Breslow: "If You Ever Needed Proof That Central Banks Have Crushed These Markets, There You Have It"

It's been a while since we featured the grouchy version of Richard Breslow, Bloomberg's  "Trader's Notes" author, who is back with a bang with his latest missive, explaining why "Ignoring Current Events Just Makes You a Slave" and why the mockery of centrally-planned "markets" has gone on long enough...

From Bloomberg's Richard Breslow

Ignoring Current Events Just Makes You a Slave: Trader’s Notes

This was billed as the most important week of the year for global markets. And we made it almost through Monday before “exhausted” traders were being advised to shuffle back to their safe rooms to get lost in watching the upcoming soccer matches. Boo hoo.

When in doubt, watch TV is one hell of an investment strategy. If you ever needed more proof that central banks have crushed these markets, there you have it. The belief that nothing matters other than an inconsequential rate hike some time over a year from now in euro land or whether the Fed will make the ever so bold move of raising the IOER by only 20 basis points speaks volumes. And it isn’t being complimentary.

It’s a truly bizarre construct to judge the import and implications of every event through the lens of whether green- pack Eurodollar futures jump or dump half a point. Especially when it’s intermingled for show with nonsense about demographic trends sure to produce a precise outcome 30 years from now. No wonder the smart money is investing in artificial intelligence programs that don’t listen to this tripe. G-7 and Korea aren’t yesterday’s news, unless day trading is your version of investing.

By far, the best thing any of the central bank meetings scheduled for this week could accomplish is to say, “here is what we are doing here and now, this is where we hope to get to and we are playing everything beyond that by ear.” Forward guidance is, we want to raise rates as soon as we can, subject to events. Period. Any idiot could have figured out quantitative easing. History will show that the real heroes are the ones who can get us out of this mindless mess. And from the look of things, it has never been more imperative.

Fed Chairman Jerome Powell is said to be less sensitive to “global headwinds” than his predecessors. If so, it will turn out to be a characteristic that redounds to his credit. If ever a market needed some tough love it’s now. The same should be urged upon ECB President Mario Draghi. At this point, whether emerging markets are taken aback by a faux hawkish Governing Council is their problem. Especially since, with the exception of certain well-advertised basket cases, the asset as a class may have disappointed but has hardly been beaten up.

How much warning about higher rates is required before it no longer dictates global monetary policy? Or before people with large carry positions stop expecting special consideration?

It’s a busy week. Don’t wish it away because there’s a bottle of central-bank administered Soma on the table by the couch. There’s enough dystopian imagery going around, so give Huxley a rest and fire yourself up by reading some Homer as you gird your loins for what awaits on the trading calendar. The men in the short shorts will wait. And if they don’t there is always golf on some other channel.

Comments

NoDebt NidStyles Tue, 06/12/2018 - 09:25 Permalink

Everyone has a plan until the first time they get punched in the face.  Sure, CBs are raising rates and talking confidently about how the economy can handle it but the minute things start to slide off the table again, they'll be back.  

I mean, could you even imagine a 2008-style crash (and, trust me, there's plenty of bad debt out there to cause another one) where the Fed and the ECB say "Sorry, nothing we can do.  Gonna have to let the markets clear all this bad debt out on their own."

It's ridiculous on its face and even more so when you consider whose agenda they are there to support.

 

In reply to by NidStyles

spastic_colon NoDebt Tue, 06/12/2018 - 09:40 Permalink

where the Fed and the ECB say "Sorry, nothing we can do.  Gonna have to let the markets clear all this bad debt out on their own."

if we ever needed an alien invasion.....so we could get them to buy our debt......I'm going to be interested to see all of the AI trying to buy and sell to each other in a crisis.

In reply to by NoDebt

striped-pad Michigander Tue, 06/12/2018 - 11:01 Permalink

Federal Reserve money comes with an automatic 6% interest rate on every dollar printed

It's worth checking factoids like this – they could be right, and it's worth knowing if there is a massive scam going on. Other times the factoid is actually misleading, and I think that's what we've got here.

Banks don't get 6% of every dollar printed. Federally-chartered banks are required to buy equity in their regional Federal Reserve Bank equal to 6% of their capital, and they receive 6% of that amount annually as a dividend from the Fed. This is completely irrespective of how many dollars the Fed creates.

The Fed's financial statement for 2017 says that it paid $784 million in dividends in 2017. (It was $711 million in 2016).

