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What Can Yellen Really Do?
Submitted by Jeffrey Snider via Alhambra Investment Partners,
For one, eurodollar futures are “obliged” to take account of any threats from the FOMC even though, in the end, they might only be self-fulfilling. Because the Fed has very little actual ability to condition money markets, none of that is truly “real” but there remains the unknown and money dealing agents still seem reticent about any kind of (further) showdown. Where the eurodollar curve was shriveled toward nothing up to the September payroll report released on October 2, the October payroll report has advanced the recent run of Yellen’s apparently restored resolve.
At pivotal points on the curve, such as the June 2018 maturity, that has obliterated the “dollar” run trend that began back around July 6. However, as the fuller curve displays, that seems to be only a change in policy perceptions and not especially much more than that.
Again, the entire curve had been flattening up to October 2 before meandering throughout October while trying to survey that FOMC resolution. The October FOMC seems to have reversed further doubts and pushed expectations back toward a rate hike. However, as the eurodollar curve today demonstrates, that amounts only to a shift in that policy view rather than a complete outlook.
Even in the shorter maturities, the curve is still inside where it was at the eurodollar outbreak of the last “dollar” wave/run. Further out, though, the curve remains much, much flatter. Again, that suggests eurodollar “obligations” about policy decisions and not wanting to contest that fate directly. In terms of economic progression, that flatter curve continues the trend.
That much we can observe directly via commodities. Copper as of yesterday’s close revisited the lowest closing price since August 26; matching that day’s multi-year low. So far this morning, copper is trading down to $2.241 at the December maturity, which is in the same range as it was on the morning of the global liquidations of August 24.
Crude oil prices continue to be similarly unresolved, trading more so in a conspicuous range both on the front and toward the rear. The shorter end of the WTI curve is, as always, being directed by the “dollar”, or at least perceptions of what that might be. Thus, the lack of discernable trend echoes what was in eurodollar futures. The fact that WTI has continued on much the same sideways line even after the front end of the eurodollar curve succumbed to Yellen madness bolsters the eurodollar case – only a policy shift. The back end of the WTI futures curve continues to be almost pinned in the same very narrow price range, marrying “dollar” with physical economy.
That physical economy according to domestic crude oil continues to be grim and getting more so. Inventories that had started to rise, coincidentally, around the week before August 24 have surged of late. The reported domestic crude oil stocks have neared again their 80-year highs despite production cuts from the summer largely holding. Less production and rising inventory, especially given this time of year, equates to “something” about demand.
With crude stocks moving up solidly despite inventories being still almost one-third above the “cycle” trend from 2009 through 2014, the economics of that behavior suggest the opposite of what the FOMC would like to project.
And that would seem to bridge the eurodollar curve’s front and back ends, aligning it with commodities more generally. In that view, eurodollar futures are suggesting exactly what they have been for almost a year and a half – that the Fed might or might not act, but if they do it won’t alter the economic course but only wield the potential to make a bad (and growing more so) physical and general economy situation that much worse.
In the end, it may not as much matter except as a test of these kinds of perceptions. The history of FOMC decisions during this “dollar” run dating back to last year has been quite the same; hint with greater magnitude at imminent rate hikes only to relent and recoil at what is wrought (and, really, what is rot underneath).
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Yellen can invest in Americans instead of Foreign Banks trying to take over America.
That would be a good place to start.
Fed-Backed Public Debt Liquidation, the Fed can step in and wipe out all consumer/mortgage/student debt.
The economy would roar back to life over-night with almost no inflation.
Step 1 Fed "buys" all the debt and uses bailout funds and interest re-accrued there-on to force banks to discharge the debts.
Step 2 Fed shreds the paper
Everyone wins.
Economy recovers
Debt is relieved, future generations have "hope" and "opportunity".
The only "hope" and "opportunity" future generations have without such a solution is the "hope" that a zombie outbreak happens and that they are presented the "opportunity" to survive said apocalypse.
So the Fed has a choice
Zombie Apocalypse
or
Hope and Opportunity
Personally I dont care which one it goes with.
Problem for federal reserve and other Central Bank is fiat monetary regime is not ever create wealth, is only vehicle for efficient, most time dishonest, redistribution of wealth. Please, you are explain to Boris how after massive dilution of wealth of nation by denomination of fiat currency and careful disposition to wealthy 1% corrupt bankster class is Central Bank reverse trend. Whether you are look at duration mismatch (lend long, borrow short) or re-capture of illicit gain of dilutative effect of QE, you are still face global finance system is beyond tipping point. Bankster is not return ill-gotten gain, but is addict to easy money like street whore is addict for crack cocaine.
…but what is Boris knowing!?
Bitcoin Has Become This Year's Top Performing Currency http://bitcointeaching.com/2015/11/bitcoin-has-become-this-years-top-per...
