en What Deflation? The Price Of Ground Beef Has Doubled Since The Last Financial Crisis <p><a href=""><em>Submitted by Michael Snyder via The Economic Collapse blog</em></a>,</p> <p><strong>Since the depths of the last recession, the price of ground beef in the United States has doubled.&nbsp; Has your paycheck doubled since then?&nbsp;</strong> Even though the Federal Reserve insists that we are in a &ldquo;low inflation&rdquo; environment, the government&rsquo;s own numbers show that the price of ground beef has been on an unprecedented run over the past six years.&nbsp; In early 2009, the average price of a pound of ground beef was hovering near 2 dollars.&nbsp; In February, it hit a brand new all-time record high of $4.238 per pound.&nbsp; Even just 12 months ago, the price of ground beef was sitting at $3.555 per pound.&nbsp; So we are talking about a huge increase.&nbsp;</p> <p><strong>And this hits American families where they really live.&nbsp;</strong> Each year, the average American consumes approximately <a href="" target="_blank" title="270 pounds of meat">270 pounds of meat</a>.&nbsp; The only nation in the world that eats more meat than we do is Luxembourg.&nbsp; If the paychecks of American workers were going up fast enough to deal with this increase, it wouldn&rsquo;t be that big of a deal.&nbsp; But of course that is not happening.&nbsp; In an article just last week, I showed that real median household income is <a href="" title="a couple thousand dollars lower">a couple thousand dollars lower</a> now than it was during the depths of the last recession.&nbsp; The middle class is being squeezed, and <strong>we are rapidly getting to the point where burgers are going to be considered a &ldquo;luxury&rdquo; item.</strong></p> <p>The following chart was posted by&nbsp;<a href="" target="_blank" title="the Economic Policy Journal">the Economic Policy Journal</a> on Wednesday, and it incorporates the latest data from the Bureau of Labor Statistics.&nbsp; When I first saw it, I was rather stunned.&nbsp; I knew that the price of ground beef had become rather outrageous in my local grocery stores, but I had no idea just how much damage had been done over the past six years&hellip;</p> <p><a href="" rel="attachment wp-att-5023" target="_blank"><img alt="Beef Price - Economic Policy Journal" class="aligncenter size-full wp-image-5023" src="" style="width: 600px; height: 463px;" /></a></p> <p>The biggest reason why the price of ground beef has been going up is the fact that the U.S. cattle herd has been shrinking.&nbsp; It shrunk seven years in a row, and on January 1st, 2014 it was the smallest that it had been <a href="" target="_blank" title="since 1951">since 1951</a>.</p> <p>The good news is that the decline appears to have stopped, at least for the moment.&nbsp; According to <a href="" target="_blank" title="the Wall Street Journal">the Wall Street Journal</a>, the size of the U.S. cattle herd actually increased by 1 percent last year&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The U.S. cattle herd expanded in 2014 for the first time in eight years, offering hope to consumers that beef prices could start to subside after soaring to a series of records.</p> <p>&nbsp;</p> <p>The nation&rsquo;s cattle supply increased 1% in the year through Jan. 1 to 89.8 million head, according to data released Friday by the U.S. Agriculture Department, reversing a steady decline fueled by prolonged drought in the southern U.S. Great Plains and industry consolidation that encouraged many ranchers to thin herds.</p> </blockquote> <p>But an increase of 1 percent is just barely going to keep up with the official population growth rate.&nbsp; If you factor in illegal immigration, we are still losing ground.</p> <p>And if we have another major drought in cattle country this summer, the cattle herd is going to start shrinking again.</p> <p>In addition, the price of food overall has been steadily rising for years.&nbsp; Here is a chart that I shared <a href="" title="the other day">the other day</a>&hellip;</p> <p><a href="" rel="attachment wp-att-8510"><img alt="Presentation Food Inflation" class="aligncenter size-large wp-image-8510" src="" style="width: 600px; height: 398px;" /></a></p> <p><strong>It boggles the mind that the Federal Reserve can claim that we are in a &ldquo;low inflation&rdquo; environment.&nbsp; Anyone that goes grocery shopping feels the pain of these rising prices every time that they go to the store.</strong></p> <p>In the list that I put together <a href="" title="yesterday">yesterday</a>, I included the following statistic&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Almost half of all Americans (<a href="" target="_blank" title="47 percent">47 percent</a>) do not put a single penny out of their paychecks into savings.</p> </blockquote> <p>One of the primary reasons why so many Americans are not saving any money is because many families simply <strong>cannot</strong> save any money.&nbsp; Their paychecks are stagnant while the cost of living just keeps going up and up.</p> <p><strong>There simply are not enough &ldquo;good jobs&rdquo; out there anymore.&nbsp; Our economy continues to bleed middle class jobs and the competition for the jobs that remain is quite intense.</strong></p> <p><u><strong>Do you know what the two most common occupations in America today are?</strong></u></p> <p><u><strong>According to the Bureau of Labor Statistics, they are &ldquo;retail sales clerk&rdquo; and &ldquo;cashier&rdquo;.</strong></u></p> <p>And of course neither of those &ldquo;occupations&rdquo; pays even close to what is required to support a middle class family.</p> <p>On average, a retail sales clerk makes&nbsp;<a href="" target="_blank" title="$24,020">$24,020</a> a year, and a cashier makes <a href="" target="_blank" title="$20,670">$20,670</a> a year.</p> <p>Because the quality of our jobs has declined so much, there are millions of American families today in which both the mother and the father are working multiple jobs in a desperate attempt to make ends meet each month.