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The Market Is A Red Herring... Distracting Us From The Reality Of The Economy
Submitted by Thad Beversdorf via FirstRebuttal blog,
Janet Yellen once again repeats that the economy is “looking stronger” although still it has yet to manifest into actual strength. In fact, it is still so weak that the Fed cannot even suggest that rates will raise anytime over the next several FOMC meetings. In short, the economy is still very sick. But so let’s break down Janet’s point of view on the economy and respective policy decisions.
- No rate increase in the foreseeable future.
- Economy is looking stronger but fails to have any real strength or even signs of strength to predict when a rate increase may be forthcoming.
- Agrees the U3 figure might be misleading and that U6 tells a more accurate story
- Believes Congress has a major problem with the Federal Gov forecasted cash flows
- Strongly opposes an audit of the Fed
- Believes housing, albeit more likely via multi family construction, could improve
- Wages and incomes are still weak
So essentially nothing has changed in 6 years. In fact, absolutely nothing has changed in 6 years. So then there has been no material improvement in the economy whatsoever. Material meaning enough to even forecast when a rate hike may come.
The Pundits (Liesman) are suggesting Janet feels the economy is strong but that the “data just isn’t cooperating”. What does that even mean?? “I’m a billionaire although my bank account just isn’t cooperating”. Umm Steve Liesman, you are by all accounts and absolute ignoramus. Like a monkey Mr. Liesman, you’re a mix of amusing for a few minutes and cute in an ugly way. And according to Jim Lebanthal, of Lebanthal Asset Mgmt, “there was no bad news”. Now remember, by ‘bad’ he means ‘good’. Because bad means more QE, which has actually never stopped and you can see this in the duration of Fed assets, which Janet touched upon. But again, the point being the economy is not strong enough to support even a forecast of a rate hike. That means the economy is weak. I don’t know how that gets confusing.
And so if the economy is weak, then the economy must have either no or a negative relationship to equity valuations. Market is at all time highs and pushing higher on bad is good. So in fact, there does seem to be a negative correlation between the economy and market valuations. Interesting if not mind blowing. The market has, after 6 years of the most extreme monetary easing in the history of the world, traded to all time highs on an economy that is too weak to warrant even an indication that rates could move above 0%. There is no other way to see this. I’m sorry but there isn’t. Seriously have a look!
That giant X constitutes as a pretty solid negative correlation between market valuations and American’s ability to support future cash flows. This is a very simple chart. However, the implication of this chart is actually incredibly important. What it suggests is that market participants have seen the detriment of the American working class as a financial market driver. That is, the less able American consumers are to drive future corporate cash flows the higher the market valuations grow. How could this ever be you ask given market valuations are fundamentally based on expected future cash flows?? Well, as I’ve discussed many times before, the Fed and only the Fed.
The market is addicted to easy money. The Fed has done everything in its power to ensure the market is certain that the easy money train is to continue as far as market participants can see. This becomes clear when we look at what happens when market participants believe the easy money train is running out of steam.
So what we see in these two charts is that upon the easy money trains i.e. QE programs ending the market goes into a sharp negative repricing mode, which is then interrupted by a new QE program. Now the second chart (data sourced from St. Louis Fed) shows that the ending of QE3 caused a 10% market sell off in just a matter of weeks, until James Bullard came out on October 15th and stated that QE4 was cocked and ready should the market continue to sell off. The market then reversed (minutes after that comment) and shot higher.
Now basically what Bullard did was to say that if the market does anything but move higher the Fed will inject more money. And so it essentially tells all those who see the market as fundamentally overvalued you are shit out of luck, don’t fight the Fed. And with that, all fundamental traders either left the market or adjusted their paradigm. And I’m not suggesting the Fed is simply doing this to steal from the poor to give to the rich. Perhaps in the beginning there is a little truth to that, in that they felt this direction would both work and create excess wealth for those important folks at the top, of which they belong. But at this point, the reason the Fed is so inclined to an upward moving market boils down to the market being the only thing preventing the wide spread realization that would lead to all out collapse.
The market is a red herring of sorts keeping our attention away from the reality of the economy. And so, to give up the market strength would be synonymous to removing the one remaining support holding up that 100 storey building that is otherwise completely rotted. Only when the economy is able to withstand a market repricing will the Fed allow the market to reprice.
