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What The Fed Is Looking At
A sense among investors that the global economy is unraveling has injected tremendous volatility into the markets. As Bloomberg's Rich Yamarone notes, if the global equity market decline is not a “Sell in May” event, but the beginning of a great unwinding, then the economy, skating on thin ice, may be even more susceptible to recession. However, most of the US equity disconnect from the reality of weak data (and other markets) can be laid at the feet of the Fed's ever-generous monetary policy. However, given all of this 'weakness' - or missing of Fed benchmarks that we discuss below - that the Fed is well aware of, we ask again, why would so many members have been out discussing 'Taper' if it were not due to their concerns of broken markets and bubble conditions.
Via Bloomberg,
The World Bank reduced its global economic forecast to 2.2 percent in 2013 – from a previous 2.4 percent estimate, and lower than the 2.3 percent performance in 2012.
From an economics perspective it was just a matter of time before conditions began to break down; gains in equity indexes to record highs amid sluggish economic performance were simply unsustainable. The bifurcation between the CRB index and the S&P 500 first appeared in December 2012. The S&P 500 now looks as if it will rejoin the commodity benchmark.
In the U.S. continued signs of frailty have surfaced, perhaps underscoring the likelihood of an economic slump. Detroit is on the brink of bankruptcy, and several top tier indicators are flashing warning signs. Economists polled by Bloomberg forecast U.S. GDP to increase a lowly 1.9 percent in 2013, after a 2.2 percent gain in 2012.
Last week’s economic tea leaves revealed that job openings declined in April and retail sales advanced 0.6 percent in May. Retail sales excluding autos were only 0.3 percent higher. The total business inventory-to-sales ratio increased to 1.31 months – the highest level since October 2009 (1.32) when the U.S. economy was in the initial stages of recovery from the Great Recession.
Import prices were decidedly deflationary as the overall figure fell 0.6 percent last month, and were 1.9 percent lower than in May 2012. All of the associated core measures (ex food, energy, etc.) were also contracting on a year-over-year basis.
Deflationary pressures may also be seen in the wholesale channel. Core intermediate producer prices, a closely followed barometer for potential inflationary or deflationary pressures, fell 0.3 percent in May and was 0.2 percent lower than a year ago. This is not an economically compromising level, but it should keep the Fed from tapering its accommodative monetary policy.
The final major economic release last week was the Fed’s industrial production report for May. The second quarter is off to a very slow start as total production was unchanged in May and contracted 0.4 percent in April. Industrial production peaked in mid-2010 (8.5 percent versus 1.61 percent today), and the regional Fed manufacturing indexes are all in contractionary territory.
Electricity output has fallen in each of the last five weeks (on a year-over-year basis), and shipments of nondefense capital goods excluding aircraft plunged 1.5 percent in April – all in all, a messy beginning to the second quarter.
So once again we ask - given all of this 'weakness' or missing of Fed benchmarks- that the Fed is well aware of, why would so many members have been out discussing 'Taper' if it were not due to their concerns of broken markets and bubble conditions. We fear an equity market positioned far too enthusiastically given the risks of a disappointing Fed.
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Good afternoon, bitchez!
We'll see. Could be a reversal out there hiding in plain sight.
Given the title, I expected Pr0n!
I think the FED finally realizes that their cure isn't a cure.
"why would so many members have been out discussing 'Taper' if it were not due to their concerns of broken markets and bubble conditions."
Because the Fed's monetary policies aren't working, so blabbing to the MSM is all they got. Bernanke is incompetent for not addressing the real issues, just lathering over reality with printed bullshit. Takes ZERO intelligence to be told by some rich elites what to do, and takes real GUTS to take unpopular corrective action. Bernanke is a wet rag - just a "go boy" for the global elites.
They don't have any options. Of course the right thing to do is not interfere but you are looking at 4 decades of imbalances and debt that would need to be liquidated. It is not politically acceptable to "just let it go" and anyone who did would be in Deep S@#@... the other option of printing and propping gets you to the same place but at least in their mind they can help their buddies out... point is it is curtains no matter what. But everyone loves to watch a train wreck so we sit here each day commenting and cheering it... http://tinyurl.com/mem7o7x
be careful there Ben is a student of the great depression ; )
It was only for his PhD. He received his doctorate of BS. Piled higher and Deeper. Being in a depression different than writing a term paper with all sorts of equations to snow the readers.
taper is just more lie lips ... and the herd of cattle can only pizz on their crooked path winding to no where
of course phoenisx will do an article on taper his clueless memos from and slop shop
Sorry, off-topic, but won't you all take a turn around our MSM sites? After this Q&A session conducted by The Guardian for Ed Snowden, I believe that it is important to consider what he says and look at our MSM's painting of him. If you see any sort of powerful, one-word labels attached to Snowden, then I did, too. Orwell speaks from the grave in their headlines - not of Snowden's revelations, but of the need to associate him with that label. I think their reaction alone speaks volumes - both of their quiet panic and their circus of public opinion...they rolled-out Darth Cheney, ffs.
They are "talking" about tapering, because they learned from the ECB and EU that talk drives markets as much as action.
The FED is looking at whatever it wants. They can just call up the NSA and get detailed pictures of your garden if they like. It's not a market after all, it's a Potemkin village, with plenty of window dressing yet zero suybstance. The next strong fiscal breeze to blow will knock the whole thing over.
Agreed.
Just a house of cards.
