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"S&P < 1870 Until QE4 Or China QE1" - Seven Observations On The Fed's "Shocking" Announcement
Three days ago we posted a prescient note by one of BofA's only worthwhile strategists, Michael Hartnett, who warned that the market "Ominously Hints Recession Imminent" Unless "Unambiguous Pessimism" Leads To Stock Rally." Since then things have gone from bad to worse, because not only are market participants still extremely pessimistic, they just saw the Fed do the most dovish announcement in years, only to see the market selloff further, thus adding to their pessimism, and brings us one step closer to the "recession" and "default" hinted earlier in the week.
So is a recession imminent? According to Hartnett, the answer is simple: if despite the massive pessimism overhang and the dovish Fed, the market can't stage a rebound, the answer is a resounding yes.
That's not all. In a note titled "The Fed Blinks", Harnett does a FOMC post-mortem in which he observes, correctly, that the "Fed admits China/Wall St threatens to reverse Main St recovery", in other words Wall Street, as in Goldman, won, Main Street lost. As usual.
Some other big picture thoughts form Hartnett:
- Fed confirming “deflationary recovery” (Chart 1); risk can rally but sell into strength; upside for risk assets constrained by growth outlook, downside protected by Fed. Fragile Wall Street + perilous China = “tactical delay” in Fed hike according to our economists; BofAML say Dec hike likely; but if no autumn risk rally despite ultra-dovish Fed & bearish sentiment = markets hinting “recession” and/or “default” imminent.

- Short-term tactics: negative for US$, banks. EM>DM, resources>banks, gold>US$, REITs>cash, growth>value decent tactical trades.
- Deflationary recovery means “growth”, “yield”, “quality” remain structurally bid; we stay long US$, volatility, real estate & stocks>bonds; but SPX>2040-2070, GT30>3.2%, DXY>97 needs stronger global growth in Q4.
- Bearish risk = deflationary bust: Asia banks indicate crisis; Q3 EPS recession. FMS says Discretionary, Banks, Tech & Eurozone most at risk should peak liquidity coincide with EPS recession…
And here are his full 7 observations in the aftermath of what may be the Fed's first official "policy error":
The Fed left rates unchanged at 0% to 0.25%. Thoughts…
1. Fed admits China/Wall St threatens to reverse Main St recovery; Fed confirming “deflationary recovery”; risk can rally but sell into strength; upside for risk assets constrained by growth outlook, downside protected by Fed.
2. Stay of execution for “liquidity era”: nonetheless liquidity has peaked (Chart 2). And peak in liquidity = peak of excess returns = trough in volatility: annualized returns between start of QE1 (3/9/2009) & end of QE3 (10/29/2014)…stocks 20%, HY 18%, REITs 31%...(Table 1); since end of QE3, returns much, much lower, volatility higher & flash cashes (oil, UST, CHF, bunds, SPX) more common.
3. No hike, no rally: fragile Wall Street + perilous China = a “tactical delay” in Fed hike according to our economists; but if no risk rally despite ultra-dovish Fed & bearish sentiment = markets hinting “recession” and/or “default” imminent: allocation to risk hindered by growth fear (China, global PMIs), default fear (EM, commodities, Wall St), and liquidity fear (bonds/stocks "untradable" right now). Stronger global growth best antidote to fear: US payroll/retail sales & Chinese exports now key data (nb latter has tough comps next 2 months).
4. Short-term tactics: negative for US$, banks. Stocks>bonds but SPX>2040-2070, GT30>3.2%, DXY>97 needs stronger global growth; EM>DM, resources>banks, gold>US$, REITs>cash, growth>value all good tactical trades.
5. Big picture = deflationary recovery: Fed confirming “deflationary recovery” status quo (Chart 3); no recession/bankruptcy thanks to low rates/oil/unemployment; but expansion remains deflationary thanks to debt, tech disruption, demographics.
Deflationary recovery means “growth”, “yield”, “quality” remain structurally bid. We stay long US$, volatility, real estate & stocks>bond, but upside for risk assets now constrained until unambiguous handoff from liquidity to growth.
6. Bullish risk = reflationary recovery: if the Fed’s failure to hike does not lead investors to completely abandon hope on growth and scurry into gold, cash & volatility, “barbell of 1999” could reemerge: Über-growth & Über-value massive outperformers post-Asia crisis.
