They’re not even trying to blame the weather this time.
On the 'growth' side, Commercial and Industrial loans are rising at a double digit annual rate of change (although it is unclear whether this is an indication of business optimism or stress - after all, we did see a big jump in these loans leading into the last recession). On the flip side, the bond market and the US dollar index seem to be flashing some warning signs about future growth. Simply put, the outlook for the economy is decidedly uncertain right now and we think so is the confidence in Janet Yellen. We think the more dire outcome for stocks would be if Toto fully pulled back the curtain on monetary policy and revealed it to be nothing more than a bunch clueless economists sitting in a conference room with no ability to control the economy or the markets. If US growth disappoints after all the Fed has done, how could anyone continue to view the Fed wizards as omnipotent? That would send the stock market back over the rainbow to the reality of an economy with big structural problems that can only be solved through political negotiation, something that has been notable only by its absence over – at least – the last 6 years. Are we headed back to Kansas?
Hot Air Hisses Out Of Housing Bubble 2.0: Even Two Middle-Class Incomes Aren’t Enough Anymore To Buy A Median HomeSubmitted by testosteronepit on 04/07/2014 12:35 -0400
“There was a moment when it made sense,” said Blackstone Group, largest home buyer in the US. But not anymore.
If the idea is to anticipate what an adversary does, it behooves us, even if we do not believe in QE on moral grounds or on efficacy grounds, to consider how the ECB can have QE, which it appears under increasing pressure to do. Here is such a course.
Diversification with a solid strategy
When Arthur Levitt's SEC adopted Rule 2a-7 in 1998, it handed the TBTF banks and GSEs a mortgage monopoly on a silver platter.
“Foreclosure Rebound Pattern”: Foreclosure Starts SUDDENLY Jump 57% in California (And Soar In Much Of The Country)Submitted by testosteronepit on 02/13/2014 19:09 -0400
Cynic in me says it must be a data problem, that the computers got hacked, or something. But that’s wishful thinking.
Despite every talking head having written off the miners, they were the best performer across US equity sub-indices. In the US equity markets Biotech and REITs also performed well. On the other hand, Nasdaq Insurance and NYSE Arca Oil ETF were the worst...along with the NYSE Composite Index (which represents 61% of all global market capitalization).
Another volatile day ended with the Dow is down around 5% in January - the worst start to a year since 2009 (and 2nd worst since 1990) and the worst month since May 2012 (a 3-sigma miss of the average +1.5% per month gain since 2009's lows). Japan, Brazil, and Russia suffered greatly on the month as gold miners, Egypt?, and US Biotech did well. There is a huge 380bps spread between the performance of the Industrials and the Transports YTD. Gold had its best month in the last 5; Treasuries rallied with 10Y yields dropping their most since May 2012; USD rallied the most in 8 months with JPY's biggest rally (and Nikkei's biggest loss) since April 2012.
The Status Quo views real estate bubbles as a "good thing": as home prices rise, the homeowner's collateral (equity) rises, creating both a psychological "wealth effect" (now that we're richer, we can afford to borrow and blow more money) and a temporary (and thus phantom) increase in collateral that will support more household debt. What few seem to realize (or discuss) is how rising home prices push rents higher.This is an entirely pernicious effect, as renters aren't getting any more "home" for the higher rent--they're paying more money for the same shelter. Central Planning pushing housing prices higher is not win-win--it is lose-lose-lose.
Over the past two weeks, Trust Preferred (or TruPS) CDOs have gained prominent attention as a result of being the first, and so far only, security that the recently implemented and largely watered-down, Volcker Rule has frowned upon, and leading various regional banks, such as Zions, to liquidate the offending asset while booking substantial losses. But... what are TruPS CDOs, and just how big (or small) of an issue is a potential wholesale liquidation in the market? Courtesy of the Philly Fed we now have the extended answer.
Global monetary conditions remain easy and despite the Fed's decision to taper, peak monetary accommodation is not here yet.
A world, in which former permabears David Rosenberg, Jeremy Grantham and now Hugh Hendry have thrown in the towel and gone bull retard, and where none other than the Chief Investment Officer of General Re-New England Asset Management - a company wholly-owned by Warren Buffett's Berkshire Hathaway, has issued one of the direst proclamations about the future to date and blasts the Fed's role in creating the biggest mess in financial history, is truly upside down...
After the DJIA and S&P briefly crossed the key resistance levels of 16000 and 1800, the upper bound on the markets has been looking increasingly more distant and this morning's lack of an overnight ramp only makes it more so. Perhaps the biggest concern, however, is that with both Yellen and Bernanke on the tape yesterday, the S&P still was unable to close green. This follows on Monday's double POMO day when the S&P once again closed... red. Not helping things was the overnight announcement by the Japanese government pension fund, the GPIF, in which the fund announced it would lower its bond allocation further however the new law to reform the GPIF could be written by spring 2015. This was hardly as exciting as the market had expected, and as a result both the USDJPY and the ES-moving EURJPY find themselves at overnight lows. Will the EURJPY engage in its usual post 8 am ramp - keep a close eye, especially since the usual morning gold and silver slam down just took place.
Q3 earnings for financials show that the interest rate risk created by the Fed after years of zero rates is very real indeed