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Citi Warns "Fed Is Kicking The Can Over The Edge Of A Cliff"

Tyler Durden's picture





 

It is becoming increasingly obvious that we are seeing the disconnect between financial markets and the real economy grow. It is also increasingly obvious (to Citi's FX Technicals team) that not only is QE not helping this dynamic, it is making things worse. It encourages misallocation of capital out of the real economy, it encourages poor risk management, it increases the danger of financial asset inflation/bubbles, and it emboldens fiscal irresponsibility etc.etc. If the Fed was prepared to draw a line under this experiment now rather than continuing to "kick the can down the road" it would not be painless but it would likely be less painful than what we might see later. Failure to do so will likely see us at the "end of the road" at some time in the future and the 'can' being "kicked over the edge of a cliff." Enough is enough. It is time to recognize reality. It is time to take monetary and fiscal responsibility - "America is exhausted…..it is time."

Via Citi FX Technicals,

Small business (the “backbone of the US economy”) is struggling again

These numbers were released this week and give rise for concern. The outlook here does not look very promising as we see all of the charts above starting to look shaky

We are particularly focused on the overall small business optimism index and what it suggests.

Small business optimism index

This chart is very compelling and looks to be following exactly the same path as that seen in 2011 (when QE2 was due to end only to “morph into operation twist”) and again in 2012 (when operation twist was due to end only to “morph” into “QE infinity”)

Important points to note on this chart are:

94.7: This was the major low posted in March 2003 (The month that the major rally in the stock market (S&P) began which then peaked in October 2007.That gave us a low to high move of 105%.) Traditional Fed easing ended in June 2003 with the Fed funds rate at 1%.This indicator then rallied to a peak of 107.7 by November 2004. The next time this support was revisited was in November 2007 when it gave way with a “print” of 94.4

 

94.5: This was the high of the bounce off the March 2009 low and was posted in Feb. 2011. The index then fell away and this high of 94.5 was once again posted in April 2012

 

94.4: After another fall away, this index again bounced into a peak of 94.4 in May 2013 and has since moved lower again.

After the break of supports in 2007 the low posted was 81 (March 2009) while we saw levels of 88.1 and 87.5 respectively after the 2011 and 2012 peaks. (The 2011 move took 6 months (Aug. 2011) and the 2012 move took 7 months (Nov 2012)). Operation twist was instituted in Sept 2011 while QE “infinity” was put in place in Sept 2012. If we were to follow the same path then the Fed could well be talking easing bias rather than tapering by the New Year (we hope not)

Overlay of the small business optimism index and the S&P 500

As can be seen from the chart above the Small business optimism index and the S&P were very correlated from 2007-2012. If anything, the Small business optimism index has tended to slightly lead i.e. the business backdrop seemed to reflect the economic backdrop which was then reflected in the equity market.

However, since Sept. 2012 when the Fed went “all in” with QE “infinity” there has been a huge divergence between these two. After an initial “hiccup” of about 9% in the Equity market it has since rallied 32% in 11 months, with no corresponding support from the business index.

There is now a “huge divergence” between the “backbone of the US economy” (Small business) and the Equity market. This clearly shows that while sharp balance sheet expansion at the Fed continues to “elevate” the equity market, it is far from clear that it is providing incremental benefit to the real economy. If these small business indicators continue to deteriorate as we expect then there is likely an inevitable negative feedback loop to the real economy and ultimately employment creation (Which at this point remains “qualitatively poor”)

If the Fed is not concerned about the dangers of creating a potential “bubble” in financial assets that does not see fundamental support, then they should be. They might want to explain what their next policy measure would be IF they allow a financial bubble to emerge while they sit at “Zero bound” short-term rates and a balance sheet likely sitting above $4 trillion.

The Equity market move is fundamental: Yeah right!

S&P and the Fed balance sheet since early 2009. Not at all correlated... well maybe a little


 

S&P, Fed Balance sheet and US GDP: QE infinity is working really well…..DUH..

Year on year real GDP growth peaked in 2010 at 2.8%.(YOY growth in nominal GDP peaked at 5.2% in 2012 and is now back at 3.1%). These levels remain extremely low by “normal” recovery standards and have failed to re-accelerate despite the fact that the Fed has nearly doubled the size of its balance sheet since 2010.

The Fed balance sheet is now $3.85 trillion and still rising.

Consumer confidence chart further supports these concerns

Has rolled lower following the June 2013 peak and is now back below the 2011 and 2012 peaks.

Huge divergence between consumer confidence and the S&P

Starting with 2000 and followed by 2007 and 2013 consumer confidence has hit a high followed by a lower high and another lower high.

At the same time the S&P has seen a high followed by a higher high and another higher high.

