Reflecting on the farce that was the FOMC statement and press conference yesterday, Bloomberg's Richard Breslow jabs that it appears Janet Yellen's 'splaining can be summed up, "we can’t know what considerable time means because we’re told it’s a very nuanced concept." In other words, we are just not smart enough, leave it to the PhDs in the room. Even Goldman was struggling to find the dovish side reflecting that market movements were more driven by positioning than anything new policy-wise. As Breslow sums up so eloquently, "a 'true normal' balance sheet remains a very distant dream, perhaps end of decade, and who knows if they’ll ever get back there."
Since it is the NY Fed, headed by an ex-Goldmanite, which will ultimately be tasked with exiting 6 years of "unconventional monetary policy" - at some point during this "recovery" if not now or any time soon for that matter - it is probably best to listen to Goldman for its post-mortem on what the chairwoman did or did not say. Which is why we present a "Q&A" with Goldman's head economist, Jan Hatzius, known to occasionally exchange a sandwich and the occasional policy guidelene, with NY Fed's Bill Dudley at the Pound and Pence, in which he explains how Yellen managed to be both more dovish and more hawkish than the "market" expected.
- House votes to arm Syrian rebels (Reuters).... aka ISIS
- Fed Plots Cautious Course on Rate Rises (Hilsenrath)
- Scots vote in independence referendum to seal the United Kingdom's fate (Reuters)
- Yes or No, the Winner of the Referendum Is Brand Scotland (BBG)
- Draghi Loan Plan Missing Estimates Hampers ECB Stimulus (BBG) - get with the spin, it simply means "Moar QE"
- Obama Plans to Tightly Control Strikes on Syria (WSJ)
- IMF warns of risks from 'excessive' financial market bets (Reuters)
- Russia Praises Ukraine's Autonomy Law for Rebel Areas (WSJ)
"It’s not hard to reach the conclusion that so many investors feel good not because things are good but because investors have been seduced into feeling good - otherwise known as “the wealth effect.” We really are far along in re-creating the markets of 2007, which felt great but were deeply unstable when shocks started to pile up. Even Janet Yellen sees “pockets of increasing risk-taking” in the markets, yet she has made clear that she won’t raise rates to fight incipient bubbles. For all of our sakes, we really wish she would."
The Fed came across as somewhat hawkish relative to expectations, according to Citi's Stephen Englander, but FX made an outsized move against high-beta G10 and EM relative to equities buying and moderate money market moves... here's why...
Yesterday's exuberant equity market reaction has been largely defined by the mainstream media as driven by WSJ Hilsenrath's 'confirmation' that Yellen will keep the uber-dovish phrase "considerable time" in the FOMC statement today. So, we wonder, why did the Fed-whisperer, after markets had closed last night, issue a quasi-retraction of his prediction explaining that instead of some prohetical "I just know" statement, it was a "best guess," as he concluded, "will the Fed take these steps? Only the people in the room know that. The rest of us will see Wednesday afternoon." It appears the sell-side disagrees with him on the language...
It has been a story of central banks, as overnight Asian stocks reversed nearly two weeks of consecutive declines - the longest stretch since 2001 - and closed higher as the same catalysts that drove US equities higher buoyed the global tide: a combination of Chinese liquidity injection (for the paltry amount of just under $90 billion; "paltry" considering Chinese banks create over $1 trillion in inside money/loans every quarter) and Hilsenrath leaking that despite all the "recovery" rhetoric, the Fed will not be turning hawkish and there will be no change in the Fed language today (perhaps not on the redline but Yellen's news conference at 2:30pm will certainly be interesting), pushed risk higher, if not benefiting US equities much which remains largely unchanged.
During the FOMC pregame show, they punctually trotted out Johnny Waterboy Hilsenrath via SpreeCast, the sparkling new-media darling interactive webcast platform, to serve up another fresh jug of spiked reinvigorating Gatorade to his favorite NY Stock Market team.
Those 4 C’s are: Confirmation, Crisis, Contagion, Catastrophe.
The economy we have now is like a mental patient, drugged up with so many antidepressants, antipsychotics, and mood stabilizers that the root of his problems has become undetectable. It sounds Utopian, but economic growth really is a panacea that improves standards of living for everyone in nearly every way. But instead of pursuing economic growth, the government wastes its time with piecemeal patches, trying to plug a hole whose cause remains unabated.
The last week has been dominated by sell-side strategists raising hawkish concerns about this week's FOMC with a focus on the drop of the "considerable time" language describing the period from the end of QE to the start of rate hikes. The Wall Street Journal's Fed-whisperer Jon Hilsenrath just dropped a rather large hint that that the "considerable period" language will remain... “Given the economic backdrop, they don’t want to send a signal right now that rate increases are imminent." Here's what the street thinks...
In January we noted 'Smart Restaurant' - the burger-flipping robot - and just last month we reported on China's robotification of the fast-food business; but, as The Washington Post reports, the greatest enemy to the minimum-wage-demanding fast-food worker has arrived: you can now order your own quarter-pound bacon cheeseburger from a welcoming, non-judging machine. With McDonalds sales the worst in almost a decade, it appears their need to maintain profits has stoked a move towards dehumanization. One wonder how long before tabltes are also declared 'unpatriotic'.
A look at new arguments suggesting that globalization is fragmenting. Are they really new? Are they true?
Generally since 1999, and especially since 2008, the financial world has been dominated by Keynesian lunacy. Collectively, Central Banks have cut interest rates over 500 times and printed more than $12 trillion combating a brief 9-12 month period of deflation.
US Industrial Production and the NY Fed Empire State Manufacturing survey are the two main releases for the US. In Europe, the euro area trade balance will be the notable print. Beyond today, US PPI, German ZEW and UK CPI are the main economic reports tomorrow. Wednesday will see the release of BOE’s meeting minutes, the US CPI, and the Euro area inflation report. On Thursday, President Obama will host Poroshenko and on the data front we have Philly Fed, initial claims, and building permits to watch out for, but the biggest market moving event will surely be the Scottish independence referendum. German PPI will be the key release on what will otherwise be a relatively quiet Friday.