It is a centrally-planned "market" and everyone is merely a bystander. Last night, following a dramatic China PMI miss, which as previously reported tumbled to the worst print since early 2014 and is flashing a "hard-landing" warning, the Shanghai Composite first dipped then spiked because all a "hard-landing" means is even more liquidity by the PBOC (which as we suggested a month ago will be the last entrant into the QE party before everyone falls apart). Then, this morning, a surprise beat by the German (and Eurozone) PMI was likewise interpreted by the algos as a catalyst to buy, and at this moment both European stock and US equity futures are their session highs. So, to summarize, for anyone confused: both good and bad data is a green light to buy stocks. In fact, all one needs is a flashing red headline to launch the momentum igniting algos into a buying spasm.
Krugman wants his US readers to believe that all proper economists now agree that cutting deficits was a bad mistake, and it’s only self-interested finance types and ideologically-motivated politicians and think-tankers that take a different view. But that’s nonsense. Just think about it: “Everyone agrees that austerity was a mistake”… apart from every government in Europe except the Greeks, and the economists and many of the civil servants that advise them. Krugman and his fan-club do not constitute all serious opinion, much as they might like to regard themselves that way. It’s all very nice sitting in a US university office preaching to the Europeans (or, indeed, preaching in the New York Times)
"Leverage is risky. Purchasing assets with borrowed money can amplify small movements in prices into extraordinary gains or crippling losses, even default."
- San Fran Fed
*FISCHER SAYS RATE LIFTOFF LIKELY WARRANTED BEFORE END-2015
With the world now convinmced that Janet Yellen is as dovish as she has ever been on rate hikes, today comes the first post-FOMC speech. None other than Vice-chair Stanley Fischer is due to address The Economic Club of New York on the topic of "Monetary-policy lessons and the way ahead." As Art Cashin warned this morning, Fischer "seems to feel that the Fed must raise rates this year. He is also the only Fed official to concede that any rate hike will be different than any seen before."
A study shows industrial robots' impact on economic growth is comparable to the impact of railroads, highways, and IT and given gains in labor productivity and aggregate growth, low- and middle-skilled workers could end up displaced.
If you believe that ignorance is bliss, you might not want to read this article.
It matters not who is in charge of the Fed or what rules Congress may insist that it adopts. Once money printing, via fiat or fractional reserve credit creation, is seen to be both feasible, justified, and legal nothing and no one can stop it. The political pressure to fund government programs will be irresistible. Everyone knows that the Fed seemingly has the ability to solve their problem by monetizing the federal debt. Should it refuse to do so, we would see riots in the streets similar to what is happening in Europe as protesters target the European Central Bank. The only solution is to destroy the monster that makes it all possible, the Fed.
The correlation between wage growth and consumer spending is now 0.93 according to RBC meaning that the 80% of the labor force who aren't seeing their pay increase will not be driving the US economic engine going forward.
In the previous installments of this series, we discussed the hidden and often unspoken crisis brewing within the employment market, as well as in personal debt. The primary consequence being a collapse in overall consumer demand, something which we are at this very moment witnessing in the macro-picture of the fiscal situation around the world. Lack of real production and lack of sustainable employment options result in a lack of savings, an over-dependency on debt and welfare, the destruction of grass-roots entrepreneurship, a conflated and disingenuous representation of gross domestic product, and ultimately an economic system devoid of structural integrity — a hollow shell of a system, vulnerable to even the slightest shocks.
The poorest households in the debt-ridden country lost nearly 86% of their income, while the richest lost only 17-20%. The tax burden on the poor increased by 337% while the burden on upper-income classes increased by only 9%!!!
"Perhaps the central bankers and economists from all over the world should take a break from the theory and their focus on economic models and instead have a look at the real world and spend some time talking to Volcker in order to remember that deflation is not the disaster they imagine it to be."
The oil jobs nightmare is in fact spreading like a cancer. Last year there was much banter from the Wall Street shysters and Bakkan shale oil experts about the true breakeven price for shale oil not being $80 (which is the truth) but actually being as low as $58 a barrel. They were spreading this lie in order to keep idiot investors buying the stocks and bonds of these fly by night shale oil companies. Well, we are now six months further down the line and Bakkan shale oil this morning is selling for $37 per barrel.
Yellen would never admit it, but the FOMC is (and has been) on a pre-set course to hike rates in June. However, a pre-set course is not a guarantee. Any deviation from this path has required a significant change in financial, economic, or geo-political conditions, particularly as ‘mid-2015’ has approached. Markets will, therefore, have to contend with one of two evils: worsening conditions, or an interest rate hike in June. In a worst case scenario, markets could be hit by both at the same time.
If it was the Fed's intention to slow down the relentless surge in the dollar with yesterday's "impatient" removal which blamed the dollar strength on the "strength" in the US economy, it promptly failed after algos and a few carbon-based traders looked at the Atlanta Fed and realized that a 0.3% Q1 GDP print is anything but "strong." As a result the EURUSD, after soaring by nearly 400 pips yesterday in a market reminiscent of a third-world FX pair's liquidity especially following the previously noted USD flash crash, the dollar has recoupped nearly all losses, and the DXY is once again on the way up and eyeing the resistance area of 100.