How The Weather Punk'd The Fed

Tyler Durden's picture




 

While every soon-to-be-retired boomer and his or her long-only asset-manager stock-broker commission-leecher lies awake at night in the forlorn hope that Ben "I'm-all-in" Bernanke finds another pile of printing presses to make use of in his game of Global No-Limit Texas Central-Banking; the economy, judging by 'selective' macro data and today's Beige Book, is limping along quite happily with no need for QE3 anytime soon (and that spells trouble for a market that is entirely dependent on the spice flow of liquidity and not just the stock of central bank assets). The sad truth is, as we first pointed out back in early February, that the economy is significantly less upwardly mobile than it 'optically' appears (or the market signals it to be) thanks to the extreme weather that has occurred and so while the spin-masters will attempt to make every headline look like we are in self-sustaining recovery mode, the Fed knows full well the reality is far different (hence Bernanke's recent comments) and yet they have not admitted to this animal-spirits-shattering reality (yet). Perhaps this shockingly simple 'chart-that's-worth-a-thousand-words' will force their hand as the correlation between regions showing extreme positivity within today's Beige book and the regions with the extremest weather disconnects is, well, extreme itself.

 

So perhaps it is left to the market to show the Fed the direction in which they should lean - as we have discussed time and again - QE3 will not occur until we have seen a significant enough correction of expectations that its impact can be expected to be positive (as we have pointed out the fading impact on the real economy and yet strangely similar nominal market impact). Or will the Fed at once shatter our illusion and offer up the $2 trillion QE3 to gods of nominal bullishness in this ever-so-independent election year

(h/t John Lohman)

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Wed, 04/11/2012 - 23:04 | 2336752 zorba THE GREEK
zorba THE GREEK's picture

The Fed was already a punk.

Wed, 04/11/2012 - 23:35 | 2336804 SHEEPFUKKER
SHEEPFUKKER's picture

If the weather too hot, bad for the market. If the weather too cold, bad for the market. What's next.....a centrally planned weather outlook?

Thu, 04/12/2012 - 00:44 | 2336889 mcguire
mcguire's picture

chemtrails..

 

Thu, 04/12/2012 - 09:17 | 2337407 kill switch
kill switch's picture

HARRP

Thu, 04/12/2012 - 01:01 | 2336912 Oh regional Indian
Oh regional Indian's picture

Sheep, it IS a centrally planned weather outlook.

Look up, Chemtrails, Cloud seeding, ionospheric Heating (aka HAARP), earthquake machines (probably linked to above)....

USAF wrote a weather weaponization position paper in the 1970's.

It's going to be a weird, weirder, weirdest year. Look at the weather in the US thsi winter.

Oh, and Bangalore had tremors yesterday. Quaking earth...

unedited-stream-of-consciousness/

Thu, 04/12/2012 - 01:52 | 2336941 TruthInSunshine
TruthInSunshine's picture

In all of my on topic posts yesterday and today, I forgot to timely remind everyone that even with all that's going on, we need to be mindful and appreciative that at least Jon Corzine is still free, at large, and the topic of his overseeing the 'vaporization' of close to 2 billion dollars is rarely discussed lately, so there's that...

 

#JonCorzineIsAnObamaBundlerInnocenceProject

Thu, 04/12/2012 - 08:20 | 2337214 Gohn Galt
Gohn Galt's picture

Actually the guberment poisoned the nation this last month in order to cool off the US.  In regards to the Mexico earthquake, it was planned(rescue teams running drill, Obama's daughter goes to watch) and manufactured to avoid a larger earthquake just as Tesla outlined.  Plus there seams to be a counter seismic wave that may have subdued a larger catastrophe out of Yellowstone. 

I am curious about the Yellowstone wave if anyone has more info.

 

Wed, 04/11/2012 - 23:09 | 2336758 CrazyCooter
CrazyCooter's picture

Not to sound like an idiot, but can anyone explain why "heat" is "bad" for the economy? It is just a knowledge gap I guess. I understand things adjust seasonally (e.g. heating fuel is in demand in the winter, but not in the summer, etc), but I am not getting the gist here. I am not sure I could logically argue this to a friend and be able to explain ...

Thanks for your time and sharing.

Regards,

Cooter

Wed, 04/11/2012 - 23:16 | 2336771 Maos Dog
Maos Dog's picture

It's not necessarily "bad" right now, the current problem is that it pulled demand forward from q2 into q1.

The "BAD" will not begin until summer when crops will wither on the vine into dust from the heatwave if this heat persists.

Thu, 04/12/2012 - 00:29 | 2336874 Yes_Questions
Yes_Questions's picture

 

 

Its been bad: 

 

http://agrilife.org/today/2012/01/27/more-than-150000-breeding-cattle-ex...

The U.S. Department of Agriculture reported Jan. 1 cattle inventory for all cattle and calves totaled 90.8 million head, 2 percent below the 92.7 million on Jan. 1, 2011. It is the lowest Jan. 1 inventory of all cattle and calves since the 88.1 million on hand in 1952, according to USDA.

http://www.agrimoney.com/news/drought-to-near-halve-russias-grain-export...