Effectively consumer confidence is acting like a momentum indicator and exhibiting “triple divergence” vis a vis the equity market

In 2000 there was a 4 month lag from when consumer confidence turned and the S&P began to struggle. In 2007 it was 3 months. So far there has been a 4 month lag (Consumer confidence peaked in June and so far the S&P has peaked in October at 1775).

It is also worth noting that the 1998-2000 rally (Which we think is very similar to today) in the S&P was 68%. A similar rally off the 2011 low gives us 1,806. In 2000 the peak of the S&P was also set at 14% above the 55 week moving average. Today such a gap would equate to 1,810 on the S&P. So there may still be a little “juice” left in this move into year end.

ABC news weekly consumer comfort index is now accelerating to the downside

As it did in 2000 and again in 2007. A move below minus 40 to minus 41 again would be concerning and suggest a danger of a return to the lows seen in 2008/2011.

The velocty of money is extremely slow.

Subpar velocity of money leads to subpar economic growth leads to subpar job creation leads to downward pressure on inflation (disinflation)

We would argue that QE encourages excessive misallocation of capital into financial markets and thereby directly contributes a decrease/contraction in money velocity.

While velocity of money and core PCE are at levels identical to the mid 1960’s and similar to the early 1970’s nominal GDP (YOY) is much lower.

In fact nominal GDP is actually back to levels (troughs) similar to 1982, 1991 and 2001.

This is happening at the same time as financial assets are booming. This is just one of many charts that suggest that all QE is now doing is encouraging a misallocation of capital into financial assets thereby contributing to the lowest level in money velocity since the data series above began in 1959. This contributes to slow economic growth and poor “qualitative” employment creation as well as disinflation. (Transfers the inflation into asset markets like we did between 1980 and 2000) This argues that we should measure inflation as a combination of traditional economy inflation and financial asset inflation thereby “smoothing” the cycle instead of encouraging “booms and busts”

Will the above eventually encourage the Fed to adopt a nominal GDP target (i.e. to encourage more traditional inflation).If so, how do they hope to achieve that. We do not really know the answer but it seems increasingly obvious that QE is not it.

Meanwhile the employment backdrop remains “qualitatively” weak.

So given all of the above let us look at what we think should happen and also what we think will (unfortunately) happen

What should happen (In our view)

The Fed needs to hold their nerve and start tapering. This is less to do with the view of the underlying economic picture and more to the view that QE has become “destructive”. It encourages a misallocation of capital and poor risk management. As a consequence there is every chance that it contributes to a falling velocity of money as liquidity simply “round trips” in financial assets rather than multiplies out in the real economy. If the “trickle down effects” of the equity market were really happening then after a 166% rally in the S&P we should be “booming”. However, the “average Joe” in the US economy is more exposed to

  • Credit- which is still tighter than in prior recoveries
  • Housing- Which is recovering but at a much slower pace than previous recoveries
  • Job creation- Which is recovering but remains “qualitatively poor”

It is quite possible (likely even) that this process will not be painless but that is not a reason not to do it. QE does not work and another way needs to be tried. The continued expansion of the Fed’s balance sheet simply encourages fiscal irresponsibility at a Governmental level in the misguided idea that the Fed will bail us out. If the Fed holds the line then Congress will be forced to address our issues head on, and that would be a good thing.

Throwing the “ball” into the fiscal arena would force Congress to look at ways to stimulate the economy in the near term but only if they address the “drag” on the economy of the long term fiscal promises that they cannot keep (i.e. reform entitlements, healthcare etc)

Fiscal stimulus and regulation reform (to make both more business friendly) would be a much more effective transfer mechanism in putting money in people’s pockets today. If combined with looking towards more business friendly policies it would potentially be a more effective “kick start” for the economy.

What about an HIA 2 (Homeland investment act) initiative to encourage repatriation of all those non-taxed corporate profits sitting overseas? A very low tax rate for these funds conditional on a robust framework for how that money needs to be used (Capex, infrastructure spending, job creation etc). This would be a fiscal stimulus that does not cost any money in the existing budgetary process (Surely that could attract a bipartisan approach). The tax received could also be used in similar areas.

A dynamic such as above (Less monetary easing/marginal tightening, combined with short term fiscal relief and long term fiscal reform would be unequivocally USD bullish in the medium to long term. Therefore a set of policies such as this would hugely strengthen our bullish USD view.

What likely will happen (In our view?)

The Fed will try to hold the line on tapering in the near term. Yellen will “do a Ben”. What we mean by that is that when Ben Bernanke was appointed he had a reputation of being “Helicopter Ben”. (A reputation that was obviously well deserved given the dynamics of recent years). However he spent his “early days” trying to establish his “dual mandate” credentials and “monetary responsibility” In fact he did this “to a fault” maintaining a “hawkish tone” in the first half of 2007 and suggesting the Fed might raise rates. They never did and the rest as they say is history. Yellen has a reputation for being a consensus builder and therefore in the “transition phase” it is likely that she will take a more balanced tone between the hawks and the doves. She may even concede some concern about the balance of positive/negative risks that QE brings (something we opined on above). In fact it is even possible that we get some tapering in the near term, possibly even in December.

