Art Cashin On "The Folks Who Brought You 1.5% GDP and 8.3% Unemployment"

Tyler Durden's picture




 

Confused what the Fed may or may not do in 3 weeks? Join the club (although the answer at this point is a definite nothing especially with food prices soaring not only in the US but around the world). There are those - banks - who as we have said repeatedly are in desperate need not of promises of further easing, but of cold, hard, free, electronic reserves. Then there is everyone else who doesn't care what the Fed does because it will have no impact on the economy, but at least it may raise 201(k)'s for a little longer, preserving the myth that asset values may still increase, and feed the illusion of wealth. At least until the impact of the latest Fed (non) intervention fizzles. Then there is Art Cashin, who deserves to be heard, if for no other reason, than because he is the true Chairman (of the fermentation committee).

From UBS Financial Markets

From The Folks Who Brought You 1.5% GDP Growth And 8.3% Unemployment – It looks like the Fed's frustration may be growing palpable. They have cut interest rates virtually to zero (and pledged to keep them there for years to come).

They have run three separate quantitative easing programs. They have engorged the U.S. banking systems with excess free reserves to the tune of nearly $2 trillion.

And all that has left the U.S. economy sputtering just above stall speed and employment virtually frozen.

The Fed's problem is that all the newly created "money" has gone unspent and unlent. To repeat an analogy I have used to explain why there is no inflation – it is as though Bernanke dropped $10 million in newly printed bills on your lawn – and you are so worried you hid them in the garage.

That's the Fed's frustration. They have made trillions of dollars available but no one wants to borrow any of them or spend them.  More correctly, no one with a good credit rating wants to borrow them or spend them.

We think Eric Rosengren articulated that frustration and hinted at there next initiative to address it. We think Bernanke may flesh  it out in coming weeks and certainly at Jackson Hole.

Traders (both here and Chicago) think it may be an aggressive Operation Twist in mortgage backed securities (the original source  of the problem).

The goal would be to drive margin rates to dramatic lower levels not seen in history. The strategy would be to make mortgage money so cheap that folks would virtually have to refinance. Others, seeing such low rates might be induced to buy other bargain basement priced housing and maybe rent it as income property.

It would be a kind of end run around the traditional banking system, which has huge free reserves and a log-jammed lending system. The next couple of weeks could be interesting.

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Thu, 08/09/2012 - 11:20 | 2691199 Jason T
Jason T's picture

The disintigration will continue and there is NO POWER great enough to stop it.  We'll make the deal iwth the devil to print money (Faust) and that'll lead us to the road to hell.  

Thu, 08/09/2012 - 11:24 | 2691205 magpie
magpie's picture

That deal was made in 1913.

Thu, 08/09/2012 - 14:20 | 2691734 Thomas
Thomas's picture

Bernanke, that arrogant bastard, has the wisdom of the free market screaming in his face that a fucked up mix of inflation and deflation are what is being demanded by the market, but he somehow thinks he knows what the market SHOULD want. Consumers aren't borrowing because they can't afford to. They have spent their future in its entirety. Now it is time to hunker down for the long haul into death. The boomers think they are gonna work till they drop but everybody knows that you fire employees who are dottering. How does stocking shelves work with the oxygen tank in tow? Bernanke suffers Hayek's Fatal Conceit, and he is not gonna let go until he destroys the system. Do you really think you can take something so complex that organism metaphors are prevalent and think you can turn a knob or two to fix it? If you were a biologist, you would be redesigning elephants because they are just too fucking fat in your opinions.

Did I mention that Bernanke was arrogant? And, BTW, when was the last time he had a job in the private sector seeing markets up front and personal? Never? Really? Never? Have any of those twits at the Fed ever done anything outside the laboratory? Really? Never? 

I have a suggestion for the Fed governors. You have had enough metaphorical Koolaide for a lifetime. Now it is time to drink the real stuff. Damn, these guys piss me off some days.

Thu, 08/09/2012 - 11:55 | 2691334 The trend is yo...
The trend is your friend's picture

If people can't afford a house or can't get financing due to poor credit at these ridiculously low rates, what will happen to housing prices when the rates actually go back to a still cheap 4.5% 30 year mortgage?   kaboom

The bottom is surely in

Thu, 08/09/2012 - 12:14 | 2691401 Larry Dallas
Larry Dallas's picture

No one is going to lend anymore like they did in yesteryear. Simply put, there is no private label securitization anymore. Everyone who originated then moved the paper off of their balance sheet as soon as they underwrote it. 

