St Louis Fed
It may be almost impossible to underestimate the gullibility of professional Fed watchers. At least Lucy van Pelt needed to place an actual football on the ground to fool poor Charlie Brown. But in today’s high stakes game of Federal Reserve mind reading, the Fed doesn’t even have to make a halfway convincing bluff to make the markets look foolish.
At the end of the day, it was all about the dollar and the reason for this morning's stock surge around the globe, as we noted last night, is absurdly delightful: Yellen signaled "weakening world growth" and "less confidence in the renormalization process." In other words, the "bad news is good news" mantra is back front and center.
It appears the complete decoupling from economic reality of the so-called US equity 'market', combined with the collapse in a data-dependent Fed's credibility - topics we have extensively covered - has reached the mainstream. Barron's always-insightful Randy Forsyth exposes the ugly reality that this is a "Bullard" market and we are just living in it as the flip-flopping Fed head is "the most visible telltale of the shifting winds of Fed expectations. Investors navigating the choppy waters of the financial markets are forced to change tacks accordingly."
What happened? It's possible the Fed has seen the market reaction and become alarmed by the complacency. It's true, the probabilities for even a June rate hike—let alone April--declined dramatically in the face of the Fed meeting. That may have alarmed the Fed, and so some members may feel the need to keep the markets more alert.
Following two days of rangebound moves, where Monday's modest market rebound was undone by the Tuesday just as modest decline (despite the early surge higher on the latest "bullish for stocks" European terrorism), overnight equity action continued to be more of the same, and as of this moment S&P 500 futures were unchanged, while European stocks were modestly higher. But while equities remain surprisingly uneventful despite loud warnings by both JPM and Goldman now that another bout of volatility and equity downside is coming, in FX there has been a substantial change, one which has seen the US dollar rise for a fourth day, the longest winning streak in a month, driven by the latest round of hawkish Fed jawboning courtesy of the Chicago Fed's Charlie Evens yesterday, which in turn has pushed down prices of oil, gold and copper.
To now dismiss Fed policy causation as “correlation theory” is laughable. The markets are now so intertwined and Fed dependent the observation of whether correlation is causality has been rendered moot. Without the Fed – there is no market. That’s now a proven fact. Period.
At this point, one wonders why any central banker would chase down the NIRP rabbit hole only to find themselves the protagonist in the latest retelling of "Krugman in Wonderland," but alas, the experiment continues. The only question now is this: will the FOMC take the plunge? Here's a chronological list of Fed NIRP commentary.
"What’s scary about this huge balance sheet expansion, is that it’s not having a bigger impact (although we don’t have a counterfactual). Indeed, the Nikkei is down -11% ytd and the yen has strengthened +6%."
"The amount of debt Americans carry is staggering and grows every day.... These data suggest that a significant portion of every generation is buried under a mountain of several different kinds of consumer debt. Though sizable slices of each generation carry no debt, the sheer magnitude of how much Americans with debt do owe is a cause for concern."
Legendary billionaire investor Jim Rogers is certain that the U.S. economy will be in recession in the next 12 months. During an interview on BloombergTV, he explained why he had covered his position in the Japanese yen, saying that the nation is "printing a lot" of the currency. Rogers also warned that there is a "100 percent" probability of a recession in the U.S. within a year, and with debt levels very high across the nation, this is a grave concern.
Fed Makes A Stunning Discovery: "Consumers Across The Country Are Borrowing More To Buy Cars And Go To School"Submitted by Tyler Durden on 03/03/2016 22:01 -0400
In his annual newsletter to shareholders, Buffett makes the argument that $56,000 today is six times better (even after his adjustment for inflation) than the $858 of GDP per Capita each US Citizen earned in 1929 but forgets to mention that $858 in 1929 was equivalent to 41.5 Troy Ounces of Gold in 1929. When measuring on an apple to apples comparison, there has been little to no gain in GDP per capita over the last 86 years in the United States. We show you the math.
In recent weeks Chinese stocks remained relatively resilient, levitating quietly day after day. That all changed overnight when the Shanghai Composite plunged by 6.4% with the drop accelerating into the close. This was the biggest drop in over a month and was big enough to almost wipe out the entire 10% rebound from the January lows in one session.
After The Cleveland Fed's warning of "significant stress" in the financial markets, we find none other than Dovish-hawk Jim Bullard's St.Louis Fed growing increasingly fearful of the "r" word.