Unemployment

Risk Off

With so much of the recent bad news roundly ignored or simply "priced in" and blamed on the snow, it is unknown just what it is that catalyzed the overnight round of risk-offness, but whatever the ultimate factor, it first dragged the Nikkei lower by 1.8%, as we noted previously, then sent the SHCOMP down by 0.55%, then ultimately dragged the USDJPY below the key 102 support area which in turn pulled US equity futures to set the scene for a red open (with no POMO and no Yellen testimony today which also was canceled due to snow), and, putting it all together, suddenly Europe too is back on the scene, with a blow out in Italian yields driven by the realization that the Letta government is on the edge of collapse, in a deja vu moment to those hot summers of 2011 and 2012.

No Janet Yellen, The Economy Is Not "Getting Better"

On Tuesday, new Federal Reserve Chairman Janet Yellen went before Congress and confidently declared that "the economic recovery gained greater traction in the second half of last year" and that "substantial progress has been made in restoring the economy to health".  This resulted in glowing headlines throughout the mainstream media such as this one from USA Today: "Yellen: Economy is improving at moderate pace".  Sadly, tens of millions of Americans are going to believe what the mainstream media is telling them.  But it isn't the truth.  As you will see below, there are all sorts of signs that the economy is taking a turn for the worse.

Chart Of The Day - The Hiringless Recovery

Many have opined that while the unemployment rate may be 6.6%, down from a peak of 10% three and a half year ago, the so-called recovery sure doesn't feel like one: after all so many Americans are still struggling to find work and as so many complain, employers are simply not hiring. Well, as it turns out, all those complaining are absolutely correct....

How To Properly Think About The Minimum Wage Problem

Recently debates over minimum wage laws have flared up again. The starting point was president Obama's State of the Union speech, in which he announced that he would push through a higher minimum wage (among other things) regardless of the objections anyone in e.g. Congress might have. There can actually not be any controversy over the basic economic laws involved, and yet the debate continues to be revived again and again.

Overnight Rally, Driven By "Creative" Chinese Trade Data, Fizzles

After initially sending the all important USDJPY carry pair - and thus all risk assets - into rally mode, the initial euphoria over manipulated Chinese trade data (see China Trade Puzzle Revived as Hong Kong Data Diverge), has all but fizzled and at last check the USDJPY was sliding to its LOD, approaching 102 from the wrong side. That, and a statement by the ECB's Coeure that the ECB is "very seriously" considering a negative deposit rate (and that the OMT is ready to be used even though it obviously isn't following the latest brewhaha from the German top court) have so far defined the overnight session, the latter having sent the EUR sliding across all major pairs.

Goldman's Yellen Post-Mortem: A Snoozer

BOTTOM LINE: Fed Chair Yellen's prepared remarks for her semiannual monetary policy testimony before the House Financial Services Committee were brief and did not contain any major surprises. The testimony itself will begin at 10:00am.

John Taylor's Rebuttal Of Yellen: "There Is Little Evidence Monetary Policy Has Helped Economic Or Job Growth"

While Janet Yellen's testimony will be uneventful, with her toeing the party line, and the fluff Q&A largely priced in - although everyone is eagerly looking forward to the Maxine Waters grilling -  far more interesting in today's Monetary Policy and State of the Economy hearing, will be the Part 2, where various experts (full list here), mostly hawks as it would appear, will provide their rebuttals to Yellen's views. None of them is more anticipated than John Taylor - the Stanford economist whose "rule" the Fed uses, even though Taylor himself has largely disavowed the implications of the Taylor rule under current "extraordinary" conditions and has become one of the most vocal opponents of the Fed's unconventional policy. The punchline from his prepared remarks: "there is little evidence that the policy has helped economic growth or job growth. Growth has been less with the unconventional policies than the Fed originally forecast." Or precisely what we have been saying for about 5 years.