</p> <p>But don&rsquo;t worry, the Federal Reserve says that we are nearly at &ldquo;<a href="" title="full employment">full employment</a>&ldquo;, and Barack Obama says that everything is going to be just fine.</p> <p>Actually, the truth is that things are about to get a lot worse.&nbsp; At this point, we are even getting pessimistic numbers out of the Federal Reserve.&nbsp; Just this week we learned that the Fed is now projecting that economic growth for the first quarter of 2015&nbsp;<a href="" target="_blank" title="will be barely above zero">will be barely above zero</a>&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><a href="" target="_blank" title="From almost 2.5% GDP growth expectations in February">From almost 2.5% GDP growth expectations in February</a></strong>, The <a href="" target="_blank" title="Atlanta Fed’s GDPNow model">Atlanta Fed&rsquo;s GDPNow model</a> has now collapsed its <strong>estimates of Q1 GDP growth to just 0.2%</strong> &ndash; <a href="" target="_blank" title="plunging from +1.4% just 2 weeks ago">plunging from +1.4% just 2 weeks ago</a>. The reality of plunging capex and no decoupling is starting to rear its ugly head in the hard data and as the sun warms things up, weather will start to lose its ability to sway sentiment.</p> </blockquote> <p>We are at a turning point.&nbsp; The bubble of false stability that we have been living in is rapidly coming to an end, and when people start to realize that another great economic crisis is coming there is going to be a lot of panic.</p> <p>And as far as food prices go, they are just going to keep taking a bigger chunk out of all of our wallets.</p> <p><strong>As high as prices are already, the truth is that your food dollars are never going to go farther than they do right now.</strong></p> <p><strong>So let us hope for the best, but let us also get prepared for the worst.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="455" height="327" alt="" src="" /> </div> </div> </div> Barack Obama Bureau of Labor Statistics Federal Reserve Reality Recession Wall Street Journal Sat, 28 Mar 2015 00:45:24 +0000 Tyler Durden 503945 at Why There Is No Wage Growth In America <p>Over the past 2 years the Obama administration has been desperate to boost minimum wages, usually over tedious bickering with republicans and corporations who have resisted such an increase, with neither party realizing that such a measure would not do much to actually boost aggregate spending. Instead, what Obama <strong>should </strong>have been focusing on was to limit the maximum number of hours worked per week, because as the following chart shows, the reason why weekly pay is rising and aggregate earnings is not due to an increase in hourly wages but because Americans are simply working longer hours every week: not quality but quantity. </p> <p><a href=""><img src="" width="600" height="595" /></a></p> <p>&nbsp;</p> <p>What this means is that we can start the countdown to the next executive order which will make it illegal for any full time worker to work over 40 hours. Of course, none of that will do much since corporations have long since figured out how to eradicate the quantity problem, and increasingly American workers limited to 29.5 hours or less so their employers can avoid spending ridiculous amount of money on Obamacare. </p> <p>In fact, as we have shown, over the past half year, non-supervisory workers, those who are not bosses or in any leadership positions, have seen the <a href="">growth in their hourly earnings tumble</a>...</p> <p><a href=""><img src="" width="600" height="383" /></a></p> <p>... even as those of their bosses - naturally - has soared!</p> <p><a href=""><img src="" width="600" height="383" /></a></p> <p>&nbsp;</p> <p>Meanwhile, as we showed earlier this week in "<a href="">Home What A Permabull Thinks Is The Biggest Threat To The Stock Market</a>", the main reason behind America's depressed economy is that its workers, scrambling to achieve higher wages, and yet distracted by a countless number of iGizmos and numerous other reasons, have suffered an unprecedented collapse in productivity to never before seen levels.</p> <p><a href=""><img src="" width="600" height="530" /></a></p> <p>&nbsp;</p> <p>And what all of the above goes back to, is one simple thing: an unprecedented amount of labor slack in the work force as can be seen by the following chart not of the unemployment rate, which can easily be manipulated and fudged by adjusting the number of Americans not in the labor force, but by the ratio of civilian employment to the total US population. This, clearly, is at depressionary levels. </p> <p><a href=""><img src="" width="600" height="399" /></a></p> <p>&nbsp;</p> <p>Good luck with those rate hikes dear Janet Yellen...</p> <p>The bottom line culprit: a record 92.9 million Americans <a href="">not in the labor force</a>. Until this primary problem plaguing the US economy is fixed, nothing else can be.</p> <p><a href=""><img src="" width="600" height="569" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1216" height="1205" alt="" src="" /> </div> </div> </div> fixed Janet Yellen None Obama Administration Obamacare Unemployment Sat, 28 Mar 2015 00:04:15 +0000 Tyler Durden 503943 at Middle East Geopolitical Relationships Simplified <p>Ok.... Got it?