Now these banks are forced to be "storage companies" and don't want the risk.

Who's going to hold all of this paper? Perhaps the gov't. But I don't see that happening anytime soon. If the gov't becomes the secondary market, then maybe this will work.

Thu, 08/09/2012 - 14:41 | 2691815 GernB
GernB's picture

By all means let the government hold the paper. Because if irresponsible lending got us into this situation then the obvious answewr is to perpetuate the irresponsible lending so as to avoid the system correcting. Markets don't work because they actually punish bad behavior. Instead we need to hold the paper and regulate the crap out of them. That'll fix it.

Thu, 08/09/2012 - 12:23 | 2691442 Thisson
Thisson's picture

Huh?  Real estate bottoms occur when interest rates PEAK, not when rates bottom. 

Thu, 08/09/2012 - 13:29 | 2691605 illyia
illyia's picture

That is a very interesting, and obvious, comment.

Thu, 08/09/2012 - 14:20 | 2691748 pd45
pd45's picture

Housing can't recover for another 3 to 4 years. All those home owners who were/are underwater and BK'ed or simply delinquent had their FICO's ruined.  It takes 7 year of pristine credit history  to build thir FICO's backup to repectable level.

Thu, 08/09/2012 - 11:22 | 2691201 vinu02
vinu02's picture

http://goo.gl/2kJ3N From 2009 lows, $DJIA is up 99%, $SPX is up 105%, and $COMPQ is up 132%.

Thu, 08/09/2012 - 11:25 | 2691212 Ivanovich
Ivanovich's picture

Thanks!  Gonna tell me what the weather outside my window is, too?

Thu, 08/09/2012 - 12:41 | 2691490 Carl Spackler
Carl Spackler's picture

Yes, the weather outside your window is global warming. 

Now be a good sheep and do whatever the governing class needs you to do to enrich/entrench itself. /sarc/

Thu, 08/09/2012 - 11:24 | 2691206 azzhatter
azzhatter's picture

Have noticed a pretty increase in food items in the past 2 weeks- Milk up 6%, eggs 6% and beef around 8%. WTF

Thu, 08/09/2012 - 11:37 | 2691257 Temporalist
Temporalist's picture

You didn't "notice" anything.  Just keep your nose pressed to your ipad retinal display and pay no attention to the monkeys banging on the print key.

Thu, 08/09/2012 - 12:11 | 2691394 Jonzey39
Jonzey39's picture

I would say you are suffering from a similar "nose pressed to your ipad retinal display" syndrome if you have failed to notice the major drought taking place in the Midwest (USA).

Yields are going to be horrific and for many farmers close to 0. I'm sure that supply of food for an overpopulated planet has nothing to do with higher food prices. I suppose the fact that high fructose corn syrup is used as a substitute for sugar has nothing to do with it either.

In fact, I would dare you to go into your local grocery store and I suspect you will find that you will have more difficulty finding food without corn starch or high fructose corn syrup than food with it.

Furthermore, a great deal of livestock which are used to produce everything from eggs, to milk, to various meats are all derived many times from the supply of corn as well as feedstock.

I don't disagree that the printing of money has pushed commodity prices higher, but to totally ignore the drought and the impact its had on prices makes me wonder what video you were watching on your IPAD. 

Thu, 08/09/2012 - 12:58 | 2691534 Beam Me Up Scotty
Beam Me Up Scotty's picture

And why again are we making gas from food(corn)?  Talk about sheer lunacy.....

Thu, 08/09/2012 - 13:15 | 2691575 Bob Sacamano
Bob Sacamano's picture

And don't forget, after a couple of years of record farm profits, we will need to create some federal emergency farm aid program to bail them out of a bad year. 

Folks -- good years are followed by bad years.  Droughts happen.  Stop the bailouts. 

Thu, 08/09/2012 - 13:22 | 2691591 mind_imminst
mind_imminst's picture

I have been beating the blogging drum about this recently...corn prices are going up and yet we still have this stupid ethanol mandate. Not only will food prices go up, the price of gas will go up, because it is blended with the stupid, increasingly more expensive, grain ethanol. 