Janet Yellen: Fed To Stay The Course On Taper - Full Testimony

Just as Goldman has predicted (and the market had seemingly hoped would not happen), Janet Yellen, in her first speech as new Fed chair "stayed the course" on the Taper:

YELLEN SAYS FOMC LIKELY TO CONTINUE QE TAPER IN MEASURED STEPS
1YELLEN SAYS RECOVERY IN LABOR MARKET IS `FAR FROM COMPLETE'
YELLEN SAY FED TO `CONTINUE TO MONITOR FOR EMERGING RISKS'

Of course, the Q&A (and hawkish follow-up panel) may well be the "common knowledge" setting moment for today but for now, the Taper is on and forward-guidance

Pre-Yellen: S&P Futs 1801, Gold $1285, 10Y 2.68%, USDJPY 102.3

Futures Sneak Above 1800 Overnight But Yellen Can Spoil The Party

A sneaky overnight levitation pushed the Spoos above 1800 thanks to a modest USDJPY run (as we had forecast) despite, or maybe due to, the lack of any newsflow, although today's first official Humphrey Hawkins conference by the new Fed chairman, Janet Yellen, before the House and followed by the first post-mortem to her testimony where several prominent hawks will speak and comprising of John B. Taylor, Mark A. Calabria, Abby M. McCloskey, and Donald Kohn, could promptly put an end to this modest euphoria. Also, keep in mind both today, and Thursday, when Yellens' testimoeny before the Senate takes place, are POMO-free days. So things may get exciting quick, especially since as Goldman's Jan Hatzius opined overnight, the third tapering - down to $55 billion per month - is on deck.

Goldman's 5 Key Questions For Janet Yellen

Fed Chair Janet Yellen will deliver her inaugural monetary policy testimony on February 11 and 13. Her prepared remarks will be released at 8:30amET and the testimony will begin at 10amET. Goldman, unlike the market of the last 3 days, believes that Ms. Yellen is likely to "stick to the script" in her first public remarks since taking over from Bernanke but they look for additional color on the following issues: (1) the recent patch of softer data; (2) the Fed's thinking on EM weakness; (3) the hurdle for stopping the taper; (4) the amount of slack in the labor market; and (5) the future of forward guidance.

Why Are So Many People Renouncing American Citizenship?

The number of Americans that renounced their citizenship was 221 percent higher in 2013 than it was in 2012.  That is a staggering figure, and it is symptomatic of a larger trend.  In recent years, a lot of really good people with very deep roots in this country have made the difficult decision to say goodbye to the United States permanently.  A few actually go to the trouble to renounce their citizenship, and that is mostly done for tax purposes.  But most willingly choose to leave America for other reasons.  Once upon a time, the United States was seen as "the land of opportunity" all over the globe and it seemed like everyone wanted to come here. But now that is all changing.  As we have abandoned the principles that this country was founded upon, our economy has gone steadily downhill.

Good Thing The US Only Has 6.6% Unemployment...

... or else the following photo just tweeted by Marie-Antoinette Michelle Obama of White House canines dining on fine taxpayer-funded china might have seemed just a little inappropriate.

Another Conspiracy Theory Becomes Fact: Meet The Men With The Plan Behind Italy's Bloodless Coup

The chart below is very familiar to anyone who was observing the hourly turmoil in the European bond market in November of 2011, when Italian bonds crashed, when yields soared to record levels, and every downtick of the Euro could have been its last. What the chart may not show are the dramatic transformations in Italy's government that took place just as the Italian bond spread exploded, which saw the resignation of career-politician Sylvio Berlusconi literally days after yields soared, and the instatement of Goldman technocrat Mario Monti as Italy's next Prime Minister. In fact as some, certainly this website, had suggested the blow out in Italian yields was merely a grand plan orchestrated to usher in a new Italian government that would, with the support of yet another Goldman alum, the ECB's then brand new head Mario Draghi, unleash a new era in Italian life, supposedly one of austerity, and which would give the impression that Europe is being fixed all the while preserving the broken European monetary system for at least another year or two. In other words a grand conspiracy theory of a pre-planned bloodless coup.... And so, as lately so often happens, courtesy of the narrative by Alan Friedman of what really happened that summer, this too conspiracy theory has just become conspiracy fact.