Ben Bernanke

Ben Bernanke

US Households Have Never Been More Reliant On The Stock Market For Their "Net Worth"

When it comes to assets, there are two kinds: hard, tangible assets such as real estate, equipment and durable goods, and then there are financial assets, or "things" that only have an actual worth in the context of a capital market and a smoothly functioning financial system allowing for value-for-value exchanges and mark-to-market: among these are corporate equities, mutual and pension fund shares and reserves, credit instruments and equity in non-corporate businesses. We bring this up because today, as it does every quarter, the Fed released its Z.1, Flow of Funds report, which shows total US household assets and liabilities. Not surprisingly, with the ongoing surge in the stock market courtesy of the Fed's open-ended QE ticking time bomb, and the second housing bubble courtesy of the banking subsidy known as foreclosure stuffing, in the quarter ended December 31, 2012, at least according to the Fed, the US household's total net worth rose by another $1.2 trillion, taking it to $66.1 trillion. However, one thing was particularly notable in this latest update, and as implied by the above paragraphs, is that as of Q4, 2012, total US household financial assets hit an all time high of $54.4 trillion, well over the previous peak of $52.8 trillion in Q3 2007, and nearly $1 trillion higher compared to the past quarter. In other words, as of Q4 2012, the US household's net worth has never been more reliant on the stock market, which by implication means: Ben Bernanke and his centrally printing colleagues around the world.

Chart Of The Day: The Minimum-Wage (Non) Recovery

Yesterday we showed all those key economic criteria (that get so little airtime for obvious reasons), which were prevalent the last time the Dow Jones Industrial Average hit an all time high, back in 2007, all of which reflected a far more vibrant economy, and more importantly, an economy, and market, not propped up by a $14 trillion global central bank liquidity tsunami. Today, our chart of the day comes from BloombergBrief, which shows yet another aspect of the "low wage" recovery, namely that while the bulk of the jobs lost heading into the "recovery" were of middle and higher paying jobs, the offset have been part-time and other low-paying jobs, which explains also why the purchasing power of the average American, in real terms, declines with every passing day.

Shorting The Market On These March Days Will Be Hazardous To Your Health

The last time we looked at the "hazardous" days for shorting in January and February, we found something very simple - being a bear on POMO days, or those days in which Ben Bernanke makes it his life's mission to personally annihilate anyone who dares to face his money-spewing helicopter-printer with something as pathetic as a sense of reality and a frontal lobe, leads to certain immediate or eventual destruction, depending on one's margin level. So thanks to the most recent monthly update of POMO days covering the month of March, here is Ben Bernanke at his most helpful, providing the schedule in which he, the NY Fed, and the Primary Dealers will proceed to rip the heads off those who happen to be short in the face of what are the now daily GETCO stop hunts that send the S&P higher by 5-15 point in minutes on, well, absolutely no news, except for the usual deluge of between $1 and $5 billion in additional purchasing handed over by Chairman Ben to the banks because, you see, they need the money. And sooner or later it will trickle down on everyone else.

So You Want To Short The Student Loan Bubble? Now You Can

Even as the gargantuan $1+ trillion student debt load has been the bubbly elephant in the room that few are still willing to talk about, there have been until now zero opportunities for a the proverbial highly convex "ABX" short in the student debt space. This of course is the trade that was put on by those who sensed the subprime bubble is about to pop in early/mid 2007 and made billions as the yield chasers were summarily punished one by one as first New Century blew up, and then everyone else. Yet while one was able to buy synthetic "hedge" exposure with limited downside and unlimited upside (by shorting synthetic index spreads) in subprime, so far the only way to be bearish on student debt has been to short the equity of various private sector lenders - a trade with very limited upside and unlimited downside, and which in the current idiotic New Normal is more likely to leave one insolvent and crushed in a smoldering heap of margin calls following yet another epic short squeeze as GETCO's stop hunting algo run amok. This may be about to change. As WSJ reports, SecondMarket Holdings, the private-market securities trading firm best known for allowing numerous overzealous fans to buy FaceBook at moronic valuations, on Monday "will roll out a platform allowing lenders to issue securities backed by student loans directly to investors." 

IceCap Asset Management: "The Worst Is Over"

The dark ages were an awful time. Considering the brightest days delivered constant warfare, the burning of books, and the fear of barbarians, no one ever looked forward to the darkest days. Fast forward 1,600 years, and the darkest days of the European debt crisis are finally over - not because the bad debt has been written off or due to the consolidation of all debt, but simply because everyone has said so. Exactly who is telling lies and who is telling the truth will only be determined in due course. Without a doubt, global economic growth remains stagnate, yet stock markets are booming. Our message on financial markets remains very consistent – do not confuse strong financial markets with a strong underlying economy. While this may sound like hogwash to many investors and investment professionals, it is the extreme, unorthodox, and never-before-tried policies by the World’s central banks that is the reason for the march higher for stocks. Regardless, for those who honestly believe in the recovery, ask yourself the following questions...

Guest Post: All Of This Whining About The Sequester Shows Why America Is Doomed

If we can't even cut federal spending by 2.4 percent without much of the country throwing an absolute hissy fit, then what hope does America have?  All of this whining and crying about the sequester is absolutely disgraceful.  The truth is that even if the sequester goes into effect, the U.S. government will still take in more money than ever before in 2013 and it will still spend more money than ever before in 2013.  So it is a bit disingenuous to call what is about to happen "a spending cut", but for the sake of argument let's concede that point. If this is how bad things are now, how bad will they be when a day of reckoning for our economy arrives? And a day of reckoning is coming. Our politicians can try to keep kicking the can down the road for as long as they can, but eventually time will run out.  We can borrow our way to prosperity for a while, but in the end there is always a very bitter price to pay for doing so. I would love to tell you that there is a chance that all of this will be turned around, but the truth is that all of this whining and crying about the sequester shows that America is doomed.

