With the Fed supposedly steeling itself at last to remove a little of its emergency ‘accommodation’, it has suddenly become fashionable to warn of the awful parallels with 1937 as an excuse The Fed must not act today. We strongly refute the analogy. Instead, the real Ghost of ’37 takes the form of mean-spirited and, counter-productive 'pitchfork populism' politics and the spectre should not be conjured up to excuse the central bank from further delaying its overdue embarkation on the long road back to normality and policy minimalism.
When an economic crisis is coming, there are usually certain indicators that appear in advance...
Did stocks window dressing come one day early in this volatile, bipolar, stop-hunting, HFT-infested market? Looking at futures this morning, which are down about 12 points already on yet another surge in the USD which has sent the EURUSD just above 1.07, the lowest since March 20 , and the USDJPY back under 120 now that the "strong dollar is bad for stocks after all" algo seems to be back from vacation, all those hedge funds who chased risk higher yesterday because their peers did the same, may find they are all selling on the way down. It will be oddly ironic if all of yesterday's widely touted gains evaporate comparably in the first 10 minutes of trading today, and lead to an end in the longest streak of quarterly increases in two decades.
Dallas Fed's Richard Fisher had his credibility (whatever is left) crushed for the 4th month in a row. After explaining carefully to no lessor status quo glad hand than Steve Liesman that the Texas economy will see a net positive from low oil prices, Dallas Fed data has utterly collapsed - at its fastest pace since Lehman. Printing a stunning -17.5 (over twice as bad as expected -8.5), this is the 4th miss in a row (and increasingly worse misses). The Dallas Fed was last lower than this in Jun 2011. Across the board, the components were an utter disaster... employees contracted, prices paid and recoeved tumbled, production plunged, and new orders collapsed. More worryingly, furture capex tumbled once again.
- Setbacks and progress as Iran, six powers meet to end nuclear impasse (Reuters)
- Russia’s Foreign Minister Sergei Lavrov to Leave Iran Nuclear Talks (WSJ)
- Obama Ramps Up Lobbying on Iran as Deadline Looms (WSJ)
- Greek yields edge up as lenders scrutinise reform pledge (Reuters)
- Oil prices drop on possible Iran deal, dollar (Reuters)
- Yemen’s Houthis Battle for Aden as Saudi Strikes Hit Rebels (BBG)
- Iran nuclear deal to see $20 oil if Tehran floods crude market (Telegraph)
- China’s Zhou Says PBOC Has Room to Act on Growth Slowdown (BBG)
With the rest of the developed world's central banks waiting for the Fed to admit defeat for one more year and delay its proposed rate hike (or launch NIRP/QE4 outright) it was all about China (the same China which a month ago we said would launch QE sooner or later) and hope that its central bank would boost asset prices, when over the weekend the PBoC governor hinted that more easing is imminent to offset the accelerating drag after he admitted that the nation’s growth rate has tumbled "a bit" too much and that policy makers have scope to respond. How much scope it really has now that its bad debt is rising exponentially is a different question. It got so bad, Shanghai Securities News leaked a false rumor earlier forcing many to believe China would announce an unexpected rate cut as soon as today, in the process sending the Shanghai Composite soaring by 2.6%.
"I'm not sure [European QE] is going to do anything - certainly, nothing that's good. The fundamental problem here, as I see it anyway, is that the European banking system is still broken... I think, increasingly, bankers are discomforted more than anything else (it's not just the ex central bankers but increasingly the people that are still holding the levers)... they are starting to ask whether they have somehow been backed into a place where they don't really want to be.... Unfortunately, [it] is getting bigger and bigger. There is a possibility at least that this whole exercise could end very badly."
Former Dallas Fed president Dick "Feral Hogs" Fisher may be worried about a major correction in a market that is "hyper overpriced", and he may be confused and unable to grasp that the only reason "traders are lazy" is because the Fed's Chief Risk Officer has made risk, and selling, illegal but when it comes to finding sources of funding there are no conerns or confusion at all. Because promptly after he officially resigned from the Dallas Fed, on Thursday March 19, the very next day the board of Pepsi announced that "On March 20, 2015, the Board of Directors (the "Board") of PepsiCo, Inc. ("PepsiCo") elected Richard W. Fisher as an independent member of the Board, effective March 23, 2015. Mr. Fisher will serve on the Audit Committee of the Board, effective March 23, 2015."
In response to questions posed by Santelli, former Dallas Fed president Richard Fisher made two points which were both salient if not downright prophetic. The first: “Well, what worries me is how totally lazy investors have gotten, totally dependent on the Federal Reserve and I find this to be a precarious situation.” The second: “Are we vulnerable in my opinion to a significant equity market correction? I believe we are. Not only has the Fed painted themselves into an even tighter corner – they’ve left no clear path as to now kick the empty can.
Recently retired Dallas Fed chief Richard Fisher tells CNBC that "lazy" retail investors have become completely dependent on the Fed and shouldn't expect a "diminutive" Janet Yellen to be able to save the day in the event of a significant correction.
Fed's Fisher: "[the stronger the dollar]... the better it is for our companies big and small to go out and hire American workers."
Goldman's Cohn: "the effects of the soaring dollar are just starting to be felt; for US exports, manufacturing, and jobs - it is not going to be positive."
White House Admits "Strong Dollar Is Headwind For Growth" As Greenback Surges At Fastest Pace In 34 YearsSubmitted by Tyler Durden on 03/10/2015 08:51 -0400
Forget 2013's "taper tantrum", FX markets are roiling over a full-blown "rate-hike-rage" as the USD Index surges to a new 12 year high, rising 23% in the last 8 months - the fastest surge since 1981. Not only is this dramaticaly bad for the US equity earnings picture but the carnage being unleashed across developed and emerging market currencies is almost unprecedented. Despite reassurance from The Fed that a strengthening dollar is positive for US jobs, The White House has now issued a statement that a "strengthening USD is a headwind for US growth."
As noted earlier, starting early with the overnight session there was already some serious fireworks in Asia, when first the USDJPY soared then tumbled, pushing the Nikkei lower some 0.7% with it, driven entirely by the surge in Dollar which rose to a fresh 12 year high overnight after gaining as much as 0.59%, in an extension of Friday’s post-NFP gains. Additionally, the EUR/USD slipped below 1.0800 to touch its lowest level since Sept’03 while USD/JPY rose above 122.00 for the first time since Jul’07, after breaching long-term resistance at 121.85. However, in recent trade the pair has seen a straight line sell-off which in turn has sent US equity futures sliding, and the ES down about 14 points as of this moment. Meanwhile, the frontrunning of the ECB continues, with German 10 Year yields sliding -3bps to 0.281%, the lowest in series history. Also touching fresh record lows were Austrian, Belgian, Dutch, Finnish, Irish, Italian, Spanish 10 Year rates.
To some (mostly those in the 1-10% wealth bucket) the main event today is the iWatch unveiling. To others (mostly those not in the 1-10% wealth bucket) it is the Eurogroup meeting in which the fate of Greece will be discussed and perhaps decided. One thing is certain: virtually nobody will care when the Fed's Mester and Kocherlakota speak later today as the Fed is now - supposedly - set to hike no matter what. Here is what the other main events are for the balance of the week.