Thu, 08/09/2012 - 11:45 | 2691297 1100-TACTICAL-12
1100-TACTICAL-12's picture

People don't have the fucking credit score to refinance. late credit card payments and soforth, in this all jobs gone oversea's fucked up economy. i suspect the vast majority of people still in their homes would love to re-fi but do not have the credit score and are just trying to hang on. lower the credit scoe requirement and let people re-fi. my rate is %7.75 adn i can't re-fi and have about $80,000 equity according to the county apprasill. wtf

Thu, 08/09/2012 - 12:17 | 2691414 ZackLo
ZackLo's picture

Because the plan For Bernanke seems to be sucker everyone who HAS Equity above the age of 62 or if they could conveniently transfer the house to someone that's 62 to get one of these...

http://en.wikipedia.org/wiki/Reverse_mortgage

MBS QE or Twist will not fix this.....Only a washout and a repricing of the equity or assets that are left that haven't been diluted will work and overhauling the whole federal budget, Interest rates attract capital....if you get paid no interest why the fuck wouldn't you bury the shit in the backyard? or build some factories in a foreign country at a higher yield?....A lot of these big name corps have an effective zero cost of capital in nominal and real terms you can't compete against that.  as a consequence they all depend on ZIRP and higher prices otherwise their business models would crater...Back in the old days you had to "add value" to get higher prices now the fed has instituted a "no value tax" through ZIRP..

chase people out of good assets, corrupt the individuals creating the good assets by a constant flow of cheap funds , innocent people run into garbage, short said garbage, Rinse,repeat?

Fed policy for 100 years minus a couple blips of accidental prosperity....

Thu, 08/09/2012 - 13:06 | 2691549 azzhatter
azzhatter's picture

these fucking Ivy league scumbags are just addicted to saying we just have to get back to the good old days. Turns out they weren't so good but the cocksuckers refuse to see it. Fuck every last one of them with a pole axe, go Galt

Thu, 08/09/2012 - 12:18 | 2691423 Renewable Life
Renewable Life's picture

Jesus Amen!!!!!!!
It's not about interest rates you fucking monkeys at the fed, it's about the 40 million jobs we have lost and outsourced over the last 25 years!!! And it's worse then it even seems, because those 40 million jobs that went to china, India, and elsewhere, created probably 150 million more jobs by way of upward mobility of the original 40 million people who now have incomes and opportunities they didn't have before!! Which is great for those people, and their Counties, but fucked for us!!!

These scumbag ivy league idiots on wall street and their federal stooges, are calling plays from an outdated, irrelevant play book written in the 30's!!! If it wasn't going to be so damn dangerous and devistating to our Country, it would be a really funny B movie!!!!!

If we don't get 20-30 million jobs back in this Country in the next two years, it's game over........ and the ONLY thing that would create that number of jobs that fast, is WWIII......... Uhhhh ohhhhh

Thu, 08/09/2012 - 12:34 | 2691470 DosZap
DosZap's picture

Renewable Life

It's not about interest rates you fucking monkeys at the fed, it's about the 40 million jobs we have lost and outsourced over the last 25 years!!!

 

Ditto's dudeski, but THAT IS THE PLAN.

The entire goal of the globalist cabal, is to take America down to the levels and living stds of the rest of the world.

NOT bring them up to OUR old standards.

To do this they HAD to destroy the Middle Class.............Big O is doing a fine job in that regard.

Thu, 08/09/2012 - 14:38 | 2691804 Overfed
Overfed's picture

It's too bad that hardly anyone in this country of retards understands that. Even the ones who do get it, won't believe it.

We're getting fucked bukai-style by the greed and powerlust of the elites on one side, and the stupidity and laziness of the masses on the other.

Thu, 08/09/2012 - 14:08 | 2691703 BlackSunshine
BlackSunshine's picture

Seriously, I read alot of strong commentary, but I don't see anything in the way of action by anyone on this board, except for maybe buying PM's.

What happened to pulling out all of your money out of the bank, striking, sit ins, etc...no one cares, the internet is the best thing for a government gone awry, it gives the sheeple the illusion that they have control.