</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="303" /></a></p> <p>&nbsp;</p> <p><a href=""><em>Source: @KarlRemarks</em></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1098" height="555" alt="" src="" /> </div> </div> </div> Middle East Fri, 27 Mar 2015 23:30:48 +0000 Tyler Durden 503939 at What Deadly Summers, Sandy Koufax And Lucky Golfers Can Tell Us About Bonds <p><em>Submitted by Michael Lebowitz of <a href="">720 Global</a></em><a href=""></a></p> <p><strong>What deadly summers, Sandy Koufax and lucky golfers can tell us about bonds</strong></p> <p>In 1918 and 1930, Washington D.C. set daily record high temperatures with readings of a sizzling 106 degrees. The observed temperatures on those two days are statistically defined as 3 standard deviation (sigma) events. Now imagine the nation’s capital enduring a 119 degree day, because that is what a 5 sigma event would entail. That is a lot of hot air even from the seat of our federal government. (<em>Data from NOAA</em>)</p> <p>Since 1900 there have been over 185,000 major league baseball games played yet amazingly only 21 perfect games pitched – 27 batters up, 27 batters down, no walks, no batters hit by a pitch and not a single player reaching first base. The odds of a perfect game being thrown are approximately 1 in 18,000 or .005%. (Keep in mind there are two pitchers so there are two chances per game). Pitching a perfect game is approximately a 4 sigma feat. To be labeled a 5 sigma phenomena a perfect game would only occur once every 400+ years! <em>(Data from baseballreference. com)</em></p> <p>Lastly for all of you golfers, according to Golf Digest, there are an estimated 150,000 holes in one per year out of an estimated 490 million rounds of golf. While a hole in one is rare event indeed, it merely measures as a 3 sigma achievement. If a hole in one were a 5 sigma event there would only be 290 per year.</p> <p>As you can see in the examples above, a five sigma event signifies extreme conditions, or an extremely rare occurrence. To bring this discussion from sports and weather to the financial world, we can relate a 5 sigma event to the stock market. Since 1975 the largest annual S&amp;P 500 gain and loss were 34% and -38% respectively. A 5 sigma move would equate to an annual gain or loss of 91%.</p> <p>With a grasp of the rarity of a 5 sigma occurrence, let us now consider the yield spread, or difference, in bond yields between Germany and The United States. As shown in graph #1 below German ten year bunds yield 0.19% (19 one-hundredths of one percent) and the U.S. ten year note yields 1.92%, resulting in a 1.73% yield spread. This is the widest that spread has been in 30 years.</p> <p>Graph #1: German and U.S. Ten Year Yields</p> <p><a href=""><img src="" width="600" height="293" /></a></p> <p>To put this spread into its proper perspective due to the various levels of interest rates over time, it is appropriate to normalize the yield spread. For instance, a 1.75% spread at 7.00% nominal yields is very different in magnitude than the same spread at 2.00% yields. To normalize the differential we calculate a ratio dividing the yield spread by the nominal U.S. yield. Currently, the <strong>resulting ratio </strong>is 0.90 (1.73%/1.92%) while the historical average since 1990 is 0.08. Statistically the normalized spread is nearly a five sigma deviation as shown on graph #2 below.</p> <p>Graph #2: Normalized Ten Year Yield Spread in Standard Deviation Terms</p> <p><a href=""><img src="" width="600" height="293" /></a></p> <p>The media, economists and other market professionals are leaning on two rationales to explain this differential; inflation rates and European Central Bank (ECB) Quantitative Easing (QE). We do not put much stock in either.</p> <p>The preferred methodology to compare interest rates is on a real basis and not a nominal one. By adjusting for inflation, the real basis provides a measure of the true cost of borrowing and true return on lending. At first glance inflation rates partially explain the abnormally wide spread as the difference in the year over year core CPI between Germany and the U.S. is over 1%. To expose the inadequacy in this theory we stand on the shoulders of Albert Edwards of Societe Generale. According to Edwards, when U.S. consumer price inflation is calculated using the same inputs and weightings as the Eurozone, U.S. inflation figures are nearly identical to those in Europe. His graph below provides a compelling illustration.</p> <p><a href=""><img src="" width="600" height="373" /></a></p> <p>The second justification, to explain abnormally wide spreads between U.S. and German government debt are the actions of the ECB. The ECB recently announced a 19 month QE program in which they will purchase €1.14 trillion of European bonds. Embedded in this amount are an estimated €214 billion or 31% of all German bunds outstanding. As a consequence, dealers and traders are front running the ECB and forcing bund prices higher (yields lower). This is one of the oldest tricks in the book and it seems reasonable that some of the recent spread widening is a result. However, what’s left out of the conversation is the Federal Reserve (Fed) and its QE programs. As a result of their policies the Fed owns almost 20% of the stock of outstanding U.S. Treasury bonds. The ECB just started QE and it will take them at least a year to buy as large a percentage of German bunds as the Fed already owns of U.S. Treasuries. So while we agree that ECB actions explain some of the spread, we don’t think it accounts for anywhere near the current amount.</p> <p>We believe the biggest reason for the massive yield differential is that Europe is in the grips of “Japanification”. In other words, they are suffering from a combination of very low economic growth, deleveraging, demographic headwinds and resulting deflationary pressures. Japan’s economy has been gripped in this same dynamic for over 20 years. Similar to Japan’s experience, European yields are pushing towards zero percent and in some cases below zero. Adding to the immense pressures pushing yields lower is what is known as a “flight to quality”. When investors are risk averse they tend to buy assets that provide safety. European investors are anxious about Greece as well as the aforementioned European economic situation and some are likely flocking to the safety of the debt of the Eurozone’s strongest constituent, Germany.</p> <p>Mean reversion in financial markets is like gravity to physics, a fundamental law. We have no doubt this law will re-assert itself and the German-U.S. yield spread will revert to the long-term trend. <span style="text-decoration: underline;">The question, of course, is how the spread corrects</span>. Will durable economic growth and inflation emerge in Europe causing German rates to rise or will the U.S. remain in a secular economic stagnation causing U.S. rates to converge lower with those currently seen in Europe and Japan? <span style="text-decoration: underline;"><strong>Our view is that there are a multitude of forces that will drive rates lower in the U.S. thereby collapsing the spread.