Why Yellen's Testimony Was Not Dovish Enough: Bank CEOs Told Her The 'Economy Is Stronger Than Markets Imply'Submitted by Tyler Durden on 02/12/2016 13:15 -0500
"The Council believes the economy is stronger than the recent negative market sentiment would imply."
First, it was The BoJ's utter collapse from omnipotence to impotence. Then came the collapse of The Fed's credibility in the short-term. And now, in the most egregious example of total central bank failure - the 'market' has priced out any chance of a rate hike through 2018... and in fact, there is now a greater chance of a rate-cut (than rate-hike) into 2017.
Following remarks that are identical to those from yesterday, today Yellen will conclude her semi-annual testimony, this time by presenting her vision about the economy and the path of future rate hikes to the Senate Banking Committee. Surprises, if any, will come during the Q&A.
Here is, courtesy of Nanex, a forensic market-level look at the key events that took place so far this morning:
"Trying to divine the end of the rout is difficult given the globe is in the midst of a series of tightly intertwined, self-reinforcing, and correlated trades and narratives (i.e. oil slumps and drags inflation down with it which prompts CBs to ratchet up accommodation which sinks banks which crushes general market sentiment and the overall price declines tighten financial market conditions and scares corporate execs and actual economic activity begins to deteriorate)."
Hong Kong traders are back from vacation, and with few options on the table, they are buying the one asset that provides the best cover to central banks losing faith, demonstrated most vividly by the total failure of the BOJ, and as a result just as Yen soars above 113, gold has taken out the numerous $1,200 stops and is currently surging to levels not seen in almost a year.
"This is a very price elastic market. The only reason price hikes held last year was that all escorts raised their prices; customers had little choice. But it’s also a testimony to income growth: customers had the available disposable income."
You can’t say you weren’t warned. The writing on the wall that “smart devices” would prove to be manna from heaven for spy agencies and hackers around the world has been obvious for a very long time. And now, from none other than James Clapper, we get confirmation...
What we do know is that the eurodollar system is failing and we know how it is failing. From negative swap spreads to the shrunken, depressed money and credit curves, they all spell out the death of the current standard. The money supply, for lack of a more appropriate term in the “dollar’s” universe, is in the long run converging with the shriveled economic baseline. The immediate problem for our current circumstances is that we don’t yet have any idea what that foundation might look like even now- how far is down.
"BOTTOM LINE: Chair Yellen’s prepared remarks to the House Financial Services Committee contained little new information on the monetary policy outlook, and were roughly in line with comments made by Vice Chair Fischer and New York Fed President Dudley over the past couple weeks. She continued to highlight the FOMC’s expectation for “gradual” increases in the federal funds rate."
Janet Yellen's "Humphrey-Hawkins" Testimony: Economic Strains, Tightening Pains, & No Stock Gains - Live FeedSubmitted by Tyler Durden on 02/10/2016 09:56 -0500
Fed Chair Yellen will be presenting her semi-annual monetary policy testimony - sometimes called the "Humphrey-Hawkins" testimony - today (House Financial Services Committee) and tomorrow (Senate Banking Committee). Her prepared remarks offered little new information over the January FOMC Statement but the Q&A will likely be the most market-moving as politicians likely demand she "get back to work" for the good of the nation's shareholders.
Broad equity indexes have declined significantly since July 2015, and forward price-to-earnings ratios have fallen to a level closer to their averages of the past three decades.
Leverage [among speculative-grade and unrated firms] firms has risen to historical highs, especially among those in the oil industry, a development that points to somewhat elevated risks of distress for some business borrowers.
The only question that matters today: is a "downbeat undertone", aka bad news, good news for stocks once again, and will the market relapse to its old "bad news is great news" regime, or will it take advantage of today's brief European bank euphoria to sell the rally as it has throughout all of 2016?