The Fed is overtly aware of the overvaluation but sees that as the lesser of two evils. I disagree as the ultimate destruction is likely now more than recoverable and that would not have been the case had the right policies been implemented from the beginning. That said, given where we are currently, I’m not sure what I would I do. The devastation is going to be ubiquitous and perhaps one must delay such an event. The crux is that this policy will never reverse the course of the economy and so we sail further and further into the storm with our fate set, only timing yet uncertain.
These charts really provide the proof that as long as the Fed feels the economy is weak it will manipulate an upward moving market. Therefore as long as Janet comes out and says the economy is too weak to stand on its own, the market trades higher as market participants then know the Fed is still committed to manipulating the market moving higher. This is why the big X exists. That is, it is defining the relationship between upward moving markets and downward moving standard of living for working class Americans, i.e. the economy. What else is there to say?
Market participants want to hear that Americans continue to do poorly enough in the eyes of the Fed so that the Fed will continue to fund their wealth appreciation. Period. Welcome to modern day America. The land of debt, income disparity and easy money to those who don’t need it. The entire system is completely out of whack. But markets can have a negative correlation to the economy so long as the Fed is willing to print and inject money. This is dependent on the USD of course, but currently there are no concerns of USD weakness.
So it appears that this unnatural and deviant dislocation between economic health or expected future cash flows and market valuations can continue for some time to come. Just par for the course in a world that has lenders paying borrowers. Fucking central banks are modern day fallen angels with the power to reverse gravity. Who even 10 years ago would have ever imagined the perversion of finance the world now considers normal. But, and yes there is always a but when nature is being distorted, make no mistake, whether it is tomorrow or 10 years from now, and you’d be wise to heed this next point, this is the last hurrah, the final transfer if you will and so to those that got ‘em, smoke’em.
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As always
The illusion of the self-regulating society throug the deregulated market
There's no coy like a decoy.
But Mr Yellen said previously that The Fed is "Data dependent". But now that the data is "Not cooperating" (aka 90% of Macro data missing YTD) one wonders what data precisely that they are dependent on?
The 3 bears would be a good start.
Why was the post about Rothschilds vs Rothschilds deleted from the contributor's history, Tyler?
For those saying it's there: no, it isn't http://www.zerohedge.com/blogs/sprott-money .
Even the search engines have references to it - 404: http://www.zerohedge.com/news/2015-02-20/rothschild-vs-rothschild
Why? Haven't you read the "no truth for some" memo?
"the data isn't cooperating"? looks like her hair stylist isn't cooperating...
Amazing. It has vanished from the Sprott site as well. Gag order anybody?
This is the original, looks like Sprott pulled that post from his site and told Tyler to do the same...for some reason.
http://www.bullionbullscanada.com/intl-commentary/26594-rothschild-vs-ro...
BTW the comments of the author Nielson beneath the article are really interesting, worth to read and thinking about.
Nothing to see here, move on.
It goes much deeper than that.
.
Reality is their illusion.
Thank you . .one of the best things I have read in a long long time... Nielsen .... in the Crash of '08. The One Bank torpedoed a few of its banking fronts (Bear Stearns, Lehman Brothers, Merrill Lynch, etc.) in order to create the pretext for the "bail-outs" and "too big to fail", and then it simply consolidated all of those assets in the surviving shells.
That's one of the reasons why the One Bank splinters itself into these numerous, corporate fronts. It also does this to hide the crime syndicate itself. If it really were "one bank" (in corporate form) even the corrupt puppets who govern us couldn't pretend that this FINANCIAL MONOPOLY was legitimate.
The other things he says.. are spot on .. worth the read... and should be passed around. Thanks again for finding it.
The original article is from Bullion Bulls Canada website, and it is still available.
Maverick
delete
Regulation is a farce. What is needed is not regulation but the enforcement of laws that punish theft and fraud. Its the simple things.
We have more laws on the books than any time or country in history and all they do is provide a curtain of obscurity to blur the lines of right and wrong. If banks were "investing" their money and knew that if they lost it, it would come from their ass, regulation would be irrelevant. Instead we have seen bailout after bailout for the last fifteen years at least. All illegal, all unconstitutional, all for our own good as we know that we just can't live without the financial manipulations of the economy that allow us to live off of debt rather than production. We don't want this criminality to end as we NEED debt to survive.
Beat me to it by a couple minutes!
"... enforcement of laws that punish theft and fraud.", in other words: regulation!
No, regulation is not laws against theft and fraud. we see many cases of theft and fraud that are completely invisible to regulation. Regulations are specific to a particular transactions, whereas theft is theft an fraud is fraud. Are you really going to tell me you think we have no regulation? Look at the volume of laws and those supposedly enforcing them. Just as we constantly hear that our immigration laws need revision when we have not tried actually enforcing them for the last forty years. It is a ruse to create more back door avenues for theft.