GoldCore's picture

 

Gold is trading flat today near a one and a half week high hit yesterday as Federal Reserve Chairman Ben Bernanke defended the U.S.  ultra loose monetary policy.

The selloff in gold ETFs in February underscores the weakness in gold sentiment among retail investors that has been prominent recently. 

Frontrunning: February 27

  • Wal-Mart's Sales Problem—And America's (WSJ)
  • Investors fret that Italy may undermine ECB backstop (Reuters)
  • Monti Government Mulls Delaying Monte Paschi Bailout (BBG)
  • Norway Faces Liquidity Shock in Record Redemption (BBG)
  • ECB's Praet Says Accommodative Policy Could Lose Effectiveness (BBG)
  • EU Chiefs Tell Italy There’s No Alternative to Austerity (BBG)
  • New Spate of Acrimony in congress As Cuts Loom (WSJ)
  • BOE's Tucker hints at radical growth moves (FT)
  • Kuroda Seen Getting DPJ Vote for BOJ, Iwata May Be Opposed (BBG)
  • Russian Banks Look to Yuan Bond Market (WSJ)
  • Dagong warns about rising debt (China Daily)
  • Italy Election Impasse Negative for Credit Rating, Moody’s Says (BBG)

Trust Me, This Time Is Different

By 1789, a lot of French people were starving. Their economy had long since deteriorated into a weak, pitiful shell. Decades of unsustainable spending had left the French treasury depleted. The currency was being rapidly debased. Food was scarce, and expensive. Perhaps most famously, though, the French monarchy was dangerously out of touch with reality, historically enshrined with the quip, “Let them eat cake.” Along the way, the government tried an experiment: issuing a form of paper money. It didn’t matter to the French politicians that every previous experiment with paper money in history had been an absolute disaster. The Bourbon monarchy paid the price for it, eventually losing their heads in a 1793 execution. History shows there are always consequences to entrusting a paper money supply to a tiny handful of men. The French experiment is but one example. Our modern fiat experiment will be another.

Guest Post: It's Always The Best Time To Buy

I really need to stop being so pessimistic. I’m getting richer by the day. My home value is rising at a rate of 1% per month according to the National Association of Realtors. At that rate, my house will be worth $1 million in less than 10 years. Every mainstream media newspaper, magazine, and news channel is telling me the “strong” housing recovery is propelling the economy and creating millions of new jobs. Keynesian economists, Wall Street bankers, government apparatchiks and housing trade organizations are all in agreement that the wealth effect from rising home prices will be the jumpstart our economy needs to get back to the glory days of 2005. Who am I to argue with such honorable men with degrees from Ivy League schools and a track record of unquestioned accuracy as we can see in the chart below? These are the facts. But why trust facts when you can believe Baghdad Ben and the NAR? It’s always the best time to buy.

Overnight Sentiment Pricing In A Favorable Italian Election Outcome

Following last night's very disappointing China HSBC PMI numbers, one would think that the traditional EURUSD, and thus ES, overnight ramp would be missing or at least delayed, especially ahead of a very possible risk off day such as Italian election day. One would be wrong. Because some time after midnight eastern, in what can only be seen as a celebration of Argo's choice as a best picture, the EURUSD resumed its upward ramp on absolutely no news, pushing the pair higher by nearly 100 pips in a smooth diagonal line, and dragging US futures up with it as usual. The catalyst apparently is that with Italian exit polls mere hours away (due out at 2pm GMT), market talk is that Berlusconi's resurgent chances have been hobbled due to a low turnout in the pro-Berlusconi northern states (recall that Lombardia is the key state for the elections) following a quick read of a Reuters recap article. What is ignored is that the referenced Reuters article also notes the "surge in protests votes being cast" in the first day of voting, which means less votes on an absolute and relative basis for Bersani and Monti, even if Berlusconi ends up getting less of the Northern vote. Of course, nobody actually has any clue what the exit polls look like. In fact, with a hung parliament a distinct possibility even assuming a Bersani-Monti coalition, both Goldman and JPM have said a 50-100 pip widening across the Italian curve is possible should a Hung Parliament develop (for more read here). But for now hope dominates and is both squeezing the shorts and causing yet another algorithmic stop hunt in FX, and thus every other asset class. Don't be surprised all of overnight's gains, and much more to be wiped out minutes after 9 am eastern when the first Italian exit polls emerge.

Congress Asks Bernanke For Full Risk Analysis On Fed's Soaring Balance Sheet

Several days ago we wrote about what we defined as the Fed's "D-Rate" - the interest rate at which the cash outflows from payments by the Fed on its Excess Reserves will surpass that cash inflows from its asset holdings, a very troubling day because as we further explained, from that point on the Fed would be "printing money just to print money." In other words, with every passing day, the Fed is getting ever closer to the point where the inflation it so very much wishes to unleash will force it to essentially request a technical bailout from Congress (and certainly will halt all future interest remittances to the Treasury), and the longer this takes, the lower the breakeven interest rate becomes, until one day it is so low the tiniest rise in rates will immediately put the Fed into the red. It now appears that Congress itself, the ultimate beneficiary of the Fed's free money policy as nearly half of all US spending is funded by the Fed's monetization of the deficit at ultra low rates, is finally catching on to what is the ultimate rock and hard place for Ben Bernanke. In a letter penned by the Chairman of the House Oversight & Government Reform Committee, Jim Jordan, says that he is "troubled by the corresponding effect that the Federal Reserve's expanding portfolio could have on current and future economic growth" and has asked the Fed what its "future plans to unwind the [$3 trillion and rising at $885 billion per month] portfolio" are.