What will matter as we see this tone and possibly action will be the reaction function of markets. IF yields push higher, IF Equity markets start to correct, IF housing numbers continue to moderate, IF emerging markets start showing stress again, will they hold the line and continue to steadily taper? We would like to think yes but a “Leopard does not change its spots”. Real GDP is very low by historic standards at this point in the cycle, official inflation (Core PCE) at the very low end of a 0.95% to 10.23% 43 year range (Stands at 1.2%) and the qualitative employment “recovery” is poor. We do not therefore believe that the Fed will “hold its nerve” if we get another negative reaction like we saw last summer to signals of imminent tapering.

In this instance it is far more likely (unfortunately) that they do not taper, or if they already have, that they reverse course and start to talk of other measures like inflation targeting/nominal GDP targeting etc. We hope not as we really think this would eventually be a strongly misguided and potentially disastrous course of action. History has shown that the longer an economy/market is subject to “interference” such that it becomes the norm rather than the exception then the worse the outcome eventually is. We cannot afford the danger of another 2000 or another 2007 in a zero bound interest rate environment and a Fed balance sheet potentially well North of $4 trillion.

Enough is enough. It is time to recognize reality. It is time to take monetary and fiscal responsibility. It is time to fix the excesses of the last quarter century+. It is time to take the pain today so that we can gain tomorrow. It is time to make this a better place for the next generation. Isn’t that what we are meant to do? That would be a much better legacy that that which are likely heading to if “Kick the can” remains the only “bankrupt” policy we have.

We honestly HOPE that this is the course we take. The US has a history of “finding a way”. As Winston Churchill famously said. “We can always count on the Americans to do the right thing, after they have exhausted all the other possibilities.”

America is exhausted…..it is time.

 


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Thu, 11/14/2013 - 21:26 | Link to Comment dufferin
dufferin's picture

lifevest on.

Thu, 11/14/2013 - 21:34 | Link to Comment kaiserhoff
kaiserhoff's picture

Ah shit.  Now I am worried.

When was Citi ever right about anything?

 

Thu, 11/14/2013 - 21:46 | Link to Comment HardAssets
HardAssets's picture

Is this CYA, a set up for a trade,  or did these guys not get the memo from upstairs ?

Citi likes this sh*t, its keeping them 'solvent' (kinda)

 

No tapering . . . . . ever

Thu, 11/14/2013 - 22:42 | Link to Comment markmotive
markmotive's picture

Since when does anyone give a sh!t what the f@ckers at Citi have to say?

You want to know the scale of the hate-on for these big-city bankers, just look at the tweets from the #askJPM f@ckup.

http://www.planbeconomics.com/2013/11/some-of-best-tweets-from-askjpm-pr...

Fri, 11/15/2013 - 00:43 | Link to Comment Nexus789
Nexus789's picture

Maybe JPM sauced up Twitter to create a spike.

Fri, 11/15/2013 - 14:06 | Link to Comment mmanvil74
mmanvil74's picture

Part of the reason for many of these disconnects is that the S&P 500 has very little to do with the US economy, and a whole lot more to do with the global economy.  

In the global economy, we have growth, and global corporations are profitable based on that growth.  S&P 500 companies don't really need broad growth in US to remain profitable, they just need US to stay out of recession while the rest of the world continues to gobble up goods and services produced by the S&P 500 companies.  

What I would like to see is a revenue and profit breakdown of the S&P 500 based on geographical zones - what % of aggregate S&P 500 company's sales and profits come from different parts of the world?  My guess is USA is maybe 1/3 of profits, maybe less.  

So don't be surprised as "mainstreet USA" struggles, while S&P 500 rises - they are nowhere nearly as dependent on one another as people think.  

I am not saying S&P 500 is fairly priced today, it seems to be high and ready for a (significant) pullback, but, in a world of ZIRP, what else do you buy but the world's largest, most profitable company's stocks?

Thu, 11/14/2013 - 22:23 | Link to Comment Stoploss
Stoploss's picture

It's becoming clear to some the more they monetize the worse it gets.

This is the part where the bond market panics, and tries to raise rates, causing Jan to crank the lever, driving the final nail in housing.

Dey gona be a whole lotta pissed off mo fo's come this time next year.

Thu, 11/14/2013 - 23:04 | Link to Comment HoofHearted
HoofHearted's picture

I prefer, "The Fed is about to kick the can into the house of cards."

Thu, 11/14/2013 - 22:50 | Link to Comment stocktivity
stocktivity's picture

Blah blah blah...until the printing stops, It's all Bullshit!!!  The market crashes and Janet just prints dollars out of thin air and does a QE to buy stocks. Rally on.

