With the case for the next Fed chairman having devolved to the most ridiculous of decision trees, such as Nancy Pelosi's "it would be great to have a woman", because apparently gender diversity trumps everything in the eyes of the California democrat, the choice of Bernanke's successor is now more nebulous than ever. It has certainly not been aided by the periodic floating of the Larry Summers trial balloon, especially as originating from the Fed's WSJ mouthpiece who one week presents Summers as the favorite and the next skewers his chances. However, one person for whom the Summers vote is essentially a done deal with 90% odds, is Scotiabank's Guy Haselmann. Here is his logic.
Much has been made this weekend of the WSJ story that Janet Yellen (and her dovish counterparts) have been so much more accurate as forecasters than the hawks on the FOMC in recent years. This along with pitting her against the asinine Larry Summers appears to create a shoe-in for 'damn-it-Janet' to take the helm as the new Maestro (or mistress?). But, as CNBC's Rick Santelli points out, it is ludicrous to proclaim a 'winner' based on inflation predictions, as transmission channels of the endless money-printing are jammed (and besides the models that predicted economic growth and new hiring from this 'spiking the punchbowl' have failed dismally). Simply put, Santelli analogizes, "the Cubs haven't won the World Series in a century, but if I poll all of the players/managers and see which predicted we wouldn't win the World Series; and whoever guessed that right, we will make them the manager, does that guarantee me that next year we're going to win the World Series?" The bottom-line, unless GDP shows sustainable growth, the rest is just a "silly discussion."
Based on media reports over the past few weeks, there are two clear front-runners in the competition to be named Ben Bernanke’s successor as Fed chairman. Current Vice Chair Janet Yellen sits in one corner, former Treasury Secretary and National Economic Council (NEC) Director Larry Summers in the other corner, and pundits are actively placing their bets. Yellen is "soft-spoken, even-tempered, 100% mainstream academic economist who boils the world down to simplistic concepts," so similarities between Bernanke and Yellen are far stronger than the differences. A hand off from one to the other would be about as eventful as a rainy day in Seattle. Compared to Yellen, Summers has a longer history as a heavyweight policymaker but as Charles Ferguson wrote, “rarely has one individual embodied so much of what is wrong with economics, with academe, and indeed with the American economy." And that’s what it seems to be coming down to: a choice between a yawn and a hiss. Why not appoint someone with a track record of getting things right, you ask? Well, that would require a culture of accountability in the White House. Does anyone remember when we last had that?
"QE in my view is less efficacious for the real economy than most people suppose," may just be the sentence that ends Larry Summers' run at becoming the next 'most powerful person in the world'. As the FT reports, the chubby ex-chief economist for Obama made these, and other, somewhat hawkish comments (entirely unacceptable for a Federal Reserve chairman) at a conference in Santa Monica in April.
Federal Reserve Chairman Bernanke's term expires January 31, 2014. While his continuation as Fed chair cannot be ruled out, he has given no public indications that he plans to seek another term and most market participants - as well as many members of Congress in last week's Humphrey-Hawkins hearings - seem to believe he will retire from public service early next year. As Goldman notes, the announcement of the next Chair of the Federal Reserve seems most likely to come in October, though nominations for Fed Chair have been announced as early as five months before the current term expires and as late as less than a month before expiration. There does not appear to be much risk to the Senate's ultimate confirmation of whomever the President chooses, though the Fed nominations have become more politically controversial over the last few years, which is likely to lengthen the confirmation process. Following previous confirmations, financial market volatility has typically increased slightly, though whether this occurs following the upcoming transition will of course depend on who is nominated.
Larry Summers has been failing up since he entered the public sphere. The reults have been catastrophic for many main street Americans.
CFTC whistleblowers, JP Morgan silver short, Andrew McGuire, Gold Leasing, Robert Rubin, Larry Summers, Gibson's paradox and that sink in your kitchen
While everyone is focused on whether Mr. Burns, aka Larry Summers will take over for Ben Bernanke (he won't), lots of peripheral resignations are flying around. the most recent one: that of the U.S. secretary of the $60-billion budget and 240,000 employees Department of Homeland Security - Janet Napolitano, who will be named the next president of the University of California system. As the LA Times reports, "nothing was pushing her out of Washington now, although the Senate’s recently approved compromise plan on immigration faces an uncertain fate in the Republican-controlled House." The good news: we await for UCLA to be promptly upgraded to AAA and issue bonds inside of the US.