</strong></span></p> <p>It is generally taken as a statement of fact that interest rates in the U.S. have been manipulated lower purely by the Fed’s zero interest rate policy and the various QE measures they have undertaken. On one hand, we do not argue with that assertion as the effects on the short end of the yield curve are self-evident. On the other hand, QE3 “taper” began at the end of 2013 and was completed in October 2014. Although the Fed continues to buy securities in order to maintain the current size of their balance sheet, there are no longer expansionary purchases taking place. Counter-intuitively interest rates have fallen dramatically since the beginning of the Fed’s “taper”. We argue that disinflation and deflationary forces in play around the globe are the primary factor driving U.S. longer-term interest rates down. These forces dwarf the policy actions being taken by the Fed and other global central banks.</p> <p>Listed below are the main factors we believe will keep economic growth stagnant, fuel disinflationary pressures and ultimately drive U.S. yields lower:</p> <ol> <li>Deleveraging of financial institutions globally is on-going through declining shadow banking systems (securitizations and repos) and rising capital requirements which reduce profitability and lending</li> <li>Deleveraging of consumers (increased savings rates and debt reduction) reduces consumption and impairs U.S. GDP growth</li> <li>Increased government regulation and interference in the U.S. economy raises uncertainty and reduces businesses willingness to invest in the future</li> <li>U.S. federal spending and current account deficits are declining, reducing the amount of U.S. dollars in circulation</li> <li>Commodity prices have been falling since early 2011, reflective of slowing global demand and rising inventories</li> <li>Protectionism in the form of competitive currency devaluations is disrupting foreign trade and further damaging global economic growth</li> <li>The ratio of working age people to total population is falling in every major country (except India) which creates a major demographic headwind for global economic growth </li> </ol> <p>Deflationary forces around the globe are legion. Despite the battalion of seemingly gargantuan efforts by central bankers to prop up inflation and restart growth, those stated objectives remain elusively out of reach. <strong>Ignoring the truth of these circumstances will not diminish their impact on U.S. yields.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="226" height="223" alt="" src="" /> </div> </div> </div> Albert Edwards Bond Central Banks Core CPI CPI European Central Bank Eurozone Federal Reserve Front Running Germany Greece India Japan Mean Reversion NOAA Quantitative Easing Shadow Banking Washington D.C. Yield Curve Fri, 27 Mar 2015 23:01:10 +0000 Tyler Durden 503940 at Explaining US Stock And Bond Markets In 5 Easy Charts <p>We’ve been saying for quite some time now that the US equity market’s seemingly inexorable (until this week) tendency to rise to new highs in the absence of the Fed’s guiding hand is almost certainly in large part attributable to the fact that in a world where you are literally guaranteed to lose money if you invest in safe haven assets such as negative-yielding German bunds, corporations can and will take advantage of the situation by issuing debt and using the proceeds to buy back stock, thus underwriting the rally in US equities. Here’s what <a href="">we said</a> after stocks turned in their best month in three years in February:&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em><span style="font-size: 1em; line-height: 1.3em;"><strong>It also explains why, in the absence of the Fed, stocks continue to rise as if QE was still taking place: simply said, bondholders - starved for any yield in an increasingly NIRP world - have taken the place of the Federal Reserve, and are willing to throw any money at companies who promise even the tiniest of returns over Treasuries, oblivious if all the proceeds will be used immediately to buyback stock</strong>, thus pushing equity prices even higher, but benefiting not only shareholders but management teams who equity-linked compensation has likewise never been higher.</span></em></p> </blockquote> <p>If you need further proof that this is precisely what is going on in US markets, consider the following from Citi:&nbsp;</p> <p>Companies are rapidly re-leveraging…</p> <p><a href=""><img src="" width="600" height="341" /></a></p> <p>&nbsp;</p> <p>...and the proceeds sure aren’t being invested in future productivity, but rather in buy backs and dividends…</p> <p><a href=""><img src="" width="600" height="240" /></a></p> <p><span style="font-size: 1em; line-height: 1.3em;">...and Citi says all that debt issued by struggling oil producers may prove dangerous given that “default risk in the energy space has jumped [and considering] the energy sector now accounts for 18% of the market”...</span></p> <p><a href=""><img src="" width="600" height="305" /></a></p> <p>...and ratings agencies are behind the curve…</p> <p><a href=""><img src="" width="600" height="336" /></a></p> <p>...and finally, there’s quite a bit more junk out there than there was last year…</p> <p><a href=""><img src="" width="394" height="255" /></a></p> <div>* &nbsp;* &nbsp;*</div> <div>We'll leave you with the following:</div> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <div><em style="line-height: 20.7999992370605px;">To be sure, this theater of financial engineering - <strong>because stocks are not going up on any resemblance of fundamental reasons but simply due to expanding balance sheet leverage - will continue only until it can no longer continue.