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Global Stocks Slide, Futures Tumble On Confusion Unleashed By "Uber-Dovish" Fed

Tyler Durden's picture




 

What was one "one and done", just became "none and done" as the Fed will no longer hike in 2015 and will certainly think twice before hiking ahead of the presidential election in 2016. By then the inventory liquidation-driven recession will be upon the US and the Fed will be looking at either NIRP or QE4. Worse, the Fed just admitted it is as, if not more concerned, with the market than with the economy. Worst, suddenly the market no longer wants a... dovish Fed?

* * *

While consensus was split if the Fed was going to hike or keep rates the same (although with Goldman pushing for the latter and even urging further easing, it is no surprise for the first time ever a FOMC member suggested negative rate), everyone was expecting some hawkish component to yesterday's FOMC announcement: either the hike itself, or a hawkish "hold" in which the Fed would promise a hike is imminent any moment. After all, 7 years later, the market needed at least a little confirmation that the economy is finally starting to pick up through the lens of the Fed. Nobody expected that dovish mess that was unleashed at 2pm yesterday, in which the Fed explicitly made it clear that it now has a third mandate: responding to Chinese and global events, and that a rate hike is virtually impossible any time emerging markets are "tantruming" due to the same dollar strength that accompanies any pre-hiking intentions, thus proving what we have said all along: the Fed is trapped in a catch 22.

This is how JPM's chief economist Michael Feroli summarized the confusion unleashed by the Fed:

"While that outcome wasn’t too much of a surprise - we were leaning toward a hike but thought it was basically a coin flip - what was a surprise was the dovish statement and dovish tone of Yellen’s remarks in her post-meeting press conference. Rather than reinforce the message that a rate hike before year-end is highly likely, she gave little sense of growing confidence that inflation will return to its 2% objective over time."

As for the Fed admitting it is now trapped by the market, here is Vanguard's senior economist Roger Aliaga-Diaz:

"We are concerned with the Fed's acknowledgement of recent market volatility in its decision. The Fed runs the risk of being held captive to the markets as, paradoxically, much of that volatility is due to the anticipation and uncertainty around when the Fed will move."

What's worse, said Catch 22 also confirms that just like all other central banks who hiked just to ease promptly thereafter, starting with Japan's failed attempt to escape ZIRP in 2000 and continuing through all the aborted rate hikes in the New Normal, a reflexive attempt to stimulate confidence, and thus inflation, by hiking rates first and hoping inflation follows, will not work forcing central banks to consider the "last option" (hyper)inflationary paradigm - direct monetary injections to the general population bypassing the bank transmission mechanism, where money creation is trapped in capital markets. In other words, monetary paradrops. That, of course, would be the final event before central banks lose all confidence, and incidentally is precisely why the market is trading as it is right now: down big in response to the most dovish Fed we have seen in over two years.

In the meanwhile, the market itself is stunned with its response to the Fed decision: while dovish holds such as this one has previously been almost inevitably bullish for risk assets, the selloff following 2pm's kneejerk response and the ongoing selling overnight, confirms something is very wrong not only with the global economy, but the market's "reaction function" to the Fed's "reaction function." Just as bad, the debate remains: when will the Fed hike, bringing with it the attendant volatility; and if the Fed does not hike, will it at least go NIRP or launch QE?

For now, all these are seen as dollar negative which is bad news for the 'recovery' narrative but good news for emerging markets for the time being.

As a result, while Emerging Markets are enjoying a brief but acute rally on the heels of dollar weakness overnight, developed market stocks are currently tumbling in virtually every market, from Japan which was down 2%, to Europe, to US equity futures which were up early but have since followed the USDJPY far lower as markets are now "tantruming" and demanding that if the Fed will not hike rates, then at least the BOJ or ECB will provide more QE.

The somewhat bright spot was Asian development markets where equities traded mostly higher as the region digested the Fed's decision to keep rates unchanged but reiterated that a 2015 rate lift-off remained on the table. ASX 200 (+0.5%) and Shanghai. Comp. (+0.4%) traded in positive territory following the FOMC decision, while an improvement in Chinese new home prices (Y/Y -2.3% vs. Prey. -3.7%) further supported sentiment. Nikkei 225 (-2.0%) underperformed ahead of its extended 5-day closure with the index weighed on by a stronger JPY. JGBs tracked the firm gains seen in USTs as domestic pension funds were said to be in bids for bonds in the super long end, while the BoJ also entered the market to purchase JPY 820b1n in government debt.

Cautious sentiment dominated the price action in early trade, as market participants re-position following the decision by the Fed to leave rates unchanged . At the same time, Fed's Yellen put particular emphasis on China and the recent market volatility in her press conference. As a result of the cautious tone European equities opened in the red (Euro Stoxx: -1.8%), with defensive sectors outperforming. Despite coming off the best levels of the session, both Bunds and Gilts are trading sharply higher, with Euribor and Short-Sterling curves flattening as market participants re-price rate hike expectations.

In FX, it has been a dollarpocalypse the hours following the FOMC announcement with the EUR gaining across the board, as the currency is now viewed as a slightly less attractive option for carry related trades and as such some unwinding has been observed. On that note, analysts at Bank of America have increased their EUR/USD forecast to 1.05 by the end of the year. The USD has continued to soften overnight (USD-Index: -0.5%) to see strength in major pairs, while safe haven flows to JPY have seen USD/JPY fall over a point to below the 119.50 level. At the same time, high-yielding currencies have been the main beneficiary with CAD and AUD seeing strength overnight despite the bleak outlook for metals and energy markets.

The commodity complex has seen further strength on the back of the week USD overnight with gold higher by over USD20.00 since the release of the FOMC rate decision. Elsewhere, copper and iron ore prices were mildly pressured with the latter on course for its worst week in over 2 months as a lack of demand from the world's largest consumer China continues to weigh. WTI and Brent futures both reside near intraday highs heading into the North American crossover and on course to finish the week in positive territory.

There is nothing on the US calendar today, which gives markets even more time to digest the confusion the Fed unleashed yesterday.