Fri, 11/15/2013 - 00:30 | Link to Comment Razzle Dazzle
Razzle Dazzle's picture

The wisdom is in your seemingly simplistic explanation. There is no great architecture. Continue throttling the gas, as there is no brake pedal or steering wheel. 

Thu, 11/14/2013 - 21:40 | Link to Comment Deathrips
Deathrips's picture

See my post for Scotia Banks best and brightests revelations, for my exact thoughts on Citi revelations. Sigh....

 

Heres a heartfelt FUCK YOU BERNANKE!!

 

RIPS

Edit: Thats funny Kaiser.... assume the position.

Thu, 11/14/2013 - 21:55 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Scotia and Citi on the same day.  Hmm.  Now if we get GS to say something similar...:  Hmm!!

Thu, 11/14/2013 - 22:04 | Link to Comment Bay of Pigs
Bay of Pigs's picture

That's what I thought. Citi? Why is ZH putting this bullshit on here?

I didn't even bother to read it.

Fri, 11/15/2013 - 15:05 | Link to Comment BigJim
BigJim's picture

Well maybe you should.

Thu, 11/14/2013 - 23:19 | Link to Comment TaperProof
TaperProof's picture

I like how Citi is just now figuring this out... they should read ZeroHedge and especially the comments.

Thu, 11/14/2013 - 21:29 | Link to Comment q99x2
q99x2's picture

More evidence that we no longer need the FED.

Thu, 11/14/2013 - 21:31 | Link to Comment PacOps
PacOps's picture

When did we ever need it?

Thu, 11/14/2013 - 22:28 | Link to Comment Ham-bone
Ham-bone's picture

 

 

'08

  • GDP $13.7 T
  • Marketable debt = $5.1 T  (blended interest rate of 5%)
  • Non-marketable debt $4.1 T
    • Fed  4% of Notes/Bonds/TIPS ($200 B)
    • Foreigner  42% of Notes/Bonds/TIPS ($2.2 T)

'13

  • GDP $16 T
  • Marketable debt = $12.2 T  (blended interest rate of 2.3%)
  • Non-marketable debt = $4.9 T
    • Fed           22% of Notes/Bonds/TIPS ($2.2 T)
    • Foreigner  50% of Notes/Bonds/TIPS ($5 T)

Couple things to notice here -

1- "Foreigners" have purchased more T's than the Fed via it's QE since '08...even w/ all the talk of Russia or China abandoning the dollar, the exact opposite is happening in their T holdings (Russia up 3000%, China up 125%)...I really wonder if they are simply being given currency swaps with which to purchase the T's (ie, they put up nothing and have nothing to lose buying these T's...they are playing w/ Fed house money???)

2- the vulnerability to the dollar is greater (or less) than ever dependent how you look at it.  Never have foreigners owned more total or % wise of US T debt...which either means a sell off creates more of an interest risk than ever...or the co-dependency means "foreigners" will continue to buy ever greater % of currency to avoid the much anticipated "dollar collapse"...fuck if I know.

3- in another 5yrs from now if these trends were extrapolated out, could look like...

'18

  • GDP $19 T
  • Marketable debt = $20 T  (blended interest rate of 1%)
  • Non-marketable debt = $3.5 T (SS surplus becomes clear deficit) 
    • Fed         40% of Notes/Bonds/TIPS
    • Foreigner  60% of Notes/Bonds/TIPS
Thu, 11/14/2013 - 23:39 | Link to Comment bunzbunzbunz
bunzbunzbunz's picture

Holy shit...do you actually look things up and try to learn? That's good. It seems lost on people here that if there is indeed a currency war, the U.S. would need to be a part of it. And if it is indeed a war, why THE FUCK would gold be safe? Gold is the obvious 'safe haven' to every illiterate fuck that can't read a graph, so obviously those in the war may need to devalue it to hurt the enemy.

Fri, 11/15/2013 - 12:47 | Link to Comment donsluck
donsluck's picture

As many people look to the gold price as evidence of future inflation, and the FED wants inflation, and the FED believes inflation is mostly a mindset of expectations, wouldn't the FED WANT a higher gold price?

Thu, 11/14/2013 - 21:33 | Link to Comment MrButtoMcFarty
MrButtoMcFarty's picture

The REAL QE is still coming.

The Fed will double down before they taper.

Just my asshole opinion....

Thu, 11/14/2013 - 21:43 | Link to Comment ChaosEquilibrium
ChaosEquilibrium's picture

...least you are honest!:)

Thu, 11/14/2013 - 21:51 | Link to Comment GrinandBearit
GrinandBearit's picture

Yes... double, even triple the amount of today's QE.  Nothing to stop them from doing this.

I also believe that Chinese will back the yuan with all the gold they are buying.  The new world reserve currency will be the yuan.