</strong></em></div> </blockquote> Bond Federal Reserve ratings Ratings Agencies Fri, 27 Mar 2015 22:30:09 +0000 Tyler Durden 503944 at Dumb Money: 30% Of New Equity Investors In China Have Elementary Education Or Less, Bloomberg Says <p>We’ve written quite a bit of late about the incredible rally in Chinese equities which we have variously attributed to <a href="">inflows</a> from the country’s $2 trillion shadow banking complex, a flood of liquidity from QE-lite among other sources, and <a href="">Crocodile Dundee-style</a> margin debt, all of which have combined to create what BNP recently <a href="">called</a> <strong>a “self-feeding, leverage-fueled domestic frenzy.” </strong></p> <p><strong>&nbsp;</strong>We now present, with little comment, the following graphic from Bloomberg — on the right is the breakdown of the education levels for new investors and on the left for existing investors…</p> <p><a href=""><img src="" width="600" height="355" /></a></p> <p>And this is what they're buying into...</p> <p><a href=""><img src="" width="600" height="314" /></a></p> <p>...and this is how they're doing it...</p> <p><a href=""><img src="" width="551" height="367" /></a></p> China Dumb Money Shadow Banking Fri, 27 Mar 2015 22:00:03 +0000 Tyler Durden 503941 at Santelli Stunned As Janet Yellen Admits "Cash Is Not A Store Of Value" <p>Intended warning or unintended slip? After <a href="">Alan Greenspan's confessional admission</a> that</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>"<strong>Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it</strong>,"</em></p> </blockquote> <p>we found it remarkable that during the Q&amp;A after her speech today that Janet Yellen, when asked about negative rates, admitted that</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>"cash in not a very convenient store of value,"</em></strong></p> </blockquote> <p>seemingly hinting at Bernanke's helicopter and that there will be no deflation in The US ever... <em><strong>&nbsp;</strong></em></p> <p>Rick Santelli then sums it all up perfectly... <em><strong>&nbsp;</strong></em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em><strong>"deflation is clearly the boogeyman... and the only thing that will save the middle class."</strong></em></p> </blockquote> <p><em>*&nbsp; *&nbsp; *<strong><br /></strong></em></p> <p><span style="text-decoration: underline;"><em><strong>Yellen: "cash is not a convenient store of value"</strong></em></span></p> <p><iframe src="" width="480" height="360" frameborder="0"></iframe></p> <p>* * *</p> <p>So if cash is not a very convenient store of value... what is? Biotechs? As Rick Santelli explains... this is the scariest thing she has ever said...</p> <p><span style="text-decoration: underline;"><em><strong>Santelli: "deflation is the boogeyman... and the only thing that can save the middle class is lower prices"</strong></em></span></p> <p><iframe src="" width="480" height="360" frameborder="0"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="436" height="178" alt="" src="" /> </div> </div> </div> Janet Yellen Rick Santelli Fri, 27 Mar 2015 21:30:20 +0000 Tyler Durden 503938 at Obama Administration Bullies Allies Over Iran Nuke Deal Dissent <p>President <strong>Obama is &quot;blowing up our alliances to secure a deal that paves Iran&rsquo;s way to a bomb,&quot;</strong> according to European sources close to the negotiations, and as <a href="">Washington Free Beacon reports</a>, <strong>efforts by the Obama administration to stem criticism</strong> of its diplomacy with Iran have <strong>included threats to nations involved in the talks, including U.S. allies</strong>. France has borne the brunt of Obama&#39;s wrath as one source in Europe close to the ongoing diplomacy said the US has begun to adopt a &ldquo;harsh&rdquo; stance toward its allies in Paris because <strong><em>&quot;the clarifications expose just how weak the Americans&rsquo; deal is shaping up to be.&quot;</em></strong></p> <p>&nbsp;</p> <p><a href=""><em>As The Washington Free Beacon reports,</em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>A series of conversations between top American and French officials, including between President Obama and French President Francois Hollande, have seen Americans engage in behavior described as <strong>bullying </strong>by sources who spoke to the Washington Free Beacon.</p> <p>&nbsp;</p> <p>The disagreement over France&rsquo;s cautious position in regard to Iran threatens to erode U.S. relations with Paris, sources said.</p> <p>&nbsp;</p> <p>Tension between Washington and Paris comes amid frustration by other U.S. allies, such as Saudi Arabia and Israel. The White House responded to this criticism by <strong>engaging in public campaigns analysts worry will endanger American interests</strong>.</p> <p>&nbsp;</p> <p>Western policy analysts who spoke to the Free Beacon, including some with close ties to the French political establishment, were <strong>dismayed over what they saw as the White House&rsquo;s willingness to sacrifice its relationship with Paris as talks with Iran reach their final stages.</strong></p> <p>&nbsp;</p> <p><strong>A recent phone call between Obama and Hollande was reported as tense </strong>as the leaders disagreed over the White House&rsquo;s accommodation of Iranian red lines.</p> <p>&nbsp;</p> <p>...</p> <p> </p><p>&ldquo;The French want a deal, but they see no rush and repeat that Iranians need a deal more than we do, and that <strong>we shouldn&rsquo;t fix artificial deadlines that put more pressure on us than Iran.&rdquo;</strong></p> <p>&nbsp;</p> <p>One source in Europe close to the ongoing diplomacy said the <strong>United States has begun to adopt a &ldquo;harsh&rdquo; stance toward its allies in Paris.</strong></p> <p>&nbsp;</p> <p><strong><u>&ldquo;There have been very harsh expressions of displeasure by the Americans toward French officials for raising substantive concerns about key elements of what the White House and State Department negotiators are willing to concede to Iran,&rdquo; said the source, who spoke on condition of anonymity. &ldquo;That is because the clarifications expose just how weak the Americans&rsquo; deal is shaping up to be.