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“Everyone’s Praying But No One’s Believing” – The ‘Fed Put’ Is Dead
“Everyone’s Praying But No One’s Believing” – The ‘Fed Put’ Is Dead
Chalk Outline
Yellen’s detailed speech initially triggered an out-sized market reaction. Unfortunately, it was mainly due to shallow market depth and weak-hand positions. The ‘risk-on’ trades that ensued seem driven by positional unwinds from short-term traders. These markets will likely reverse back to lower prices once those initial trades are digested.
Yellen’s speech should quickly begin to hurt over-priced financial assets. The stellar performance of financial prices over the past several years has primarily been driven by central bank accommodation. The double digit average returns (15%+) of the S&P 500 from 2009-2014 was not driven by economic strength, but rather by massive global central bank actions. There is simply a poor correlation between economic activity and the S&P 500 in any given year.
Since the Fed’s balance sheet flat-lined in 2014 (with the policy rate locked at 0%) risk assets have chopped side-ways-to-lower. Therefore, a sooner (than priced-in) removal of accommodation should be hurting, not helping, risk assets.
The looming 2015 rate hike, threatened by Yellen and other FOMC members, is desirable and plausible in their eyes due to several factors:
1) confidence that the US economy is on firmer footing and has moved materially away from crisis conditions;2) a sense of desire and urgency to move off the ‘zero lower bound’;
3) anxiety about not having any ammunition during the next economic downturn;
4) fear of missing the business cycle and with it the opportunity to move off of zero rates, and;
5) as stated in Yellen’s speech, the potential that holding rates too low for too long “could encourage excessive leverage and other forms of inappropriate risk-taking that might undermine financial stability”.
Yellen’s speech was the first time I can ever remember a Federal Reserve Chairperson commenting that inappropriate risk-taking might be undermining financial stability. This is explicit confirmation that the Fed’s aim of lifting asset prices in the hopes they bolster broader economic activity has reached the end of its useful life. Barring a financial or economic disaster, the ‘Fed put’ has been put out to pasture.
…click on the above link to read the rest of the article…
“Everyone Preparing for the Wrong Outcome”: Schiff Says QE4 is Coming, Not a Rate Hike!
“Everyone Preparing for the Wrong Outcome”: Schiff Says QE4 is Coming, Not a Rate Hike!
The printing presses are firing up all over again… err, at least the digital ledgers are, anyway.
Financial expert and infamous goldbug Peter Schiff was interviewed by Fox Business from the floor of the U.S. Stock Exchange.
Schiff warned viewers that “everyone is preparing for the wrong outcome with the U.S. economy.”
That outcome? The financial world has been waiting with feverish anticipation for “the big day” when the Federal Reserve finally raises interest rates – a quiet move big enough to shift economic tectonic plates.
But contrary to conventional wisdom about when the Federal Reserve will raise interest rates, and thus turn the page on a new era of the economy, Schiff says they can’t and won’t raise rates anytime soon – though they should have several years ago.
It didn’t happen months ago when many expected it. It won’t happen now in September, and likely not for a long time.
Why?
Because the Federal Reserve can’t raise rates without collapsing the bubble economy.
“I was saying they weren’t going to raise rates. Not because they shouldn’t, but because they can’t, because they will prick this bubble economy that they worked so hard to inflate,” Peter Schiff told Fox Business.
Instead of letting certain markets fail as they should have, they were propped up by the Fed. And these zombie banks and businesses have been sucking life out of the real economy – at great expense to average people.
“The economy has never been good. We’ve really been in a recession, I think, for the entirety of the recovery. I think the policies that the Federal Reserve has used to prop up the stock market and the real estate market have hurt the real economy. That’s why things are actually getting worse. But on Wall Street, yeah, things look good. But if the Fed takes away those monetary supports, we’re going to be in a bear market. We’re going to be in a deeper recession. We’re going to resume the financial crisis that was interrupted by this monetary policy.”
