- Triumph Confirms 'Era of Merkelism' (Spiegel)
- Merkel must reach out to leftist rivals after poll triumph (Reuters)
- Norwegian Air says both its Dreamliners hit by technical issues (Reuters)
- Chinese court gives Bo Xilai life sentence (CBS)
- Social Dems Deflect Talk of Merkel Alliance (Spiegel)
- Blasts shake Nairobi mall, smoke pours from building (Reuters)
- Open-Government Laws Fuel Hedge-Fund Profits (WSJ)
- Forbes Calls Goldman CEO Holier Than Mother Teresa (Matt Taibbi)
- BlackBerry move away from consumers unlikely to stem decline (Reuters)
- And another Greek strike: Greek teachers, civil servants to strike against layoffs (Reuters)
In a world in which all the matters is "scale", the ability to Martingale down on losing bets as close to infinity as possible (something which JPMorgan learned with the London Whale may not be the best strategy especially when one can't print money out of thin air), and being as close to the Fed's Heidelberg rotary printer as possible, it was expected that that "expert" of government backstops and bailouts, the Octogenarian of Omaha, Warren Buffett, would have only kind words for Ben Bernanke. But not even we predicted that Buffett would explicitly admit what we have only tongue-in-cheek joked about in the past, namely that the Fed is the world's greatest (and most profitable) hedge fund. Which is precisely what he did: "Billionaire investor Warren Buffett compared the U.S. Federal Reserve to a hedge fund because of the central bank’s ability to profit from bond purchases while accumulating a balance sheet of more than $3 trillion. "The Fed is the greatest hedge fund in history,” Buffett told students yesterday at Georgetown University in Washington. It’s generating “$80 billion or $90 billion a year probably” in revenue for the U.S. government, he said.
Why aren't rising stock markets being greeted with wild celebrations? We think the study of socionomics may offer some clues.
What Ben Bernanke did by not Tapering was expose the fragility of the US economy for all to see. His actions, Mises Institute's Peter Klein explains in this brief clip, based on the premise that the US economy was not capable of sustaining any reduction in the $85 billion per month stimulus free-money, means once again "the economy is so dependent on artificial stimulation from the central bank... that the economy is in another artificial boom just like the artificial boom we have been trying to get out of." Critically, for all those proclaiming the US as a "cleanest shirt," Bernanke proved them wrong (and exposed the fallacy of data such as the unemployment rate and jobless claims as having any value - as we have explained). In conclusion, Klein notes "any signs of economic growth or progress that we have experienced since 2008 are solely the result of government stimulus; in other words, more malinvestment." This will not end well.
There was a time, long ago, when some still believed the myth that the Federal Reserve, and the selection of its Chairman, were supposed to be apolitical and impartial. Luckily, that was a long time ago, because otherwise some may question not only the logic, but the motives, behind what the media reports is an aggressive push by White House officials to "muster support among Democrats on the Senate Banking Committee to back Federal Reserve Vice Chair Janet Yellen," according to Reuters which cited three sources said on Friday, laying the groundwork for her expected nomination to the Fed's top job. If the White House is suddenly intent on picking Mrs. Yellen (or is that Mister?), one wonders just how diluted her "runner up" credibility at the Fed would be, since it has been made quite clear she was continuously Obama's B (or lower) grade choice to head the Fed, with Summers at the very top. And of course, a just as important question is how even more diluted is Obama's credibility and political brand if a few ultra-liberal Senators can impose their choice for next Fed head over that of both Larry Summers, of the "Committee to save the world" and the president himself.
Raghuram Rajan has been in his job at the head of the Reserve Bank of India for just a few weeks now and already changes are being made as the 23rd President
Ben Bernanke Continues To Crush It As Most Hedge Funds Underperform: Complete Hedge Fund Performance UpdateSubmitted by Tyler Durden on 09/20/2013 10:57 -0500
Ben Bernanke Capital LLC and his risk-managed S&P 500 continue to crush it (if not so much the Fed's $2.75BN DV01 balance sheet which is nursing over $200 billion in unbooked losses on the surge in rates YTD). This comes at the expense of all those other levered-beta chasers formerly known as hedge funds (whose short-books continue to destroy their performance, and careers, left and right, and which inverse strategy - going long the most shorted names - is the best performing alpha-generating strat in the past year), who as the following summary table summarizing the performance of the most prominent hedge funds are fighting tooth and nail to generate meager mid- to high-single digit returns. And since this relative underperformance in a world in which there is no risk left continues for the fifth year in a row, one can't help but wonder: just how viable is the hedge fund model at a time when Ben Bernanke is the taxpayer funded, uber-risk manager for everyone?
When even the Fed's personal trusted scribe, the WSJ's Jon Hilsenrath, who at least on one occasion saw substantial editorial influence by the NYFed on his upcoming article (dealing with his "prize winning" investigation into Stephen Friedman), accuses the Fed of failing to communicate, one can imagine just how badly the streams of telegraphing futures step by the Marriner Eccles central planners must have gotten crossed. From Hilsy: "Federal Reserve officials created new uncertainty about how much farther they will push their easy-money policies—and new questions about how effective they are at communicating their thinking—with the decision to stand pat on the pace of their bond purchases for now.... Fed Chairman Ben Bernanke also seemed to walk away from some of the guidance he had given in June on how the bond-buying program would play out over the next year, making it even less clear when the program will end." This is ironic, because it was none other than Hilsenrath back on May 10 who wrote "Fed Maps Exit from Stimulus" in which he first laid out that "Federal Reserve officials have mapped out a strategy for winding down an unprecedented $85 billion-a-month bond-buying program meant to spur the economy—an effort to preserve flexibility and manage highly unpredictable market expectations." How does it feel to have been used Jon?
