Testimony

The overnight global scramble to buy stocks, any stocks, anywhere, continued, with the Nikkei soaring higher by 2% as the USDJPY rose firmly over 100, to levels not seen since May as the previously reported speculation that more QE from the BOJ is just around the corner takes a firm hold. Sentiment that the liquidity bonanza would accelerate around the world (with possibly more QE from the ECB) was undented by news of a surge in Chinese short-term money market rates or the Moody's one-notch downgrade of four TBTF banks on Federal support review. The release of more market-friendly promises from China only added fuel to the fire and as a result S&P futures are now just shy of 1800, a level which will almost certainly be taken out today as the multiple expansion ramp continues unabated. At this point absolutely nobody is even remotely considering standing in front of the centrally-planned liquidity juggernaut that has made "market" down days a thing of the past.

How is inflation of 2% acceptable? Why is this base assumption never challenged? At this rate, in 10 years you’ve lost roughly 20% of your purchasing power. And during the average worker’s lifetime, they will see a 40-60% decrease in purchasing power.

Today the treasury auctioned off 16bln 30yr bonds at 1pm (ET).  This occurred during a fairly volatile backdrop.

The financial crisis of 2007-2008 has sparked the most intense interest in international monetary reform since Richard Nixon closed the gold window at the New York Fed and devalued the U.S. dollar in 1971.

Sell bonds??  Buy bonds??  What should i do?? 
I'm so confused!!!

It would appear that much of the rally yesterday (and early overnight) was driven by hope (and confirmed relief) that Fed chair nominee Yellen is not about to take on a substantially less-dovish tone in today’s testimony in an effort to garner the support of the more hawkish elements of the Senate Banking Committee. There was a great deal of confirmation bias in the market's move and interpretation but, as BofAML notes below, this may be misplaced. The more important part of today’s testimony is yet to come in the Q&A session - where we will hear likely more unscripted thoughts from the QEeen at her Senate confirmation this morning.

Japan growth cut in half, Europe growth cut by more than half, but none of that matters: today it will be all about the coronation of QEeen Yellen, who testifies before the Senate Banking Committee at 10am. Not even Japanese finance minister Aso's return to outright currency intervention warnings (in addition to the BOJ's QE monetary base dilution), when he said that Japan must always be ready to send signal to markets to curb excessive and one sided FX moves and it is important that Japan has intervention as FX policy option, which sent the USDJPY back up to 100 for the first time since September 11 made much of an impact on futures trading which after surging early in the session following the release of Yellen's prepared remarks, have now "tapered" virtually all gains. Certainly, the follow up from Europe doing the same and also warning it too may engage in QE, has been lost. Which is odd considering the entire developed world is now on the verge of engaging in the most furious open monetization of virtually everything in history.

With gold down 10 of the last 11 days (until today), Peter Schiff tells CNBC that this temporary downswing is due to "the fantasy of a US recovery," that so many actually believe and thus, due to this 'recovery' the Fed will taper back its quantitative easing. "It's not gonna happen," Schiff explains, "we have a phony recovery," and the Fed will more likely increase the amount of QE in order to sustain it, "which is very bullish for gold." Crucially, Schiff clarifies that he "doesn't think a taper is inevitable," as many believe, "but an end to QE won't happen by the Fed's choice - the market will force them to tread on the brakes as the USD collapses." As we noted earlier, Schiff also believes there is an attempt to do "whatever it takes" to pull the EUR down to maintain the USD - but as today's price action shows, it's not working... "Long-term, the fundamentals have never been better for gold."

Just as the market was expecting, and may have been leaked once again, Janet didn't let anyone down. Today's exuberance in stocks matched only by confirmation that Janet Yellen has gained her helicopter pilot's license and is ready to take over the reigns of printer-in-chief from Bernanke. Key extracts:  "Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential...  I believe the Federal Reserve has made significant progress toward its goals but has more work to do." In short: Get to work Mr. Chairwoman, and allow Congress to keep doing more of what they have been doing under the Fed's central planning: nothing.

With better US labor market data, the key event in the upcoming week could well be the Yellen nomination hearing in the Senate Banking Committee. Yellen will likely deliver brief prepared remarks followed by questions from members of the committee. Yellen is expected to be relatively circumspect in discussing potential future Federal Reserve policy decisions in the hearings. Nonetheless, the testimony may help clarify her views on monetary policy and the current state of the economy. Yellen has not spoken publicly on either of these topics since the spring of this year. In addition to the nomination hearing, there will be a series of Fed speeches again, including one by Chairman Bernanke.

A dispassionate overview of the investment climate and what to expect this week.  

For the first time today, in addition to previous anecdotal evidence that the first several days of the Obamacare rollout (with 248 enrollees in the first two days) have been an abysmal failure, and the days since have fared no better, HHS Secretary Sebelius finally admitted to the Senate Finance Committee that over a month after the rollout of healthcare.gov, the enrollment figures have been "very low." Of course, being able to qualify the number didn't mean she could or would actually put it in numeric terms - it would have been simply too humiliating and may have forced her to finally do what so far nobody in the Obama administration has done: take responsibility for one after another failure (after all, for everything else, there's "Mr. Chairwoman getting to work") and resign. One thing, however, is certain, the "very low" number whatever it may be, is orders of magnitude below Obama's mission critical goal of enrolling 494,620 people in October, and another 706,600 for November.

In a stunning series of lies, damned lies, and twisted statistics, the Fed's Jim Bullard unleashed a torrent of self-agrandizing comfort-speak on CNBC this morning. From his comment that "bubbles, such as housing and dot-com, were blindingly obvious at the time," despite Bernanke's (and Greenspan's) insistence at the time that they were not to his comments about the size of Fed Treasury holdings (and monetization) as being "average" based on some statistic, the Fed president gave himself one more out as he admonished:

*BULLARD SAYS FED DOESN'T WANT TO SUPPORT 'FISCAL RECKLESSNESS'

Oh no, you'd never want to do that... With an administration lying to the American people's face over Obamacare and now the even more powerful Fed incapable of the truth, what hope is there that anyone gets out of this debacle in tact.

In yesterday's stage-setting drama, "coming in mid-November" replaced of the often heard "plead the fifth" as response of choice for Marilyn Tavenner (CMS Administrator). Today brings the main event, amid another server crash, as Kathleen Sebelius (HHS Secretary) takes the stand to explain healthcare.gov's shortcomings and how great it will all be at some point in the future if we just have some patience, spend a few more billions of taxpayer money on lines of code, and ignore the fact that the website is just the start of the problems with Obamacare... Her initial remarks (released early - below) are almost exactly the same as her testimony to Congress (and a carbon copy of Tavenner's remarks): “I want to assure you that HealthCare.gov can be fixed, and we are working around the clock to give you the experience that you deserve.”

If there was another reason for the Fed to keep its foot 'through' the floor, it is the fact that despite a record growth in the Fed balance sheet YoY, CPI (ex food and energy) dropped to 1.7% and missed by its biggest margin in 14 months. This is the 2nd lowest print in two-and-a-half years. Perhaps most dismally, real hourly wages rose at only 0.9% year-over-year - around half the rate of inflation. Overall, energy costs rose the most MoM (+0.8%) while Apparel fell 0.5% MoM (its biggest drop in 6 months as we suspect the JCP-driven sales deflation has begun already); and given Sebelius' testimony today we note that healthcare costs are up 2.4% YoY (almost triple the rate of wage increase).