San Francisco Fed
Dazed And Confused: Futures Tumble Below 200 DMA, Oil Near $40, Soaring Treasurys Signal Deflationary DelugeSubmitted by Tyler Durden on 08/20/2015 07:00 -0400
It is unclear what precipitated it (some blamed China concerns, fears of rate hikes, commodity weakness, technical picture deterioration although it's all just goalseeking guesswork) but overnight S&P futures followed yesterday's unexpected slide following what were explicitly dovish Fed minutes, and took another sharp leg lower down by almost 20 points, set to open below the 200 DMA again, as the dazed and confused investing world reacts to what both the Treasury and Oil market signal is a deflationary deluge. Indeed, oil is about to trade under $40 while the 10Y Treasury was last seen trading at 2.07%. Incidentally, the last time oil was here in March of 2009, the Fed was about to unleash QE 1. This time, so called experts are debating if the Fed will hike rates in one month or three.
"Evidence in support of Bernanke's view of the channels through which QE works is at best mixed. There is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed inflation and real economic activity. Indeed, casual evidence suggests that QE has been ineffective in increasing inflation."
We are delighted to report that about 7 years after it was glaringly obvious to everyone except the Fed of course, now - with the usual half decade delay - even the NY Fed has finally figured out what even 5 year olds get. "A new study from the New York Federal Reserve faults these policies for enabling college institutions to aggressively raise tuitions. The implication is the federal government is fueling a vicious cycle of higher prices and government aid that ultimately could cost taxpayers and price some Americans out of higher education, similar to what some economists contend happened with the housing bubble."
The Fed would have needed to hike rates by 800 bps in the wake of the dot-com collapse in order to prevent the housing bubble. That would have purged the system and gradually, the FOMC could have eased by around 300 bps over the next four years. That policy course would have prevented the speculative bubble that brought capital markets the world over to their knees in 2008. And why didn’t the Fed do this? Because "such a large increase in interest rates would have depressed output more than the Great Recession did." In other words, thanks to Alan Greenspan, the US economy cannot function under a normalized monetary policy regime.
And so the 2015 season of the Greek drama is coming to a close following last night's vote in Greek parliament to vote the country into even more austerity than was the case before Syriza was voted into power with promises of removing all austerity, even with Europe - which formally admits Greece is unsustainable in its current debt configuration - now terminally split on how to proceed, with Germany's finmin still calling for a "temporary Grexit", the IMF demanding massive debt haircuts, while the rest of Europe (and not so happy if one is Finnish or Dutch) just happy to kick the can for the third time.
China Soars Most Since 2009 After Government Threatens Short Sellers With Arrest, Global Stocks SurgeSubmitted by Tyler Durden on 07/09/2015 08:57 -0400
The Shanghai Composite Index had dropped as much as 3.8% to a 4 month low before the news that the cops were going to arrest anyone who was caught "maliciously shorting stocks", when everything suddenly took off, and the SHCOMP closed a "Dramamine required" 5.8% higher, the biggest daily increase since March 2009! Stocks around the globe followed, with US equity futures wiping out much of yesterday's losses and up 1% at last check.
After seven long years of aggressively defending a monetary policy regime that's served to exacerbate the divide between the haves and the have-nots, the Fed looks at whether "the legend of Robin Hood" offers any helpful pointers about how to reignite America's economic growth engine. Spoiler alert: the Fed doesn't think "taking from the rich to give to the poor" would be very productive.
"While most are focused on the risks around a withdrawal of liquidity, we believe the biggest hit to confidence could be the opposite: if another round of US QE is necessary to prop up the economy," BofAML says, suggesting the Fed is now cornered as raising rates risks destabilizing markets and QE4 risks betraying the futility of successive central bank interventions.
Steve Liesman is quaking in his reporter's boots this morning as the SF Fed & BEA's credibility-crushing "double-seasonal-adjustment" thesis is crushed into statistical neverland by the The NY Fed. A study by economists at the Board of Governors of the Federal Reserve did not find significant statistical evidence for such distortions on the aggregate GDP level, despite meteoroconomist Joe Lavorgna's assertion that Q1 grew 1.2% thanks to the magic of made-up numbers. As The NY Fed concludes, in a tone that suggests "sigh, again, "it will not be surprising if the question of residual seasonality comes up again next year when first-quarter growth numbers are announced."
Although we solved the "mystery" of America's missing wage growth some three months ago, the central planner/ Ivory Tower crowd is still confused. WSJ has taken the time to lay out nine prevailing theories from some of the country’s ‘finest’ economic minds...
Given the rather depressing plight of the average US laborer, it’s little wonder that some workers are inclined to “alter their mood” a bit before punching the clock. Indeed, over the past 24 months, a decades-old trend towards falling workplace drug usage has reversed itself, with 4% of workers now testing positive for either legal or illegal drug use.
Friday Humor And Epic Trolling: Joe LaVorgna Says Q1 GDP Actually Rose 1.2% (If Seasonally Adjusted Some More)Submitted by Tyler Durden on 05/29/2015 14:41 -0400
Just when you thought Wall Street's best paid, yet worst weatherman couldn't come up with any more gut-busting, roaring humor, he unleashes what is surely today's biggest financial trollery.
"The real disconnect lies in the failure of the economy to grow, as most people assumed that it would, after the Fed's quantitative easing and zero interest rates had supposedly worked their magic. But as I have said many times before, these policies act more as economic depressants than they do as stimulants. As long as these monetary policies persist, our economy will never return to the growth rates that would be considered healthy.... We prefer the ability to manipulate figures rather than allowing the figures to tell us things that we don't want to hear."
Traders looking to get an early start on the holiday weekend will have to wait a bit longer today, as Janet Yellen is set to speak to a sold-out audience at the Providence, Rhode Island Chamber of Commerce’s Economic Outlook Luncheon today.... *YELLEN SAYS RATE RISE AT SOME POINT THIS YEAR IS APPROPRIATE