Thu, 11/14/2013 - 21:34 | Link to Comment OwnSilverPlayMusic
OwnSilverPlayMusic's picture

You can't stop this trainwreck.  Get a good bourbon, roll yourself a nice joint and just kick back and watch the fireworks. Learning mandarin wouldn't hurt either.

Thu, 11/14/2013 - 21:36 | Link to Comment James-Morrison
James-Morrison's picture

It's not like the writing is on the wall already.

You just have to look.

Thu, 11/14/2013 - 22:26 | Link to Comment max2205
max2205's picture

I am convinced they will let the market 'correct' to 1200.....then it'll be flat for about 10 years....better than 667

Thu, 11/14/2013 - 21:34 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Problem: The U.S. economy is in a major descent. 

Government solution:  Fed sends another trillion to the big banks and buys another trillion in T bonds.

 

 

Thu, 11/14/2013 - 21:35 | Link to Comment q99x2
q99x2's picture

Not many articles about CSCO and the NSA fallout or about the tech revolution against the NWO.

Thu, 11/14/2013 - 21:36 | Link to Comment ChaosEquilibrium
ChaosEquilibrium's picture

The COLLAPSE will be/is EPIC!!!!

Thu, 11/14/2013 - 21:43 | Link to Comment 29.5 hours
29.5 hours's picture

 


"We would argue that QE encourages excessive misallocation of capital into financial markets"

And I would argue that there are people at Citi who have demonstrated, at last, the ability to detect the blindingly obvious.

I'm with kaiserhoff -- it is now sort of worrying that the Wall St. Journal and other mainstream sources are beginning to put out disaster vibes. Something is off.

 

 

Thu, 11/14/2013 - 21:44 | Link to Comment rsnoble
rsnoble's picture

And what does Citi have to stand by for saying enough is enough?  Are they ready to initiate a mass short position?  Why should we listen and or trust this group of fucktards over the over?

Thu, 11/14/2013 - 21:45 | Link to Comment rubearish10
rubearish10's picture

Great article and QEellen will not hold the line (and taper) because she did say today that another crisis must be avoided. So, why even take the chance??

Thu, 11/14/2013 - 23:06 | Link to Comment Carl Popper
Carl Popper's picture

She just told all of us to go full retard and that she has our back. Better listen.

Thu, 11/14/2013 - 21:45 | Link to Comment explosivo
explosivo's picture

Doesn't Citi own the Fed?

Thu, 11/14/2013 - 21:45 | Link to Comment Mandel Bot
Mandel Bot's picture

When a too-big-to-fail bank bites the hand that feeds it, the feeding frenzy cannot be far off.

Fri, 11/15/2013 - 05:27 | Link to Comment lakecity55
lakecity55's picture

It's good they can't print Gold.

Or Silver.

Got Fizz?

Thu, 11/14/2013 - 21:48 | Link to Comment GrinandBearit
GrinandBearit's picture

WTF?  Citi is profiting from all of it!

Thu, 11/14/2013 - 21:49 | Link to Comment DOGGONE
Thu, 11/14/2013 - 21:49 | Link to Comment Sleepless Knight
Sleepless Knight's picture

why so responsible NOW?

Thu, 11/14/2013 - 21:51 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Citi just doesn't get it, they are victims of their own cobwebbed thinking. Using technicals to analyze a fabian inspired QE printing scam ? Puh feckin' lease.

"Enough is enough. It is time to recognize reality. It is time to take monetary and fiscal responsibility. It is time to fix the excesses of the last quarter century+. It is time to take the pain today so that we can gain tomorrow. It is time to make this a better place for the next generation. Isn’t that what we are meant to do? That would be a much better legacy that that which are likely heading to if “Kick the can” remains the only “bankrupt” policy we have.

We honestly HOPE that this is the course we take. The US has a history of “finding a way”. As Winston Churchill famously said. “We can always count on the Americans to do the right thing, after they have exhausted all the other possibilities.”America is exhausted…..it is time."

They have yet to realize that the Fabians' do not give a shiite about " pain today for gain tomorrow" or "better place for next generation". The Fabian response is - STFU and get ready to pay for everyones SNAP card, Obamaphone, and ObamaCare, and higher capital gains taxes on your equity market gains.... ' cause you didn't build that... QE did.

The Fabians will drive equities higher and higher. It will keep the sheeple believing that they are "making money" or "getting rich" from QE like they are supposed to be based on the ClubFed policies. Cramer said tonight that it is a good thing and the people should just participate...it's not a bubble if you don't think its a bubble.

As equities go higher and higher... the retreat from QE becomes moar and moar difficult. If there is a USD crisis, then there will aslo be a Euro and Yen crisis... oh buy gold you say ? Right...the Fabians have showed historically, that they will just outlaw using gold as a currency. The Fabians will look for an Int'l, comon currency...SDRs or soemhting similar.

I do agree with Citi on this point.... it is getting very late and the point of no return is nigh.  