Bulletin Headline Summary

  • Cautious sentiment dominated the price action in early trade, and as such European equities opened in the red with defensive sectors outperforming
  • EUR gained across the board, as the currency is now viewed as a slightly less attractive option for carry related trades and as such some unwinding has been observed
  • Looking ahead, notable events on the calendar include Canadian CPI as well as comments from BoE's Haldane and ECB's Coeure
  • Treasuries extend post-Fed rally, move to gain on week after Yellen cited concern over slowing growth in China and turbulence in global markets for keeping rates unchanged.
  • Fresh charges in the U.K. Libor rigging investigation may target traders linked to the benchmark’s euro counterpart, with prosecutors focusing efforts on that strand of the probe in recent weeks
  • Greece’s election remains too close to call as a three-week campaign wraps up on Friday with no clear front-runner in a vote that may put Europe’s most indebted state on course for thorny coalition talks as of next week
  • China’s stocks capped their steepest weekly loss this month as turnover shrank amid growing concern government measures to support the world’s second-largest equity market and economy are failing
  • Life is getting better in the U.S. even with stagnating wages for some workers, thanks to improvements in technology and cars, according to JPM’s Jamie Dimon
  • Abe’s fiscal policy is backfiring again: More than a year after a sales-tax increase tipped Japan into a recession, efforts to clamp down on soaring pension payments are suppressing a recovery in consumer spending
  • PBOC orders banks to tighten supervision of their clients’ FX deals, Reuters reports, citing unidentified people with direct knowledge of the matter
  • Sovereign 10Y bond yields lower. Asian stocks higher with the exception of Japan. European stocks, U.S. equity-index futures decline. Crude oil, gold and copper rise

US Event Summary

  • 10:00am: Leading Index, Aug., est. 0.2% (prior -0.2%)
  • 11:30am: U.S. to sell $13b 10Y TIPS

DB concludes the overnight wrap

So the Fed stands pat and the spell of record low rates continues as concerns about developments abroad and the fragility of markets proved to be enough of a red flag for policymakers. The overall tone and message from both the statement and Fed Chair Yellen certainly felt like it was weighed more towards the dovish end of the scale. Median dot plot estimates were lowered by a quarter basis point for the next three years (leaving one hike for 2015), while the LT rate was also notched down by the same proportion to 3.5%. Growth and inflation expectations for 2016 and 2017 were revised down, while the 2% core inflation target was moved back to 2018. The stronger Dollar and the disinflationary impact that this is having was an overriding theme. There was some support from Yellen on the improvements in domestic activity with both business spending and the labour market in particular highlighted. She also kept the door open for a move this year, including October, but once again the timing was downplayed with the expected path of rate rises re-emphasized as the more important factor.

In terms of the market reaction, the price action in Treasuries actually started about 45 minutes pre-FOMC as yields moved south in a hurry. The most notable move was in the 2y which was already down about 5bps prior to the release. The yield then plummeted a further 8bps post-decision and Yellen conference, finishing the day 13.1bps lower at 0.682% and in turn marking the biggest single day move lower since March 2009 when the Fed announced its QE program. The 10y closed just over 10bps lower at 2.191%, although it’s worth noting that it’s pretty much back to where it was at last Friday’s close. Meanwhile, the Dollar unsurprisingly came under decent pressure, the Dollar index finishing down 0.91%. Some of the more interesting price action came in risk assets. Equities initially rallied on the decision, the S&P 500 jumping as high as +1.3% before nerves crept in as Yellen’s press conference got underway, with the index eventually paring all of that move and more, closing down -0.26%. Credit indices saw a similar trend, CDX IG finishing about half a basis point tighter after trading nearly 3bps tighter.

While there weren’t huge changes to the statement put out by the committee, the main focus was on the paragraph ‘recent global economic and financial developments may restrain economic activity somewhat and are likely to put downward pressure on inflation in the near term’. This was followed up by Yellen in her press conference saying that officials had decided to stay put ‘in light of the heightened uncertainties abroad’. Yellen balanced this with supportive comments around the state of the domestic economy, but that was already overshadowed somewhat by a cut in growth estimates by the committee for 2016 (to 2.3% from 2.5% previously) and 2017 (2.2% from 2.3%), while core PCE projections were notched down to 1.7% (from 1.8%) and 1.9% (from 2.0%) respectively. The proportion of Fed officials now expecting a move by the year end has dropped to 13 out of the 17 officials, down from 15 who expected such at June. As mentioned median dot plots were nudged down 25bps and one committee member is now advocating for a rate cut.

As DB’s Peter Hooper notes, the Fed has now added considerable complexity to the task of divining when conditions will be ‘right’ in their view by stressing the importance of economic and financial market developments abroad as well as at home. The door has been kept open for now, but one has to think that that door is slowly starting to creak shut and a lot will rest on how markets react over the next month or so. As we stand, market pricing for an October hike is at just 18%, while December is currently at 44%.

In terms of trading in Asia this morning, with the exception of Japan - which has been weighed down by a stronger Yen - most major equity bourses have followed up in a positive manner, although not without some early swings. In China the Shanghai Comp and CSI 300 are up +0.40% and +0.62% respectively at the midday break, although the former has crossed between gains and losses eight times already. Elsewhere the Hang Seng (+0.42%), Kospi (+0.63%) and ASX (+0.88%) have all taken a leg up, although in Japan we’ve seen both the Nikkei (-1.39%) and Topix (-1.62%) tumble. Oil markets are more or less unchanged after falling over a percent yesterday, while Gold (-0.30%) has given back some of yesterday’s post FOMC gains. S&P 500 futures are currently up +0.2%, while Treasuries have seen little change. EM currencies have firmed although no more than three-tenths of a percent while Asia credit is generally a couple basis points tighter. Meanwhile, August home price data out of China this morning was reasonably supportive with prices rising in 35 of the 70 cities from the previous month.

Unsurprisingly there wasn’t much to report in the European session prior to the Fed yesterday. Equity markets were fairly mixed. The Stoxx 600 closed -0.18% while there were some modest gains for the DAX (+0.02%) and CAC (+0.20%) although in fairness there was little conviction for most of the session. It was a decent day for European credit though. Crossover closed some 7bps tighter and Main finished 1.5bps tighter.

Despite the obvious main event of the Fed taking up most of the attention there was also some data out yesterday. The highlight was a soft headline Philly Fed business outlook print for September which declined over 14pts to -6.0 (vs. +5.9 expected). The reading was the lowest since February 2013, although there were some positives in the details. Notable was a decent leg higher for capex expectations, while there were also firmer new orders and employment indices numbers. The six-month ahead outlook also rose relative to last month. Elsewhere, both housing starts (-3.0% mom vs. -3.8% expected) and building permits (+3.5% mom vs. +2.5% expected) readings recorded beats. Finally initial jobless claims declined 11k last month to 264k after expectations of no change. Meanwhile, in the UK we got an in-line +0.2% mom gain for retail sales for August, with the ex auto and fuel reading also printed as expected at +0.1% mom.