7. Bearish risk = deflationary bust: Asia banks indicate in coming weeks markets at early stage of crisis; Q3 EPS shows recessionary global economy. Crowded Discretionary, Banks, Tech & Eurozone (Chart 4) most at risk should peak liquidity coincide with EPS recession, SPX<1870, GT30<2.8%, DXY<93...at least until new extreme policies introduced (Fed QE4, China QE1 or a G7 shift toward fiscal policy stimulus).
And here is BofA's "bearish risk" punchline:
- SPX<1870, GT30<2.8%, DXY<93...at least until new extreme policies introduced (Fed QE4, China QE1 or a G7 shift toward fiscal policy stimulus).
And there's your bogey: push the S&P down another 100 points, and wait for the Bullard to be unleashed, only this time his jawboning will have to be backed with actual money printing. The good news is that Fed credibility is now virtually non-existant, and the next QE will be the last. Then, the paradrops begin.

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QE to infinity, Bitchez!
With ultra high debt levels globally, there is no exit from ZIRP. Just ask the Japanese. All fiat currencies will eventually mean revert to their intrinsic value of zero.
No more Clintons!
No more Bush's!
Hillary for Prison 2016!
Jeb for cuckservative of the year!
I'm disappointed that our Federal Reserve didn't raise rates, as I think there's a serious risk of our economic recovery getting out of hand and turning into a bubble. In the meantime, economic growth will continue regardless of whether we introduce further easing, so as always the smart thing to do is to continue to buy and hold the core US Stock Indices, be right and sit tight. The dollar is maintaining its strength despite the FOMC decision, because our economic growth is so strong, and because the dollar is hands down the safest currency to be holding while other countries experience economic turmoil.
As always, a pleasure read.
The debasement shall continue unabated.
MDB rolmfao
So, what you're saying is BTFD?
"I think there's a serious risk of our economic recovery getting out of hand and turning into a bubble."
You say that like it's a bad thing. I'll take another bubble. Last party before everything slides off the table.
If you're gonna go broke you might as well do it owing hundreds of trillions, not just pocket change. You're broke either way. The pain is the same.
A quadrillion would be too much. 999 trillion should be okay. We can probably print our way out of that on such economic strength.
I have to agree.
We have no chance whatsoever of getting out of the hole we are in. I, for one, would love another bubble and opportunity to set aside that much more ( gold, ammo, food, et al ) before this goes sideways. I just have my doubts that they have any chance of doing so. TPTB are pretty much out of bullets. That's why I suspect a massive military engagement is on the horizon ( ala WW1 / WW2 ).
The people that are wishing for this to blow up now, I believe, have little concept of what that is actually going to entail for us as a people and a nation.
Be careful what you wish for.
And believe me, I totally understand your frustration and fatalism. The whole, "just do it already" meme.... has its attraction.
Every moment this boat stays right side up you should be focusing on solidifying your position financially as best as you are able ...... because when this goes up .... oh boy.
Yes, very worrying. I can't believe stocks are down on such good news!
Oy vey. Thats a good shabbos Goyim. Just have faith in we G-Ds chosenite people and we will lead you to utopia. *snickers*
Ladies and gentlemen, please place your trays in the upright position, lean forward and place your pillows on your laps and prepare for a uncontrolled crash landing.
We will try to land without suffering overwhelming fatalities but your safety cannot be assured. God have mercy on us all. BTW, there are no parachutes, or life preservers so, unless you can grow wings rapidly, good luck. Over and out....
This is a depression, folks. EBTs are modern soup kitchens, unemployment is north of 25%, and the velocity of money has reached snail pace.
Something like $13.7 trillion in MZM. That's an avalache of money when it finally does get moving. Better stock up on shaving razors.
Why buy razors? All the hipsters dress like 1930s hobos. Poverty is cool now.
Only the rich think poverty is cool. It sucked being a hippie.
Yep, most people have experiecing depression since 2006-2008. Average wages have gone down. Percent of labor force not working has gone up. Poverty rates have increased. Health care, education and property taxes have soared. Working hours have gone down.
The elites have done pretty well with 0% interest rates pumping up asset prices. Great job FED. You blew another bubble that has enriched the upperclass while the middle and lower class have been squeezed.
My guess is we go NIRP which will pump up most assets even more as the wealthy try to put the money into some other asset class than a NIRP earning bank balance. If the markets drop enough on the latest FED move, we may get NIRP earlier rather than later.
