It took Hilsenrath just under a minute to pump out his 1057 (excluding the title) word thesis on the FOMC minutes. As usual, this is indicative of a comfortable embargo cushion which one can be assured was unbreached, as anything else would be very illegal. "Federal Reserve officials had a wide-ranging discussion about the outlook for monetary policy at their Oct. 29-30 policy meeting. The bottom line was that they stuck to the view that they might begin winding down their $85 billion-per-month bond-buying program in the “coming months” but are looking for ways to reinforce their plans to keep short-term interest rates low for a long-time after the program ends. They struggled to build a consensus on how they would respond to a variety of different scenarios. One example: What to do if the economy didn’t improve as expected and the costs of continuing bond-buying outweighed the benefits? Another example: How to convince the public that even after bond buying ends, short-term interest rates will remain low."
With the schizophrenia that seems to have availed across the FOMC members (hawks are doves, doves are hawks, tapering is not tightening, etc.) it is not surprising that the minutes reflect some confusion:
- *FOMC SAW `SEVERAL SIGNIFICANT RISKS' REMAINING FOR ECONOMY
- *FED TAPER LIKELY IN COMING MONTHS ON BETTER DATA, MINUTES SHOW
- *METLIFE FOUNDATION, SESAME WORKSHOP PARTNER TO PROVIDE FINL
- *FOMC SAW DOWNSIDE RISKS TO ECONOMY, LABOR MARKET `DIMINISHED'
- *FOMC SAW CONSUMER SENTIMENT REMAINING `UNUSUALLY LOW'
- *FOMC SAW RECOVERY IN HOUSING AS HAVING `SLOWED SOMEWHAT'
So summing up - when we get to an unknown point in the future with an unknown state of parameters, we may do an unknown amount of tapering - maybe possibly. Pre-Minutes: SPX 1791, 10Y 2.75, EUR 1.3444, Gold $1262
At one point during the evening, when pressed about whether his Quantitative Easing program was good for Wall Street at the expense of Main Street, Ben Bernanke flat out denied it, saying that such a premise is "simply not true". He defended his printing $85 billion per month, suggesting that fixing interest rates at zero is beneficial for society because, among other things, it allows people to 'buy cars'. I saw these words coming out of his mouth and thought to myself, "Is this guy f'ing serious?" Cars. Wow. As if going into debt to purchase a rapidly depreciating consumer item is somehow a victory for the people.
After the DJIA and S&P briefly crossed the key resistance levels of 16000 and 1800, the upper bound on the markets has been looking increasingly more distant and this morning's lack of an overnight ramp only makes it more so. Perhaps the biggest concern, however, is that with both Yellen and Bernanke on the tape yesterday, the S&P still was unable to close green. This follows on Monday's double POMO day when the S&P once again closed... red. Not helping things was the overnight announcement by the Japanese government pension fund, the GPIF, in which the fund announced it would lower its bond allocation further however the new law to reform the GPIF could be written by spring 2015. This was hardly as exciting as the market had expected, and as a result both the USDJPY and the ES-moving EURJPY find themselves at overnight lows. Will the EURJPY engage in its usual post 8 am ramp - keep a close eye, especially since the usual morning gold and silver slam down just took place.
Standard microeconomic theory shows that deviations of a price from its natural level bring forth bad results. One of the easiest ways to grasp the pernicious effects of price controls is when it is phrased in terms of the minimum wage. Long story short, the minimum wage acts as a price floor which stops people from selling labour services at a price below the mandated level. The final result is an increase in unemployment, partly from existing workers who lose their jobs and partly from new entrants to the labour market looking for a job but unable to get hired. It’s really not a very difficult theory to comprehend. Yet I’m always surprised at how few are able to apply this basic lesson.
Yesterday it was Carl Icahn explaining some uncomfortable truths to the mainstream media (who rapidly turned their cognitively dissonant backs on his status quo defying statements). Today, it is uber-bull Larry Fink's turn to unleash truth-hell...
- *FINK SAYS PENSION FUNDS TO START SELLING STOCKS TO REBALANCE
- *FINK SAYS STRUCTURAL UNEMPLOYMENT GROWING
- *FINK SAYS QE NOT HELPING WITH STRUCTURAL UNEMPLOYMENT
- *FINK SAYS CENTRAL BANKS' POWERS TO CREATE JOBS LIMITED
His remarks - coinciding with Europe's close and the end of POMO (and this EURJPY's levitation) has knocked half of this morning's gains off stocks...