Before we get onto the day ahead, one event which has somewhat flown under the radar is Greece’s general election this Sunday. The recent polls have been too close to call, with fairly evenly split support for Syriza and New Democracy although neither is likely to control a majority in parliament. The successful conclusion of the 3rd ESM package and broad-based political support to meet creditors’ demands eliminated a lot of the political risk however and as DB’s George Saravelos pointed out previously the eventual outcome of the vote may not entail particularly different paths ahead. The bigger picture is the popular support towards underlying Eurozone membership as the key underlying factor behind ensuring that Greece’s path towards stabilization is in place.

It’s a quiet day for data today, with the focus set to be more on the price action following the Fed. There’s nothing of note in Europe this morning, while over in the US we’ve got the Conference Board’s leading indicator as the only notable release. Tomorrow we get the first Fedspeak post yesterday’s decision with Williams and Bullard both due to speak on the US economic outlook, so it’ll be worth keeping an eye on that.

 

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Fri, 09/18/2015 - 06:56 | 6564262 tocointhephrase
tocointhephrase's picture

Bad news is bad news!

Fri, 09/18/2015 - 07:02 | 6564273 VinceFostersGhost
VinceFostersGhost's picture

 

 

The Fed.....they're just a bunch of freakin bankers......and not very good ones.

Fri, 09/18/2015 - 07:17 | 6564306 negative rates
negative rates's picture

The fed, always wrong, but never in doubt.

Fri, 09/18/2015 - 07:26 | 6564327 VinceFostersGhost
VinceFostersGhost's picture

 

 

Print money.......charge your grandkids.

 

Party on!!!

Fri, 09/18/2015 - 07:52 | 6564382 mtl4
mtl4's picture

There is an old saying that goes something like "we plant trees today in order for future generations to enjoy the shade" but it is clear the markets are now heading for supernova territory with the inability to raise rates and allow markets to properly price risk.  

Fri, 09/18/2015 - 07:26 | 6564328 aint no fortuna...
aint no fortunate son's picture

What the Fed said yesterday was that they have no ammunition left, that they're powerless to stop the financial and economic shitstorm that will soon envelope the world, a shitstorm of their own making

Fri, 09/18/2015 - 07:37 | 6564349 xcehn
xcehn's picture

"Fund Investors May Pay Fees for Withdrawals Amid Turmoil: Mutual funds may be able to charge their investors who rush to cash out during periods of market stress under a rule being considered by the U.S. Securities and Exchange Commission."
http://www.bloomberg.com/news/articles/2015-09-11/fund-investors-may-pay...

Fri, 09/18/2015 - 07:45 | 6564373 Pure Evil
Pure Evil's picture

Just WOW!

NIRP creep.

I guess that's better than rounding up anyone cashing out and putting a bullet in the back of their head.

But, just to be on the safe side, maybe we should read the fine print to see if they've included that too.

Fri, 09/18/2015 - 07:49 | 6564379 xcehn
xcehn's picture

On the express highway to cashless. No exits from the criminal 'financial system' for the serfs.

Fri, 09/18/2015 - 07:51 | 6564381 Money Counterfeiter
Money Counterfeiter's picture

I really do not think the Fed or any banker cares about financial conditions.  Print money, keep power.Rope and trees will cure the financial problems of the world.

Fri, 09/18/2015 - 07:54 | 6564395 CheapBastard
CheapBastard's picture

Markets are tumbling because they watched Yellen and finally figured out; she looks like an idiot, walsk like an idiot and talks like an idiot so she must be an idiot.

Fri, 09/18/2015 - 08:27 | 6564410 mtl4
mtl4's picture

Politicians (lawyers) always think they can solve problems with more laws but the reality is that by continuing to lock all the doors and set the house on fire it will encourage hoarding of moveable physical goods (collectables, cash, PMs, etc......immovable assets like real estate will be increasingly taxed) and liquidity will be driven to unimaginable lows (far more than any QE could ever counteract).  The stupidity is truly reaching extreme levels but the good news is that history has shown without exception that situations like this do correct themselves (although it can be rather violent).

Fri, 09/18/2015 - 08:15 | 6564464 kralizec
kralizec's picture

I have nothing at risk in the casino, why the fuck do I care?

Fri, 09/18/2015 - 09:07 | 6564674 Squids_In
Squids_In's picture

Well they do have one bullet left in the magazine. NIRP. But if they shoot that off and nothing happens it's goodnight nurse. So instead they'll just tease the market with it. Incessently. If they can make it to the other side of the presidential election, Hillary will start a war someplace to goose up profits again.

Fri, 09/18/2015 - 07:08 | 6564286 Rearden-Steel
Rearden-Steel's picture

Central bank armories are looking mighty empty.

Fri, 09/18/2015 - 07:28 | 6564331 DeadFred
DeadFred's picture

And it looks like they may have just lost their BTFD bullet as well. Sell-the-news isn't a new idea but it never was in effect before for Fed news. I don't buy the article's take on why the rally failed but fail it did.

Fri, 09/18/2015 - 07:49 | 6564377 Pure Evil
Pure Evil's picture

Maybe the market is holding a temper tantrum.

What time will we be hearing the cries for MOAR QE today and from which talking head?

Even a three year old would know how to play this game.

Fri, 09/18/2015 - 07:10 | 6564290 Oldwood
Oldwood's picture

The "news" is whatever they say it is. Reality is whatever we think it is.

The truth is that NO ONE knows anything for sure.

CHAOS

Fri, 09/18/2015 - 06:58 | 6564265 wmbz
wmbz's picture

"Nobody expected that dovish mess that was unleashed at 2pm yesterday"

Well I wouldn't say "nobody" plenty of people did. Outside of all the so called "experts".

Fri, 09/18/2015 - 07:50 | 6564386 Curiously_Crazy
Curiously_Crazy's picture

You beat me to it in a round about way.

I was gonna say "Did *anyone* think that they would?"

I guess I gotta get out more.

Fri, 09/18/2015 - 07:00 | 6564267 nmewn
nmewn's picture

OT...but this is definitely "a thing"...

What is your "Patriotism Credit Score"?...lol.

China Is Building The Mother Of All Reputation Systems To Monitor Citizen Behavior

http://www.fastcoexist.com/3050606/china-is-building-the-mother-of-all-r...

Fri, 09/18/2015 - 07:01 | 6564269 conscious being
conscious being's picture

Quick! Print more money and buy stawks now!

Fri, 09/18/2015 - 07:34 | 6564351 RaceToTheBottom
RaceToTheBottom's picture

Now, where are my helicopter keys?