I like the articles on ZH, but the commentary is all the same "Fed this, Fed that, etc..." more commentary, no action.

Ron Paul?

Thu, 08/09/2012 - 20:02 | 2692608 Renewable Life
Renewable Life's picture

I'm with you, what do you want to do??

I thought a million person march on DC would be nice, with one little extra nuance.... All million would be armed!!!!!!!

The imagery alone of a million armed citizens, marching on Washington DC to protest our loss of Sovereignty, Liberty, and Freedom, would last a generation!!!!

Call it the "Million Armed March" or "A Million Strong", that would get the MSM attention wouldn't???????

Thu, 08/09/2012 - 13:05 | 2691542 Beam Me Up Scotty
Beam Me Up Scotty's picture

Too bad.  Lots of people made horrible financial decisions when housing was going sky high too.  Turning their houses into ATM's so they could buy a nice new big boy truck with snowmobiles and jet skis and boats and 4 wheelers.  I don't feel sorry for any of these fuckers, they are a big reason we are where we are today.  Then alot of them have the audacity to strategically default on their underwater house and everything else they owe money on and leave the people who do make their payments holding the bag via reduced property valuations and higher property taxes.

Boo Hoo.

Thu, 08/09/2012 - 11:50 | 2691316 Nadaclue
Nadaclue's picture

It's been going on for the last four years but has been hidden. Same price for grocerys but qty's are reduced, then they got to the point where what was once a full box is now 2/3 full so they've had to reduce package sizes.

I'm surprised Milk and eggs have stayed so low for so long as any size changes would be immediately recognized. Beef on the other hand has gone rocket these last 18 mos. I used to be able to buy nice marbled Rib-Eyes @ 4.99 on sale, $6.99 regular. Now they are $6.99 on sale and $9.99 regular for what is poor quality choice meat. Sad times.

Hopefully this mass kill from corn shortages will flood the market with meats and I have to large sub zero freezers I can fill.

Thu, 08/09/2012 - 12:08 | 2691382 DOT
DOT's picture

Adjustments to herds have been ongoing.

Pork Shoulder here in the Mid. is about $1.49/lb

Chicken (corn fed ) is today going at $0.49 to 0.79/lb

Stock-up when you can, if you think your freezers will have power.

Thu, 08/09/2012 - 12:23 | 2691441 DosZap
DosZap's picture

Chicken (corn fed ) is today going at $0.49 to 0.79/lb

Stock-up when you can, if you think your freezers will have power.

I have not seen chicken below $1.29# in months.And that is for Legs!.

Whole fryers are $4.00+.

Thu, 08/09/2012 - 12:22 | 2691440 ParkAveFlasher
ParkAveFlasher's picture

On the topic of anecdote, Omaha Steaks (overpriced to begin with, but stick with me) prices their hamburger sets the same as last summer by dollars and number of patties, however they have reduced the patty sizes from 5oz to 4oz.  Of course, if they didn't sell 4oz patties last summer, so I imagine it's the type of thing that registers in the inflation calc as "data not available".  And that's how the Fed does you. 

Thu, 08/09/2012 - 12:36 | 2691475 Nobody For President
Nobody For President's picture

Piker - gas just went up a dime a gallon overnight (~4%) here in North CA - one lousy little refinery fire...which really effects the price of the gas already in the underground tanks at the stations.

Thu, 08/09/2012 - 13:11 | 2691564 Beam Me Up Scotty
Beam Me Up Scotty's picture

Its about replacement cost moron, not what you bought that load of gas for.  When gas prices go down, if you have high priced gas in the ground, you can't just lose money on it.  But if the competition across the street lowers their price because they got a fresh load at lower prices you are forced to lower your price or your won't sell your gas.  Now you are stuck with high priced gas in the ground that you can't sell.  Great business model isn't it.  Thats why stations that operate the way YOU think they would go out of business.  You have to make extra money on the way up to offset the losses you might make on the way down.

AND, gas stations are the ones who make the TINIEST part of the pie on gasoline.  Quit blaming them.

Thu, 08/09/2012 - 13:20 | 2691586 Bob Sacamano
Bob Sacamano's picture

Thank you BMUS.  Good to know someone understands how the world works. 