- Greece's Economic Future 'Uncertain,' Creditors Say (WSJ)
- Secret Court's Redefinition of 'Relevant' Empowered Vast NSA Data-Gathering (WSJ)
- Thomson Reuters Halts Early Peeks At Consumer Data (WSJ)
- Larry Summers Circles as Fed Opening Looms (WSJ)
- S&P to Argue Puffery Defense in First Courtroom Test (BBG)
- Geithner joins top table of public speakers with lucrative appearances (FT)
- Losing $317 Billion Makes U.S. Debt Safer for Mizuho to HSBC (BBG)
- Pilot Error Eyed in San Francisco Plane Crash (WSJ)
- Investment group sues U.S. over Fannie, Freddie bailout terms (Reuters)
- Egypt officials 'order closure of Islamist party HQ' (AFP)
- Heinz Kerry Transferred to Boston Hospital for Treatment (BBG) - a boating accident?
Overnight newsflow (which nowadays has zero impact on markets which only care what Ben Bernanke had for dinner) started in Japan where factory orders were reported to have risen the most since December 2011, retail sales climbed, the unemployment rate rose modestly, consumer prices stayed flat compared to a year ago, however real spending plunged -1.6% significantly below the market consensus forecast for +1.3% yoy, marking the first yoy decline in five months. This suggests that households are cutting utility costs more so than the level of increase in prices. By contrast, real spending on clothing and footwear grew sharply by 6.9% yoy (+0.6% in April) marking positive growth for a fourth consecutive month. Simply said, the Japanese reflation continues to be limited by the lack of wage growth even as utility and energy prices are exploding and limiting the potential for core inflation across the board.
Paul Fisher Head of Markets at the Bank of England told the economic worriers of the UK that the BoE would not pull the stoppers out on the economic stimulus plan in the UK and that the “macroeconomic outlook here is not as bright as in the US, therefore we are some way behind them in terms of return to anything like trend growth”. Has Mr. Fisher been to the US recently?
We recently asked:"are there really unpredictable market shocks or are investors paid not to care? To us, all signs point towards the next currency reset. We think monetary authorities are compulsively destroying the current global monetary system; they simply have no choice if they are to keep it afloat in the short term." With Bernanke not attending Jackson Hole, we think the choice for next Fed Chair may have profound economic implications, and that it would not require expertise in econometric modeling, credit policy management, and maintaining the public perception of economic stability. We think the next Fed Chairman will oversee a conversion of the global monetary regime. Neither growth nor austerity nor gloom of night will stay these currencies from their appointed devaluations. Bank balance sheets must be preserved; ergo sufficient inflation must be manufactured. We think the dull but persistent economic malaise amid increasingly aggressive monetary intervention policies will soon engender fear among the not-so-great washed – net savers. We think all should question whether we are 100% wrong. If not, then prudence dictates some allocation to properly held precious metals. (Presently, it is less than 1% of all global pensions.)
Brian Sack, he who held the fattest finger on the Fed's green buy button until Simon Potter and his young protege Kevin Henry stepped into those prodigious shoes, has landed a role at mega quant fund D.E.Shaw. As Reuters reports, the former head of the Fed's Market Group will be the co-Director of Global Economics. The fund, with its reputation for mathematical modeling and computer-driven trading over short-term horizons will, we are sure, benefit from Sack's empirical ability to stomp on the throat of the VIX and tinker with VWAPs, though we hope he lasts longer than Larry Summers did. Of course, this almost guarantees that former-D.E.Shaw alum Jeff Bezos' Amazon.com share price will continue to surge as its fundamental performance plunges. The Plunge Protection Team, it appears, is in strong demand, though we hope someone explains that maybe D.E.Shaw does have a MtM policy (and not unlimited balance sheet).
As I and many others have pointed out for years, unless you are a crony Wall Street welfare queen you can pretty much forget about any high level position in the Obama Administration. Barack made that clear from day one when he decided to surround himself with two of the people at the core of the 2008 financial crisis, Larry Summers and Tim Geithner. The trend is simply continuing with the current nominee for Treasury Secretary: Jack “Bailout Bonus” Lew. The revolving door is institutionalized and at this point as reliable as a Swiss watch.
Judging by how the SkyNet formerly known as "the market" has been trading in the past three weeks (and years), one may get the impression the "smart money", hiding behind Bloomberg terminals for 9 hours each day, has gone full lunatic retard. Yet not even said Bloomberg terminals users are completely insane, as confirmed by a just released poll of Bloomberg Professional users, who were asked on their opinion for the two next probably Bernanke replacements: one Larry Summers, best known, together with Robert Rubin, Alan Greenspan and everyone in Congress and Senate over the past 30 years, for destroying the US economy, as well as one Janet Yellen, currently vice chair of the Fed, and almost certain replacement for the Chairsatan once his term expires in early 2014. The verdict: nay to both, but a resounding hell no to the man who destroyed the US banking system, then crushed the Harvard endowment, and finally brought the US consumer and economy to a state of complete ruin.