The US Economy Continues Its Collapse
The US Economy Continues Its Collapse
Do you remember when real reporters existed? Those were the days before the Clinton regime concentrated the media into a few hands and turned the media into a Ministry of Propaganda, a tool of Big Brother. The false reality in which Americans live extends into economic life. Last Friday’s employment report was a continuation of a long string of bad news spun into good news. The media repeats two numbers as if they mean something—the monthly payroll jobs gains and the unemployment rate—and ignores the numbers that show the continuing multi-year decline in employment opportunities while the economy is allegedly recovering.
The so-called recovery is based on the U.3 measure of the unemployment rate. This measure does not include any unemployed person who has become discouraged from the inability to find a job and has not looked for a job in four weeks. The U.3 measure of unemployment only includes the still hopeful who think they will find a job.
The government has a second official measure of unemployment, U.6. This measure, seldom reported, includes among the unemployed those who have been discouraged for less than one year. This official measure is double the 5.3% U.3 measure. What does it mean that the unemployment rate is over 10% after six years of alleged economic recovery?
In 1994 the Clinton regime stopped counting long-term discouraged workers as unemployed. Clinton wanted his economy to look better than Reagan’s, so he ceased counting the long-term discouraged workers that were part of Reagan’s unemployment rate. John Williams (shadowstats.com) continues to measure the long-term discouraged with the official methodology of that time, and when these unemployed are included, the US rate of unemployment as of July 2015 is 23%, several times higher than during the recession with which Fed chairman Paul Volcker greeted the Reagan presidency.
…click on the above link to read the rest of the article…
What U.S. Fed chair Janet Yellen doesn’t know: Don Pittis
Continued risks to a U.S. and Canadian economic recovery keep us guessing about interest rates
If everyone is so confident interest rates are going to go up in the autumn, why doesn’t U.S. Federal Reserve chair Janet Yellen just say they are going to go up in September? The answer is risk.
Before yesterday’s monetary policy statement from the Fed, released on paper without the benefit of an explanatory news conference, there was some speculation she would make that very announcement. But that’snot the way it turned out.
“The Fed effectively did this in 2004” — putting the markets on notice that a move would come soon — “shortly before it last embarked on a rate-increasing cycle,” said the Financial Times in an article anticipating the central bank’s latest pronouncement.
Seeking hints
But instead, the people who read each statement to glean the smallest hints about what the Fed will do next were disappointed about how little information it contained. There was a little optimism and a little pessimism but there was one sentence that summed up the gist of the538-word release.
“The Committee continues to see the risks to the outlook for economic activity,” said the statement unanimously agreed upon by Yellen and her advisors.
As Prime Minister Stephen Harper and the industry he championed discovered, risks are events that seem to come out of nowhere. The oil price plunge, followed by a general collapse in commodities prices, in a matter of months turned Canada from one of the world’s hottest economies into one on the verge of recession.
In the case of the U.S. economy, there are similar events that could change what has been a relatively positive outlook.
…click on the above link to read the rest of the article…
A Recession Within A Recession
A Recession Within A Recession
On Friday, the federal government announced that the U.S. economy contracted at a 0.7 percent annual rate during the first quarter of 2015. This unexpected shrinking of the economy is being primarily blamed on “harsh” weather during the first three months of this year and on the strengthening of the U.S. dollar. Most economists are confident that U.S. GDP will rebound back into positive territory when the numbers for the second quarter come out, but if that does not happen we will officially meet the government’s criteria for being in another “recession”. To make sure that the numbers for Q2 will look “acceptable”, the Bureau of Economic Analysis is about to change the way that it calculates GDP again. They are just going to keep “seasonally adjusting” the numbers until they get what they want. At this point, the government numbers are so full of “assumptions” and “estimates” that they don’t really bear much resemblance to reality anyway. In fact, John Williams of shadowstats.com has calculated that if the government was actually using honest numbers that they would show that we have continually been in a recession since 2005. That is why I am referring to this as a “recession within a recession”. Most people can look around and see that economic conditions for most Americans are not good, and now they are about to get even worse.
For quite a while I have been warning that another economic downturn was coming. Well, now we have official confirmation from the Obama administration that it is happening. The following is an excerpt from the statement that the Bureau of Economic Analysis released on Friday…
…click on the above link to read the rest of the article…
The Rich Get Richer: Titanic Stock Bubble Fueled by Buyback Blitz
The Rich Get Richer: Titanic Stock Bubble Fueled by Buyback Blitz
Why are stocks still flying-high when the smart money has fled overseas and the US economy has ground to a halt?