Thu, 11/14/2013 - 21:54 | Link to Comment jim249
jim249's picture

I am just glad there are large organizations screaming form the top of their lungs that enough is enough! It is TIME!

Thu, 11/14/2013 - 21:55 | Link to Comment buzzsaw99
buzzsaw99's picture

Ungrateful bastards.

You only exist out here because of me! That's the only reason! Without *me*, you, personally, every fuckin' wise guy skell around'll take a ... whether you know this or not, but you only have your fuckin casino because I made that possible. [/Nicky "federal reserve" Santoro]

Thu, 11/14/2013 - 21:57 | Link to Comment akarc
akarc's picture

This is so much garbage I'm gonna have to clean the spit off my computer screen. A Banks saying enough is enough? After they already have it all?  A market that is nothing more than a bunch of rich fucks playing poker with stocks? Ante up boys how many walmarts for a facebook, oh yeah slave boy, bring us another round.

What has happened, what should happen, what might happen, what probably will happen, if, if and if some more. The commentary has become as absurd as the reality.  

Thu, 11/14/2013 - 22:13 | Link to Comment ChaosEquilibrium
ChaosEquilibrium's picture

Ever day going forward the FED is reducing the "pool of useful people' in a future societal structure!!  Bankers, Traders, Management, Lawyers, Politicans....I truly hope you are acquiring "useful skills"...but I DO NOT wish you 'luck'-----YOU ARE BECOMING OBSOLETE....you just might not realize that eventual FACT!

Thu, 11/14/2013 - 22:19 | Link to Comment starman
starman's picture

This train is about to crash in to the ticket booth! Good luck with that.

Thu, 11/14/2013 - 22:23 | Link to Comment Cabreado
Cabreado's picture

Nausea-inducing article, from every angle, including seeing it here.

The only worthiness comes from where The Sickness is being INvoluntarily exposed, little by little... and that's how it works.

 

Thu, 11/14/2013 - 22:24 | Link to Comment surf0766
surf0766's picture

See they know it is over. None of them want the credit for what is coming. The "see we told ya so's" are out in force.

We must be closer than anyone knows. Nice bill in Russia this week.  How strong is the dollar again in Kramerika?

Thu, 11/14/2013 - 22:29 | Link to Comment Notarocketscientist
Notarocketscientist's picture

Nah - it is not time.

The central banks know that there is no way out of this - if they taper we collapse NOW - if they don't taper we will collapse but it will be delayed - and it will still be an absolute collapse

Do you want to collapse now or LATER?

I prefer later.

So what do we see? More crazy policies like lending money to clowns to buy cars in order to keep auto sales from going off a cliff.  Bernanke is not stupid - he knows this is a crazy policy.  But it's better than the alternative.

The reality is that we have reached the end of growth because we have reached the End of Cheap Energy

 

Scientists Wary of Shale Oil and Gas as U.S. Energy Salvation

Hughes sums up: "Tight oil is an important contributor to the U.S. energy supply, but its long-term sustainability is questionable. It should be not be viewed as a panacea for business as usual in future U.S. energy security planning."

http://www.sciencedaily.com/releases/2013/10/131028141516.htm

 

 

U.S. Shale-Oil Boom May Not Last as Fracking Wells Lack Staying Power

“I look at shale as more of a retirement party than a revolution,” says Art Berman, a petroleum geologist who spent 20 years with what was then Amoco and now runs his own firm, Labyrinth Consulting Services, in Sugar Land, Tex. “It’s the last gasp.”

http://www.businessweek.com/articles/2013-10-10/u-dot-s-dot-shale-oil-boom-may-not-last-as-fracking-wells-lack-staying-power

 

THE FRACKING PONZI SCHEME

Robert Ayres, a scientist and professor at the Paris-based INSEAD business school, wrote recently that a "mini-bubble" is being inflated by shale gas enthusiasts. “Drilling for oil in the U.S. in 2012 was at the rate of 25,000 new wells per year, just to keep output at the same level as it was in the year 2000, when only 5,000 wells were drilled."  http://www.forbes.com/sites/insead/2013/05/08/shale-oil-and-gas-the-contrarian-view/

 

Why America's Shale Oil Boom Could End Sooner Than You Think

http://www.forbes.com/sites/christopherhelman/2013/06/13/why-americas-shale-oil-boom-could-end-sooner-than-you-think/

 

FRACKING WILL CREATE AN ECONOMIC CRISIS

Overinflated industry claims could pull the rug out from optimistic growth forecasts within just five years.  A report released in March by the Berlin-based Energy Watch Group (EWG) concluded that: "... world oil production has not increased anymore but has entered a plateau since about 2005."  Crude oil production was "already in slight decline since about 2008."   

http://www.guardian.co.uk/environment/earth-insight/2013/jun/21/shale-gas-peak-oil-economic-crisis 

Fri, 11/15/2013 - 02:22 | Link to Comment edotabin
edotabin's picture

Fracking was the only way out (that I could see) of this death spiral. We make nothing, we do nothing, we know nothing, we learn nothing..... At some point, it will be reduced to ....nothing.