Oh - and with NIRP comes cash capital controls.
Yeah I told a coworker at 11am the day of the rate change that if the rate didn't rise that we would be looking at NIRP and we would have to pay the bank to keep our money in there. He said who in their right minds would keep their money in the bank if they did that. I told him you'd have no choice as they would institute capital controls shortly afterwards when the bank runs started. NIRP and capital controls here will be bringing a lot of very pissed off folks out of the woods.
I wonder if Credit Unions would have to follow NIRP?
Market volume is off the charts.
+10,000
The ONLY DIFFERENCE TODAY VS 1930 IS FDIC & SSA/FOOD STAMPS/HOUSING ASSISTANCE ETC.!!!!
SHEEP!!! STOP WATCHING TELEVISION AND READING MSM PUBLICATIONS! WAKE UP!!!!!
It's probably too late, JRobby - the die has been cast. What must play out will play out. We cannot squeeze 50 cats into a breadbox without a blender.
50 CATS IN A BREADBOX
LMFAO
Thanks
Last I heard, the FDIC had less than 1% of the funds it would need to pay out to the >$250,000 depositors in the event of a systemic banking collapse. The conventional wisdom is that the taxpayers would by law have to step in and make those depositors whole. But, per Wikipedia:
In light of apparent systemic risks facing the banking system, the adequacy of FDIC's financial backing has come into question. Beyond the funds in the Deposit Insurance Fund above and the FDIC's power to charge insurance premia, FDIC insurance is additionally assured by the Federal government. According to the FDIC.gov website (as of March 2013), "FDIC deposit insurance is backed by the full faith and credit of the United States government. This means that the resources of the United States government stand behind FDIC-insured depositors."[43] The statutory basis for this claim is less than clear. Congress, in 1987, passed a non-binding "Sense of Congress" to that effect,[44] but there appear to be no laws strictly binding the government to make good on any insurance liabilities unmet by the FDIC.
Also per Wiki that total amount of supposedly insured deposits is approximately $7 Trillion dollars. But I suppose, if the gov wanted to step in to the breach, it would be a snap to sell $7 Trillion in treasuries to pay off the sheeple to keep them calm. /s
Or maybe people should seriously research the financial stability of the bank to which they loan their money before doing so, maybe even going beyond watching their commericials on the TV.
Gold and Silver is MONEY!! The Dollar is just paper!
Gold and Silver Coins, Bars See Very Robust Demand – Delays and Premiums Risinghttp://www.silverdoctors.com/gold-and-silver-coins-bars-see-very-robust-...
Think of fiat dollars as leveraged ETFs. You wouldn't hold them long term because they're constantly eroding in value and trending ever towards zero. If you look at the dollar purchasing power chart for the last hundred years and compare it to the FAZ chart over the last 4 years, it's clear that these things revert to zero over the long term. I'm thinking about investing my savings into Mosin Nagants and spam cans. Much better long term outlook than dollars.
It's all about achieving your objectives from a position of mental superiority. https://www.youtube.com/watch?v=DO1Q7F23DxM
is reality finally going to set in? it's anyone's guess as to how ugly that reality actually is.
wall st is nothing more than a con. the fed is complicit in this con. wall st makes money when stocks go up AND when stocks go down. its time for them to go down. and money goes pouring UP the ladder. i expect 17XX next week on SPX. enjoy.
I just want to interject that I told everyone they're would be no rate increase; and there wasn't. In fact, don't expect one until the summer of 2016, even then, only if they need to defend the dollar.
I guess that wasn't a very popular comment... to say "I told ya so". But I don't really blame you... you have what causes people to say things like that. Cornflakesdisease.
Fed admits China/Wall St threatens to reverse Main St recovery;
This is the most amusing thing I have read all week. Mainstreets recovery, ...ahahahaa
Of all of the "Big Lies" in the container ship of Big Lies, the mantra about "recovery" is the most despicable. Using readily available true inflation figures, and accepting the gov numbers for GDP annual rate of growth, we have been experiencing GDP contraction in real dollars at the rate of about 5% annually since the "2008 financial crisis". On top of that, Wall St. profits and speculative bank profits secondary to the creation of bubbles are included in the gov GDP figures, and have doubled as a GDP component.