According to Marketwatch:
“For the eighth week in a row, long-term mutual funds saw more money flowing out of U.S. stocks and into international stocks, according to the Investment Company Institute……For the week ended April 22, U.S. stocks saw $3.4 billion in net outflows from long-term mutual funds…For the year to date, net outflows for U.S. stocks are $13.79 billion, while inflows for international stocks are $41.12 billion.
Those figures, however, don’t count exchange-traded funds. In April alone, mutual funds and ETFs that focus on international stocks saw $31.8 billion in net inflows, while U.S.-focused funds and ETFs shed $15.4 billion, according to TrimTabs Investment Research.” (“Why U.S. stocks are near highs even as fund investors flee“, Marketwatch)
So if retail investors are moving their cash to Europe and Japan (to take advantage of QE), and the US economy is dead-in-the-water, (First Quarter GDP checked in at an abysmal 0.1 percent) then why are stocks still just two percent off their peak?
Answer: Stock buybacks.
The Fed’s uber-accommodative monetary policy has created an environment in which corporate bosses can borrow boatloads of money at historic low rates in the bond market which they then use to purchase their own company’s shares. When a company reduces the number of outstanding shares on the market, stock prices move higher which provides lavish rewards for both management and shareholders. Of course, goosing prices adds nothing to the company’s overall productivity or growth prospects, in fact, it undermines future earnings by adding more red ink to the balance sheet. But these “negatives” are never factored into the decision-making which focuses exclusively on short-term profits. Now get a load of this from Morgan Stanley via Zero Hedge:
…click on the above link to read the rest of the article…
Why the Fed Will Crash the Economy If It Hikes Rates: In Three Charts
Why the Fed Will Crash the Economy If It Hikes Rates: In Three Charts
If you’ve been scratching your head since the middle of last year as consumer confidence surveys depicted an optimistic, eager to spend consumer while other hard economic data was showing a sputtering economy, we’re here to put your mind to rest. You’re not crazy. The U.S. economy is dramatically diverging from where most consumers think it is and we have three charts to prove it.
Most Americans have never heard of the Labor Force Participation Rate. Consumers judge the availability of jobs, or lack of them, by the Unemployment Rate that is fed to them in newspaper headlines and TV sound bites monthly. The Unemployment Rate has been coming down nicely and fueling positive vibes among consumers.
Unfortunately, the Labor Force Participation Rate, which measures the number of people who are either employed or actively looking for a job has been hitting historic low numbers, suggesting far more slack in the labor market than captured by the official Unemployment Rate.
On February 4, Jim Clifton, Chairman and CEO of Gallup, told a stunned interviewer at CNBC that he was concerned he might “suddenly disappear” and not make it home that evening if he disputed the reliability of what the U.S. government is reporting as unemployed workers. Clifton’s concerns are essentially based on the fact that consumer confidence and Fed jawboning on when it’s going to hike interest rates to slow down this “strong” U.S. economy before it overheats is about all the U.S. has left in its monetary arsenal.
Clifton had penned an opinion piece on the company’s web site which punctured the rosy spin on the improving jobs market. Clifton wrote:
…click on the above link to read the rest of the article…
The Dwindling US Economy
The Dwindling US Economy
The announcement today (April 29) of a barely positive GDP first quarter 2015 growth rate of 0.2 percent (two-tenths of one percent) is an intentional exaggeration.
Today’s GDP report is the “advance estimate.” There will be two revisions, with the first occurring in one month on May 29.
Although the “consensus estimate,” which is Wall Street’s estimate, declined dramatically over the past month, the consensus estimate was for 1.0 percent.
The BEA’s advance estimate bears the burden of impact on financial markets even though it is the least reliable estimate. Subsequent revisions receive much less attention. Because of its market impact, the advance estimate is fudged by the Bureau of Economic Affairs (BEA) in order not to upset financial markets keyed to the consensus forecast.
