that CNBC's Rick Santelli hears from the mainstream media when discussing polls that suggest US citizens are against a rise in the debt ceiling. Perhaps, as he exclaims, "we should only poll the Harvard and Princeton professors," since they have such a good grasp of reality. But, it is the "giant leap of faith" that the Fed can really move unemployment and keep the economy humming along to support the level of equities that has the Chicagoan irate. Congress - listen up - he explodes, "70% of Americans oppose raising the debt ceiling, and 55% oppose it even if it means default." With the mid-terms not so far away, Santelli warns, "Americans know exactly what they want and they are not getting it from the current Congress."
Bond yields snapped lower, equity prices surged higher, gold and silver prices ripped higher, and the USD snapped dramatically lower (as JPY surged) on the worse-than-expected payrolls print (and terrible downward revision). The sad reflection of bad-news-is-good-news reaction of US capital markets to this 'most important number in the world' is summed up perfectly by CNBC's Rick Santelli as he exclaims how sad this reaction is and asks "what are we a banana republic?" Well, yes, Rick, it appears we are...
With interest rates rising and now clearly weighing on the housing recovery (and affordability, as we noted earlier), many look at the extreme jumps in auto sales being pumped out today and worry that higher rates will impact that credit-fueled orgasm of optimism. While house price appreciation and belief in its linear extrapolation seemed to have prompted an inordinate amount of fed-funded credit-based car sales in the last month, the fact is that rates won't 'directly' affect car-buyers, since as CNBC's Rick Santelli exclaims, auto-loan rates are massively high already with millions paying high double-digit rates and terms are now as long at 97 months!! Simply put, with incomes stagnating, should we see any marginal impact on ability-to-pay or credit-availability (which will be affected by higher rates weighing on funding abilities - see below), then as Santelli concludes, watch out for these little words... "Auto Sub-prime loans."
Presented with little comment aside to ask (as Rick Santelli did a few months back)... just who is Ben Bernanke working for?
As the following two charts show, despite the rest of the world being mired in an entirely lackadaisical muddle-through (in terms of both manufacturing and non-manufacturing PMIs), the US is representing itself as the new growth engine with an expanding and rising economy (if the 'recovery-is-right-around-the-corner' data is to be believed). Of course, we are hearing the term 'decoupling' and 'cleanest dirty shirt' once again (begging the question Rick Santelli has asked numerous times "so why not remove the Fed's training wheels") but we remind, there is never a decoupling in the highly interconnected global economy (and its stagnant trade volumes). Our simple question is, with all this dramatic divergence from the rest of the world, stagnant income growth, and anemic manufacturing job growth at best, how will the consumer-driven US sustain its exuberance?
Day after day, CNBC's Rick Santelli hears analysts arguing how the economy is doing pretty well and that there is always some anecdotal fact that backs up their cognitively dissonant view with fundamentals. However, as Santelli asks (rhetorically), it always comes back to the same question, "if things are really that good, why do we still need the [Fed] training wheels on?" The answer is presumably obvious as actions ($85bn per month of POMO-provided liquidity to the 21 primary dealers) speak louder than analysts words (we promise recovery is just around the next corner.) While careful not to explicitly rebuff the exuberance of his channel's clients revenue-base, Santelli notes the oddly correlated relationship (that has time and again appeared in pixelated format on these very pages) between the Federal Reserve balance sheet and the ebbs and flows of the US equity market. As he concludes, the only (causal) transmission mechanism for the Fed's actions is via the primary dealers and implicitly the Fed is the entity that is goosing the stock market.
Much has been made this weekend of the WSJ story that Janet Yellen (and her dovish counterparts) have been so much more accurate as forecasters than the hawks on the FOMC in recent years. This along with pitting her against the asinine Larry Summers appears to create a shoe-in for 'damn-it-Janet' to take the helm as the new Maestro (or mistress?). But, as CNBC's Rick Santelli points out, it is ludicrous to proclaim a 'winner' based on inflation predictions, as transmission channels of the endless money-printing are jammed (and besides the models that predicted economic growth and new hiring from this 'spiking the punchbowl' have failed dismally). Simply put, Santelli analogizes, "the Cubs haven't won the World Series in a century, but if I poll all of the players/managers and see which predicted we wouldn't win the World Series; and whoever guessed that right, we will make them the manager, does that guarantee me that next year we're going to win the World Series?" The bottom-line, unless GDP shows sustainable growth, the rest is just a "silly discussion."
Despite consumer confidence at a six-year high, the latest AP survey of the real America shows a stunning four out of five U.S. adults struggle with joblessness, are near poverty, or rely on welfare for at least parts of their lives amid signs of deteriorating economic security and an elusive American dream. Hardship is particularly on the rise among whites, based on several measures. Pessimism among whites about their families' economic futures has climbed to the highest point since at least 1987.
It would appear, judging by the following discussion that the mainstream is so far down the rabbit-hole of central-planning bias that, as CNBC's Rick Santelli exclaims, "you can't imagine it any other way." In a brief 60 second screamfest, Santelli and Liesman battle over just who (or what) should be in charge. Santelli's free-market perspective that markets will set the equilibrium prices is entirely lost on a bleating Liesman who, when addressing the question of what would happen without a 'Fed', utters the following serf-like phrase, "but, who would pull the levers?"
Based on the following quotes just uttered by the Chairman...
- BERNANKE: WALL STREET HASN'T BENEFITED MORE THAN MAIN STREET
- BERNANKE SAYS FED `VERY FOCUSED' ON MAIN STREET
... Bernanke's next career as a sit-down comedian smash hit is guaranteed.
Reminiscing on the good ol' days when traders and investors poured over fundamental metrics, CNBC's Rick Santelli looks upon the current environment as a single-factor "Bernanke-loves-me, he-loves-me-not" un-reality and the impact he has on savers. "It seems a little bit ridiculous," he understates before launching into two minutes of clarifying thought on just what it is that Bernanke is doing and that we are suffering through. Just who is Bernanke working for?
Commenting on the divergence between the bond market's Taper-On reaction and the equity markets Taper-off reaction amid the total lack of clarity from the FOMC, CNBC's Rick Santelli asks the (rhetorical) question that everyone should ask: "[What the Fed minutes said] is, listen, we have to wait for bigger confirmation that the economy is doing better; and for that, we're going to look at the employment side. [At the same time] we have the fewest people working that can work in 30 years, and all-time-record-high profits for corporations. Now, does that strategy sound rational to you?" It seems, now that Bernanke has seemingly promised that it will really never end, that Santelli's question will become increasingly critical in this country.
The following three minutes of absolute perfection uttered by CNBC's Rick Santelli is dangerous for anyone living in Kyle Bass' "intellectually dishonest" alter-world of denial and "unicorns and rainbows" as the Chicagoan goes off on the ignorance of everyone in these so-called markets. When every talking head is bullish and the world is going so great that we should all "buy stocks," Santelli demands we ask Bernanke - "what are you scared of," that keeps you pumping this much money into the system for this long? Simply put, Santelli's epic rant is the filter that every investor (or member of the public) should be viewing financial media and the Fed today (or in fact every day).