 

Thu, 11/14/2013 - 22:43 | Link to Comment moneybots
moneybots's picture

"If the Fed was prepared to draw a line under this experiment now rather than continuing to "kick the can down the road" it would not be painless but it would likely be less painful than what we might see later."

 

But Yellen sees nothing wrong.  She said so today. 

Kicking the can means pushing the problem off to tomorrow, which is what they have done all along.  Tomorrow is always a day away.

Chuck Prince, formerly of Citi said that they needed to keep dancing while the music was playing.  Kicking the can keeps the music playing.  What, Citi worried, now?

Thu, 11/14/2013 - 22:48 | Link to Comment yogibear
yogibear's picture

It doesn't implode until the fat lady sings....

Now we have the fat lady, just wait for her to sing.

Thu, 11/14/2013 - 22:51 | Link to Comment moneybots
moneybots's picture

"In this instance it is far more likely (unfortunately) that they do not taper, or if they already have, that they reverse course and start to talk of other measures like inflation targeting/nominal GDP targeting etc. We hope not as we really think this would eventually be a strongly misguided and potentially disastrous course of action."

 

The policy has been misguided all along.

 

Thu, 11/14/2013 - 23:00 | Link to Comment Carl Popper
Carl Popper's picture

Scotia Bank, Citi, and numerous others now.

I feel better about going full retard. It is now conventional wisdom the stock market is about to go to hell.

Thu, 11/14/2013 - 23:03 | Link to Comment Yen Cross
Yen Cross's picture

   This shit is going to end so badly! The markets are completely ignoring all of the macro news, and it's NOT good...

   The U.S. jobs numbers are lousy. The economic calendar for Europe was terrible this week. The fucking peNekkei has been up 4 or 5 % over the last 2-3 days WTF? The news out of Japan has also been shitty..

   All you cocksucking pols and banksters had better enjoy while you can, because your day is nigh fuckers!

Thu, 11/14/2013 - 23:19 | Link to Comment bunzbunzbunz
bunzbunzbunz's picture

What?! We pay attention to the news. Bad news is good news. Good news is therefore badnews, which in turn makes it good news. Buy high, sell higher bitch!

Anyway.... go take a look at inflation adjusted gold prices over the last 100 years and tell me gold or anything else is a better place to put your money than equities. http://www.macrotrends.net/1333/gold-and-silver-prices-100-year-historical-chart

Thu, 11/14/2013 - 23:40 | Link to Comment Yen Cross
Yen Cross's picture

    I'll bet it took you 6 weeks and 1 day to find that chart. You should pawn your bigwheel and xbox and go all in on AMZN.

  Trooooll/ Member 6 weeks 1 day

Fri, 11/15/2013 - 08:31 | Link to Comment MythicalFish
MythicalFish's picture

And even the "Fragile Five" are ramping up.

 

http://www.geek-art.net/wp-content/uploads/2013/08/Linda-Hordijk-This-Wi...

 

Thu, 11/14/2013 - 23:13 | Link to Comment bunzbunzbunz
bunzbunzbunz's picture

But...if large financial companies start saying something is bad, shouldn't that mean the ZH community should want it? <brain exploding sound and gesture>

Thu, 11/14/2013 - 23:50 | Link to Comment Radical Marijuana
Radical Marijuana's picture

My macabre sense of humour is tickled when relatively mainstream types get smacked on the side of head by their analysis of the financial news. For me, one of the surprising things has been to watch relative insiders starting to speak up and bicker between themselves about how objectively insane the numbers have become. Before 2008, one would have been astonished by anything like that, while more and more it appears to be relatively routine, since the real numbers are manifestly so NUTS, that it is no longer possible to simply continue to deliberately ignore them. All those lovely charts provide a way to visualize whatever "kicking the can over the edge of the cliff" might mean.

Of course, for many decades my view has been that exponential growth, backed by weapons of mass destruction, was going to necessarily hit a wall, and then bounce off a cliff. Good luck with building some parachute on the way down ... Apart from some breakthrough new energy technology, which is possible to scale up, then I see no way to fix these problems, other than the default to much more genocidal wars, along with democidal martial law. Even IF there are dramatic scientific breakthroughs to new energy technologies that can be scaled up (which I believe is possible), that energy would have to be channeled through better ecological ideas, for that energy to actually start to save us from our apparent fate of hitting the wall, and then bouncing off the cliff. That is why I picked my current avatar on Zero Hedge, as a symbol of my irrational hopes for a series of miracles, since it comes from this source:

http://www.thrivemovement.com/

http://www.thrivemovement.com/the_code-fundamental_pattern

“Looking back on almost half a century of research, including thousands of books, films, interviews with experts from diverse fields, if I were to pick one common denominator to all the facets of my quest, it would be the TORUS, the fundamental energy pattern that invites our alignment at every level of our existence for us to survive and thrive.”

