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“We Frontloaded A Tremendous Market Rally” Former Fed President Admits, Warns “No Ammo Left”
“We Frontloaded A Tremendous Market Rally” Former Fed President Admits, Warns “No Ammo Left”
In perhaps the most shocking of mea culpas seen in modern financial history, former Dallas Fed head Richard Fisher unleashed some seriously uncomfortable truthiness during a 5-minute confessional interview on CNBC. While talking heads attempt to blame China for recent US market volatility, Fisher explains “It is not China,” it is The Fed that is at fault: “What The Fed did, and I was part of it, was front-loaded an enormous rally market rally in order to create a wealth effect… and an uncomfortable digestive period is likely now.” Simply put he concludes, there can’t be much more accomodation, “The Fed is a giant weapon that has no ammunition left.”
Must watch!!! A shocked Simon Hobbs (at 5:10) is a must-see… “Will The Fed come on and say ‘we’re sorry, we over-inflated the market’ when it crashes?”
In my tenure at The Fed, every market participant was demanding we do more… “It was The Fed, The Fed, The Fed… in my opinion they got lazy.. and it is time to go back to fundamental analysis… and not just expect the tide to lift all boats… and as [The Fed] tide recedes we are going to see who is wearing a bathing suit and who is not”
Oil Bankruptcies Hit Highest Level Since Crisis And There’s “More To Come”, Fed Warns
Oil Bankruptcies Hit Highest Level Since Crisis And There’s “More To Come”, Fed Warns
“Two things become clear in an analysis of the financial health of US hydrocarbon production: 1) the sector is not at all homogenous, exhibiting a range of financial health; 2) some of the sector indeed looks exposed to distress [and] lifelines for distressed producers could include public equity markets, asset sales, private equity, or consolidation. If all else fails, Chapter 11 may be necessary.” That’s Citi’s assessment of America’s “shale revolution”, which the Saudis have been desperately trying to crush for more than a year now.
As Citi and others have noted – a year or so after we discussed the issue at length – uneconomic producers in the US are almost entirely dependent on capital markets for their continued survival. “The shale sector is now being financially stress-tested, exposing shale’s dirty secret: many shale producers depend on capital market injections to fund ongoing activity because they have thus far greatly outspent cash flow,” Citi wrote in September. Here’s a look at what the bank means:
Of course this all worked out fine in an environment characterized by relatively high crude prices and ultra accommodative monetary policy. The cost of capital was low and yield-starved investors were forgiving, allowing the US oil patch to keeping drilling and pumping long after it should have been bankrupt. Now, the proverbial chickens have come home to roost. In the wake of the Fed hike, HY is rolling over and as UBS noted over the summer, “the commodity related industries total 22.8% of the overall HY market index on a par-weighted basis; sectors most at-risk for defaults (defined as failure to pay, bankruptcy and distressed restructurings) total 18.2% of the index and include the oil/gas producer (10.6%), metals/mining (4.7%), and oil service/equipment (2.9%) industries.”
…click on the above link to read the rest of the article…
Futures Soar On Hope Central Planners Are Back In Control, China Rollercoaster Ends In The Red
Futures Soar On Hope Central Planners Are Back In Control, China Rollercoaster Ends In The Red
For the first half an hour after China opened, things looked bleak: after opening down 5%, the Shanghai Composite staged a quick relief rally, then tumbled again. And then, just around 10pm Eastern, we saw acoordinated central bank intervention stepping in to give the flailing PBOC a helping hand, driven by the BOJ but also involving NY Fed members, that sent the USDJPY soaring which in turn dragged ES and most risk assets up with it. And while Shanghai did end up closing down -1.7%, with Shenzhen 2.2% lower at the close, the final outcome was far better than what could have been, with the result being that S&P futures have gone back to doing their thing, and have wiped out all of yesterday’s losses in the levitating, zero volume, overnight session which has long become a favorite setting for central banks buying E-Minis.
As Bloomberg’s Richard Breslow comments, the majority of Asian equity indexes finished with losses but on an upbeat note, helping most European markets to start with modest gains that have increased with the morning, thanks to the aforementioned domestic and global mood stabilization. S&P futures have been positive all day other than a brief dip negative at the worst of the day’s China levels. Chinese equities opened quite weak and were down another 5% before the authorities assured the market that speculation they would withdraw from market supportive measures was misguided. This began a rally of over 6% before a mid-afternoon swoon.
…click on the above link to read the rest of the article…
Oil Bust Mauls Texas Manufacturers, Atlanta Fed Sees Hit to Broader US Economy
Oil Bust Mauls Texas Manufacturers, Atlanta Fed Sees Hit to Broader US Economy
By now, every executive in the American oil patch goes through the day with one eye riveted on the price of oil. And on Monday, West Texas Intermediate plunged once again below $50 a barrel. It has become the nightmare price for Texas manufactures.
The Texas economy grew admirably during the fracking boom. The high price of oil threw money in all directions. Drillers and oil field services companies, along with suppliers of the drilling boom raked in orders and the big bucks. But now the fracking boom has turned into a fracking bust, and the consequences are spreading through the economy.
The Dallas Fed’s February manufacturing index for General Business Activity dropped to -11.2 from the already crummy -4.4 in January, the lowest level since April 2013. In the survey, 22% of the business executives reported that conditions were “worsening” while only 10.8% said conditions were “improving.”
The new orders index swooned to -12.2, the “lowest reading since June 2009.” Growth of new orders hit -16.3, unfilled orders -17.3. The shipments index dropped to -3.3, “a low not seen since 2009.”
This is how companies are reacting: as costs are getting slashed to preserve cash flow, the capital expenditures index dropped to -4.8.
Texas, the job creating machine? The employment index is beginning to stagnate: 15% of the companies reported net hiring, 14% reported net layoffs, and the hours worked index descended into the negative.
…click on the above link to read the rest of the article…