&rdquo;</u></strong></p> </blockquote> <p>Another Western source familiar with the talks said the White House is sacrificing longstanding alliances to cement a contentious deal with Iran before Obama&rsquo;s term in office ends.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;The President could be hammering out the best deal in the history of diplomacy</strong>, and it still wouldn&rsquo;t be worth sacrificing our alliances with France, Israel, and Saudi Arabia&mdash;key partners in Europe, the eastern Mediterranean, and the Gulf,&rdquo; the source said. <strong><u>&ldquo;But he&rsquo;s blowing up our alliances to secure a deal that paves Iran&rsquo;s way to a bomb.&rdquo;</u></strong></p> <p>&nbsp;</p> <p><strong>A State Department spokesperson declined to comment on the issue.</strong></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>How to make friends and influence people... perhaps this is yet another glimpse into why so many &quot;allies&quot; are sidling up to China&#39;s new non-hegemonic Yuan liberalization push...</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="706" height="607" alt="" src="" /> </div> </div> </div> China France Iran Israel Obama Administration President Obama Saudi Arabia White House Yuan Fri, 27 Mar 2015 21:00:58 +0000 Tyler Durden 503936 at 5 Things To Ponder: Random Musings <p><a href=""><em>Submitted by Lance Roberts via STA Wealth Management</em></a>,</p> <p>This weekend&#39;s reading list is a bit of a hodge-podge of reads on a variety of different topics. However, before we get into it I wanted to address an interesting statement by the Atlanta Federal Reserve President Dennis Lockhart who Thursday:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;Atlanta Federal Reserve Bank president Dennis Lockhart said on Thursday there was little risk of a misstep that would force the Fed to lower rates once it begins raising them.</p> <p>&nbsp;</p> <p>The economy is in solid shape to weather the upcoming turn to tightening monetary policy Lockhart, said at an investment education conference in Detroit.</p> <p>&nbsp;</p> <p>&quot;&#39;Conditions are pretty solid,&#39; said Lockhart, who regards an initial rate hike at the June, July or September Fed meetings as a high probability. &#39;I take the decision pretty seriously,&#39; Lockhart said. &#39;Once we start, I want to be able to move deliberately towards higher rates.&#39;&quot;</p> </blockquote> <p>This is a pretty common meme among the majority of economists as of late, and particularly surprising coming from the Atlanta Fed President considering:</p> <ol style="list-style-type: lower-alpha;"> <li><em>&nbsp;The U.S. is currently more than 6-years into an economic recovery (long by historic standards), and;</em></li> <li><em>&nbsp;The <a href="">Atlanta Fed&#39;s own GDPNow</a> forecast is pegging a near 0% growth rate for the first quarter.</em></li> </ol> <p>But let&#39;s take a look at the decline in durable goods orders this week. Paul McCulley, the former legendary economist and fund manager at PIMCO, viewed durable goods a bit differently than the mainstream analysis generally given. He preferred the year-over-year trend of the 3-month moving average of core CAPEX orders as an indicator of broader economic activity over the next few quarters. If you are currently &quot;bullish&quot; on the direction of the US economy, you may want to take a closer look at the chart below.</p> <p><a class="highslide ageent-ru" href="" target="_blank" title="Core-Capex-3Mo-AnnChg-032615"><img alt="Core-Capex-3Mo-AnnChg-032615" class="i_want_img5" src="" style="width: 600px; height: 400px;" /></a></p> <p>Secondly, core CAPEX has been negative on a monthly basis for 6-consecutive months. Since 1992, there have only been 5-instances where core CAPEX orders have been negative for 4-or more consecutive months. The first three instances were leading indicators of future recessions. In 2012, there were 6-consecutive months of decline as the economy got very close to a recession but was saved by Central Bank interventions and the warmest winter in 65-year. The latest core CAPEX decline capped a second 6-month period as it appears that Q1 GDP will ring in close to zero.</p> <p><a class="highslide ageent-ru" href="" target="_blank" title="Core-Capex-MoMChange-032615"><img alt="Core-Capex-MoMChange-032615" class="i_want_img5" src="" style="width: 601px; height: 346px;" /></a></p> <p>I am not suggesting that the economy is about to slip into an immediate recession. However, I am suggesting that underlying economic strength in the U.S. is likely much weaker than headline statistics suggest.</p> <p>Furthermore, <a href="">as discussed Wednesday,</a> the deterioration in underlying price momentum in the market is also raising other warning flags. To wit:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;...the price of the market currently remains in a positive trend but the underlying momentum and strength measures are showing signs of a negative divergence. This suggests that while market prices are trending higher, the risks of a correction are currently rising as the &#39;<em>supports&#39;</em> weaken.</p> <p>&nbsp;</p> <p>The negative divergence of the markets from economic strength and momentum are simply warning signs and do not currently suggest becoming grossly underweight equity exposure. However, warning signs exist for a reason, and much like Wyle E. Coyote chasing the Roadrunner, not paying attention to the signs has tended to have rather severe consequences.&quot;</p> </blockquote> <p>So, with that being said, let&#39;s get to our weekend reading list.</p> <hr /> <p><u><strong>1) The Meaning Of Liquidity </strong></u><a href="">by Howard Marks via Oaktree Capital</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;<strong>Sometimes people think of liquidity as the quality of something being readily saleable or marketable.</strong> For this, the key question is whether it&rsquo;s registered, publicly listed and legal for sale to the public. &quot;Marketable securities&quot; are liquid in this sense; you can buy or sell them in the public markets. &quot;Non- marketable&quot; securities include things like private placements and interests in private partnerships, whose salability is restricted and can require the qualification of buyers, documentation, and perhaps a time delay.