But the Fed (beholden to their banker owners), the gov (captured by campaign doners and unwilling to admit it has utterly failed the voters), and the media (owned by six filthy rich guys) keep repeating the Big Lie about the "recovery".
When push comes to shove, the Fed's actions reveal the existence of the Big Lie. Each time they refuse to raise rates, they are admitting there has been no recovery. Ignore what the say. Watch what they do. "The economy is really doing quite well, but for (whatever new reason they can dream up and speak without laughing) we are not going to raise rates yet."
Covert QEKHen' taking place every day. No need for QE4. SPX 2040-2070 by EOQ (2 weeks) through grand short squeeze/HFT spoofing/MM greed. The ZH picks the most bearish analytic heroes from the TBTF banks now: unwashed finance MBAs that do not know how desperate TBTBs use their illegal finance weapons. Besides, price-insensitive quant selling will be over by EOW. No need to go full-ZH right now.
So why are stawks plunging?
That's the market saying give me more QE or NIRP. If the FED had actually raised rates, the market would have been down more.
Markets and algos now have added a stong economic "NO EXIT" in their planning (that was not there before).
Since there is an active "no exit" strategy, they are primed to withdraw all funds from the markets on an instant.
Lots of tipping points and triggers every day now going forward.
Delicate times.
Since there is "no exit" then there is only econmic collapse (death) at the very end and no long term future for the markets.
Cyprus and Greece are templates for the future, developed by GS and CBs. ZIRP and NIRP are the new normal.
That is why.
"prescient" is the word for all that but everyone and his dog is "prescient" these days (except the alleged eggheads at teh fed).
Like I believe what BofA has to say after yesterdays bad cal, fuck these guys as well.
"EBTs are modern soup kitchens"
Good one TeamDepends!!
Get back to the choppah!
The Fed is holding the football like Lucy, and anyone who believes they are going to raise rates is Charlie Brown trying to kick the football. Anyone who is shocked at the decision not to raise the rates has never seen how this cartoon ends.
I liked this image back in the day
http://www.funnyist.com/wp-content/uploads/2013/03/129.jpg
Hartnett makes a better door than a window.
"Ominously Hints Recession Imminent" ?????
Obviously this gentlemen lives in a gated community.
Recession: When the poor are too scared to spend, or lose their money.
Depression: When the rich are too scared to spend, or lose their money.
We are heading for a depression. Just look at the paper claims per ounce of physical gold. It's almost approaching 200 claims per ounce. Some rich fuckers are going to be in for a world of pain. Jump on the Silver bandwagon Zero-Hedgers. It's the only lifeboat left for the masses.
James Wesley Rawles says, when it happens, American population may be cut in half.
What? all the illegals go home 'cause there ain't no work? Shit. We may as well go with them.
That'll only happen when the Federal/State benies dry up.
the Developed Market countries (US, EU, Austraila, Canada, UK) will always be better off than the Emerging Market, as long as fiat 'holds value'.
We are witnessing a massive migration of 3 Billion humans from EM to DM countries.
As long as there are planes, trains, and empty shipping containers.
The next 10 years may see massive movements.
The commodity collapse (after the last 8 year buildup) will cause many EM countries to collapse, and if they can put a plane ticket together...they move to DM.
Many evil doings will occur.
I've lost a little confidence in JWR. He still believes the arab terrorists were behind 9-11 for example,at least according to second hand comments I saw on the You Tube site mentioining this 50% population reduction, which promptly made me decide NOT to watch it.
In the meantime, I finally settled down on the 9-11 anniversary to start reviewing the arguments for an inside job--you know, after all the hoopla has died down and new facts or evidence, if there is any that has not been swept away the govt/CIA, and come to the conclusion that it is more likely that 9-11 was an inside job than not.
Steel melts at 2500, not at the 1500 degrees at which jet fuel burns. Admittedly steel weakens up to 50% at 1500 but thias should not be ebnough to allow a perfect symmetrical collapse of not one, but three buildings.
Siverstein, who owned the 99 year lease, made a killing by collecting billions in the insurance settlement for the properties which were duds finacially-losing money and occupancy-insurance policies that he took out shortly before the attacks
Thermite easily cuts steel, melts it, as witnessed by the molten steel flowing out. Burning jet fuel can't. Iron microspheres can't form at burning jet fuel temps either.
Also the squibbs and lower explosions which preceeded the collapse all indicative of deliberate demolition.
