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The San Francisco Fed Just Gave A Green Light For A June Rate Hike

Tyler Durden's picture




 

Back on March 3, it was none other than a Federal Reserve bank, that of Atlanta, which as we first reported shocked the world or at least those permabullish, consensus-chasing, Wall Street weathermen-cum- economists who assume that a world with $200 trillion in debt will grow at the same CAGR as a world without 4 times global GDP in leverage, when it urgently warned that the Q1 consensus GDP estimate was very wrong.

 

The Atlanta Fed turned out to be spot on, with its 0.1% forecast relative to the 0.2% first estimate print by the BEA, and in fact, following subsequent revisions which now anticipate Q1 GDP to crash to -1.2%, will show Atlanta Fed, which has Q2 GDP at 0.7%, to have been optimistic.

Perhaps because it was unhappy with the Atlanta Fed hogging all the economic spotlight in 2015, none other than Janet Yellen's own Fed, San Francisco's, moments ago came out with a paper authored by that inimitiable economist Glenn Rudebusch, which seeks to resolve "The Puzzle of Weak First-Quarter GDP Growth" and blames it all on, drumroll, seasonal adjustments, or rather not enough:

The official estimate of real GDP growth for the first three months of 2015 was shockingly weak. However, such estimates in the past appear to have understated first-quarter growth fairly consistently, even though they are adjusted to try to account for seasonal patterns. Applying a second round of seasonal adjustment corrects this residual seasonality. After this correction, aggregate output grew much faster in the first quarter than reported.

You can read the full surreal piece here, but the punchline is the following - if the unadjusted data, or even the seasonally adjusted data sucks, what do you do? You "double" seasonally adjust it.

No, seriously:

Quote the authors:

Figure 4 shows recent real GDP growth—both the BEA’s published seasonally adjusted data in red and our double seasonally adjusted version in  blue. The application of second-round seasonal adjustment increases real GDP growth in the first quarter of 2015 from its initial published value of 0.2% to 1.8%. Taking this correction at face value, real GDP growth in the first quarter was stronger and much closer to the economy’s sustainable rate of trend growth.

And if the double seasonally adjusted data doesn't work? Why triple adjust it, then quadruple adjust it, until you get precisely the goalseeked number you want, as US economic "data" promptly devolve to a level of ridiculousness that will make even the Chinese Department of Truth turn green with envy.

That this is sheer idiocy has been clear to Zero Hedge readers for years. In fact, the stupidity behind the spin and goal seeking of "data" has even become clear to the self-appointed Keynesian mouthpiece trolls:

But that's not the punchline: the punchline is that since San Fran Fed's Glenn "double seasonal adjustment" Rudebusch is one of Yellen's favorite hometown economists, she now has the green light to completely ignore the weakest economic print since last Q1, and to focus entirely on the best economic print in the US: the surge in part-time senior citizen workers, pardon, the "zero slack" unemployment rate of 5.4%.

She also has the justification why to ignore it: the bad data wasn't seasonally adjusted enough (the good data was seasonally-adjusted just right).

Which may well mean that the Fed, which so urgently wants to hike rates just so it sends the US stock market and the economy, into a repressionary tailspin to be then granted permission to engage in QE4, just to "Trichet" itself, may very well hike rates next month, just as the entire consensus coterie of clueless Wall Street weathermen say there is zero chance of a Fed rate hike in June.

Source: San Fran Fed

 

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Mon, 05/18/2015 - 14:06 | 6106273 LawsofPhysics
LawsofPhysics's picture

Oh yes, please, go ahead and hike those rates!!!   (LOL!!!)

wake me when we are back about 4% on the ten year.

Now, regarding the Fed's balance sheet...

Mon, 05/18/2015 - 14:14 | 6106309 Newsboy
Newsboy's picture

Yeah, the Fed will buy everything in the world, "expanding it's balance sheet" to help us all.