 

Russia entered 2010-11 with rich stocks, of 20m tonnes, left over from bumper harvests in the two previous years, providing some buffer against this year's poor result.


However, nearly half of the inventories are held in government stores, and are likely to be directed solely at domestic users. The livestock farmers that Russia is attempting to champion, to cut its huge imports of meat, are reported as slaughtering animals for fear of a lack of feed during the winter months.

 


Thu, 04/12/2012 - 00:32 | 2336880 PersonalRespons...
PersonalResponsibility's picture

So you know for a fact that we will not have a cooler summer and more rain than normal?

Thu, 04/12/2012 - 01:49 | 2336939 Lednbrass
Lednbrass's picture

According to the weather gurus the very dry La Nina pattern is ending right about now, should be a wetter year.

http://www.cpc.ncep.noaa.gov/products/analysis_monitoring/enso_advisory/ensodisc.html

Beef will go higher though, last years dryness forced alot of slaughtering and less calves.

Thu, 04/12/2012 - 06:29 | 2337077 Confused
Confused's picture

I'm pretty sure you might want to reread that comment. 

 

But it did say: "from the heatwave if this heat persists."

 

;-) 

Wed, 04/11/2012 - 23:19 | 2336775 Clockwork Orange
Clockwork Orange's picture

A simple pull forward. Good weather means more shopping, house hunting, traveling about, etc. when would would otherwise have been hibernating at home. Perhaps of greater importance was the lack of snow, icy travel, and so forth.

Wed, 04/11/2012 - 23:20 | 2336778 Pairadimes
Pairadimes's picture

Cooter,

I'm by no means an expert, but the gist of this as I understand it is that the abnormally warm weather has been favorable to economic activity, and yet the traditional seasonal adjustments to the data still get made, which makes the adjusted data look better that it should. The big idea is that the warm winter created a one-time shift in consumption that was then adjusted further upward with coefficients that are based on the influence of average seasonal patterns. Presto, instant exuberance that will not last.

Wed, 04/11/2012 - 23:28 | 2336791 Cursive
Cursive's picture

@Pairadimes

Well said.

Thu, 04/12/2012 - 00:14 | 2336856 CrazyCooter
CrazyCooter's picture

Roger, Roger! I got it now.

Regards,

Cooter

Thu, 04/12/2012 - 06:58 | 2337091 msamour
msamour's picture

I was wondering the same thing. Thanks for asking Cooter.

Thu, 04/12/2012 - 06:28 | 2337075 DanDaley
DanDaley's picture

You have to respect someone can use the word "coefficients" correctly (at least I think he did).

Wed, 04/11/2012 - 23:20 | 2336779 LetThemEatRand
LetThemEatRand's picture

The warm winter skewed economic data to make it appear that there was a recovery.  Imagine if a golf course owner in Ohio said, "the economy must be picking up.  I've had a lot more people out golfing in February than ever before."  His increase in golfers is due to a weather anamoly, not a positive lasting change in the economy.   But he sees more golfers, and thinks that people must have more disposable income.  An extremely cold winter would have made the economy seem even worse than it is if that is possible.

Wed, 04/11/2012 - 23:30 | 2336794 Fish Gone Bad
Fish Gone Bad's picture

I will contribute a bit more.  There are some businesses that actually really need the cold winter.  Snow mobile rentals, ski resorts, winter tourism things, etc.  There are a mess of plants that need a certain number of days of frost for them to bear fruit.  So while people are not paying for as much heating oil, there are other areas of the economy that are getting kicked to the curb as well.  As if things in Maine couldn't get any worse ...

Wed, 04/11/2012 - 23:45 | 2336814 TMT
TMT's picture

Good point. I live in the southwest and our tourism revenue was down because we normally attract a ton of winter visitors. But due to the weather it dropped off this year.

But on a macro level the higher temps juiced the economy by pulling demand forward.

Thu, 04/12/2012 - 04:48 | 2337039 UP Forester
UP Forester's picture

Warm is good, until it isn't.

http://www.npr.org/local/stories/Michigan-Radio/150344215

From some reports, 80% of the cherry crop and 25%+ of the grape crop in Michigan is toast.

Wed, 04/11/2012 - 23:50 | 2336819 LowProfile
LowProfile's picture

Consider though that the money not spent on heating oil gets spent on other goods and services, same with Winter recreation.

Also, dealing with snow and ice (snow removal services, etc.) is actually a negative, as dealing with it doesn't add to the productive economy (normally an increased cost which was eliminated this year).

Wed, 04/11/2012 - 23:52 | 2336824 Seer
Seer's picture

And... the bug population will be out in FULL force this year.  Good freezes do much more than most people realize.

Thu, 04/12/2012 - 00:34 | 2336883 PersonalRespons...
PersonalResponsibility's picture

Some bugs, if born too early, suffer a population drop-off.

There's always the other side; keep note.

