by ilene - October 30th, 2014 10:41 am
Courtesy of Pam Martens.
Back on June 25 of this year, Wall Street On Parade ran the following headline: “BOE’s Carney: Inflated Central Bank Balance Sheet the New Normal; Expect to Hear the Same Conclusion from the U.S. Fed.”
The day before our headline, Bank of England Governor, Mark Carney, had just explained to Parliament why their central bank’s balance sheet, bloated through quantitative easing, was not going to be shrinking anytime soon.
Carney: “…I would define – picking up on what my colleagues have said – pre-crisis position as a position that’s consistent with the normal course of liquidity requirements of the banking system…What has changed, to the good, in terms of the banking system here is that through regulation and supervision we have put much more responsibility on the banks themselves to hold liquidity to manage liquidity shocks. And, as a consequence of that, their demand for reserves can be expected to be higher. The further consequence of that is that the balance sheet of the Bank of England will be larger…”
Translation: We have no idea how to unwind this mess any better than the Americans do.
We commented in the article that: “There is a very real suspicion that Carney was simply laying the groundwork for Fed Chair Janet Yellen to begin to slip the same hints into her forthcoming speeches.”
by ilene - October 30th, 2014 10:13 am
Courtesy of Lee Adler of the Wall Street Examiner
The advance number for third quarter GDP came in at 3.5%, surprising the Wall Street conomists, whose consensus guesspectation was 3%.
It should not have been a “surprise.”
The US Treasury reports tax collection data virtually in real time, every day. I publish a chart of the withholding tax data and report the implications of that data for the markets every week in the Wall Street Examiner Professional Edition Money/Liquidity service reports. It showed that the average inflation adjusted growth rate in Q3 was 3.55%. That data is available to the whole world in real time. Remind me again what Wall Street’s excuse is for not understanding exactly how the economy is doing. And what about the Fed, whose economic growth perceptions are NEVER on the mark. What is its excuse?
Here’s the latest data through October 28.
This data has also proven to be a good indicator of whether non-farm payrolls will beat or miss conomic guesspectations.Unfortunately the BLS data is manipulated, and the seasonally adjusted headline number is absolute fiction, that gets massively revised in subsequent months and years. The tax data is real, hard data, that is never subject to major revision. If you want to know what the economy is doing, follow the money, in this case, the taxes. Follow it in real time every week in the Wall Street Examiner Professional Edition.
Copyright © 2014 The Wall Street Examiner. All Rights Reserved.
by ilene - October 29th, 2014 11:04 pm
By John Mauldin
The story of energy is the story of human expansion. From the days when we roamed the African savanna, we tamed first fire and then other forms of energy, using them as tools to control our environment and improve our lives. The control of energy has always been at the heart of the human story.
This week our Outside the Box essay is from my friend Marin Katusa, who has written a fascinating book about a part of that story, a subplot of intrigue and conspiracy. Under Putin, Russia has aspired to dominate the energy markets. Called The Colder War, Marin’s book is a well-written tale of the rise of Putin and his desire to change the way the world’s energy markets are controlled.
I sat down a few months ago with an advance copy, not sure what to expect. Marin is personally very colorful and entertaining, but would that charisma translate to words on a page? I started on a Sunday afternoon and finished before I laid my head on the pillow that night. The Colder War was an entertaining and gripping story of the rise of Putin and the shifting sands of the world of oil. It was also an insightful overview of the last century. I highly recommend it.
At the end of the day, I disagree with Marin as to Putin’s ability to achieve his vision. While Putin wants to displace the petro-dollar as the global medium of energy exchange, he will fail. But maybe that’s the hometown boy in me thinking my team will win.
But that is the last 10% of the book. The first 90% is an easy must-read. Warning: it is not written from a US perspective. Marin’s view of the events of the last century sound more like those I hear when I travel outside the US.
I took the liberty of checking his story with a good friend of mine, Jerry Fullenwider, a very successful Texas oil entrepreneur, who lived in Russia during Putin’s rise. He confirmed Marin’s tales and more. He has his history right. And what a history it is. Today’s OTB is the introduction to the book, and if…
by ilene - October 29th, 2014 7:30 pm
Note from dshort: The NYSE has released new data for margin debt, now available through September. I've updated the charts in this commentary to include the latest numbers.