Then, for the investment of conjured digital fiat currency, it will awkwardly find itself owning evereything in the world.

Of course the invisible shareholders of the share-holding banks would have to decide what to allow the rest of the humans to do to survive, and it might involve killing the dislyoal humans...

Mon, 05/18/2015 - 14:23 | 6106330 Headbanger
Headbanger's picture

No it's not

The Feral Reserve is going into full survival mode now and has had it with propping up the economy for all the ass hats in DC.

And look for another "666" sell signal soon.

 

Mon, 05/18/2015 - 14:53 | 6106461 espirit
espirit's picture

Kabuki theater.

"Buy moar before the rate hike". 

Mon, 05/18/2015 - 15:17 | 6106579 knukles
knukles's picture

Can I get a colonoscopy with that rate hike?
Great!  Gimme 2 and another to go!

Mon, 05/18/2015 - 15:22 | 6106612 MonetaryApostate
MonetaryApostate's picture

Locn n load people, those ignorant masses aren't going to be happy, not one iota, and if you can't see what will follow then all of your time on ZH has been wasted.

Mon, 05/18/2015 - 16:56 | 6107104 Squid-puppets a...
Squid-puppets a-go-go's picture

i thought it was 'zero slacks' - they work for such a pittance they cant afford to buy trousers

Mon, 05/18/2015 - 15:19 | 6106590 Ham-bone
Ham-bone's picture

Implications of rate hikes on Federal debt in the last two charts...obviously, corporations and the rest of the interest rate sensitive economy will not be good.

http://econimica.blogspot.com/2015/05/the-fed-encouraged-packing-tnt-round.html

Mon, 05/18/2015 - 15:00 | 6106483 KnuckleDragger-X
KnuckleDragger-X's picture

Yep, the FED know's the shit is getting ready to fly and is hoping nobody notices they are the chief instigator in the coming collapse. This time it'll be too big a disaster to be able to bail anybody out, so Yellen is going for "innocent bystander".....

Mon, 05/18/2015 - 16:05 | 6106863 walküre
walküre's picture

As long as Yellen & Co. come out alive and well on the other side, it makes sense - for them.

She said "valuations are high" which means, she and her friends are not buying anymore of this crap. They want to buy on the cheap and frankly, so do I.

Please Yellen, raise rates and faster than anyone is anticipating. My cash is getting dusty.

Mon, 05/18/2015 - 16:06 | 6106864 walküre
walküre's picture

As long as Yellen & Co. come out alive and well on the other side, it makes sense - for them.

She said "valuations are high" which means, she and her friends are not buying anymore of this crap. They want to buy on the cheap and frankly, so do I. If you can't fight 'em you have to join 'em.

Please Yellen, raise rates and faster than anyone is anticipating. My cash is getting dusty.

Mon, 05/18/2015 - 14:25 | 6106355 i_call_you_my_base
i_call_you_my_base's picture

I bought a bunch of beanie babies in anticipation of offloading them on the fed.

Mon, 05/18/2015 - 14:19 | 6106327 insanelysane
insanelysane's picture

This is what happens at the Fed when the internet goes down and the "economists" can't surf porn.  They start fooling around with Excel.

Mon, 05/18/2015 - 16:27 | 6106972 Butterflying
Butterflying's picture

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... www.jobs-review.com

Mon, 05/18/2015 - 14:07 | 6106280 saints51
saints51's picture

September sure is lining up to be a bumpy ride. Crude getting smacked down right now right before pit close. Let us see if they can get a last minute low volume melt up.

Mon, 05/18/2015 - 14:22 | 6106337 saints51
saints51's picture

They love doing this shit. It is the new 330pm ramp. Eventually it will bottom out and bankrupt majority of the players in Shale.

Mon, 05/18/2015 - 15:08 | 6106529 froze25
froze25's picture

Wow, you called it on the melt up.  How is the volume, I cannot see it?