No regulations
Enforcement of laws already on the books.
Until we recognize our problem is not a lack of laws but a lack of will to enforce them, it is all a joke. Obama is demanding that congress act to create new laws, but of course only those laws he wants. He demands comprehensive new laws because they provide something to everyone. Unfortunately he has blatantly demonstrated his willingness to arbitrarily enforce only those laws he sees fit.
I say NO NEW LAWS.
ENFORCE< ENFORCE< ENFORCE!!!
Regulations partially come from the false idea that government do-gooders can prevent all bad things. What ends up happening is all people pay an additional tax or fee and the basic crime, whether it is fraud, assault, or manslaughter continues to not be enforced. A society can only take so much. The growing dysfunctionality of our society will ultimately become too much to bear and nothing will get done or work and then collapse.
Corruption is an overhead cost. When people first started dealing with China, corruption was just another cost of doing business. It made it all the easier to adopt those same practices here (it didn't take much convincing)
What deregulation? TBTF is codified in law.
Deregulation must be coupled with allowing failures, receivership, and bankruptcies to occur so that consequences are felt by market participants.
Nerfing the world so that only positive outcomes exist is the folly of current policy, economic and otherwise. It simply cannot be.
Tell that to them:
http://x2t.com/leaked
Regulations are created that everyone knows will not be enforced, other that to punish their competition. Theft and fraud need very little definition, like porn, we know it when we see it. But instead we end up with "law makers" parsing the meaning of "is", while fraud is compounded, creating even more demand for "regulation" that only adds to the monopolization of these "industries".
We know what fraud is. We know what theft is. And we have seen plenty of it. No regulation would have put Corzine in jail. But enforcement of laws against theft and fraud certainly would have. WHICH DID NOT HAPPEN
I guess I had better sell all my gold and buy stocks, then.
Who would want to buy that from you? It's a relic.
The "economy" around us is doing just great. It's what I am exchanging with others and seeing others exchange with one another as of late that seems to be changing and making things interesting...
"Full faith and credit" as it were...
Equities are up.....things must be going great!
Shiny objects.....
Squirrel!!
I want to have a talk with you squirreleo, just stay away from the feeders and we'll be okay.
'EVERYTHING IS AWESOME!' (tm)
It's like telling yourself that your diet is working.
But you are not ready to buy smaller sizes.
You must still exercise even more than you are now.
No one actually believes you are losing weight.
This is what happens when you can't find a nice shrubbery
Janet, if its getting stronger then:
- why does the baltic dry index keep making record lows?
- why is our national debt increasing constantly?
- why are there ~100 million working age adults not working?
- why does the number of SNAP recipients remain at record highs?
- why are businesses being destroyed faster than they are being created?
janet ffels th economy is strong. well......that was just her gut feeling. she confuses that with being full. which explains why she never stops eating and getting fatter.
oh, silly, just BTFD and stop thinking (or stop trying to think). Objectivity and critical thinking has no place in Fed or govt activities.
sorry - how unAmerikan of me - I guess its better to be popular than right - at least that's the best strategy at home
Lol! Don't worry, it will all be discussed in great detail by the best talking heads in the business, after the fact, and after it's too late to hold anyone accountable!
no one could possibly have ever seen it coming
my worry factor has went up with the chart of the s and p.
i have no concerns as i am on the sidelines. only possible action is to short this bitch.
but the worry goes on. let me explain. if i put that cash in a brokerage account it now sits vulnerable to the coming bail ins. so i make a killing on shorting an obvious trade coming. can i get that sold and out of the system b/4 it is froze? the markets crashes, i sell. i wait three trading days. transfer it into bank account to access it. go to the bank and get it. will it be available for withdrawl? a serious concern or am i thinking too much?
I think your concern is spot on. Have you considered alternative investmens out side of the stock market?
Might want to have a look....
durable goods. i'm good at 58. just concerned about the cash being devalued. gold as 10 %. the 90 is vulnerble. prepping within reason. garden-yes. canning and storage yes. model(g and s&w 19's-favs) yes.seems to me the best durable good investment lies with brass as part of the mix? think about it. 100 packs of 9mm used to be 9.99, then 11.99 now 23.99. think thousands...
Sometimes April just can't come soon enough, off to the woodshed again.
brass baby brass. top brass lead me to the tough decision...
good things can happen out beyond and out of view of the woodshed.