 

Thu, 04/12/2012 - 04:57 | 2337045 zhandax
zhandax's picture

If bugs bother you, it doesn't really matter whether you have x or x*10 of them.  If, as I suspect, you are objecting to mosquitoes, get rid of your standing water (i.e. those low spots in your lawn).

Thu, 04/12/2012 - 00:47 | 2336890 bnbdnb
bnbdnb's picture

In Oklahoma, I swear we have a crane fly epidemic.

Thu, 04/12/2012 - 06:59 | 2337092 Winston Churchill
Winston Churchill's picture

Love bugs a month early in Florida.

Thu, 04/12/2012 - 08:16 | 2337202 Umh
Umh's picture

I think the assumption is that consumers didn't have to pay as much to heat their homes and businesses. So maybe they bought beer instead? It does sound like a bit of a wash since most people are unable to not spend the money they have in their pocket.

Wed, 04/11/2012 - 23:19 | 2336766 Cursive
Cursive's picture

John Lohman is an analytical animal and Zero Hedge is the financial press's 800 pound gorilla with a chainsaw for a penis.  Who else and where else would we see this analysis?

Wed, 04/11/2012 - 23:36 | 2336803 holdbuysell
holdbuysell's picture

"Zero Hedge is the financial press's 800 pound gorilla with a chainsaw for a penis."

Sounds as if ZH has a new Avatar if there's ever a time for a change.

Wed, 04/11/2012 - 23:52 | 2336822 LowProfile
LowProfile's picture

PAGING WILLIAM BANZAAAAIIIII

Thu, 04/12/2012 - 00:01 | 2336836 Cursive
Cursive's picture

@LowProfile

LOL!  Would love to see this set to pictures!  WB7, please?  I may have to give Ole Hickory a rest if something like this (in an avatar-worthy format) were to present itself.

Thu, 04/12/2012 - 05:05 | 2337047 zhandax
zhandax's picture

Banzai, if you do this, please replace that Federal douchebag on the $50 dollar bill and leave my deceased neighbor in peace.

Thu, 04/12/2012 - 07:10 | 2337105 Bobbyrib
Bobbyrib's picture

$10 bill would have been more appropriate. Still bitter about losing the Civil War, huh?

Thu, 04/12/2012 - 13:55 | 2338685 zhandax
zhandax's picture

Simple-minded twit...name me another president since who stuck it up the rothschild's ass and broke it off

Wed, 04/11/2012 - 23:25 | 2336773 DormRoom
DormRoom's picture

flow is necessary because of the collateral chains in shadow banking.  That way exchange-value never collapses to use-value, thereby exposing the risk of the underlying collateral, and the overall lack of quality collateral in the system, and the huge gap between collateral monetization, and depository back money.

 

We will not see QE, but there will be sterilized QE, since the FED needs to create 'quality collateral' from bad collateral to prop up the collateral chains, so deleveraging in shadow banking doesn't create another credit crunch.

Thu, 04/12/2012 - 05:13 | 2337052 zhandax
zhandax's picture

Sounds like that 'Steady drip, drip, drip of gonorrhea'.

Thu, 04/12/2012 - 07:18 | 2337117 spinone
spinone's picture

Worked so well when they tried to contain subprime.

Wed, 04/11/2012 - 23:20 | 2336777 Red Raspberry
Red Raspberry's picture

I actually had nmy furnace conme on this week.

Wed, 04/11/2012 - 23:25 | 2336782 Flakmeister
Flakmeister's picture

Global warming... hey, it's all good...

But seriously, all the warm weather is doing is (perhaps!) pulling forward a little extra demand....

It also means seasonal adjustments are fubar....more so that usual.

Finally, it was a bit of a stimulus in that heating bills got clipped as well...

No worry, we make that back on the price of food from drought and increased AC demand in the summer...Maybe not this summer, but one is definately coming soon....

Wed, 04/11/2012 - 23:32 | 2336795 non_anon
non_anon's picture

40 years of plenty

for infinite debt

Wed, 04/11/2012 - 23:36 | 2336805 CryingBear
CryingBear's picture

i dont understand why AAPL was down AGAIN today. 2-days in a row. unbelievable. 

Wed, 04/11/2012 - 23:56 | 2336832 Seer
Seer's picture

Folks in China running out of kidneys?

Thu, 04/12/2012 - 05:28 | 2337058 zhandax
zhandax's picture

U sure U weren't drunk when you decided on a username?

Wed, 04/11/2012 - 23:38 | 2336807 sasebo
sasebo's picture

A couple of questions -----

Where is the money coming from to levitate the phony baloney market?

What are they going to buy with all that free money besides useless assets?

 

Wed, 04/11/2012 - 23:50 | 2336818 BooMushroom
BooMushroom's picture

1. Bernanke
2. Oil and comoditites

Wed, 04/11/2012 - 23:52 | 2336825 LowProfile
LowProfile's picture

3.  Real Estate

Wed, 04/11/2012 - 23:59 | 2336837 TMT
TMT's picture

Yeah they're buying all the FDIC assets for pennies on the dollar with leverage provided by the tax payer. Total scam.

Lowprofile are you bullish real estate? Residential or commercial?

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