In 2017, by contrast, the amount remitted to the Treasury by the Fed was $80.559 billion.

There are many criticisms which can be made of what the Fed does, but I don't think the 6% dividend is a major one.

P.S. If you're going to downvote me because you think I'm wrong, can you also reply showing me some evidence so I can learn from it please? Thanks.

{Edit} 

Source for figures: https://www.federalreserve.gov/aboutthefed/files/combinedfinstmt2017.pdf

In reply to by Michigander

striped-pad Mr. Universe Tue, 06/12/2018 - 15:30 Permalink

I agree about the relevance of the 80 billion compared to the 666 billion, but I hope you agree that my original point stands – the 6% dividend isn't how banks make their fortune.

Member banks can create pretty much as much money as they want, but remember that the money which a bank creates is a debt owed by the bank to the holder of the money – it is a liability of the bank, which reduces the bank's net worth.

The only reason that bank deposits are treated as money is that people assume that the banks are solvent, or at least that someone else (probably taxpayers via the government) will bail the banks out. From that point of view, it is banks' influence on government which gives them the ability to write IOUs without having the ability to honour them, rather than the other way round. If the governments were answerable to the people, and the people insisted on banks not being bailed out, banks would gain no power by writing IOUs which make them worse off.

In reply to by Mr. Universe

striped-pad Umh Tue, 06/12/2018 - 15:36 Permalink

I would have liked 6% interest too, but I wanted to make the point that that is not how banks get so much influence.

Of course, if interest rates were at a level set by the market, rather than preposterously artificially low for political reasons, the 6% might not seem such a big deal.

In reply to by Umh

shortonoil Rapunzal Tue, 06/12/2018 - 10:30 Permalink

As the peripheral economies continue to implode (Turkey, Argentina, Brazil, South Africa, Venezuela, China, and the Middle East) from capital outflows the central banks will continue to attempt covering up the ongoing, and increasingly destructive on slot. The last thing they want anyone to know is that their debt based fiat currencies are now failing around the world. They will just keep telling everyone how important their "data driven" policies are to the world of finance. Enough will believe it to keep the mess going until they realize that entire world's financial activity is now taking place on two computers that someone forgot to unplug.

In reply to by Rapunzal

LawsofPhysics Tue, 06/12/2018 - 09:09 Permalink

The central bankers and financiers of the world knew that there was no way out, so they did what they do best, printed new money for THEMSELVES so they could "buy" (steal really) the remaining assets and take control of productive capacity!

Forcing everyone else into debt slavery. No matter, such "let the majority eat cake" monetary experiments have been tried before, this one will end no differently, in the meantime...

"Full Faith and Credit"

same as it ever was! Interesting times indeed!

ll951983 LawsofPhysics Tue, 06/12/2018 - 09:38 Permalink

 

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In reply to by LawsofPhysics

ravolla ll951983 Tue, 06/12/2018 - 09:43 Permalink

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Biblicism = TodaysFox ("I made $7000 sucking cock on the Internet")  SAME SPAMMER!

R.I.P.   "Mr Hankey" who has joined "The Fallen Spammers" -- banned for pathological over the top whackism.

THIS is an important week here in the SPAMMER's BUNKHOUSE.  You see, there are dozens of "personalities" living in this one single sad SPAMMER's sick little mind, which he calls "Spammer's Bunkhouse."  How sick is that?

This week I (we?) are celebrating SEVEN YEARS here on ZH, obsessively SPAMMING every thread we can with off-topic comments.

SAD BUT TRUE!!  I (we?) have wasted my (our) youth (or at least the last seven years) with at least one hand in my pants and the other hand SPAMMING ZH.  Yes, indeed.  DOZENS and DOZENS (maybe hundreds) of log-on's banned -- 
>>  "I made $7500 last week on the Internet sucking cock!": that's me.
>>  Biblicism: that's me.
>>  All the porn at Celebrity-leaks: that's me.
>>  Daily Westerner: that's me.

>>  "In the news....SPAMMER broomsticked by furious readers" -- registered in Nigeria) :: that's me TOO!! 

That's our life (all of us living in Master Spammer's Mind): mopping the floor at the Porn Cinema at 2am, working the drive-thru window at SONIC, sucking cock on the Internet, and spamming ZH with an enormous Excel spreadsheet of the log-on's of dozens of "digital friends" who upvote one another and virtually suck my little micro penis..

