"...we tried carefully to look at evidence of potential financial instability that might be brewing and some of the hallmarks of that, clearly overvalued asset prices, high leverage, rising leverage, and rapid credit growth. We certainly don’t see those imbalances. And so although interest rates are low, and that is something that could encourage reach for yield behavior, I wouldn’t describe this as a bubble economy."
Earlier today, CNBC's Steve Liesman made two very important, in fact "critical", if about one year overdue, discoveries. The first one was that Americans are angry. The second discovery is that angry Americans largely support Trump over Hillary.
Following yesterday's dollar spike which, which topped the longest rally in the greenback in one month, the prevailing trade overnight has been more of the same, and in the last session of this holiday shortened week we have seen the USD rise for the fifth consecutive day on concerns the suddenly hawkish Fed (at least as long as the S&P is above 2000) may hike sooner than expected, which in turn has pressured WTI below $39 earlier in the session, and leading to weakness across virtually all global risk assets.
The last thing the Fed can bear is for a recession that may be bubbling just under the surface to boil over into full view in the months heading into the election. If that occurs, we all may be seeing a great many press conferences from Mar-a-Lago. That is a development that I’m sure Janet Yellen wants to avoid at all costs.
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.
SF Fed president and flipflopper extraordinaire John Williams told Market News International in an exclusive interview that "he will be advocating for another interest rate hike as early as the April meeting of the Fed's rate-setting Federal Open Market Committee - or, failing that, at the June meeting - provided the economy continues to do as well as it has been." Maybe, or maybe not: "for now, though, the Fed is considering raising rates, not lowering them. Williams says such a move would be "appropriate" if inflation data continues to move toward 2% in coming months as he expects."
The market just ran out of buying power.
Santelli: Steve, could you understand any of it? Any of it seriously? Just a yes or no.
Liesman: Not much, it was not precisely responsive to the question i asked.
“...parts of the U.S. jobs report for January seem fishy...”
Fed Back-Pedals Hawkishness, Hints At Policy Error: "Monitoring Global Developments", Admits "Growth Slowed Last Year"Submitted by Tyler Durden on 01/27/2016 16:01 -0400
Treading a fine line between losing all credibility and exposing their total devotion to the stock market, it appears The Fed is maintaining its delusion that everything will be fine as they unwind the largest and most experimental monetary policy of all time, and yet for the first time we get proof that the Fed admits it made an error by hiking into a slowing economy: "labor market conditions improved further even as economic growth slowed late last year.
Here’s a newsflash that CNBC didn’t mention. According to the BLS, the US economy generated a miniscule 11,000 jobs in the month of December.
"The idea of lettting an asset bubble run is literally one of the most foolish things a central bank can do... they always end badly;"
What do you do when you're a government statistician and the economic data doesn't say what you want it to say? Why you "adjust" it of course.
There's been no shortage of discussion about the weather among economists this year as "snow in the winter" took the blame for a bevy of bad data in H1 while summer is Citi's new scapgoat for any weakness in August and September payrolls. Meanwhile, unseasonably mild temps took the fall for poor October retail sales and now, going into the winter, it's all about El Nino.
... for many equities are simply, as SocGen puts it, "too scary."