Mon, 05/18/2015 - 15:59 | 6106830 saints51
saints51's picture

The volume did increase so I was wrong about that. This game is really easy to make money in. I just read Goldman said the markets were going nowhere on CNBC. Well now I know they are going to move. They love pillaging muppets.

Mon, 05/18/2015 - 14:13 | 6106306 NoDebt
NoDebt's picture

I prefer "Olymic judging" methodology- throw out the highest and lowest and average the rest.

 

Mon, 05/18/2015 - 14:15 | 6106314 Arius.
Arius.'s picture

( Alliance News ) - Federal Reserve Bank of Chicago President Charles Evans said it will not be appropriate to start raising the fed funds rate until sometime in early 2016.

 

http://www.kitco.com/news/2015-05-18/REPEAT-Fed-s-Evans-Not-Appropriate-...

 

Confused ...

Mon, 05/18/2015 - 14:49 | 6106441 GeezerGeek
GeezerGeek's picture

So we have the Chicago Fed and the SF Fed in opposition to one another. What can I do to get them together for a good old-fashioned shootout like just happened in Texas between biker gangs? Banker gangs, biker gangs, more or less the same to me. Nine dead bankers and another hundred arrested would put a smile on my face.

Mon, 05/18/2015 - 15:30 | 6106655 Budnacho
Budnacho's picture

Chicago vs. Frisco?....no contest unless the San Franciscans begin to run....the weight of Deep-Dish-Pizza will slow anyone....

Mon, 05/18/2015 - 17:05 | 6107136 Arius.
Arius.'s picture

Which one made it to ZH?  my bet is on SF winning this round ... june hike

Mon, 05/18/2015 - 14:18 | 6106318 MFL8240
MFL8240's picture

The game is getting more and more  out of control.  They will lie, steal and say whatever you want to hear as the wheels continue to loosen on the Ponzi Train!  We can now chaulk the US to their list of countries they have taken over the money and destyroyed.  Germany was a lessen for all and no one got the message.

Mon, 05/18/2015 - 14:25 | 6106354 Son of Loki
Son of Loki's picture

I was amazed at the number of cars broken down by the side of the highway when driving along this weekend. It almost outnumbers the number of homeless begging for money under the highway at intersections.

 

I wonder if they build "Hobo Cities" if the rent will be affordable?

Mon, 05/18/2015 - 14:16 | 6106319 Salah
Salah's picture

Remember in the Cold War, how high i-rates were?  What was the implicit message to "America's allies" (i.e. Europe, Asia, SA, MENA, et al).... "it pays to stick with the winner!" (of WW2).  And this was before Nixon shut the gold window, which boosted them even more.  It was a true multi-polar world.

What happens when this faux global uni-polar world is revealed as a sham and the multi-polar world re-emerges? 

Mon, 05/18/2015 - 14:25 | 6106352 froze25
froze25's picture

I totally get what you are saying, It will be int interesting times for the younger side of the population.  As for the older side I hope you are happy with the shit pile you left us from not speaking out and playing the Red Team vs Blue team game.

Mon, 05/18/2015 - 14:57 | 6106473 GeezerGeek
GeezerGeek's picture

Naysayers aren't popular, as I've learned while speaking out against government idiocy since Nixon imposed wage and price controls, severed the link between gold and FRN, etc. No one wanted to listen to me. Heck, I remember wondering WTF (although that was not how one said it back then) when Kennedy ran a $1 billion deficit. No one, outside of a few fringe web sites, wants to listen now. It's so much easier to bury one's head in the sand and pretend everything is fine. Meanwhile, enjoy the shit pile. In fact, embrace it. And when they come to take you to a reeducation camp to get those nasty ZHer thoughts purged, give them a hug and hope some shit rubs off on your oppressors.

Mon, 05/18/2015 - 14:32 | 6106363 SheepDog-One
SheepDog-One's picture

Did we just quit when the Germans bombed Pearl Harbor? HELL NO!