Fri, 09/18/2015 - 07:30 | 6564335 Pool Shark
Pool Shark's picture

 

 

Yes, because imaginary 1's and 0's inside computers must be compared to wheat, copper, soybeans, porkbellies and other necessary consummables...

That should just about do it for Bitcoin.

"Fonestar; paging Mr. Fonestar..."

 

Fri, 09/18/2015 - 07:41 | 6564365 VinceFostersGhost
VinceFostersGhost's picture

 

 

Bitcoin Is Officially a Commodity

 

I fry them over-easy.....with a little salt and pepper. Mmmmm!

Fri, 09/18/2015 - 07:57 | 6564402 Curiously_Crazy
Curiously_Crazy's picture

Heh yeah but anyone who has ever employed me considered me a commodity because of my knowledge, that can't be eaten either. Though I suppose me the person could be eaten.

Pussy is a commodity - it's just a matter of the price, yet you can't eat that... erm ok I think I'll just give up now and bail while I'm behind.

Fri, 09/18/2015 - 08:00 | 6564416 VinceFostersGhost
VinceFostersGhost's picture

 

 

Pussy is a commodity

 

Well you need to get some gold then......cause they don't call them gold diggers for nothing.

Fri, 09/18/2015 - 08:08 | 6564438 Arnold
Arnold's picture

Financial instruments and Data and Apps are commodities now.

Why not Bitcoin?

No hard assets for you!

Fri, 09/18/2015 - 07:01 | 6564271 JustObserving
JustObserving's picture

The last Fed hike was on June 29, 2006 and now people realize that the Fed is uber-dovish?

With the massive debt in the land of the free, we will have NIRP soon enough

Fri, 09/18/2015 - 07:31 | 6564338 ArkansasAngie
ArkansasAngie's picture

NIRP is taxation without representation at its finest.

Talking about austarity measures to maintain the status quo.

Clean out the freakin system already.  

Brankrupt the yahoos already.

 

Fri, 09/18/2015 - 07:45 | 6564274 Grandad Grumps
Grandad Grumps's picture

What the lack of any kind of Fed action says to me is that the Fed admits that they not only screwed middle America for the benefit of bankers and to facilitate the corruption of America and the world, but that this is now the situation that we will be forced to live with... for the foreseeable future.

There will be no improvement in economy or society and they have no intention, plans or ability to do anything else.

Fri, 09/18/2015 - 10:26 | 6565007 BullyBearish
BullyBearish's picture

And...this means more financial engineering and less investment in the future for corporations, after all, each CEO is saying "I want to be on my island when this house of cards falls"

Fri, 09/18/2015 - 07:05 | 6564276 NoDebt
NoDebt's picture

Three mandates?  I count four.  Price stability, unemployment stability, stock market stability and global economic stability.  

Guess which one of those four drives the bus?

As a side note, I'll point out that dead is a very stable condition.

Fri, 09/18/2015 - 07:08 | 6564284 VinceFostersGhost
VinceFostersGhost's picture

 

 

Five....if you count keeping your doctor.

Fri, 09/18/2015 - 07:17 | 6564304 Oldwood
Oldwood's picture

Exactly!

The only true stable and sustainable state is death.

The desire should be relatively mild and survivable cycles. Like everything else in the natural world.

Fri, 09/18/2015 - 07:20 | 6564315 negative rates
negative rates's picture

Didn't you mean crashes the bus?

Fri, 09/18/2015 - 07:53 | 6564391 Grandad Grumps
Grandad Grumps's picture

They have repeatedly stated that they have a mandate to have inflation. So, they cannot have a mandate of price stability. The USD has 2% of its value from when the Fed was started showing conclusively that the Fed mandate is inflation and not price stability.

The apparent stock market mandate is ownership of all asset classes and control of their price (not increasing price). The Fed owns Cede and Company, which owns all stock not delivered in certificate form.

The Fed does not want global economic stability. That would be stagnation. What they want is global economic control and the ability to fund areas of their choosing and not fund other areas. For the past 15 years they have fnded Chinese people and businesses and defunded the US people and business .... while at the same time funding US banks to purchase and control US assets (both directly and indirectly through debt funding control).

Unemployment stability? Nah ... they want to control the unemployment narrative, not the actual numbers. The Fed cares nothing for the employment of people other than how employment affects its ability to control through debt.

Fri, 09/18/2015 - 08:10 | 6564449 Arnold
Arnold's picture

Mission Creep.

Fri, 09/18/2015 - 07:04 | 6564277 overmedicatedun...
overmedicatedundersexed's picture

i and most of us here on zh had a clue, never in our life time seems about right for a rate incr. the bond markets (muni ,corp, and fed .gov) cannot remain at current levels with a rate incr. what a mess the jewish run fed is making for the common folk, while making the chosen wealthy- (think head of gs and even facebook do kinda look jewish - just chance I know)

Fri, 09/18/2015 - 07:25 | 6564326 negative rates
negative rates's picture

The fed is actually a catholic, non-linear, and clueless, it's the financial advisors who are jewish and the british who are linear that control the fed, together they make policy, the mkts break policy which leads to a dovish fed over all juggling the numbers, a bunch of zeros right now.

Fri, 09/18/2015 - 07:53 | 6564393 klayton biggs bee
klayton biggs bee's picture

And everyone just knows the Arabs run Hollywood!

Just ask Alex Jones!

Fri, 09/18/2015 - 07:36 | 6564355 ArkansasAngie
ArkansasAngie's picture

All we have in this ole world is time.

 

And that, my friend, is what they're stealing from you ... time.

 

Piss on'em

Fri, 09/18/2015 - 10:56 | 6565124 Bemused Observer
Bemused Observer's picture

Those are words of wisdom, AA.

It's why I have stopped fighting the system. Now I just keep myself removed from it...on the sidelines, as an observer, a Bemused Observer.

There have been several incidents over the past few years that, a decade ago, would have had me gearing up for the fight. But I have recently realized that even if I win, which I frequently do, all that TIME spent has been stolen from me, forever. If I lose some money, that can always be replaced, but the TIME spent trying to 'right the wrong' can never be replaced, at ANY price.

When it occurred to me that the time has infinitely more value to me than anything they can possibly steal from me, my attitude did a 180.

So, go ahead, steal a few bucks from me...nickel and dime me to fucking death. The vast bulk of my accumulated wealth is beyond your reach (Oh, those boating accidents...what can you do?) I will NOT be taking the bait anymore. I will NOT allow the system and it's supporters to reach even deeper and steal MY precious time as well.