-- Foster Gamble

Of course, such irrational hopes in a series of scientific and political miracles pushes even me outside of my comfort zone, and therefore, I can not imagine how far outside of their comfort zone it would push the kinds of relatively mainstream financial analysts (picked to be republished on Zero Hedge) outside of their comfort zone, to contemplate that some of the information in that Thrive movie might in fact be correct ???

Thu, 11/14/2013 - 23:34 | Link to Comment I Write Code
I Write Code's picture

citi has a competent and honest analyst?  I thought they were all killed and eaten in 2007.

Fri, 11/15/2013 - 02:02 | Link to Comment dunce
dunce's picture

This got me thinking about who could say enough is enough and has the ability and authority to puta stop to the insanity. I am sure it is not obama, he is being abandoned by his enablers and there are many living in fear that the market will crash and they will get blamed so they are frozen in fear. Any credible loud command to halt would be like yelling fire in a crowded theater. Panic would ensue.  It may be that no one is in control and it is only momentum going forward. What will be the metaphorical wall or ditch that ends the wild ride?

Fri, 11/15/2013 - 02:59 | Link to Comment Decimus Lunius ...
Decimus Lunius Luvenalis's picture

In reality, all that had to be written is: "if the economy is so stellar, why do we need QE infinity?"  

“Half the harm that is done in this world is due to people who want to feel important. They don't mean to do harm; but the harm does not interest them. Or they do not see it, or they justify it because they are absorbed in the endless struggle to think well of themselves.”

 

T.S. Eliot was right 60 or so years ago.

Fri, 11/15/2013 - 03:12 | Link to Comment Decimus Lunius ...
Decimus Lunius Luvenalis's picture

I've read ZH for a long time, but honesty this call to fiscal discipline to monetary discipline is bullshit.  Value of anything is entirely made up.  We can couch it terms of history or math or political ideology but they idea of money and power are simply made up.  To pontificate about shoring up fiscally fucked budgets as a way to grow the future is like saying that capturing the uniocorn or yeti will solve problems.  The salemen politicians can't reduce their juice, the chinese slaves can't reduce their exports, innovating small business can't cope with regulatory cost, so we get a made up debt that is enforced on those that actually have to produce to pay to those that hock made up shit at a premium to those that produce nothing other than sales pitches based on shit they receive at discount that make Jews quiver.  

Fri, 11/15/2013 - 05:25 | Link to Comment lakecity55
lakecity55's picture

(Wife in bathroom)

"Honey, we're out of TP."

"Use the dollar bills I put in there, dear."

Fri, 11/15/2013 - 07:48 | Link to Comment Element
Element's picture

People have been using the 'eye-of-the-storm' and 'escape-velocity', and the titanic metaphor, for years now, but the more accurate mental-image is of a huge beached whale, near the high-water mark, called the 'real-economy', surrounded on one side by the feeble-minded true-beliver drones and zealots, who're still trying to 'save' it and urge and stimulate it back to sea. But on the other side is a boiling mass of FIRE sector sharks taking ragged bites out of it's side, and off its fins, and trying to get in to its liver first, and making sure it stands no chance at all of ever swimming away on its own again. While the authoritahs and FED clown-shows are all cheering the blood gushing out of it into the white surf, pretending to the little-ones that the whale's going to make it out, and get better again, it's really going to make it with one more really huge in-rushing of red liquidity ... and a fresh boil of shark fins and over-eager teeth.

Or maybe the zombie metaphore? ... it works so well too.

Fri, 11/15/2013 - 09:45 | Link to Comment bentaxle
bentaxle's picture

Imagine the surprised look on their faces when they discover something they wrote, like this, actually turns out to be true!

Fri, 11/15/2013 - 16:47 | Link to Comment mkhs
mkhs's picture

Declining velocity of money.  What would happen if you sucked the interest income of the savers and hid it in a vault as excess reserves?

Helicopter Ben. Ha, more like hoover Ben.

Sat, 11/16/2013 - 13:13 | Link to Comment Postkey
Postkey's picture

 

"It is becoming increasingly obvious that we are seeing the disconnect between financial markets and the real economy grow. "

Maybe this is why?

 

"It would be splendid if the US were able to shake off the biggest fiscal squeeze since post-Korea demobilisation in the 1950s. If that were to occur it would be a massive vindication of QE, evidence that monetary stimulus can overpower fiscal contraction. As an amateur monetarist, I would relish this (friendly) defeat of the Keynesian camp, those apostles of fiscal primacy.

My fear is that the Keynesians will be proved right yet again. You cannot tighten quite so violently in an anaemic economy without consequences."

 

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100025218/can-the-world-cope-with-a-trigger-happy-fed/

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