Previewing Yellen's Jackon Hole "Gobbledygook": Not One Analyst Thinks Yellen Will Say Anything Remotely HawkishSubmitted by Tyler Durden on 08/21/2014 13:55 -0400
Ahead of Yellen's Jackson Hole speech tomorrow, the sell-side, hypnotized by 6 years of Fed bubble-inflating generosity, refuses to even consider the possibility that the Fed could possibly pull the punch bowl away, and the absolutely unanimous consensus is that despite yesterday's minutes (or perhaps due to, because as the Chinese Department of Truth has taught us, one must first and foremost baffle with BS), Yellen will go uber-dove. So without further ado, here is what the Penguins expect Yellen's "gobbledygook" will reveal tomorrow, and as a reminder, yesterday Citi warned that there is "tremendous" downside risk if Yellen doesn't go "full-dovish".
Following last week's surge back over the 300k Maginot Line, the Labor Department print this week is 298k (sigh of relief heard around the world). This is also the week that BLS surveys for the Augsut NFP print. Continuing claims fell once again to 2.500 million - the lowest print since June 2007. So great news... that explains why stocks are fading modestly off the highs in reaction.
With the FOMC Minutes in the books, the only remaining major event for the week is the Jackson Hole conference, where Yellen is now expected to talk back any Hawkish aftertaste left from the Minutes, and which starts today but no speeches are due until tomorrow. And while the Minutes were generally seen as hawkish, stocks continue to levitate, blissfully oblivious what tighter monetary conditions would mean to an asset bubble, which according to many, is now the biggest in history. And speaking of equities, US futures climbed to a fresh record high overnight on just the right mix of bad news.
The consensus expectation is overwhelming that Fed Chair Yellen will deliver a dovish message at Jackson Hole. Macro investors have largely eliminated their short Treasury position and look to be long risk, particularly via equities and EM. FX positioning is long USD and long EM, the long USD largely because the euro zone economy is slipping again and the ECB is hinting at further ease. Our question is whether Yellen can be more dovish than what is now priced in, not whether she will be dovish on the Richter scale of dovishness. Full dovish, semi-dovish, or contingent dovish.
Even Hellicopter Ben would have balanced remarks. However, Janet Yellen has taken dovishness to an all-time high or low dpending on your perspective.
The July FOMC minutes generally had a slightly hawkish tone, warns Goldman's Jan Hatzius, emphasizing that labor market slack had improved faster than expected and that the labor market was now closer to what might be considered normal in the longer run. Overall, these remarks suggest that the change in the labor market language found in the July FOMC statement - shifting focus to broader labor market indicators rather than the unemployment rate specifically - was not intended to be a dovish change, as some commentators thought at the time. Finally, some participants noted some evidence of stretched valuations in specific markets.
The Wall Street Journal's Jon Hilsenrath unleashed an instantaneous reaction to today's FOMC minutes and the message is clear - markets are much less uncertain than the Fed about the timing (sooner rather than later) of the first rate-hike. The minutes of the meeting, Hilsy notes, provide fresh evidence of an intensifying debate inside the central bank about when to respond to a surprisingly swift descent in the unemployment rate and rising consumer prices. The minutes appeared to reflect a slightly more aggressive stance than Ms. Yellen's testimony.
These are the minutes from when the Fed toned down deflation fears and raised concerns over labor slack, and expectations going in were for a slightly more hawkish tone from the minutes (and perhaps commentary on financial stability - bubbles - and exit strategies). This is what we got:
- *MANY FED OFFICIALS SAID JOB GAINS MIGHT BRING RATE RISE SOONER
- *FOMC AGREED BALANCE SHEET SHOULD BE CUT GRADUALLY, PREDICTABLY
- *SOME FOMC PARTICIPANTS MORE UNCOMFORTABLE WITH FORWARD GUIDANCE
Sounds pretty hawkish to us...
Pre-FOMC Minutes: S&P Futs 1982.5, 10Y 2.4175%, Gold $1294 , USDJPY 103.40, Oil $95.40
Why So Much Anger In Ferguson? 10 Facts About The Massive Economic Gap Between White & Black AmericaSubmitted by Tyler Durden on 08/19/2014 21:48 -0400
When people feel like they don't have anything else to lose, they are likely to do just about anything. Many in the mainstream media seem absolutely mystified as to why there is so much anger in Ferguson, but as I pointed out yesterday, all of this anger did not erupt out of a vacuum. Economic conditions in Ferguson, and for African-Americans as a whole, have been deteriorating for years. Sadly, many white Americans are totally oblivious to any of this.
The FOMC has used experimental tools for so long to keep the accelerator pressed that it fears what happens when the car stops. Therefore, the FOMC believes they have little choice other than to keep the car going forward, which works until it doesn’t. The risk/reward tradeoff continues to skew unfavorably. The farther markets move into the right-tail side of the distribution curve, the deeper they will eventually more into the left-tail. Vrooom...Crash.
Good thing the Federal Reserve isn`t worried about inflation, another 2% rise is just noise. But when the Fed does start worrying about inflation, not only is it too late, it is 1970s too late!
At this point, one has to wonder, just what is the point of all the Central Banks’ activities? The QE efforts in the US and Japan (two of the biggest in history) haven’t really generated jobs or GDP growth… so just what ARE they doing?
The main event of the week will be Yellen's long awaited speech at the Jackson Hole 3-day symposium taking place August 21-23. The theme of this year's symposium is entitled "Re-Evaluating Labour Market Dynamics" and Yellen is expected to deliver her keynote address on Friday morning US time. Consensus is that she will likely highlight that the alternative measures of labour market slack in evaluating the ongoing significant under-utilisation of labour resources (eg, duration of employment, quit rate in JOLTS data) have yet to normalise relative to 2002-2007 levels. Any sound bite that touches on the debate of cyclical versus structural drivers of labour force participation will also be closely followed. Unlike some of the previous Jackson Hole symposiums, this is probably not one that will serve as a precursor of any monetary policy changes but the tone of Yellen's speech may still have a market impact and set the mood for busier times ahead in September.
While there have been many socio-economic 'explanations for the recent events in Ferguson, many of which have exceeded the realm of the factual and have brazenly encroached on feelings, emotions, heartstrings, and so on, the unpleasant reality is that much of what has transpired not only in the small 21,000-person St. Louis suburban community, but what is taking place across all of America has to do with a far simpler phenomenon: the rise of poverty and the destruction of America's middle class.
I was left slack-jawed as I listened to an interview on financial media between the host and guest. I have always enjoyed as well as respected the host even though many times I may totally disagree. However, as for the guest being interviewed, not only did I disagree: I lost quite a bit of respect for. During the interview the questions were posed as to why people (investors et al) harbor these feelings of angst as to whether or not they should get in, get out, etc,, etc. The guest then went on to use data points, math, trend references, and any other metric available within a snake oil sales bag as to prove his point: Where people not believing in this market rally along with those who’ve not participated are, (and I quote) “Idiots.” I have only one answer to that statement: What you’ve just demonstrated is exactly why people with more than half a brain aren’t buying your message: You are insulting their/our intelligence.