Michael Pento says the NFP news is good news because now the FED is forced to raise interest rates in Dec or loose all credibility. Also gold has already priced in this interest rate hike so buy now. After the rate hike this will solidify the depression and the FED will be forced into QE and ZIRP again in 2016 which will be wildly bullish for gold.
http://kingworldnews.com/michael-pento-11-8-15/
I agree with all of that, especially the idea that any further QE would be wildly bullish for gold. No question about that, because once that panic has set in there will be no stopping it. I think the bankers are also getting prepared to run gold and especially silver to the damned moon. Not today, not next week... but they are not dumb, they will be on board for that ride, and indeed will promote it. It's going to be a fun ride in a way... in a hellishly scary world. But gold's surge should last at least a full decade.
But I also think that whole metals sector has one final spike lower to put in a typical spike bottom that we will easily recognize a year from now as a classic bottom. You know, the old saying "A top is a process, a bottom is an event." Like that.
Yeah. I'm looking at gold miners (and others) for good fundamental value now. Being a contrarian is how money is made. Just look at what Kyle Bass and many others did. They shorted the stupidity of the FED and won.
Me too. And silver miners. Many of them will survive. Not to sound like a shill, but Alexco Resources has a hell of a good story. They own the richest silver deposit on earth, have a working mine that they can fire up at any time, and best of all... they have a subsidiary business doing remediation work on previous mine sites that other companies left behind. That business brings in lots of cash so they can explore all they want and still survive. Their customer is the gov't of Canada. Best of all worlds. I'm into that one and others.
I like McEwen Mining. The CEO owns 25% of the company and owns producing mines and good deposits. Another I like is Platinum Group Metals (PLG).
Thanks. I like Excellon, Bear Creek Mining (silver) and Endeavour Silver Corp. Yamana and Victoria Gold. Victoria has little volume right now so I don't own that one quite yet. But it's definitely on my radar for the potential upside. I have small stakes in all others I named.
Maybe you are invest in Boris Copper Mine, subsidiary of Alatovkrap Holding. We are specialize high profit mining concern, extract high grade refine copper from low depth urban proximity mine site. Is very very lucrative*
*Please to wear thick leather glove and rubber sole boot.
Rob McEwen is one of few good guys in a bad business. MUX under $1.00 is worth thinking about.
Yellen is an employee of the Federal Reserve which is a consortium of banks, she will act in their interest not ours.
I wish more people understood this.
I can't conceive of 'anybody' who doesn't understand that.
You're forgetting the American people, who don't know the Federal Reserve from Federal Express.
On second thought, as inconceivable as it seems to me... you're right. There 'are' a lot of people who think the Fed is some sort of government institution.
By causing a 50% inflation spike in the next 5 years, the FED is set to make 4 to 5 trillion dollars.
And the banks that own the FED set to make another 4 to 5 trillion dollars.
And they get it nearly for free.
If deflation would really be happening, they'd go bankrupt.
So they have all the movites to ease and keep on easing. You don't need to be a rocket scientist to understand that.
And those who spead the doubt will most probably be on their payroll or just populists trying to look smart and sell their books and DVD's.
And those people at the FED? They think of us like a 12 year old looks at ants. In their eyes, we've got it comming because god made them special and hates us.
Those are the kind of people who think they've got it in their genes to run the world.
The dollar run or dollar strength is exactly what FED needs to worry about as the following USD/CAD chart shows. 1987, 2001 and 2008 clearly stand out. 2015 USD growth shown to far right.
http://fxtop.com/en/historical-exchange-rates-graph-zoom.php?C1=USD&C2=C...
I think she is going to be f...ed!
Might be the only time in a life.
Better enjoy it!
Has she tried shooting herself? That might fix the economy. Broken skull theory.
Waiting for Godot? Stop waiting...your savior has been delayed indefinitely.
What can Yellen really do? Well, so far she's showed remarkable skill in getting investors to believe in unicorns. Even professional seasoned investors. I consider this an interesting experiment in just how long can you postpone something as monumental as this and still retain credibility? Her methods will be studied by scientists and sociologists for years to come. Each month that rolls by brings more incredulous results of uncertain action by investors and nervous popcorn gobbling by dozens of mainstream expert talking heads. Nobody out there knows WTF. Damn! Shes good!
Dropping the tail (the financial economy) that wags the dog (real economy) is not an issue as it is not going to be the Predator's tail. Far more slick to see the tail wither with Cronies (Fed, etc) taking the blame. Why must wealth preservation be in papers, fiat monies and debt peaked land and labor systems. Many of these spins from an old paradigm are just entertaining for the Predators who do not fund them. Conversely, it helps in their stealthy entrances into real economies where the physicals are in guarded warehouses and terrains and their habitats are gated communities. Plenty of time given by preys for debt defaults to be distibuted among themselves and kicked down to the next gen. Cronies of the old paradigm can be discarded tissues too. Channel your talents to the new paradigm and do not indulge in the dreamland of smashing the Matrix. You are not even organized to marshall a countervailing force.
About 5 years ago I said the federal reserve would never again raise rates, at least not until hyperinflation occurs. That opinion still seems reasonable to me.