</p> <p>&nbsp;</p> <p>But the more important definition of liquidity is this one from Investopedia: &#39;The degree to which an asset or security can be bought or sold in the market <em>without affecting the asset&#39;s price.&#39;</em><em> </em>(Emphasis added) <strong>Thus the key criterion isn&rsquo;t &#39;can you sell it?&#39; It&rsquo;s &#39;can you sell it at a price equal or close to the last price?&#39;</strong> Most liquid assets are registered and/or listed; that can be a necessary but not sufficient condition. <strong>For them to be truly liquid in this latter sense, one has to be able to move them promptly and without the imposition of a material discount. &quot;</strong></p> </blockquote> <p><strong><span style="color: #dc0000;">Read Also:</span> Bond Market Fears Liquidity Crunch Repeat </strong><a href="">by David Oakely via FT</a></p> <p>&nbsp;</p> <p><u><strong>2) There Is No Bubble In The Bond Market </strong></u><a href="">by Brad DeLong</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;When we call something a &quot;bubble&quot; we attach a number of meaning-tags to it. Here are three:</p> <ul> <li>Bubbles are collective irrationality.</li> <li>Bubbles pop.</li> <li>Owning bubbly assets entails large long- and fat-tailed risks.</li> </ul> <p>Safe bond prices are certainly elevated?&mdash;?more than elevated: absurd. The Federal Reserve has squeezed the term premium by shrinking the supply of long-term bonds and put the underlying fundamental future short rate to which the term previous applied on a very low path.</p> <p>&nbsp;</p> <p>But does holding bonds entail accepting large long- and fat-tailed risks? Only if you must sell your bonds in the future. If you have the option to hold them to maturity, your risks are bounded and very small. What you are complaining about is not risk, but rather lousy expected return. And even if you cannot hold them to maturity, the fact that others can hold them to maturity provides a pool of demand that limits how far bond prices can crash.&quot;</p> </blockquote> <p><strong><span style="color: #dc0000;">Read Also:</span> A Bond Bubble Is Very Different From A Stock Bubble </strong><a href="">by Cullen Roche via Pragmatic Capitalist</a></p> <p><strong><span style="color: #dc0000;">And Read:</span> Student Loan Forgiveness Is A Non-Solution </strong><a href="">via The Libertennial</a></p> <p>&nbsp;</p> <p><u><strong>3) The Current Boom Will Turn To Bust </strong></u><a href="">by Henry Blodget via Business Insider</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;Bubbles&quot; are rare, extreme events in which investment activity and valuations temporarily deviate wildly from historical trends &mdash; and then crash back down to the trend line in a colossal collapse.</p> <p>&nbsp;</p> <p>&quot;Booms,&quot; meanwhile, are far more common. They also see ever-increasing investment activity and valuations, and they also end in mean-reversion (&quot;busts.&quot;) But the magnitude of the dime-a-dozen boom-bust cycle is nothing like the peak and valley that you experience in a bubble.&quot;</p> </blockquote> <p><a class="highslide ageent-ru" href="" target="_blank" title="Tech-Boom-Bust-032615"><img alt="Tech-Boom-Bust-032615" class="i_want_img5" src="" style="width: 500px; height: 281px;" /></a></p> <p><strong><span style="color: #dc0000;">But Also Read:</span> This Is Nothing Like The Market Back In 2000 </strong><a href="">by Brett Arends via MarketWatch</a></p> <p>&nbsp;</p> <p><u>4<strong>) Gundlach - Don&#39;t Bet On Higher Rates </strong></u><a href="">by Robert Huebscher via Advisor Perspectives </a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;Gundlach reiterated his belief that raising rates would be a mistake due to the weak global economy and low inflation. Even if the Fed were to take that step, he said, it would eventually be forced to reverse and lower rates, as several European countries have had to do after attempting premature rate increases.</p> <p>&nbsp;</p> <p>&#39;I&rsquo;m afraid that the Fed is intent on being a blockhead and raising interest rates against this backdrop,&#39; he said, &#39;and further strengthening the dollar, weakening the economy, weakening corporate earnings, and basically having to reverse policy.&#39;</p> <p>&nbsp;</p> <p>Demographic problems and the growth of the federal deficit will push rates higher, he believes, but that might not occur for another five years. Gundlach also boldly predicted an inglorious fate for Detroit&rsquo;s automakers.&quot;</p> </blockquote> <p><strong><span style="color: #dc0000;">Read Also: </span></strong><strong>Why Yellen &amp; The Feds Are Bubble Blind </strong><a href="">by David Stockman via David Stockman&#39;s Contra Corner</a><span> </span></p> <p>&nbsp;</p> <p><u><strong>5) Here&#39;s Why We &quot;Appreciate&quot; Home Sales </strong></u><a href="">by Lee Adler via Wall Street Examiner</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;The problem is that ZIRP suppresses inventory. Owners who would ordinarily cash out at a certain point in their lives, don&rsquo;t, because the opportunity cost is too high. Their house is worth more to them as an asset, than cash would be, so they hold on to their properties rather than liquidate. As a result, listing inventory stays near record lows.&nbsp;Low inventories mean that prices will continue to &ldquo;appreciate&rdquo; even though demand remains modest.