All indications are that the first quarter experienced negative GDP growth, that is, a decline from the previous quarter. However, if BEA reported a negative GDP when the financial markets were relying on positive real growth, the government’s Plunge Protection Team might be unable to prevent a substantial market decline.
Therefore, the BEA in its advance estimate reported a barely positive result that kept GDP out of negative territory. This gives financial markets a month to undergo an orderly reduction prior to the first and then second revisions of the advance estimate, or simply to forget the poor performance altogether until the second quarter advance estimate.
…click on the above link to read the rest of the article…
One Last Look At The Real Economy Before It Implodes – Part 4
One Last Look At The Real Economy Before It Implodes – Part 4
In the first three installments of this series, we examined the realities behind supply and demand, unemployment and personal debt, and national debt. As has been proven in each consecutive article with ample evidence, mainstream establishment numbers are, for the most part, utter garbage. They are not legitimate. They are meaningless.
The figures and stats that do have some truth to them are so obscured from the public view and unreported by the media that they may as well be state secrets. The average person has no clue of their existence because his primary sources of information are establishment-dominated. Even MSM talking heads and economic “analysts” are so mesmerized by the false version of the economic world that they have no point of reference when suddenly confronted with singular facts. Some people call this catastrophic behavior a “positive feedback loop.” It is a mainstream echo chamber that has become a financial tomb.
Now that I have covered the lies within our economy that I can prove absolutely, it is time to move on to the lies that are more difficult to pin down. These lies often slip past our investigations because the hard data that could be used to expose them is simply not available to the general public. In fact, much of the data is not even available to government officials. I am, of course, talking about the hard data behind the activities of central banks across the globe — the International Monetary Fund, the Bank for International Settlements and the Federal Reserve in particular. In this installment, we will explore the purpose of these lies; to hide the imminent destruction of our currency — by hook, by crook and by fiat.
…click on the above link to read the rest of the article…
The Fed Has Failed the Nation, in One Chart
The Fed Has Failed the Nation, in One Chart
There is only one way to end the financial tyranny of the Federal Reserve–abolish it, and put an end to the predatory pathologies of its policies.
The Federal Reserve has failed not just the nation and the U.S. economy, but more importantly, the American people that it supposedly serves. It has also failed the world, by showing other central banks that they can reward private banks and top .01% with absolute impunity.
The supposed goal of the Fed’s zero-interest rate policy (ZIRP) and quantitative easing (QE) was to make borrowing easier for both corporations and consumers, the idea being companies would borrow to invest in new productive capacity and consumers would buy the new goods and services being produced with cheap credit.
The secondary publicly stated goal was to spark a rally in stocks, bonds and real estate that would spark awealth effect: as households saw their net worth rise, they would feel wealthier and thus more likely to buy goods and services they didn’t need on credit.
The real reason for ZIRP and QE was to rebuild the balance sheets and profits of banks on the backs of savers who have earned near-zero thanks to the Fed’s manipulation of markets. But setting aside the obvious success of the Fed’s real goals–enriching the banks and the super-wealthy who have access to near-zero interest credit–let’s see what corporations did with the Fed’s nearly-free money.
…click on the above link to read the rest of the article…
The American Dream – Moonshine and Scam
The American Dream – Moonshine and Scam
Infection
When we left you yesterday, we were trying to connect the bloated, cankerous ankles of the US economy to the sugar rush of its post-1971 credit-based money system.
Today, we look at the face of our government. It is older… with more worry lines and wrinkles. But whence cometh that pale and stupid look?
That is also the result of the same advanced diabetic epizootic that has infected American society.
Soft and Mushy
After real money and real savings left the economy circa 1971, GDP growth rates fell. Wages atrophied. And now, for the first time in 35 years, American business deaths outnumber business births. The body economic grew soft and mushy – unable to hold itself erect or to stand on its own two feet. Thenceforth, it needed the crutch of increasing credit.
The new credit-based monetary system meant that Americans had less real wealth. But until 2007, they could still get what they wanted by borrowing. Few noticed that they were borrowing from the company store and becoming slaves to their credit masters.