- JPMorgan Guilty Admission a Win for SEC’s Policy Shift (BBG)
- Pricing Glitch Afflicts Rollout of Online Health Exchanges (WSJ)
- This will end well: Japan LDP Considers Draft Bill to Put Government in Control of Fukushima Cleanup (WSJ)
- How a German tech giant trims its U.S. tax bill (Reuters)
- Despite Merkel's Popularity, Angst Creeps In (WSJ)
- Hank Paulson warns of regulatory conflict (FT)
- Rajan Surprises With India Rate Rise to Quell Inflation (BBG)
- Apple Begins Selling New iPhones (WSJ)
- Pope Says Church Should Stop Obsessing Over Gays, Abortion (BBG)
The Fed's failure yesterday to announce some sort of tapering of its QE program, despite the consensus of an overwhelming percentage of economists who expected action, once again reveals the degree to which mainstream analysts have overestimated the strength of our current economy. The Fed understands, as the market seems not to, that the current "recovery" could not survive without continuation of massive monetary stimulus. Mainstream economists have mistaken the symptoms of the Fed's monetary expansion, most notably rising stock and real estate prices, as signs of real and sustainable growth. But the current asset price bubbles have nothing to do with the real economy. To the contrary, they are setting up for a painful correction that will likely be worse than the one we experienced five years ago. Following this playbook, the Fed will likely maintain the pretense that tapering is a near term possibility and that it has a credible plan on the shelf to bring an end to QE. In reality the Fed is stalling for time and hoping that the economy will inexplicably roar back to life. Unfortunately, hope is not a strategy.
When it comes to discombobulated people, IceCap's Keith Dicker notes the financial World has a bunch of them. Leading the pack during the roaring 1990s was the King of Confusion himself – Alan Greenspan. His money reign at the US Federal Reserve was highlighted by bailing out Wall Street’s biggest hedge fund, which planted the seed for the dot-com bubble. Unfortunately for the market, only the combination of retirement and hindsight allowed Mr. Greenspan to become less confused when he admitted he had found a “flaw” in his economic philosophy. Next up on the baffle scale has to be the Eurozone. The decision in 1995 to create a common currency was actually brilliant. The final watered down product - not so much. For now, as markets roll into the fall, investors, politicians, and central bankers remain just as discombobulated as ever... And if you think you are confused... Try being Ben Bernanke for a day.
Are you ready for Janet Yellen? Wall Street wants her, the mainstream media wants her and it appears that her confirmation would be a slam dunk. She would be the first woman ever to chair the Federal Reserve, and her philosophy is that a little bit of inflation is actually good for an economy. She was reportedly the architect for many of the unprecedented monetary decisions that Ben Bernanke made during his tenure, and that has many on Wall Street and in the media very excited. Noting that we "already know that Yellen is on board with Bernanke's easy money policies", CNN recently even went so far as to publish a rabidly pro-Yellen article with this stunning headline: "Dear Mr. President: Name Yellen now!" But after watching what a disaster Bernanke has been, do we really want more of the same? It doesn't really matter whether she is a woman, a man, a giant lizard or a robot, the question is whether or not she is going to continue to take us down the path to ruin that Bernanke has taken us.
The Federal Reserve decision to refrain from and put off indefinitely a QE taper is very bullish.
The Fed is struggling to keep interest rates low for as long as possible in a desperate attempt to prolong a very fragile U.S. recovery or non recovery in our opinion.
Money printing and debt monetisation on this scale has led to higher gold prices throughout history and will do so again.
The Federal Reserve is effectively insolvent and investors and savers should prepare for falls in the U.S. dollar, a dollar crisis and an international monetary crisis.
It is undeniable that America is thoroughly addicted to fiat stimulus. Every aspect of our economy, from stocks, to bonds, to banks, and by indirect extension main street, is now utterly dependent on the continued 24/7 currency creation bonanza. The stock market no longer rallies to the tune of increased retail sales, growing export markets or improved employment expectations. In fact, “good” economic news today is met with panic and market sell-offs! Why? Because investors and banks still playing equities understand full well that any sign of fiscal improvement might mean the end of the private Federal Reserve’s QE pajama party. They know that without the Fed’s opiate-laced lifeline, the economy dies a fast and painful death. All mainstream economic news currently revolves around the Fed, as pundits clamor to divine whether the latest signals mean the free money will flow, trickle, or dry up. At the edge of the Federal Reserve’s 100th anniversary, it is vital that we see the current developments for what they really are – history changing, in a fashion so violent they are apt to scar America forever.
For now, markets are holding on to gains (in bonds, stocks, and gold) as we prepare for Ben to explain just how bad things are... and answer the tough questions about the growth slowdown in 2016... Of Course, that doesn't matter:
DOW JONES INDUSTRIAL AVERAGE RISES TO ALL-TIME HIGH
*S&P 500 RISES TO RECORD HIGH AFTER FED STATEMENT
Seems like moar of the same is here to stay in the Yellen Fed but now we know that QE is not helping the real economy - how will they 'communicate' its effectiveness? We suppose that, for now, Stein's warning of 'froth' is just for the academics...