<span>&quot;</span></p> </blockquote> <p><span><strong><span style="color: #dc0000;">Read Also:</span>&nbsp;The Fed&#39;s Artifical Steepening Of The Yield Curve&nbsp;</strong><a href="">by Jeffrey Snider via Alhambra Partners </a> </span></p> <hr /> <h3><span style="color: #dc0000;"><strong>Bonus Read: <span style="color: #000000;">Barclay&#39;s Says Oil Bottom Not In</span></strong></span></h3> <p><span style="color: #dc0000;"><a class="highslide ageent-ru" href="" target="_blank" title="Barclays-OilBottomNotIn-032615"><img alt="Barclays-OilBottomNotIn-032615" class="i_want_img" src="" style="width: 600px; height: 655px;" /></a></span></p> <p><span style="color: #000000;">Barclays sees prices bottoming somewhere in the mid-$30s for West Texas Intermediate crude oil and in the low- to mid-$40s for Brent and expects <em>&quot;further widening in oil market contangos as more expensive storage needs to get incentivised.&quot;&nbsp;</em></span></p> <p><span style="color: #000000;">Over the last few months, the number of oil rigs in use in the US has collapsed, but Barclays doesn&#39;t think that enough production has yet come offline for this to impact production. <a href=";utm_medium=feed&amp;utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29">Barclays writes that: </a></span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><span style="color: #000000;">&quot;The decline in US rig counts has been rapid and substantial (now down by almost 50% from its October 2014 high), but is unlikely to be an accurate signal of future production trends because usually when falling prices force rigs to decline it is those that are least productive that get cut first, while surviving rigs tend to be left on the most productive areas.&quot;</span></p> </blockquote> <h3><strong><span style="color: #dc0000;"><strong>Bonus Video: <span style="color: #000000;">Daniel Kahneman On The Riddle Of Experience And Memory</span></strong></span></strong></h3> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;Using examples from vacations to colonoscopies, Nobel laureate and founder of behavioral economics Daniel Kahneman reveals how our &quot;experiencing selves&quot; and our &quot;remembering selves&quot; perceive happiness differently. This new insight has profound implications for economics, public policy &mdash; and our own self-awareness.&quot;</p> </blockquote> <p><a href="">Via Ted Talks</a></p> <p><iframe src="" width="560" height="315" frameborder="0" scrolling="no" webkitAllowFullScreen mozallowfullscreen allowFullScreen></iframe></p> <hr /> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div> <p>&quot;<span style="background-color: transparent;">Man looks in the abyss, there&#39;s nothing staring back at him. At that moment, man finds his character. And that is what keeps him out of the abyss.&quot; - Lou Mannheim, Wall Street</span></p> </blockquote> <p>Have A Great Weekend.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="556" height="380" alt="" src="" /> </div> </div> </div> Barclays Behavioral Economics Bond Crude Crude Oil Dennis Lockhart Detroit Federal Deficit Federal Reserve Federal Reserve Bank Global Economy Gundlach Henry Blodget Howard Marks Monetary Policy Nobel Laureate Oaktree Paul McCulley PIMCO Pragmatic Capitalist Recession recovery Yield Curve Fri, 27 Mar 2015 20:30:37 +0000 Tyler Durden 503935 at Crude Carnage & Hawkish Yellen Leave Dow In The Red For 2015 <p>After all the exuberance last week following Janet Yellen&#39;s utter confusion, stocks suffered their worst week in months... even with th epanic buying on INTC news and in anticpation of Yellen...</p> <p><iframe allowfullscreen="" frameborder="0" height="360" src="" width="480"></iframe></p> <p>&nbsp;</p> <p>Very quiet last two days... with some excitmenmt from Intel and Yellen at the close...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 355px;" /></a></p> <p>&nbsp;</p> <p>But futures show the reality of the volatility...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 340px;" /></a></p> <p>&nbsp;</p> <p>As The S&amp;P 500 was pinned at unchanged YTD (Dow red in 2015)</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 404px;" /></a></p> <p>&nbsp;</p> <p>Energy stocks outperformed (though closed red on the week) but Financials were the worst sector this week, down over 3% - the worst week for financials in 11 months</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 495px;" /></a></p> <p><strong>Biotechs dropped over 6% on the week (<u>with highest volume ever</u>) </strong>- the biggest drop since early Oct 2014 (but the swing from last week&#39;s highs to this week&#39;s lows of over 15% was the biggest in 11 months)</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 472px;" /></a></p> <p>Trannies were worst this week, and suffered their biggest weekly drop in almost 6 months - <strong>Trannies are now down since the end of QE3</strong></p> <p><a href=""><img alt="" src="" style="width: 600px; height: 447px;" /></a></p> <p>&nbsp;</p> <p>All down post-FOMC...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 414px;" /></a></p> <p>This was on course to be the best week for crude since July 2013 until prices collapsed in the last hour or so... ending up 4% - still the best since early Feb.</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 404px;" /></a></p> <p>&nbsp;</p> <p>After 5 straight weeks up... AAPL is down 4 of last 5 weeks</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 404px;" /></a></p> <p>&nbsp;</p> <p>Intel did its best to drag The Dow into the green YTD...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 415px;" /></a></p> <p>&nbsp;</p> <p>Treasury yields ended the week very modestly higher, rallying all day today...not 5 days in a row of USD selling during EU day session</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 316px;" /></a></p> <p>The US Dollar ended the week lower by around 0.4% led by EUR and Swissy strength...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 314px;" /></a></p> <p>&nbsp;</p> <p>but Silver and The Russian Ruble remain the best performers against the USD year-to-date...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 389px;" /></a></p> <p>&nbsp;</p> <p>Copper lost ground as China growth fears spread but PMs rose on weaker dollar and war fears... oil did its crazy thing...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 314px;" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</em></p> China Copper Crude Janet Yellen Reality Volatility Fri, 27 Mar 2015 20:06:01 +0000 Tyler Durden 503934 at