"make a killing shorting an obvious trade"
What exactly is your timing?
that is the whole question! when? tops are impossible to locate. back side seems safe, but we know that the fed can chage that fast. just seems futile...
stay out of the casino. They'll lock the doors & nobody will get out alive
Well I said fork it yesterday and bought some May Puts on IWM when it was 122.95. Of course wouldn't u no the sum bitch went to a new intra day high today? I may regret it, but piss on it. This effing market cannot keep going UP 6 % per fucking month. But I do know that NASDAQwill keep going up til NASDAQ hits 5,000. Which it did just before the 2000 crash. I am long Oil so hopefully I will cover my ass in case Mr. Market decides to expire my Puts.
Let's face it. The reality as time goes on, is that the productive, capitalistic, freedom loving, mentally uninfected people who built this country on their backs with a healthy dose of morality, ethics, and hard work are retiring and hanging it up, leaving only an ever increasing population of people who expect somebody else to do it for them: "Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by producing nothing--when you see that money is flowing to those who deal, not in goods, but in favors--when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you--when you see corruption being rewarded and honesty becoming a self-sacrifice--you may know that your society is doomed."
Ayn Rand, Atlas Shrugged (1957)
When you give them everything from birth to maturity,,, they'll expect the same from maturity to death.
I'm not seeing the negative correlation. Looks to me like SPY goes up whether median household income goes down, up, or sideways. BTFATH.
it's been all fun and games for the ppt until now. the unfun shit starts when they have to keep stock and bond values high in the face of a twenty year outflow.
That's true. Stocks and bonds are due at some point to be cashed in, as most aren't generating enough revenue as investments to live on. And even worse, when this occurs, it will cause even more damage, as the money will be used mainly for consumption, and not capital investment, digging the hole even deeper. It's like burning your last logs for heat instead of using them to build a better shelter, with the bulk of winter still ahead. Yes, the fun and games, the bread and circuses, will surely wind down and end up badly.
You have to think the big money boys aren't going to allow the money to be kept on the table.
Stocks took 6 years to get to this level. Making all of those gains in a couple of months on the reverse side is just too tempting.
Greed overrides everything!
It is amazing that with FEDLand operating globally, Disneyland was able to raise prices. Dueling RollACosters and FantasyLand .... it’s not even close!
In the game of contract bridge does a black swan always outbid a red herring in the grand scheme of trick-taking?
We're in a fed inspired Catch 22. Unintended or otherwise. Yellen will never allow an interest rate raise until the economy is strong enough to withstand a stock market repricing, but the economy will never be strong enough to withstand a stock market repricing as long as the fed is manipulating interest rates, data, natural risk/reward and preventing defaults.
It's worse than that. They knew this when they started this BS, instead of fixing it when it might have been able to be fixed. Now it won't be just "broken", it will be "broken very hard".
That should tell you that it never was fixable, these people are not stupid, just evil and willing to sacrafice the herd and keep the land and a few hire hands. Yellowstone is so much nicer when there are not a bunch of unwashed masses traipsing around the trails. Old fat hairy men chasing Becky Quick around the geyser. Wheeee!
Greed trumps the Fed.
When the big money boys decide it's been enough of the fun and games for the mutual fund managers and pension people they'll take it down big and scoop up all the money.
Just too temping.
They'll just have to decide at what level they'll do it at.
I would take 6 years of gains in 2 months. Who wouldn't? There is no honor among thieves.
Bullard will be cnbc from 7-9 am Thursday...how convienient....
Liesman is the best:
Yankees r winning but the Red Sox r
ahead on the scoreboard. How does
CNBC stay in business ?
You paid your cable bill, right?
markets, when left untampered, reflect social mood
barry knows this and built this bubble to get re-elected
barry is going to hang onto this bubble for two years - or at least try - to leave behind a trainwreck for the next president
Feelings .. nothing more than feelings.
thank you president obama...
All while the another POS gov. agency (FCC) grabs more unconstitutional power.... It just goes on and on and on and on and...................while we watch, and watch, and watch and...........................
The US need to be more isolationist/non-interventionist and forget empirical ambitions - focus on local, state and national issues first rather than global ones.
Sometimes it's wise to take action to put out raging neighborhood fires before your own house is consumed.
What they are trying to move to is an economy that does not rely on production or consumption of real tangible product to move equity valuations higher. As long as corporations can sell stock and buy it back, management is happy.