You may find what is happening at one Wal-Mart in Ohio very hard to believe. At the Wal-mart on Atlantic Boulevard in Canton, Ohio employees are being asked to donate food items so that other employees that cannot afford to buy Thanksgiving dinner will be able to enjoy one too. On the one hand, it is commendable that someone at that Wal-Mart is deeply concerned about the employees that are so poor that they cannot afford to buy the food that they need for Thanksgiving. On the other hand, this is a perfect example that shows how the quality of the jobs in this country has gone down the toilet.
The big news that has somehow shocked the media is that the BLS was caught fudging the jobs numbers going into the 2012 election. How on earth is this news? Anyone with a working frontal cortex is aware that CPI, the unemployment numbers, GDP and virtually everything else reported by the Federal Government is massaged to the point of being fraudulent.
Pushing the neo-liberal argument further than it wants to go, with interesting results.
It is time for the centrally-planned markets to "try" for the round number trifecta of 16000, 1800 and 4000 again, although it may be a tad more difficult on a day in which there is no double POMO and just $2.75-$3.50 billion will be injected by the NY Fed into the S&P - perhaps it is Bitcoin that will hit the nice round number of $1000 first? Overnight, the Chinese Plenum news rerun finally was priced in and the SHComp closed red, as did the Nikkei 225 as the Asian euphoria based on communist promises about what may happen by 2020 fades. What's worse, the Chinese 7-day repo rate is up 140bp this morning to 6.63% amid talk of tightening domestic liquidity conditions, and back to levels seen during the June liquidity squeeze. All this is happening as China continues leaking more details and hope of what reform the mercantilist country can achieve, and how much internal consumption the export-driven country can attain: overnight there were also additional reports of interest rate liberalization and that the PBOC are to set up a floating CNY rate. Good luck with that.
On Friday October 5, 2012, the BLS released what was arguably the most important report of Obama's first term: the final jobs number, and unemployment rate before the November 2012 presidential election. As so many predicted, it "plunged" from 8.1% to 7.8% allowing the president to conduct countless teleprompted speeches praising the success of his economic recovery. It also served as the basis for the infamous Jack Welch tweet: "Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers" and prompted the pro-Obama media to quickly brand all those who questioned it as conspiracy theorists... Well, as it turns out over a year later, the conspiracy theorists were once again, spot on: the Bureau Of Lies And Subterfuge manipulated the most important jobs report in Obama's career.
It would be a mistake to think that QE is the first time the Fed's policies have benefited the well-to-do at the expense of the average American. The Fed’s polices have always benefited crony capitalists and big spending politicians at the expense of the average American. The well-connected benefit from inflation, as they receive the newly-created money first, before general price increases have spread through the economy. It is obvious, then, that middle- and working-class Americans are hardest hit by the rising level of prices. Far from promoting a sound economy for all, the Federal Reserve is the main cause of the boom-and-bust economy, as well as the leading facilitator of big government and crony capitalism. Fortunately, in recent years more Americans have become aware of how the Fed is impacting their lives.
The Senate Banking Committee’s confirmation hearing for current Vice-Chair of the Federal Reserve began with Janet Yellen delivering prepared remarks. Most observers likely tuned out well before the completion of the 2 ½ hours meeting to decide whether Yellen was worthy to succeed outgoing Chair Ben Bernanke and ascend to the top spot at the Fed. With the ongoing debacle of the Affordable Health Care website handcuffing Democrats, tough questions about QE, ZIRP, the oft talked about Taper and the possibility of reducing the Fed’s gargantuan $4 trillion balance sheet were verboten. That left Republicans to address the elephant(s) in the room. Predictably, it took nearly the entire hearing until a Senator from Nebraska offered his views about the damage being done by the various fiscal and monetary machinations undertaken to combat the Great Recession. What happened, beginning just after the 2 hour point of the meeting, was both remarkable and revealing...
Somehow, Fed head Bill Dudley has managed to encompass the entire "we must keep the foot to the floor" premise of the Fed in one mind-bending sentence:
- *DUDLEY SEES 'POSSIBILITY OF SOME UNFORESEEN SHOCK'
So - based on an "unforeseen" shock - which he "sees", and while there are "nascent signs the economy may be doing better", the Fed should remain as exceptionally easy just in case... (asteroid? alien invasion? West Coast quake?)
Amid the Spanish FinMin's "concerns about the pace of the increase" in government debt, and PM Rajoy's confidence that the nation would exit the eurozone-fueled banking bailout by January, bad loans in the still disastrously-troubled nations have re-accelerated to an all-time record high of 12.68% of total loans. Mostly linked to the collapsed property sector, bad loans climbed by 6.9 billion euros from the previous month to an unprecedented 187.8 billion euros ($254 billion) in September. Having almost completed the drawdown of its 41 billion bailout - and with the situation fundamentally worse than ever (e.g. record high unemployment), Spanish bond spreads have collapsed to 250bps - their lowest in 29 months.