The Fed opened a new deck and started dealing itself all the cards, back when it opened "Pandoras's Box" by starting 'Quantitative Easing.' Throughout history, anyone doing this embarks on an unstoppable path. Now they and we are damned if do and damned if we don't!
Please wake me just before the event. Watching the facade is getting old.
and the best thing is benny boy aka bubble boy said they will only pull back QE if unemployment reaches 6.5%
lol
= QE infinite
The FED needs an employment quality index. Something like the number of advanced degrees flipping hamburgers.
Naaah. That's probably a little close to the truth.
What market decline?
The fact that an economic slump is even being talked about as a possibility is pretty clear evidence that QE does not work as an economic stimulant.
DATY
"Dive at the Y"
it means "dining at the Y" not "dive".
No offense, but detecting a play on words, is not your strong suit.
Who cares? It's all a farce. To pretend it matters only serves to further perpetuate the farce so why bother?
Have you ever seen a car company escape an incentive program once they start giving their crappy shit a way? Never..Discounting leads to more discounting until they run out of ways to cover up their losses. The fed is caught in a liquidity trap that it can't escape and can't taper. They gave so much of their crappy paper away that they need an exponential growth of debt to keep it from collapsing. The moment they take away the discounts the losses will be there for the world to see.
Doc the fed already succeeded in getting people to actually think they they can taper. All they need is an excuse now not to taper. then everyone can talk about how they were about to taper.
They have been given two reasons..Syria, and the sequester.
how fubared is this..................so now everybody is expecting a taper because things are looking up........because ben sees an economy that can begin to stand on its own.......the stock market is flying again.....so now if there is no taper.....would the stock market take that to mean ben thinks things are perhaps not as rosy?? and would markets then get concerned that there is no tapering because of potential ominous signs in the ecnonomy???? holy shit this is twisted..................
Well, the "markets" took QE4EVA (direct monetization of Treasuries) to be Gold bearish. Along your line of thought, what was it before QE? Why did Gold rally before QE4? This market is an illusion, spun in a labyrinth of bullshit.
wait.....gold rallied because the fed wasnt keeping a lid on it? but now they are? or perhaps now they arent because everybody is buying stocks???
"The fed is caught in a liquidity trap that it can't escape and can't taper."
Mentioned in an earlier thread, it actually doesn't matter whether they taper or not, liquidity is fucked either way absent some very large increase in USG spending in the very near future. Banks need UST for collateral. Fed buys up all the collateral. Where to get it from then?
Queue the war bonds.
I'll tell you what the FED is looking at. They are looking at taking as much actual wealth from the United States of America as possible. Secondly they are using the IRS to eliminate opposition. And thirdly their associates are paying Federal Politicians and agencies to commit treason against the United States of America. And lastly they are funding the DHS in preparations to begin killing Americans.
So whatever else you take away from those precious FED minutes don't forget what the FED's purpose is.
Does this translate to inflation or deflation? There seems to be quite a disagreement on that amongst economists and market analysts.
Import prices down 0.6% might suggest we're heading toward door #2 ...... gold longs continue to insist it's all transitory. A constant subject for debate. Coin flip it since nothing makes sense anymore < except end demand >.
3:30 ramp time! OMG!
but the media has told me it's the TREASURY market that's priced to perfection...not equities. Who am i to believe? Or "is it possible as interest rates decline and growth is sustained...and as commodities roll over" (i can understand the connection between commodities and equities and coporate debt...but treasuries?) CERTAIN equities still have room to run here? hmmm. no cost push inflation. no wage push inflation. growth. government on its hands and knees begging for tax revenues. MASSIVE and NEW federal spending programs. the only problem i see in the immediate term is that the dollar (Obamacare, War in Syria)...having spiked...now slowly starts to move higher again.(say...next six to 8 weeks.) that would be equity negative as East Asia Inc goes "full throttle pushcart wars." i'm sure there's a million and one reasons i'm wrong here..."the only thing certain about the future is that it's uncertain."
Between Hilsenbobo and the FT´s articles.....I don´t know what leaker to believe...taper or no taper....I do believe that Bernanke knows his stuff is not working....that is for sure.....I also believe that he knows he can´t stop..or all hell breaks loose....so what is next...????? Who knows but the people that pay for the news in advance....watch for the HFt´moves before the news is out.....that is the real game here....the NSA is jelous on the HFT´s info gathering....
why don't we call it what it is WELFARE and all the investor welfare moms will cry if they don't get their government cheese
What the Fed is looking at???? Answer.. the ABYSS! Get ready for the MAD MAX Lifestyle..http://tinyurl.com/mem7o7x
If the Fed quits showing up for US Bond auctions, it's game over. Interest rates moon shot, economic activity goes comatose, tax revenues will collapse with economic activity, and the US will default on its debt as the interest consumes bigger and bigger chunks of the tax revenue. Taper?!? Whatever. The Fed has engineered a liquidity/credibility trap. The only way out lies in collapse of one variety or another.
Given that the Ben and the Fed are now a wholly owned Democratic Parti franchise the 'taper' in the current enviroment would not be politically or economically possible.
The only true growth in the US economy is the oil and gas sector and related spin off support and manufacturing activities - other than that the US GDP is flat to negative.
As has been noted by others the absymal growth (and even those are suspect) rates of the last 3 years were only possible through massive injections of Fed liquidity.
There is no 'recovery' in Europe. Japs and ChiComs are looking pretty illin' as well. There is always going to be another self justification not to 'taper'. I don't know how much longer the economy staggers on, but my guess is it will be an external shock that finally kicks the skids out from under it.