The free fall collapse as opposed to an object that meets resistance-as the floors collapse, they should be slowed slightly as they run into resistance from the ensuing floors.
NORAD was conveniently preocccupied with "drill" scheduled for the same day-all designed to be sure the airliners would never be intercepted.
much much more as well.
I think the FED not raising interest rates might be the spark to finally reverses the gold market back higher.
Yesterday was an "uh oh" moment for many investors that the FED may not have a handle on things as originally thought.
FED credibility is quickly fading and with that goes confidence. And when confidence goes, the equity markets will crash.
That's not all. In a note titled "The Fed Blinks", Harnett does a FOMC post-mortem in which he observes, correctly, that the "Fed admits China/Wall St threatens to reverse Main St recovery", in other words Wall Street, as in Goldman, won, Main Street lost. As usual.
This is all just theater.
For any properly managed Medium of Exchange (MOE) process, DEFAULTs must be monitored. When detected they must be immediately balanced by like INTEREST collections. This "guarantees" zero INFLATION, all the time and everywhere. The operative relation is:
Now, knowing that, go back and read this article and see how ridiculous such analysis is.
All we're seeing is the elite's farming operation (often called the business cycle) in action. In this instance they may have gotten too greedy and killed the engine.
Remember, the elites need government to operate their farm. And remember, government buys votes with giveaways. And remember INFLATION pays for these giveaways.
All these QEs are the government paying its bills (and bailing out elite's bad bets) with counterfeit money (i.e. trading promises they certify and have no intention of delivering on ... they just roll them over). Everything governments do is INFLATIONary ... except their fudging of the numbers ... which is ILLUSIONary.
There's gonna be a Showdown.
https://youtu.be/UF5NUSu1qRg
In my mind, the question is:
" When QE4 is announced, will that drive the market up again, or be seen for what it means ? ".
And things are so f*cked up that I do not know the answer.
Regardless of how it's seen that liquidity will have to settle somewhere. What hasn't been bid?
The entire world is in economic limbo, paralyzed, waiting for the other shoe to drop… If not right now then later when that “propping up is no longer sustainable and it collapses like a house of cards.”
Financial System Booby Trapped with Debt Bombs-David Stockman
By Greg Hunter On September 16, 2015 In Market Analysis 89 Comments
By Greg Hunter’s USAWatchdog.com
Former Reagan Administration budget director David Stockman says the biggest crash coming is not going to be in the stock market. Stockman warns, “I think we are headed for a central calamity. The central banks of the world have been on a 20 year campaign to massively expand their balance sheets and intrude into financial markets in ways that were never before imagined. In the process, they falsified every asset value there is from overnight money all the way to 30-year bonds and the stock market. Everything now is trading off the central banks, but the central banks have hit the end of the road. They have printed so much money and created such a massive global bubble that we are now in the process of that bubble fracturing. The central banks are now beginning to become confused and panicked about what to do. The Chinese have no idea what to do with their $28 trillion credit bubble and that house of cards in China. Our Fed is now on the verge of another meeting where they are debating if 80 months of 0% interest rates is enough. That is crazy.”
Stockman, who also had a 20 year career on Wall Street, says enormous amounts of global bond debt will never be repaid. Stockman explains, “That’s why I say the financial system is booby-trapped with debt bombs waiting to explode. I use the 100 year Brazilian bonds as an example, but there are trillions of dollars of this stuff all over the place. You know the central bankers pretend that they don’t see any bubbles. These people are not only bubble blind, they are bubble deaf. They have no capacity to understand the explosive nature of the financial markets that they are toying with.”
http://usawatchdog.com/financial-system-booby-trapped-with-debt-bombs-david-stockman/#more-16192
I think bubble/bomb is the wrong term. I think debt supernova is more like it.
The corporate media won't/ can't call out Obama on this lousy economy or you are considered a "racist"
Because it's the Fed, you moron, not the presidency.
In order for this site to be at all useful, it would be helpful if the posters actually knew sometihng about how government in this country works.
Get it thru your head that the POTUS is a figurehead, and little or nothing to do with the policies that (mis)guide the U.S . economy. He least of all controls the FED and Treasury (unless a zionist Jew is elected as POTUS this will always be the case).
He is an incompetent nincompoop elected by a few states that got sick and tired of that idiot who preceded him.
The current debt based monetary system just died.
Visit the positive money web-site for an alternative.