MEET my current imaginary friends.  We all live in one SPAMMER's HEAD but as for me, I have gone off the reservation.  These other "personalities" are pretty troubled.

ll951983  <<< NEWBIE  sucks cock on the Internet!
Wadalt
Leakanthrophy
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Powow
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Mr Hankey    <<<  total utter WHACK JOB  -- joined "The Fallen"
gzcekkyret     <<<  NEWBIE

You know SPAMMERS never die on ZH -- here's just a sampling of the banned log-on's ("The Fallen Spammers") ---

 beepbop, pier, lloll, loebster, ergatz, armada, Mtnrunnr, Anonymous, luky luke, Cjgipper, winged, moimeme, macki mack, tchubby, sincerely_yours, HillaryOdor, winged, lexxus, kavlar, lhomme, letsit, tazs, techies-r-us, stizazz, lock-stock, beauticelli, Mano-A-Mano, mofio, santafe, Aristotle of Greece, Gargoyle, bleu, oops, lance-a-lot, Loftie, toro, Yippee Kiyay, lonnng, Nekoti, SumTing Wong, King Tut, Adullam, evoila, rp2016, alt right dude, altright-girl, alt-right girl, Blufin, Schlomo Scheklestein, BraveForce, Mr Hankey

In reply to by ll951983

Nunyadambizness Tue, 06/12/2018 - 09:20 Permalink

OH come on now...  Everything is fine, just fine!  The Dow is going up, record highs for the S&P, real estate skyrocketing, what could POSSIBLY go wrong??  This is just fear mongering so this guy can pick up some bargains when people listen to him and sell.  Right?  Wouldn't you agree?

 

</sarc>

Nature_Boy_Wooooo Tue, 06/12/2018 - 09:23 Permalink

If Central banks are crushing the market and pumping the market.......... shouldn't we just call it manipulation?

 

I guess that would kill tommorows........Central Banks Are Pumping The Market article.

looks so real Tue, 06/12/2018 - 09:36 Permalink

It's never been this good If the dam is about to break we have electric eyes looking at and repairing all the cracks their's nothing flash digital cash can't fix. The federal reserve should test this theory by raising rates and showing that you can't bring down the market.The world is linked the money will find new ways to flow technology really is king and very undervalued.

nsurf9 Tue, 06/12/2018 - 09:42 Permalink

Brand new $10 bills - get yours right here, right now - just $19.95.  Limited supply won't last long.  Get yours today (and, especially tomorrow!)!                                                                      Paid Advertising (you betcha)

Ron_Mexico Tue, 06/12/2018 - 09:55 Permalink

Homer is nice, but if you want to learn how to think and how to live, read Marcus Aurelius. That is what the Fed chairman needs to be reading these days.

JohnGaltUk Tue, 06/12/2018 - 09:57 Permalink

Trump is going to cut off the deep state at their nuts.

Currency reset and issue new currency making all old USD Obama was shipping round on pallets, worthless. No safety in the Euro either. Italy is printing the Lira up right now, while Steve Bannon guides them.

The photo of Trump and those bent European politicians on the weekend said it all, they knew it will be serious.

pocomotion Tue, 06/12/2018 - 10:12 Permalink

I spent most of my teen and adult life believing money gets me chicks and fun times.  Now I sit around complaining about lack of money and lack of fun times.

I guess there's truth in money getting you - women and fun times.  Keeping moneys flowing is the majorities of peoples dilemma.

Batman11 Tue, 06/12/2018 - 11:04 Permalink

The markets bring an end to everyone’s belief in the markets.

“Stocks have reached what looks like a permanently high plateau.” Irving Fisher 1929.

This chump believes in the markets and price discovery.

He’s soon going to be a laughing stock as everyone loses faith in the markets and capitalism itself.

1929 and 2008 were Minsky moments.

https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.png

1929 – Inflating US stock market with debt (margin lending)

2008 - Inflating US real estate market with debt (mortgage lending)

The central banks saved the belief in the markets by keeping them up.

 

Batman11 Batman11 Tue, 06/12/2018 - 13:12 Permalink

Why did they invent the GDP measure?

Markets were all the rage in the 1920s and they thought the US stock market represented real economic activity, but in 1929 they found it didn’t.

The bankers like free markets for manipulating, skimming, rigging, distorting, inflating and crashing.

What the bankers like about the markets is the problem with using markets as any sort of useful measure.

In reply to by Batman11