No one ever figured out how to create gold. So, Washington insiders changed the money system in two steps. In 1968, LBJ asked Congress to end the requirement for the dollar to be backed by gold. And in 1971, “Tricky Dicky” ended the direct convertibility of dollars to gold.
With the new dollar, unbacked by gold, they could create all the money they wanted. After the 1970s, instead of earning more money, or borrowing from the savings of his neighbors, the typical American had to grovel to the elite who controlled the credit machine.
…click on the above link to read the rest of the article…
US Economy Heads Toward Zero Growth in Q1
US Economy Heads Toward Zero Growth in Q1
GDPNow: Wall Street’s promise of Escape Velocity is a joke.
The consistency with which nearly every report on the US economy has deteriorated over the last few months is astonishing. Only the jobs report has been spared that sharp downdraft. So we blame the weather, which in parts of the US was truly atrocious, while in other parts, particularly in California, it was gorgeous.
Too gorgeous. This is supposed to be our rainy season, but every day the sun is out as we’re heading into our fourth year of drought. Yet the drought isn’t what keeps people from shopping or companies from ordering equipment. So out here, we’re baffled when the weather gets blamed.
Today’s durable goods report for February was another shot at this wobbly edifice of the US economy.
New orders for manufactured durable goods dropped by 1.4%, the Census Bureau reported. It was the third decrease in four months. Transportation equipment fell 3.5%, also the third decrease in four months. Excluding transportation, new orders – “core” durable goods – fell 0.4%, down for the fifth month in a row.
And Core Capital Goods New Orders, considered an important gauge of business spending, fell 1.4%, down for the sixth month in a row. The weather is really hard to blame for this, so folks blamed the strong dollar and slack demand in the US and globally.
…click on the above link to read the rest of the article…
One Last Look At The Real Economy Before It Implodes – Part 2
One Last Look At The Real Economy Before It Implodes – Part 2
Consumer spending in the U.S. accounts for approximately 70 percent of gross domestic product, though it is important to note that the manner in which “official” GDP is calculated is highly inaccurate. For example, all government money used within the Medicare coverage system to pay for “consumer health demands,” as well as the now flailing Obamacare socialized welfare program, are counted toward GDP, despite the fact that such capital is created from thin air by the Federal Reserve and also generates debt for the average taxpayer. Government debt creation does not beget successful domestic production. If that was a reality, then all socialist and communist countries (same thing) would be wildly enriched today. This is simply not the case.
That said, the swift decline in manufacturing jobs in the U.S. over the past two decades, including a considerable 33 percent overall decline in manufacturing jobs from 2001 to 2010, leaves only the consumer and service sectors as the primary areas of employment and “production.” The service sector provides about three out of every four jobs available in America, according to the Bureau of Labor Statistics.
The truth is that America actually produces very little that is tangible beyond Big Macs, pharmaceuticals and the occasional overpriced fighter jet that doesn’t function correctly and is filled with Chinese parts. All three will kill you at varying degrees of speed…
…click on the above link to read the rest of the article…
The Great Immoderation: How The Fed Is Sowing The Next Recession
The Great Immoderation: How The Fed Is Sowing The Next Recession
In February 2004 Ben Bernanke famously declared the business cycle had been tamed and took a bow in behalf of enlightened monetary management, claiming it was the principal source of this beneficent development. Exactly 55 months later, of course, he terrorized the Congressional leadership and a clueless President with the frieghtening proposition that a Great Depression 2.0 was just around the corner.
As to why he had been so stupendously wrong, Bernanke did not say. Nor did he explain why the brilliantly “stable” US economy had suddenly stumbled to the edge of an abyss despite the Fed’s energetic money printing in the interim. And the Fed had not been stingy in the slightest; it balance sheet had actually expanded by $150 billion or nearly 4.5% annually between February 2004 and the Lehman bankruptcy.
Indeed, six and one-half years on from the financial crisis—-events that made a mockery of the Great Moderation—–the monetary politburo and its acolytes on Wall Street have offered no coherent explanation as to why Armageddon loomed nigh and why the worst business cycle plunge since the 1930s actually materialized. Certainly their lame Monday morning claim that “prudential regulation” had failed doesn’t cut it.
…click on the above link to read the rest of the article…