Visit the positive money web-site for an alternative.
I took your advice and found this: http://positivemoney.org/our-proposals
I didn't find any alternative there.
I found this:
You would think five years of research would come to know that "all" money is debt based. Money is "a promise to complete a trade". It is implicitly and explicitly debt. Show me any form of money (existing or which you conceive) where this is not so.
What do you mean "return it to"? When was it ever been anything but the banks that controlled creation of money?
Money is "a promise to complete a trade" ... always has been and always will be. And a promise is a debt.
This is obvious when examining trade: (1) Negotiation, (2) Promise to deliver, (3) Delivery.
With simple barter exchange, (2) and (3) happen simultaneously on-the-spot. Money allows (2) and (3) to proceed over time and space. Thus, money is "obviously" a promise to complete a trade. It is "created" by traders making trading promises and getting them certified. It is destroyed by traders delivering on those trading promises. If they fail to deliver that DEFAULT is immediately countered by a like amount INTEREST collection. This guarantees zero INFLATION by the operative relation:
INFLATION = DEFAULT - INTEREST = zero.
No money related to the trade exists before certification. No money related to the trade exists after delivery (or if defaulted, after like interest collection). Thus there can be no inflation. In the mean time, the money created by the trader circulates as the most universally valued object of simple barter exchange.
You don't "put money into the economy" ... real or otherwise. Money is created by traders making trading promises and getting them certified ... the certificates then becoming the most valued object of simple barter exchange.
This is because:
Monitoring DEFAULTs and immediately meeting them with equal INTEREST collections is an automatic negative feedback system which is self stabilizing. Bubbles (and the so-called business cycle) cannot form with a properly managed MOE process.
From whom is the interest collected?
Surely not the defaulting trader?
From whom is the interest collected?
Optimally it is an actuarial process. Just as insurance underwriters assess risk in assigning premiums, the certifier of the trading promise would assess propensity to default in collecting interest. The trading promises are then monitored for defaults (just as claims are monitored). If the provision for default was estimated low, higher interest collections would be factored into new underwriting (just like insurance). If estimated high, the reverse action is taken.
It would "always" be collected from defaulting traders. They are the ones who are failing. If the trader is in a class where 1% defaults are experienced, every trader in that class would have to return (pay back) 101 units for every 100 units he creates. This would reclaim the 1% the defaulters leave in circulation.
Surely not the defaulting trader?
Actually yes. You're not going to collect interest from responsible traders. If all traders were totally responsible, defaults would be zero and zero interest would need to be collected.
But if all this is too complicated, just implement it as a continuous flow process. If the process is leaking (defaulting) you make up the volume by topping it off (collecting interest). That's not optimal or fair but it does guarantee zero inflation.
Interesting logic:
"We stay long US$"
Followed by:
"...at least until new extreme policies introduced (Fed QE4, China QE1 or a G7 shift toward fiscal policy stimulus)."
Tell me something:
What is it going to be like when what has been considered 'safe', 'liquid' and 'deep', turns out to be a hot, steaming (and ~very~ deep) pile of $UST/$USD Bull-Shit...? All these years. All this supposed 'safety'. All the supposed 'where else are you gonna park your money'...
It is going to be called the 'crying game'.
I'm not sure how anyone could watch the last several years and not bring up the Yen. Everything is the carry trade now. USDJPY weakness today = stock weakness today. However, the Yen is going to continue to depreciate because that shirt is even dirtier than ours...so stocks go up.
It isn't a matter of which shirt is dirtier. It is the magnitude of a change in perception.
The Yen has a smaller potential magnitude compared to the dollar because everyone already knows the Yen is the dirtier shirt.
It's amazing to me that the FOMC would sit down and vote 9 to 1 to reduce their reputation.
I think the Chinese have a bond gun to their head. Really no choice for them.
...
"And im all out of chewing gum"
Maybe, perhaps, could possibly be that in a completely logical, rational, metric-established galaxy these statistics would apply.
However, we are not butt only rarely have been in even a moment of a rational universe and never more will be.
And the more the Interwebnet has thrived, become the Monolith in 2001 Space Odyssey, our Oracle, god, and satan, these formerly difficult to divine standards (which are now as common as photos of Kim Kardashian's monstrous ass) are just about meaningless.