I consider these petty thefts of fiat to be the cost of doing business here. Those nickels and dimes have been placed there deliberately...I EXPECT them to be stolen. They are the bait placed to distract you, so go for it, you petty money grubbing fucktards.

Meanwhile, my 'stack' of REAL wealth is safe and sound.

Fri, 09/18/2015 - 07:07 | 6564280 ABB
ABB's picture

Back to square one again.

 

Bad news is good news once more. bad news = more apetite for risk.

Fed will be forced for more QE or NIRP, as China is offloading the Treasuries as well.

ONCE YOU PoP, YOU SIMPLY CAN NOT STOP.

Fri, 09/18/2015 - 07:06 | 6564281 Keltner Channel Surf
Keltner Channel Surf's picture

I saw this movie:  family nurse slips sick child another sedative so he remains ill and she can continue her life's work ...

(By the way, am I the only one who thinks any selloff today will stem more from the standard post-FOMC windfall profit-taking after the typical vapor-volume short squeeze we see going into most Fed meetings, rather than any disappointment at the dovish 'hold' ?)

Fri, 09/18/2015 - 07:14 | 6564294 VinceFostersGhost
VinceFostersGhost's picture

 

 

family nurse slips sick child another sedative so he remains ill and she can continue her life's work

 

Oh.....like John Boehner and Mitch McConnell.....yeah. pretty much.

 

Of course I doubt the nurse was grafting out millions of dollars for herself in the process.

Fri, 09/18/2015 - 07:24 | 6564323 Oldwood
Oldwood's picture

Of course there is a history of nurses who actually KILL their patients as part of their belief that they are doing good by ending suffering.

Many progressives see our current system as causing unnecessary suffering and seek to end it in any way possible...which strangely or not parallels many perspective here on the hedge.

Sadly the mercy they seek to extend adds to the world's misery, but as they say you must break a few eggs,right? Can't let a little death and destruction stifle a "good" idea. That has been the theme of every tyrant in history.

Fri, 09/18/2015 - 07:34 | 6564347 negative rates
negative rates's picture

It's mostly those damn democrates (not all by the way) and the derivatives they contain who have a never ending desire to steal anything and everything they can get their hands on. Can you imagine rabbits laying awake at night plotting thier next move to steal drugs so they can maintain their pitiful life style? once and a while they lose a recruit to a metal fence post but over all they get their kill and thrill to keep the party going.

Fri, 09/18/2015 - 07:35 | 6564352 Latitude25
Latitude25's picture

Wow that must be your longest comment in years.  congrats

Fri, 09/18/2015 - 07:45 | 6564371 VinceFostersGhost
VinceFostersGhost's picture

 

 

I noticed you didn't make a point.

Fri, 09/18/2015 - 07:52 | 6564389 Latitude25
Latitude25's picture

It wasn't a point.  It was an observation just like the one you just made.

Fri, 09/18/2015 - 07:56 | 6564400 VinceFostersGhost
VinceFostersGhost's picture

 

 

Since you're here.....will you tell me who the Kardashians are?

 

No one will tell me......but apparently they're pretty damn important.

Fri, 09/18/2015 - 08:08 | 6564436 Latitude25
Latitude25's picture

They're a super race from outer space whose mission is to give you extreme pleasure based on the size of their asses.  You need to follow their every movement so you can train your kids and they will be able to travel the galaxy.

Fri, 09/18/2015 - 07:48 | 6564374 negative rates
negative rates's picture

Stick around for my last post, muliple pages, it may the last one you ever read, and don't hold your breath waiting, it could be fatal, and who wants to die before their time is up?

Fri, 09/18/2015 - 07:55 | 6564397 Oldwood
Oldwood's picture

Something for nothing IS the paradigm.

Fri, 09/18/2015 - 08:29 | 6564513 negative rates
negative rates's picture

Yeah but bad laws and bad education making for bad people, and we expect the results not to be bad, makes no sense to me. Reminds me of breakfast at tiffanys and the old ladys who don't want to see the light of day, but oh the problems they cause above them are just dandy.

Fri, 09/18/2015 - 07:23 | 6564319 ToSoft4Truth
ToSoft4Truth's picture

Today’s Santa Rally Perquisite leaves the DOW down 250….  But don’t fear, December will soon be here. 

Fri, 09/18/2015 - 07:32 | 6564344 Latitude25
Latitude25's picture

And nurses worldwide are doing the same thing and the sedative manufacturers are making a killing.

Fri, 09/18/2015 - 07:44 | 6564367 jakesdad
jakesdad's picture

"am I the only one who thinks any selloff today will stem more from the standard post-FOMC windfall profit-taking after the typical vapor-volume short squeeze we see going into most Fed meetings, rather than any disappointment at the dovish 'hold' "

 

I don't doubt that will aggrevate today and/or there might be a bounce next week but I don't see how the overall trendline isn't negative at this point.  I got 95% out a month ago right before all the fun started & have no intention of buying any "dips" above at least a 25% correction.  if (likely when) we go nirp I'm not sure what I'm going to do but I can guarantee you it won't be overpriced stocks.  already have 1% of net in physical ag as "bail-in insurance" but may resume accumulatiing.

Fri, 09/18/2015 - 08:13 | 6564452 Farmer Joe in B...
Farmer Joe in Brooklyn's picture

Only 1%...?!?

Jeez....I probably have 25% of my net worth in physical gold and silver. And still stacking.

Dear .gov cunts (I know you are reading this)... I dare you to come and take it. Double fucking dare you.

Tick tock, motherfuckers...tick tock...

Fri, 09/18/2015 - 07:10 | 6564289 DirkDiggler11
DirkDiggler11's picture

The Fed had already put themselves in a box. With this policy decision they put a lid on the box and duct taped the damn thing on. They are totally fucked now. So, now the US Fed bases its monetary policy on the condition of "world" markets and not the US markets ?

This is all a B.S. Anyways. The "markets" we're going to fall regardless of which decision the Fed made. Trading this week by the PPT was just pumping the markets to allow the "friends" of the Fed to get out of the market at higher levels. By not raising the rates the Fed does not play the part of the global bogeyman and does not solely get the blame for crashing the world's financial systems. The blame game will now shift back to China and Japan.

Executive summary: sell all stocks and bonds, get your fucking money out of banks. Buy PM's, Ammo, Food, and Whiskey if you don't want to be the raped bitch of the FSA that comes looking for you once their government goodies end. Nuff said.

Fri, 09/18/2015 - 07:10 | 6564291 phoolish
phoolish's picture

Market already rallied big off the bottom in anticipation of this.  Now, the bots are digesting the fed's new impotence and credibility failure.