Mon, 05/18/2015 - 14:20 | 6106325 DetectiveStern
DetectiveStern's picture

Who the fuck thinks an increase in old people working in bars and restaurants in anyway a good thing.

I want perk with my pint not knee nipples with my gnocchi.

Mon, 05/18/2015 - 14:22 | 6106338 i_call_you_my_base
i_call_you_my_base's picture

If the data doesn't hit your expectations, you readjust the data? I must have skipped that statistics class.

Mon, 05/18/2015 - 14:59 | 6106480 GeezerGeek
GeezerGeek's picture

It's called fuzzy math. Taught in Creative Accounting 101.

Mon, 05/18/2015 - 14:23 | 6106342 gcjohns1971
gcjohns1971's picture

They have to hike rates in June...

...so they can claim QE worked in time to roll it out again in October.

Mon, 05/18/2015 - 14:23 | 6106343 I Write Code
I Write Code's picture

Green bird, all systems are go, fly captain fly upon your mystery ship.

Mon, 05/18/2015 - 14:25 | 6106345 Market Rage
Market Rage's picture

Maybe the bond market will take care of it for everyone....

Mon, 05/18/2015 - 14:24 | 6106346 Glass Seagull
Glass Seagull's picture

 

 

fucking farcical

Mon, 05/18/2015 - 15:02 | 6106497 GeezerGeek
GeezerGeek's picture

Gold was looking a bit too strong, so they needed to say something to get the algos to drive the price back down.

Mon, 05/18/2015 - 14:25 | 6106350 Fun Facts
Fun Facts's picture

USA career path:

zionist media moguel > Federal Reserve Corporation chair

Former Warner Brothers Chief Barry Meyer Joins Board of Federal Reserve in San Francisco

http://variety.com/2014/biz/news/former-wb-chief-barry-meyer-joins-board...

Mon, 05/18/2015 - 14:27 | 6106359 ebworthen
ebworthen's picture

Aggregate seasonally adjusted piles of manure are still bullshit.

Go on, raise rates, reality has been beckoning for 6 years at least.

Mon, 05/18/2015 - 14:29 | 6106373 SheepDog-One
SheepDog-One's picture

'Imminent rate hike'.....trollolololl

Mon, 05/18/2015 - 14:32 | 6106382 FreeShitter
FreeShitter's picture

The Steins are winning.

Mon, 05/18/2015 - 14:38 | 6106401 jg
jg's picture

Hmmm, data mining and goal seeking at its best.

Reminds of 'Get Smart':  'Would you believe....No?  Okay, would you believe...No?  Okay...'

https://www.youtube.com/watch?v=0Hd2e_tRBlY

 

Mon, 05/18/2015 - 14:40 | 6106407 TN Jed
TN Jed's picture

Delta House is on double secret adjusted probation?  Toga!

Mon, 05/18/2015 - 14:54 | 6106460 A is A
A is A's picture

LMAO. Look what I just found on Duke University's "Summary of Rules for Identifying ARIMA Models":

"never use more than one order of seasonal differencing"

http://people.duke.edu/~rnau/arimrule.htm

More taxpayer money hard at work...

Mon, 05/18/2015 - 14:59 | 6106476 fremannx
fremannx's picture

.

Mon, 05/18/2015 - 14:58 | 6106477 fremannx
fremannx's picture

And so it begins. The Fed will eventually discredited and dismantled, but not before untold suffering occurs. The Creature from Jekyll Island is cutting it's own throat...

http://www.globaldeflationnews.com/the-creature-from-jekyll-island-the-e...

 

Mon, 05/18/2015 - 14:58 | 6106478 foodstampbarry
foodstampbarry's picture

It's grand theft auto and everything else the elites can steal until that day comes. 

Mon, 05/18/2015 - 15:01 | 6106489 WTFUD
WTFUD's picture

Jump down , turnaround , pick a bale of cotton.