The New York Stock Exchange publishes end-of-month data for margin debt on the NYXdata website, where we can also find historical data back to 1959. Let's examine the numbers and study the relationship between margin debt and the market, using the S&P 500 as the surrogate for the latter.
The first chart shows the two series in real terms — adjusted for inflation to today's dollar using the Consumer Price Index as the deflator. I picked 1995 as an arbitrary start date. We were well into the Boomer Bull Market that began in 1982 and approaching the start of the Tech Bubble that shaped investor sentiment during the second half of the decade. The astonishing surge in leverage in late 1999 peaked in March 2000, the same month that the S&P 500 hit its all-time daily high, although the highest monthly close for that year was five months later in August. A similar surge began in 2006, peaking in July 2007, three months before the market peak.
Debt hit a trough in February 2009, a month before the March market bottom. It then began another major cycle of increase. Margin debt hit an all-time high in February of this year.
The latest Margin Data
Unfortunately, the NYSE margin debt data is about a month old when it is published. Following its February peak, real margin declined sharply for two months, -3.9% in March -3.2% in April and was flat in May. It then jumped 5.7% in June, its largest gain in 17 months. July saw a 0.9% decline, but number has drifted higher the two subsequent months, up 0.6% in August and 0.2% in September. It is now only is 0.4% below the February peak.
The next chart shows the percentage growth of the two data series from the same 1995 starting date, again based on real (inflation-adjusted) data. I've added markers to show the precise monthly values and added callouts to…
by ilene - October 29th, 2014 7:17 pm
Orbital Sciences' Antares rocket exploded shortly after takeoff Tuesday night.
And now the company's shares are crashing as well.
In premarket trade on Wednesday, Orbital Sciences shares were down more than 15% after the company's unmanned Antares rocket exploded shortly after taking off for the International Space Station with about 5,000 pounds of supplies.
In a statement, Orbital Sciences said that shortly after takeoff the rocket experienced a "catastrophic failure."
No was hurt in the incident.
by ilene - October 29th, 2014 4:51 pm
Courtesy of Mish.
Goodbye Retail Associates, Hello Robots
The future of shopping has arrived, and its not human.
Not only do robots cost less than humans, they don’t complain, they speak multiple languages, and most importantly, by scanning aisles they know where every item is in the store and can take you straight to it.
OSHbot is the newest member of the “Fellow Robots” family, and developed in partnership with Lowes Innovation Labs.
The future of shopping has arrived
Retail Robotics is an exciting and fast growing new market and Fellow Robots is at the forefront. Advances in sensors, wireless networking, voice recognition and design prototyping are enabling us to build the smart retail robots that can autonomously navigate through stores, help communicate with customers to understand what they need and locate it quickly.
OSHbot incorporates the latest of these advanced technologies. For example, a customer may bring in a spare part and scan the object using OSHbot’s 3D sensing camera. After scanning and identifying the object, OSHbot will provide product information to the customer and guide them to its location on store shelves.
- Front Screen: 19.5 inches
- Back Screen: 29 inches
- Height: 5 ft
- Weight: 85 pounds
- Voice recognition
- Advanced sensors
- Autonomous navigation
- Obstacle avoidance
Making Science Fiction a Reality
by ilene - October 29th, 2014 3:18 pm
Submitted by Tyler Durden.
Aside from the S&P 500 of course, which made billionaires out of millionaires (even if it failed to make billionaires into trillionaires this time around - we will have to wait for QE4 or QE5 for that), some may wonder: who was the biggest beneficiary of QE3? It certainly wasn't the US middle class, which has seen its real wages decline in 6 of the past 7 months, and its disposable income is back at levels not seen since the mid-1990s. No, the biggest winner of QE3 is the same entity that we noted benefited the most from QE over the past 6 years, and which even the WSJ realized was the primary beneficiary of the trillions in cash created out of thin air by the Fed, when in late September Hilsenrath wrote "Fed Rate Policies Aid Foreign Banks"… something we first said back in 2011 with "Exclusive: The Fed's $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went."
So when it comes to the Fed's QE3 generosity to foreign banks, what was the real number?