Fri, 09/18/2015 - 07:11 | 6564295 Batman11
Batman11's picture

Cheap oil = collapsing global economy

Low commidity prices = lack of demand for raw materials from which real things are made

Central Banks can prop up stock markets (for now) but eventually reality will set in.

Maintaining the penthouse suite while the foundations are crumbling.

More banker insanity.

 

Fri, 09/18/2015 - 07:17 | 6564305 overmedicatedun...
overmedicatedundersexed's picture

in expensive office space, seated on expensive furniture, some are getting nervous very nervous..perhaps we need to lighten up on equity, what can we sell? the fed just showed it's ass. and the investors are worried the people might just think the fed is powerless..so back to what to sell and where do we put the cash.

Fri, 09/18/2015 - 07:36 | 6564358 negative rates
negative rates's picture

And you can't compete with insanity.

Fri, 09/18/2015 - 07:14 | 6564300 world_debt_slave
world_debt_slave's picture

still waiting for the other shoe to drop

Fri, 09/18/2015 - 07:16 | 6564302 wmbz
wmbz's picture

Looking at the picture of Jack Yellen, I think he favors Uncle Fester a little.

Of course Uncle Fester was much easier on the eye!

Fri, 09/18/2015 - 07:32 | 6564345 Doom and Dust
Doom and Dust's picture

Shoving Janet the Hutt in our goy faces, now that's adding insult to injury.

Fri, 09/18/2015 - 07:58 | 6564404 Pure Evil
Pure Evil's picture

Yeah!

Why can't they get a clue from Faux News and give us a blonde buxom bimbo?

No, they give us Jabba the Hutt's mini me.

Fri, 09/18/2015 - 07:17 | 6564310 Roanman
Roanman's picture

You just aren't gonna put one over on ol' Roger Aliaga-Diaz. "The Fed runs the risk of being held captive to the markets ....."

It is exactly this type of shrewd, spot on financial analysis that has established Economics and Economists as the most rigorous and effective sciences/ists on this Earth.

My teeth hurt.

Fri, 09/18/2015 - 07:29 | 6564334 gmak
gmak's picture

lol. spot on.

Fri, 09/18/2015 - 07:22 | 6564318 Infinite QE
Infinite QE's picture

No, the crack junkies are prancing for a rate cut. Infinite QE to buy bigger and bigger ego houses.

Rate Cut!

Rate Cut!

Rate Cut!

'til the insanity burns to a cinder.

Fri, 09/18/2015 - 07:27 | 6564329 wmbz
wmbz's picture

 "Infinite QE to buy bigger and bigger ego houses".

Yep, the tip top are 100% hooked on "free" money and since they own/control the system there is no one to stop them.

So yes it will burn to a cinder over time.

Fri, 09/18/2015 - 07:31 | 6564339 overmedicatedun...
overmedicatedundersexed's picture

futures red red red...a friday to remember..we may see 500 point swings as PPT vs the just get me out crowd.

Fri, 09/18/2015 - 07:50 | 6564385 ToSoft4Truth
ToSoft4Truth's picture

We’re reduced to surveys?

Fri, 09/18/2015 - 07:29 | 6564333 undercover brother
undercover brother's picture

Over the last 30 years the fed has proved to be terrible at economic forecasting and even worse at conducting monetary policy.  If congress had any guts and brains, they would hold hearings about whether the fed is even needed, should be restructured or even disbanded.   Everyone should research how the central bank came to be, what its true purpose was, and how this idea was sold to the US congress and the president at the time.  They were a disaster in the 1930's attempting to protect their members to the point where only a war bailed the country out of their mess, and they're a disaster now as well.  Had they simply allowed the natural course of business to occur without meddling and without the covert goal of protecting their member banks and other politically connected yet horribly run corporations from losses, there would have been a few tough years after Lehman, with some failures, bankruptcies, restructurings and reorganizations.  The net effect of that would have been a clear out of overhead and underbrush filled with junk and in the end would have resulted in a much healthier and stronger country; one whose financial market wouldn't go berzerk over the possibility of a measly 25bp rate raise.

Fri, 09/18/2015 - 07:31 | 6564340 paint it red ca...
paint it red call it hell's picture

Picking this toe headed dupe to ride the fed into oblivian was a power move to signal the end. She appears as if she isn't better suited to a rocker and crochet needle.

Fri, 09/18/2015 - 07:34 | 6564350 gmak
gmak's picture

The CBs used up a lot of powder getting the markets up to where a sell off wouldn't turn into an apocalypse.  Now they have to rest a while. Although, there was some activity this AM aroun d 4:30AM NYT after London had opened.  Activity was about 100 emini contracts every 5 seconds or so, until it became 1000 - 2000 in the same time frame, in bursts with rests in between.  Most trades were single lots, with the odd 10 or 15 lot. The buys during this period (at the ASK) were 150 - 250 lots.

 

It didn't push price to where stops were run and the sell off began.  I guess no one wants to wake Yellen at 4 in the morning to get permission to increase the trading allotment for the day.

 

If this is illegal, why is it permitted to continue by the American citizen?

Fri, 09/18/2015 - 09:12 | 6564695 undercover brother
undercover brother's picture

The american citizen has no clue this is going on and even if you tried to explain it they wouldn't understand.   Nor do most in congress for that matter.   AND, even if they did, the investor class (the class that makes political contributions) directly benefitis the most from these direct and illegal interventions to prop up the market, so they won't speak up.  

Fri, 09/18/2015 - 07:37 | 6564359 ToSoft4Truth
ToSoft4Truth's picture

At least she's a woman, I think. 

Fri, 09/18/2015 - 07:44 | 6564370 Latitude25
Latitude25's picture

Does it feel any better when a woman stabs you in the back?

Fri, 09/18/2015 - 07:50 | 6564383 Obamaroid Ointment
Obamaroid Ointment's picture

They'll come to their senses on 1/21/17, after our boy Barry's gone & there's someone else to blame.

Fri, 09/18/2015 - 07:53 | 6564392 ToSoft4Truth
ToSoft4Truth's picture

The clock hands on Jr.’s homemade clock-bomb pointed to 9:23.

We wait for the “9/23” false flag. 

Fri, 09/18/2015 - 08:01 | 6564384 Obamaroid Ointment
Obamaroid Ointment's picture

The next crash is going to make the Great Depression look like missing lunch. And it was all so unnecessary, just PR for the politicians & to pump up their crony donors.