Thu, 08/09/2012 - 16:00 | 2692051 WoodMizer
WoodMizer's picture

Quite right, the Gas station owners, I am friends with, claim to make 1 to 5 cents per gallon.  They make all their money on beer, sodas and cigs, with consumer sentiment as low as it is turnover on sodas and food must be struggling.  The loss of food income might incentivize the owners to hedge their losses by raising gas prices faster than they once did.  Of course it could also be due to the massive swings in gas prices we have seen since 2005, once burned twice shy.

Station owners are the middlemen least responsible for the premium on energy. 

 

Mon, 08/13/2012 - 12:42 | 2701046 Bob Sacamano
Bob Sacamano's picture

Then they are poor operators (@ 1-5 cents).  Average margin is 10-12 cents per gallon over the long term (i.e., rolling 4 or 5 quarters).  Look at any publicly traded c-store gas data.

Thu, 08/09/2012 - 16:06 | 2692081 WoodMizer
WoodMizer's picture

What do beef, poultry, eggs and milk producers use for feed?

What have soy and corn prices done in the past three months?

What happened the cost of refrigerated shipping over the past 3 years?

Can't print food and energy, but you can use fuzzy math to shift blame.

Fri, 08/10/2012 - 12:14 | 2694296 larz
larz's picture

Pay no attention there is no inflation havent you seen the govt numbers? there hasnt been inflation for years just look at the numbers and I just bought an ipad for much less than last year and my house - man is that ever cheap - too bad the bank owns it oh well cant have everything i guess, my paycheck is going down steadily too wow inflation thats a good one

Thu, 08/09/2012 - 11:24 | 2691207 HD
HD's picture

Wouldn't just be easier to send everyone a FED gift card redeemable for any goods and services in the United States? I know I'd feel better about endless reckless money printing if I could have some free Benny bucks to buy more useless crap.

Thu, 08/09/2012 - 11:34 | 2691247 youngman
youngman's picture

They are doing that now...as long as you vote Democratic...its called reperations

Thu, 08/09/2012 - 11:41 | 2691277 LongSoupLine
LongSoupLine's picture

...and a FEMA trailer too!

Thu, 08/09/2012 - 11:24 | 2691208 buzzsaw99
buzzsaw99's picture

the stock market and ny banker bonuses are the only barometers of success that the fed uses. everything else is an[sic] bs excuse to boost those two.

Thu, 08/09/2012 - 11:25 | 2691214 bigwavedave
bigwavedave's picture

Art needs to retire and brew his own beer. Did you ever hear that humming sound Art? That HFT sound. How much equity does Art own in HFT firms? My guess is a DUCK EGG ZERO. Retire. Or die trying. 

Thu, 08/09/2012 - 12:42 | 2691494 Nobody For President
Nobody For President's picture

I cherish Art as one of the last of the human traders amid the cancerous growth of the HFT machines. He (and I) may be a dying breed, but if you welcome the current 'market', or even accept the sound of 'inevitablility' of total computerised trading, you are not dying - you are already dead.

http://www.youtube.com/watch?v=x5m1A7zoIcc

Thu, 08/09/2012 - 16:18 | 2692115 stocktivity
stocktivity's picture

Art is an institution who will never be replaced...enjoy him now while you still can.

Thu, 08/09/2012 - 11:25 | 2691215 Cognitive Dissonance
Cognitive Dissonance's picture

"We think Bernanke may flesh it out in coming weeks and certainly at Jackson Hole."

And that is why the markets are up. Everyone is trying to front run Jackson Hole.

Good luck with that.

Thu, 08/09/2012 - 11:26 | 2691217 max2205
max2205's picture

right......

Thu, 08/09/2012 - 11:27 | 2691219 Winston Churchill
Winston Churchill's picture

Talking is the only thing the Fed can do.

They are boxed into a corner of their own making.

The "market' is staggering around like a drunk looking for a

hidden bottle in the landing cupboards.Forgetting he already drank it.

Whoops,theres the stairs.

Thu, 08/09/2012 - 11:35 | 2691252 HD
HD's picture

You paint quite a picture there good sir. A green arrow for your trouble.

Thu, 08/09/2012 - 11:27 | 2691224 Satan
Satan's picture

An interest free loan is still expensive if what you intend to buy with it is over priced.

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