Happy dayz are here again.

The Tylers and the Tin-Foil heads on Z/H must eat all their words now, EVERYTHING IS FIXED.

Do i need the sarc?

Mon, 05/18/2015 - 15:06 | 6106512 q99x2
q99x2's picture

Arrest Joe Weisenthal for taking bribes from Goldman Sachs.

Mon, 05/18/2015 - 15:17 | 6106583 Haager
Haager's picture

He's taking brides from Goldman-Sachs?

Sounds filthy. And awkward.

Mon, 05/18/2015 - 15:28 | 6106646 In.Sip.ient
In.Sip.ient's picture

Why is everyone mystified by the FED doing a rate hike???

 

Told you many times, this is NOT about the economy.

 

This is about currency competition and keeping the US$

as the reserve currency.  Nothing more complicated than that!

 

 

Mon, 05/18/2015 - 15:33 | 6106676 Consuelo
Consuelo's picture

Agreed, but that dynamic in and of itself is becoming less relevant as the quarters pass.   There will come a point where it won't matter - to them anyway.

Mon, 05/18/2015 - 17:04 | 6107132 In.Sip.ient
In.Sip.ient's picture

And it looks like the "it" ( the US economy ) "don't matter"

point is about to arrive this June... and given all the hoopla

about that time frame, I'd say they knew that quite a while

back...

 

 

 

Mon, 05/18/2015 - 15:36 | 6106699 Bastiat
Bastiat's picture

Oh, I think it's more complicated than that.

Mon, 05/18/2015 - 15:30 | 6106663 Consuelo
Consuelo's picture

Can somebody put in a call to Jim Willie and ask him how much more of the Fed Punch & Judy show we can expect before the Chinese hit the gold-plated $Treasury-annihilator button...?

 

 

Mon, 05/18/2015 - 15:53 | 6106798 LawsofPhysics
LawsofPhysics's picture

Are you suggesting that the Chinese numbers are honest?  That hasn't been my experience.  I have learned however, that the Chinese can be dealt with when you know exactly what the required bribes and tit-for-tat protocol is.  Still, it does not make doing business any cheaper. 

Mon, 05/18/2015 - 15:31 | 6106669 FEDupwithDC
FEDupwithDC's picture

Should we be concerned that academic research from the San Fran Fed begins with a reference to Steve LIESman?

" However, a number of analysts have suggested that the reported weakness in first-quarter growth may have been exaggerated by a statistical anomaly(see, for example, Liesman 2015"

 

Mon, 05/18/2015 - 15:38 | 6106707 csmith
csmith's picture

Sort of like "Double Secret Probation..."

https://www.youtube.com/watch?v=Y0cF2piwjYQ

 

Mon, 05/18/2015 - 15:51 | 6106786 I Write Code
I Write Code's picture

Speaking of which hey, do stocks ever make a new high or low in the last hour anymore?

Answer: nyetski.  Janet just sets the price of the day in the second hour then leaves the robots to maintain it.

Mon, 05/18/2015 - 21:28 | 6108078 Totally_Clueless
Totally_Clueless's picture

I've been running around my house trying to tell my family this is happening and they all look at me like I'm a total retard.

And - apology in advance for whatever completely idiotic shit I manage to post/ask about on these forums now that I've joined this place.

Like my name says.... I really have no idea wtf is happening out there, I look at these charts and they're Egyptian hieroglyphs to me. I just know that something is really wrong and I'm trying to make some sense out of it, I figure this place is as good as any to try to get some insight so I'm giving you shmucks an opportunity enlighten me!

Smooches to all from the dipshit new chick xxx

Wed, 05/20/2015 - 15:02 | 6114551 JenkinsLane
JenkinsLane's picture

Essentially, what we need here people is Goldilocks seasonal adjustments to quarterly GDP prints - not too much but not too little either.

Do NOT follow this link or you will be banned from the site!