Fri, 09/18/2015 - 07:57 | 6564387 Able Ape
Able Ape's picture

Just Confusion?  That's being VERY generous...

Ms. Yellen looks like she has to read an instruction manual everytime she wipes her ass...eewww, that's a nasty image....

Fri, 09/18/2015 - 07:54 | 6564394 Atomizer
Atomizer's picture

Janet Yellen is the boy who called woof. 

Fri, 09/18/2015 - 07:54 | 6564396 ToSoft4Truth
ToSoft4Truth's picture

Go long 151, rum.

Fri, 09/18/2015 - 08:22 | 6564488 Doppelganger71
Doppelganger71's picture

What, no Jagermeister? :)

Fri, 09/18/2015 - 07:56 | 6564401 carneades_jazz_hands
carneades_jazz_hands's picture

Why even have a Fed any longer? Close them down, save the money.
Unless, you mean to tell me that the economy is so bad it can´t handle interest rates over 1/4%.
In which case, we should end the Fed, because after 7+ years their policies clearly have failed.
So counter-productive.

Fri, 09/18/2015 - 08:05 | 6564429 Obamaroid Ointment
Obamaroid Ointment's picture

The Fed policies haven't failed for the Democrats, unless the crash happens before Barry's gone.

Fri, 09/18/2015 - 07:58 | 6564405 Grandad Grumps
Grandad Grumps's picture

With great power comes great responsibility. Janet, you are responsible for more than simply making your tribe more rich and powerful.

Greed and evil often accompany power, but one would hope, for the sake of the world it would not.

Fri, 09/18/2015 - 07:58 | 6564409 Cloud9.5
Cloud9.5's picture

The entitlement system is based on the false premise that exponential growth will continue forever.  We reached the end of growth sometime around 2005 when worldwide production of light sweet crude peaked.  Oil prices skyrocketed, the economy collapsed.  Given a choice between immediate systemic collapse and eventual collapse brought on by hyperinflation, the power brokers chose the latter. 

Fault them if you will, whatever shreds of normalcy remain, remains because of the ongoing system of fraud. 

 

This may take a while, look how long Japan has been able to keep the lights on.  

Fri, 09/18/2015 - 08:04 | 6564425 john_connor
john_connor's picture

Liquidity Trap.  The patient is numb/overdosed.  Game over.

 

Fri, 09/18/2015 - 08:15 | 6564465 Herdee
Herdee's picture

The Fed was all over the place,Canada,foreign countries,currencies,global problems.What ever happened to looking after the U.S. Don't listen to all the crap?

Fri, 09/18/2015 - 08:22 | 6564478 buzzsaw99
buzzsaw99's picture

just when i thought i couldn't hate the fed any moar yellen comes out with the "concern about china" crap on television. the fed put isn't just for usa equities, now they guarantee the entire world markets. fuck 'em. die bitchez.

Fri, 09/18/2015 - 08:44 | 6564585 Nothing Ever Happens
Nothing Ever Happens's picture

But . . . but . . . why should that dog Ol' Yellen be concerned with China? I just saw on cnbs that China's funderrmentals are sound, so what's with the agita, hon?

Btw, I wondered if it would, and it did--if you google cnbs, cnbc pops up at #3 on the list. Love me some Algo dogfood.

 

Fri, 09/18/2015 - 08:21 | 6564483 Doppelganger71
Doppelganger71's picture

How do you upload an image here, or is there any way to do so to begin with?

Fri, 09/18/2015 - 08:23 | 6564491 buzzsaw99
buzzsaw99's picture

send zh some $, that's how. so easy a cave man could do it.

Fri, 09/18/2015 - 08:44 | 6564581 silverer
silverer's picture

You can use HTML here only as the tools provide.  To upload pictures requires resource files that accompany the HTML.  From our desks, we don't have permission to upload the resource files to the server.

Fri, 09/18/2015 - 08:23 | 6564487 silverer
silverer's picture

This is what happens when a printing press decides your financial future instead of basic fundamentals of real, tangible economic performance.  The helium is rapidly leaking out of the big, floating promise...

Fri, 09/18/2015 - 08:26 | 6564499 Mick Shrimpton
Mick Shrimpton's picture

The explanation with stocks is simple profit taking.  People already bet that the Fed wouldn't raise interest rates yesterday and for the rest of 2015.

Fri, 09/18/2015 - 08:33 | 6564538 goldenbuddha454
goldenbuddha454's picture

No, there's no confusion about anything.  The economy is tanking and everyone is damned sure its tanking, otherwise they'd be raising rates.  End of Story, er wait, not the end of story, death spiral deflation to ensue followed by QE 4 endless money printing and hyper- inflation.  Now, End of Story.

Fri, 09/18/2015 - 08:43 | 6564579 VW Nerd
VW Nerd's picture

You know you're in trouble when all you have left in your toolbox is a bunch of lies nobody is willing to believe anymore.

Fri, 09/18/2015 - 09:05 | 6564613 InsanityIsWinning
InsanityIsWinning's picture

Yellen showed her hand when she admitted that the 'stock market' volitility was a factor.  Mr. Market was listening and Mr. Market now want more liquidity. Give a squirrel a donut and it wants a glass of milk . . . . Yellen looks bad naked . . . gold will shine

Fri, 09/18/2015 - 08:56 | 6564642 tok1
tok1's picture

People will walker up soon

19 trill USD debt is a problem that neðst to be restructured it cant be wished away.

Internet income is like the blood flötina theough the economy, tíð not going to perform without it.

The short end should be 1 to 1.5% , the long end world still be 2.5-3%.

Interrst income seems small on p/l sheets but is a constant small income that covers expenses ( ie account for payrolls woth on internet income willl need to spend funda to cover the account cost) where as 1 to 3% internet will cover th cost and leave a small income that keppa coming year aftur year.

You take that out of every account in the economy, not to mention pensions ect

Fri, 09/18/2015 - 09:00 | 6564655 ejmoosa
ejmoosa's picture

I listened to Yellen's entire presentation.  Besides being clueless, the thing that was most shocking was that here, on the door step of the possible first rate increase in frorever, Yellen could not absolutely rule out that there would never be a rate increase.

Seriously?

 

 

Fri, 09/18/2015 - 09:08 | 6564679 yogibear
yogibear's picture

Wait til the Federal Reserve does their Krugman, larger, QE4.

Zimbabewe will look small in comparison.

Fri, 09/18/2015 - 10:05 | 6564926 Sages wife
Sages wife's picture

"...the market no longer wants a...dovish Fed."

This is telling. No more cover. Look out.