Most information, data, and so-called predictions by one entity or another--- written or referred to here and everywhere else, the ones published for purely public dissemination are like the semen and other bodily fluids on these human beans' sheets:
http://www.inquisitr.com/305573/top-5-most-famous-prostitutes-of-all-time
dried up b 4 they hit the mattress.
React to them at your own peril, for Tralfamadorians they are not.
If an auto maker offers 0% financing because the car engines don't run right- would you make a decision to buy based on the 0% or on the faulty engines?
QE, QE baby....
what they're doing and what they're telling you they're doing are two different things. and it may be that they arent actually doing the buying, maybe those belgium trading bonds are being remitted directly. that kid in the photo with the hedge fund and the startled woman pretending to be his wife, that is the beard of the beard. QE has already begun, global reserves are probably being remitted to the Treasury, in exchange for cash. the fed may not be doing it but they know it is happening. whats it all mean? probably means there is a lot more cash in the global system, when will that cash be reported, maybe never. you print it you hand it out to foreign reserve holders, remember cash is only a small portion of the dollar float, so the money is mostly meant to be handed around between foreign potentates. if you travel you may notice dollars floating everywhere, with little flecks of helicopter grease. china buys stuff from japan, they use these dollars. this is inflationary, and it beckons back to bernankes use of the term sterilization. he was confident that bulging foreign reserves would not work their way back into the system, but that was when the bulk of the reserves were in bonds. still cash is difficult to move, with all the terror and money laundering rules, try to get a trillion into this country in cash and see what happens. the only reason we know this is happening is that real estate prices on the west coast are off the charts. thats about all these people can buy. and if you wait too long those dollars will be worthless. this is the similar economy to the late 70s after vietnam was over, we went into a recession with a housing bubble. commercial RE went crazy. now it will happen in spades. the irony is if the IMF pan to issue SDR goes through all those dollars are orphaned. you see there are now two dollars in use, the one we have domestically and the one we hand out in foreign trade exchanges. the idea is to keep those dollars from competing for the same goods in the same markets. where they spill over you will have massive inflation.
1. Fed admits China/Wall St threatens to reverse Main St recovery
Dude this is the number 5 reason Lloyd Blankfein needs to be arrested for treason and the FED needs to be taken over by a publicly owned and operated open source financial system (besides the fact that it is easier than ever before). The Bankers and banking families have declared WWIII against the populations of the world and they are systematically killing us.Their use of clandestine tactics to accomplish it doesn't change anything. They are war criminals. Somebody needs to crowdfund the dropping of information pamphlets across the mid east war zones and other areas like Greece, Ukraine, Cyprus, North Africa, Middle Africa and Brazil to let them know who and how they are doing it by providing funding.
QE is going to implode the middle class, the insurance companies and the pension funds. As the population ages, the cost of payouts for both insurance and pension funds rise dramatically. Their bond portfolios are yielding nothing because of ZIRP and now they are raising insurace rates to cover the spread. The faster their portfolio expires and the lower the average yield, will force them to nail their policy holders and eventually cut the payments to their beneficiaries. The Fed has caused this and now we are paying for it.
The Fed is nothing but a criminal cartel that is destroying the middle class in favor of wall street. They need to stop buying any bonds and let the market determine where rates need to be.
problem is the pension funds for the middle class are invested in wall street, so the circle closes, but youre right about insurance companies, ultimately they have to raise rates because the return on investment isnt happening. my mother is in an LTC which went into receivership, they capped rates at about half of what home care costs. and if your half million dollar house burns down you get half of that because after all, housing in in a bubble.
Maybe this is behind the big push for assisted-suicide. It's much cheaper to convince the aging boomers life isn't worth living and give them a pill to end it than it is to pay their pensions and medical bills.
For reference, the reader should look at Japan.
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.
I am not sure the FED lost credibility.
Its more that the fedral grovernment lost credibility in its economic assessment. They would have you believe that the situation was mending and now is struggling but truth is they hid the reality and now they cannot continue to hide the mess. Will it unravel completely?
They should just skip the B.S. and just put $1000 in every American's bank account (and if they don't have one, I'm sure that JPM would love to give them one) every month. Forget policy, forget what unemployment is, forget what is going on in China and the EU or the Mid East. All the QEs never ignited the economy over all, just in NJ, NY and Connecticut did it work. The Fed should get that helicopter in the air and keep it there until the economy just completely dies. Dies to the point we will have to completely reset the country. Crash it and burn it. sarc off.