"We have to be careful of these kind of exponentially rising markets," chides Marc Faber, adding that he "sees no value in stocks." Fearful of shorting, however, because "the bubble in all asset prices" can keep going due to the printing of money by world central banks, Faber explains to a blind Steve Liesman the difference between valuations and bubbles (as we noted here), warning that "future return expectations from stocks are now very low."
Following his "can we get some mexican music to go along with that" Ted Cruz comments, the always "apolitical" Steve Liesman - who honed his 'economic' teeth while on a mission to communist Russia - has issued an apology. Explaining his remarks were not meant to be "offensive in any way," Liesman suggested perhaps country-western would be a better choice next time...
You know it's getting troubling when everyone's favorite hopium-providing financial-advisor-pitchfest channel is unable to find a silver-lining upon which to place your BTHFATH 401(k) bets. Steve Liesman unveiled the CNBC All-American Economic Survey and it was not pretty. In a nutshell, optimism is plunging and pessimism is surging as 61% are downbeat on the current state of the economy and pessimistic for the economic future.
UPDATE: As opposed to CNBC's earlier premature note, the 10Y Treasury cash bond just broke above 3.00% for the first time in 26 months as China gets going...
We are assured by the great and good of the status quo that when 10Y rates burst through the 3.00% barrier (its highest in 26 months) it will not hinder the housing recovery (as affordability plunges), slow equity buybacks (via increased cost of capital), or crush bank earnings (via AFS losses and NIM compression as the curve flattens). Bond yields are rising as a 'positive' sign for the economy... must be right? But wasn't it Steve Liesman just 2 weeks ago, amid his "best nailing it on CNBC in years", that proclaimed 10Y would hit 2.65% before 3.00%? As we warned 3 weeks ago, a move to 3.0% will create more meaningful outflows from retail and ETFs and 3.5% is the trigger for a "disorderly rotation," from risk to cash.
Following the market's shocking realization that the taper is coming prompting a kneejerk to the kneejerk reaction after the FOMC minutes, and yet another painful session in Asia, stocks were desperate for some good news from somewhere, which they got thanks to a Goldilocks PMI from China printing by the smallest possible expansionary quantum, or 50.1, and well above expectations, as well as a continuation of better than expected European PMI data with the August composite rising from 50.5 to 51.7 vs. Exp. 50.9, based pm a Services PMI rising into expansion to 51.0 from 49.8, (Exp. 50.2), and Manufacturing at 51.3 vs. Exp. 50.8 up from 50.3, the highest since June 2011. It is perhaps stunning just how conflicting this "improving" data is with private sector industrial and manufacturing company metrics, but with the credit creation situation in Europe (read: all that matters) at record lows, and with banks retrenching and needing to delever by trillions, it is only a matter of time before this latest propaganda wave is exposed for what it is. The net effect of the overnight data is to push the USDJPY to nearly 99.00 which thanks to the ubiquitous correlation algos has dragged US equity futures higher, if only briefly (the 10 Year is at 2.91% - under 10bps from redline territory), while slamming the offsetting EURUSD despite the "better" than expected European data.
Until now, we have refrained from trying to explain Fedspeak to the masses. The truth is it's not opaque. It's not indecipherable. It's simple. Or at least you can choose to believe it is, as we have. At last week’s press conference, Federal Reserve Chairman Ben Bernanke fielded questions from reporters employed by some of the world's most esteemed news organizations. Here is a summary, translated from Fedspeak into ordinary American English and heavily condensed for easy tweeting.
Given that ALL of the stock market gains since 2008 were based on Fed money printing… what do you think will happen when the Fed tries to taper QE?
Over a year ago, we first explained what one of the key terminal problems affecting the modern financial system is: namely the increasing scarcity and disappearance of money-good assets ("safe" or otherwise) which due to the way "modern" finance is structured, where a set universe of assets forms what is known as "high-quality collateral" backstopping trillions of rehypothecated shadow liabilities all of which have negligible margin requirements (and thus provide virtually unlimited leverage) until times turn rough and there is a scramble for collateral, has become perhaps the most critical, and missing, lynchpin of financial stability. Not surprisingly, recent attempts to replenish assets (read collateral) backing shadow money, most recently via attempted Basel III regulations, failed miserably as it became clear it would be impossible to procure the just $1-$2.5 trillion in collateral needed according to regulatory requirements. The reason why this is a big problem is that as the Matt Zames-headed Treasury Borrowing Advisory Committee (TBAC) showed today as part of the appendix to the quarterly refunding presentation, total demand for "High Qualty Collateral" (HQC) would and could be as high as $11.2 trillion under stressed market conditions.
MERS: The Center of the Mortgage Scam
Today any lingering doubts that the market is a complete and manipulated farce were put to rest following the epic embarassment that was the early release of FOMC minutes due to what Steve Liesman announced was a leak of the March minutes yesterday to a hundred or so staffers and various lobby organizations, which means the minutes promplty became public knowledge to anyone and everyone connected to Washington, such as all hedge funds, banks, and other financial firms. Everyone, except of course, the general public. Which is why we politely petition the Fed to add us and all of ours readers to the early distribution list for the Minutes and all other releases that are leaked in advance of distribution to the general public. Since we have all given up on any pretense of a "fair and efficient" market, it is only "fair" (at least until such time that Chairman Bernanke decides to finally start throwing €500 and ¥100,000,000,000,000 bills out of helicopters).