Here is the answer.
The first chart below shows that since starting in December 2012, when QE3 was formally launched, and continuing through today, the Fed injected some $1.3 trillion reserves with banks, which has manifested as extra cash held by various banks operating in the US, both domestic, but most importantly, foreign.
So how does this increase in bank cash assets look like when broken down by banking group? The answer is shown below:
And the bottom line:
- Small domestic banks, such as your mom and pop regional bank which is anything but Too Big To Fail: change in cash: zero.
- Large domestic banks, think JPM's CIO group, i.e., its London Whale division which used precisely this "excess" Fed cash to try to corner the IG market and blow up in the process: call it just under $600 billion in cash as a result of QE3.
- And the winner, with over $700 billion in extra cash
No Plans for Normalization: Fed Ends QE, Will Hold Rates Low for “Considerable Time”, Will Reinvest Proceeds
by ilene - October 29th, 2014 2:47 pm
Courtesy of Mish.
Inquiring minds may wish to slog through today’s FOMC Press Release on Monetary Policy but it’s really not worth the time it takes to read it.
Here are a few details, generally expected
- The Committee judges that there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program.
- The Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate.
- The Committee anticipates, based on its current assessment, that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program this month, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.
- If incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated.
- The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
Reinvesting Principal Payments
The Fed also released a Statement Regarding Purchases of Treasury Securities and Agency Mortgage-Backed Securities.
NEW YORK — On October 29, 2014, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to conclude the current asset purchase program by the end of October . The FOMC also directed the Desk to maintain the existing policy of reinvesting principal payments from the Federal Reserve’s holdings of agency debt and agency MBS in agency MBS and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.
Reinvestments in agency MBS will continue to be concentrated in newly-issued agency MBS in the
by ilene - October 29th, 2014 2:03 pm
Courtesy of Mish.
Sanctions or not, NASA uses Russian-made engines to propel rockets.
Yesterday, just seconds after takeoff, a NASA Antares rocket with a Russian-made engine exploded on takeoff. The mission was to carry supplies to the orbiting space station.
Today, the Guardian reports that Russian rocket manufacturer insists it is not to blame for Antares crash.
The Russian maker of the engine used in the unmanned US supply rocket that exploded after liftoff in Virginia denied on Wednesday that its product was at fault for the catastrophe.
The launch phase of the Orbital Sciences Corporation’s Antares rocket relied on two AJ-26 engines that were originally produced in the 1970s for a failed Soviet moon program and later modernised for US space flights. Speculation quickly centered on the Soviet-based engines, which have failed in tests, when the rocket exploded in a giant fireball after takeoff on Tuesday night.
But the Kuznetsov company in the Russian city of Samara suggested the blame lay not with its NK-33 engines, which formed the basis for the AJ-26 engines, but rather with their later modification in the United States, Russian news agency Itar-Tass reported.
Investigators from Nasa were scouring the site of the failed launch in Virginia by helicopter on Wednesday as they attempted to assess the extent of damage to the Wallops Flight Facility, which is owned by the agency. Engineers working for Orbital Science were trying to work out what caused the failure of the company’s $200m rocket, which forced the cargo mission resupplying the International Space Station to be aborted seconds after launch.
The launch was the first time the Antares rocket had been launched at night from Wallops, and the fireball caused by its explosion could be seen from miles around.
The accident is likely to intensify scrutiny over Nasa’s deal to subcontract resupply missions to private space operators following the end of its shuttle programme.
Orbital is under particular pressure to
by ilene - October 29th, 2014 11:06 am
The third chart shows that since around 2007, the correlation between interest rates and mortgage applications is more positive than negative, i.e. rates and number of applications are going in the same direction, mostly down. The spike in applications from around 1996 through 2005 could be attributed to the housing bubble (chart 2), but the failure of the apps to regain an upward move argues against any real recovery for the average, non-0.1%er, person. ~ Ilene
Presented with little comment because realistically what is there to say about a so-called 'housing recovery' when the volume of applications for home purchases is the lowest since August 1995. Keep believing that lower rates will support home prices… keep believing the Fed's QE worked… or face facts, this is not your mother's housing market any more…
The transmission channel is officially broken…