Fri, 09/18/2015 - 10:15 | 6564962 gcjohns1971
gcjohns1971's picture

Feeling very vindicated about my view that the Fed not only WILL not raise rates, but CANNOT.

The secret to understanding this is in understanding the fundamental structure of the monetary system.

SHORTLY:

- They use INTEREST-BEARING-DEBT as the 'Asset' to secure the creation of an amount of currency equal to the face-value of that debt.

     Q:  If all the money in the world is only ever enough to pay the principle...then how can the interest be paid?????

     A:  It can't.  Not possible.  The system functions by those debts always increasing.  

- The system requires debt-growth by whatever means necessary in order to avoid collapse.

     Q:  How do the debts always increase?

     A: Ever lowering (real) rates over the long term accomplished mostly by expansion of government debt in monetary base money creation, and consumer debt for banking system money-creation.  (Yes. Your Mortgage?  It is just an accounting entry.  They didn't actually have anything to loan.  Please remember that the builder who received your mortgage deposited it, where it became the basis for new loans. All those loans also are nothing more than accounting entries, with no actual currency being loaned.  So...you might call it virtual currency that came into existence at the moment the loan was signed.)

     Q:  How do they ensure government debt always rises?

     A: They offer 'guaranteed lender of last resort' status to governments.  They also pay propagandists and syncophants to distribute the notion that government can do things that cannot be done by other organizations generally.  Specifically they pay the propagandists to politicize all questions by suggesting that all problems ought to be solved through government.  This, plus unlimited government financing, leads to ever-expanding government.

    Q: What are the effects of ever-expanding debt as a basis for creating currency?

    A: It delivers an ever-increasing percentage ownership of real wealth to those who make the loans, because while the principal is never paid off, the interest must be serviced by payment of real production.

    A: It makes the portion of the accumulated total debt representing accumulated interest EVER LARGER.

    A: It makes the portion of the accumulated total debt representing actual physical goods and services EVER SMALLER.

    A: It makes cronies of those who make the loans richer.

    A: It redirects businesses more-and more away from servicing real production, to servicing the banksters' and their cronies' desires.

- The banking system intergrates and amplifies this debt-based currency system by 'loaning' currency into existence.  No actual currency is on hand for loans.  All loans are accounting-entries only...and when deposited into a different bank form the basis for still more loans based on nothing...in a pyramid scheme, or ponzi-scheme manner.

    Q: Can the pyramid grow forever, allowing us to simply experience continued price inflation as the economy absorbs a larger-and-larger monetary base?

    A:  No, it is mathematically impossible.  It is impossible because the debt service must always be paid from real production, and the debt service in this system grows faster than the currency it creates.

    Q: How is it possible to know when the debt is approaching its limits?

    A: Compare average income (across all people not just the employed) to subsistence costs...food, shelter, clothing.   Everyone must subsist, whether working or not.  When there is insufficient income to buy more than subsistence, firstly more people must go to work (multi-income familes), and when that is not enough then they must go into debt to the limit of their ability...which bids up prices.  So when total income is insufficient to pay for both subsistence and debt-service, the system will collapse...with some delays caused by shifting policy.

    Q: How close are we to approaching maximum debt.

    A: Since 2008, debt has gone hyperbolic.  Failure to service it, or alternately, explicit devaluations of currencies to enable debt-service are imminent and on-going.

 

Fri, 09/18/2015 - 12:30 | 6565670 polo007
polo007's picture

According to Macquarie Research:
 
https://app.box.com/s/hx16540dwpct4uj5h5iohxsa4197zozd
 
Time for a policy U-turn?
 
Back to the future: British Leyland
 
From conventional QEs to more unorthodox policies…
 
- As discussed (here and here), we do not believe that investors are likely to benefit from acceleration in growth rates, trade or liquidity and indeed on the contrary, negative feedback loops from EMs to DMs imply that neither would be able to support global growth. Secular stagnation is the key explanatory variable (here). The deflationary pressures from overleveraging, overcapacity and technology shifts can be either allowed to work through economies or the public sector needs to continue resisting via expansionary policies.
 
- Since ’08, monetary policies were doing most of the lifting with limited participation by fiscal authorities (bar China). In other words, in the absence of either private or public sectors driving higher velocity of money, it was Central Banks that were supplying incremental liquidity to preclude contraction of nominal GDP and avoid stronger deflationary pressures.
However, marginal utility of incremental injections has been declining (witness much lower impact of recent ECB’s QE and increase in BoJ accommodation since Dec ’14).
 
- Part of the reason for monetary stimulus fading is that supply of US$ remains low. Global economy continues to reside on a de-facto US$ standard and current incremental supply is almost non-existent (depending on definition growing at +2%/-1% clip vs. average since ‘01 of ~15%). In other words, due to lack of recovery in the US velocity of money and lack of QEs, global economy is not getting enough US$ to continue leveraging.

 
…as efficacy of conventional monetary QE is questioned
 
- At the same time efficacy of continuing with conventional QE policies is being challenged and not just by independent observes but also ‘insiders’ (such as recent SF Fed paper). As velocity of money globally continues to fall, conventional QEs have to become exponentially larger, as marginal benefit declines.
If the public sector is not prepared to step aside, what other measures can be introduced to support nominal GDP and avoid deflation?
 
- There are several policies that could be and probably would be considered over the next 12-18 months. If the private sector lacks confidence and visibility to raise velocity of money, then (arguably) the public sector could. In other words, instead of acting via bond markets and banking sector, why shouldn’t public sector bypass markets altogether and inject stimulus directly into the ‘blood stream’? Whilst it might or might not be called QE, it would have a much stronger impact and unlike the last seven years, the recovery could actually mimic a conventional business cycle and investors would soon start discussing multiplier effects and positioning in areas of greatest investment.

 
British Leyland failed, but it might work at least for a while
 
- British Leyland (formed from nationalized British car companies in the late ’60s) destroyed its automotive industry but for a time it provided employment and investment. Central Banks directly monetizing Government spending and funding projects would do the same. Whilst ultimately it would lead to stagflation (UK, 70s) or deflation (China, today), it could provide strong initial boost to generate impression of recovery and sustainable business cycle. It could also significantly shift global terms of trade (to the benefit of commodity producers) and cause a period of underperformance by our ‘Quality & Stability’ portfolio and improve performance of ‘Anti-Quality’ screen. What is probability of the above policy shift? Low over next six months; very high over the longer term.

Fri, 09/18/2015 - 13:10 | 6565876 chickadee
chickadee's picture

May the farce be with you.

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