We urge readers to make liberal use of the Fed's contact page and request "fair" and equal treatment with those who in the eyes of the Fed are more equal than all others.
Fewer jobs, BTFD; Bond yields at 5-month lows, BTFD; Macro data collapsing, BTFD; earning season straight ahead, BTFD. US equities dumped in the pre-open on huge volume as the NFP data hit and disappointed with not even Steve Liesman able to find a silver lining, but we wriggled higher after the US open and briefly topped out at the European close - all amid extremely low volume. Then things went quiet, too quiet; until the dreaded witching 30 minutes. Volume disappeared to trickle and at 1530ET to the dot, the magical levitation fairy took us on her wings made of bull's scrotums and smashed stops to pull S&P futures (and thusly the rest of the market) up 10 points. Although we closed red - making it 13 days in a row of down-up now (an all-time record of prevarication) - all asunder declared victory for the bulls and declared that this 'market' shows that everyone just wants to buy those dips. Meanwhile, EURJPY exploded (JPY lost 5% against the USD in the last 36 hours); Treasury yields collapsed - not participating in the jerk higher in stocks; Silver and Oil recoupled (again) to close -4.2% on the week; Gold ended -1.2% at $1580 (notably off its lows); and while high-beta sectors recovered Utes and Healthcare won the week. The Dow, in all its might, closed above pre-Cyprus levels (just).
Another Beige Book comes and goes providing little real color as to anything useful about the real world. The excessive use of words synonymous with 'mediocre' appears to be the best we can do (on a $1 trillion deficit?) - but of course, the Dow is still near all-time highs...
- *FED SAYS ECONOMY GREW AT 'MODEST TO MODERATE PACE' IN FEBRUARY
- *FED SAYS 'MANUFACTURING MODESTLY IMPROVED IN MOST REGIONS'
- *FED SAYS SEVERAL DISTRICTS REPORTED 'RESTRAINED HIRING'
- *FED SAYS MOST DISTRICTS SAW MODEST PRESSURES ON PRICES
- *FED SAYS 'WAGE PRESSURES WERE MOSTLY LIMITED'
Of course, the spin will be, at least it's not bad... the S&P is 3 points off the highs, BTFD. Perhaps of most note, though: "Many District contacts commented on the expired payroll tax holiday and the Affordable Care Act as having restrained sales growth."
As I noted in an article published Thursday morning, the government bought three quarters of a percentage point worth of growth in the third quarter leading several hapless commentators to opine on national television that the U.S. economy was not only on solid footing but was in fact experiencing "above trend" growth. Of course if you're the mainstream financial media what is good for the Q3 goose is not necessarily good for the Q4 gander and so when fourth quarter GDP printed in contraction territory Wednesday, viewers were encouraged (much to the chagrin of a predictably irate Rick Santelli) to discount "volatile" government consumption expenditures and focus only on the components that made a positive contribution.
When people talk about "cash in the bank", or "money on the sidelines", the conventional wisdom reverts to an image of inert capital, used by banks to fund loans (as has been the case under fractional reserve banking since time immemorial) sitting in a bank vault or numbered account either physically or electronically, and collecting interest, well, collecting interest in the Old Normal (not the New ZIRPy one, where instead of discussing why it is not collecting interest the progressive intelligentsia would rather debate such trolling idiocies as trillion dollar coins, quadrillion euro Swiss cheeses, and quintillion yen tuna). There is one problem, however, with this conventional wisdom: it is dead wrong. Tracking deposit flow data is so critical, as it provides hints of major inflection points, such as when there is a massive build up of deposits via reserves (either real, from saving clients, or synthetic, via the reserve pathway) which can then be used as investments in the market. And of all major inflection points, perhaps none is more critical than the just released data from today's H.6 statement, which showed that in the trailing 4 week period ended December 31, a record $220 billion was put into savings accounts (obviously a blatant misnomer in a time when there is no interest available on any savings). This is the biggest 4-week total amount injected into US savings accounts ever, greater than in the aftermath of Lehman, greater than during the first debt ceiling crisis, greater than any other time in US history.
Earlier today, Bill Frezza of the Competitive Enterprise Institute and CNBC's Steve Liesman got into a heated exchange over a recent Frezza article, based on some of the key points we made in a prior post "A Record $2 Trillion In Deposits Over Loans - The Fed's Indirect Market Propping Pathway Exposed" in which, as the title implies, we showed how it was that the Fed was indirectly intervening in the stock market by way of banks using excess deposits to chase risky returns and generally push the market higher. We urge readers to spend the few minutes of this clip to familiarize themselves with Frezza's point which is essentially what Zero Hedge suggested, and Liesman's objection that "this is something the banks don't do and can't do." Liesman's naive view, as is to be expected for anyone who does not understand money creation under a fractional reserve system, was simple: the Fed does not create reserves to boost bank profits, and thus shareholder returns, and certainly is not using the fungible cash, which at the end of the day is what reserves amount to once dispersed among the US banks, to gun risk assets higher.
Alas, Steve is very much wrong.