Essentially the pure bullshit economy, which they have done a wonderful job of creating so far. The Fed prints money, it gets loaned out to corporations at near zero percent and they can fund stock buybacks to make executives and partners filthy rich. As long as they can keep borrowing MOAR, then the party can continue.
Earnings no longer matter because corporations are free to make up whatever rules they want to get a result pleasing to analysts. Stocks go up. Bad economic data means more free money, so stocks go up.
Oil goes up because somebody claims there might be more demand in the future, even though that demand never materializes.
The real economy will be what is created for and consumed by the 1%. The rest will have to eat their scraps.
Well done adr ..
Most of the ignorant (lack of knowledge) public still think the market IS the economy.
The Fed and the administration are counting on their attention being diverted FROM the economy.
It's hard to convince the public otherwise when the news just reports the market's climb and seldom reporting the reason being the Fed's virtually zero interest rates meaning the market is the only place to realize any gains - on paper.
Most people get their 'education' on economics either from talk radio or talking point of their favorite news reader .. they got very little of what was actually taking place from any source .. because the media who should be telling them what is going on . either have NO clue or shill for their pay masters. IT is grinding difficult to convince someone who listens to Limbaugh or Liesman that those two have NO grasp of economics . .or cycles.. or what went down the last 3 decades or more systemically . the US model changed.. we got Volcker saying in 79 . the American standard of living would have to decline so the rest of the world could rise.. WTF .. I thought free market capitalism was about making the pie bigger and inviting more to the table . silly me. The financialization of the US economic model that followed on Volckers' words in the 80s . the credit debt consumer junkie society replaced the producer saver society .. little did the muppets know that in the end they would be left with little but debt and taxes .. and a system that would not sustain itself because it was cannibalizing its own body parts.. corporations became about stock buybacks and shuffling paper gains around or buying each other up profiting in the short term while killing off actual productive capacity .. .. and banks became too big to fail ..... no longer even caring whethre or not it had depositors or lent money .. . as long as the govt. could keep the money flowing to them .. .. I see no good outcome . they will bring this down in the next year or two . after that they will offer up some global THING . with SDR or regional currency .. along with a new order.. you might get part of your debt wiped out . at a price.. no more constitution . no more liberty .. take it or leave it. The only out is going to be bloodshed or some group of nations deciding they have had enough or our shit and blowing DC AND NYC to hell and back .. not to be desired . but that is where we are headed.
Blowing DC AND NYC to hell and back IS desired by anyone with a brain AND a SOUL...
I heard Frthjof Bergmann describe his view that the current economic situation is not a regular cyclical downturn and so will not be followed by a similar upturn and will not be susceptible to manipulation of interest rates and similar measures. He gives his reasons. You can also hear him on the podcast 'The Partially examined Life' episode 83.
It is worth a look. it makes perfect sense. I am basing my decisions accordingly.
Excellent interview:
01 20 15 - FINANCIAL REPRESSION AUTHORITY - w/ Lacy Hunthttps://www.youtube.com/watch?v=oTbLKIc3JA8
What do you call it when deception is sine qua non to successfully fooling everybody?
a magic show.
When the Russians and the Chinese have decided they've had enough of our foreign policy, that will herald the day the world stands still - and the U.S. economy implodes 48 hours later. And likley not a moment sooner.
Market is a puppet on a string... Look at the SPY volume today, the market is at all time highs and nobody wants to play anymore. Dead as a doornail. Plenty of selling in the VIX to make up for it I guess.
Speaking of the Russians and the Chinese, they used a red herring in the late 50's when they hung out the dirty laundry of their disagreements over peaceful co-existance and the 'great leap forward' for all the world to see.
Nixon himself believed it and flew to Beijing in 1972 to meet with Mao, to pry apart the Chinese - Russian split even further.
As the Russian - Chinese relationship soured, the US - Chinese relationship sweetened.
It is clear by deceiving the US about their squabble with Russia, China go Taiwan's permanent seat on the UNSC and the right to trade freely with the West. And today the are close to having the world's largest economy.
All thanks to the red herring of a conflict with Russia and a great desire by the nations of the world in the 1970's to believe that conflict to be true.
I'm worried that history repeats (rhymes). When the international Shylock banksters turn off the money taps, as in the 1930s', we will react as our ancestors did - fatalistic and demoralized. There will again be haggard men in long bread lines, starving wives and children. Charismatic, populist politicians will be selected for us to provide scapegoats and uniforms for a new, global bloodletting. Usurious Shylock will again want his pound of goyim flesh!