by clarisezoleta - September 22nd, 2016 3:40 pm
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00:03:45 Checking on the Markets
00:04:28 Seeking Alpha: Market News
00:07:03 Checking on the Markets
00:10:38 Fed dot plot
00:13:45 Trade Ideas and Money Opinions
00:21:23 Rate Increase Impact on Oil
00:22:30 Currency Charts
00:24:33 DX Trade Ideas
00:28:44 Interest Rates
00:31:54 TLT Charts
00:32:22 TLT Trade Ideas
00:33:58 Wells Fargo
00:40:33 More Trade Ideas
00:46:19 VXX Trade Ideas
00:51:36 FOMC Meetings
00:52:16 Petroleum Status Report
00:58:50 Checking on the Markets
00:59:17 Change in GDP
01:00:23 Federal Funds rate
01:02:22 More on FOMC Meetings
01:04:22 Checking on the Markets
01:11:46 Active Trader
01:18:50 Other Trade Ideas
01:21:57 5% Portfolio
01:28:20 Short-Term Portfolio
01:29:23 Long-Term Portfolio
01:34:29 Butterfly Portfolio
01:39:35 More Trade Ideas
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by phil - September 22nd, 2016 8:14 am
Verklempt: so shocked and overwhelmed that we cannot speak.
That's the reaction Bill Gross and I had to the FOMC statement yesterday (and you can hear our LIVE reporting at the time in our Webinar Replay). CNBC says Steve Leasman was also verklempt as that Fed report was indeed shocking. Yes, we knew they might not raise rates (but I was sure enough to make it yesterday's headline that they wouldn't) but we didn't think they would LOWER their rate forecast by 30% over the next 3 years – that was STUNNING!
Note the red numbers highlighting the changes on the projected Federal Funds Rates – that was the shocker in yesterday's report and that was why I was wrong yesterday – because we were supposed to end the year at 0.9% average and that means we NEEDED to hike now because putting off the hike wouldn't give it time to get the average in line with the Fed's targets – it did not occur to Bill Gross or I that they would suddenly lower the targets.
This is not just putting off one raise, this is putting of 1/3 of all potential raises for the next 36 months and, before you grab your pompoms to celebrate infinite free money – think about the reason they are taking this action. Look at the top of that chart – long-term GDP projections are down 10%, from 2% to 1.8% – how is that a good thing? Inflation is 2% so the only "growth" in our economy is inflationary growth – that's pathetic!
Not as pathetic as Japan (yet) where the new crime against savers by the Central Banksters is being called "Yield Curve Control" where the BoJ will target 0% yield for the 10-year Japanese Government Bond, which had been negative for months. So it’s trying to push up the 10-year yield a smidgen. Shorter maturities would still sport a negative yield. This would steepen the yield curve. In effect, the BoJ will control the yield curve. By the end of next year, it might own 50% of all JGBs. As noted by Wolf Richter:
"Why even pretend there’s still a bond market? Maybe it’s just for
by ilene - September 21st, 2016 9:54 pm
Courtesy of Joshua Brown, The Reformed Broker
This has been going on since before you were born, fam.
by ilene - September 21st, 2016 6:44 pm
Courtesy of John Mauldin
I’ve been saying for the past couple years that the next recession here in the US will probably be triggered by an external macro event or cascade of events, coming out of Europe or China. Today’s Outside the Box sharpens our focus on China, which had already got quite a lot sharper with Michael Pettis’s piece in Outside the Box on Sept. 2.
Today’s post comes from Ambrose Evans-Pritchard of the London Telegraph. He is commenting on the recently released quarterly report of the Bank for International Settlements (“the central banks’ bank”), in which the BIS repeats Pettis’s warning that China faces escalating risk of a major debt and banking crisis.
The BIS is also rightly concerned about spillover from China to the global economy. After noting that outstanding loans in China have reached $28 trillion – as much as the commercial banking loan books of the US and Japan combined – Ambrose adds, “The scale is enough to threaten a worldwide shock if China ever loses control. Corporate debt alone has reached 171pc of GDP, and it is this that is keeping global regulators awake at night.”
Total Chinese debt reached 255% of GDP at the end of 2015, a jump of 107% in the past eight years – and still rising fast. Every year, China’s leadership promises to rein in debt growth, and every year the growth just keeps accelerating. That is because China’s GDP growth is fueled by debt, and that debt is becoming increasingly inefficient in producing GDP.
Does China still have the resources to deal with this issue? The answer is a qualified yes – but then there may not be the resources to deal with the other little items on China’s shopping list. The New Silk Road that China seems to be actually in the process of building is estimated to cost $1 trillion, and that’s without cost overruns. Plus, the Chinese leadership has promised massive spending on the interior part of the country to bring up the quality of people’s lives there.
by phil - September 21st, 2016 8:31 am
Oh sorry, that's tomorrow's headline!
Silly me, sometimes I get ahead of myself. As I've been saying all week(s), the market is overbought and the Fed is boxed in and even the bat-shit crazy Bank of Japan didn't lower rates this morning and the only reason they were able to hold if is because they have been assured that our Fed will be raising rates at 2pm, effectively devaluing the Yen against the Dollar anyway.
Still, not everyone is as certain as I am which is why I called for a short on the Nikkei Futures (/NKD) in our Live Member Chat Room this morning (7:02), saying:
We're back at 2,140, of course, along with 18,125, 4,825 and 1,230 – exactly where we were yesterday so it's just a reset by the TradeBots ahead of the Fed but now it's a lot more dangerous to short those futures, though still fun if you are careful enough to keep VERY TIGHT STOPS above those lines. /NKD blasted to 16,800 and now back to 16,700 as the Dollar pulls back, still a good short there.
As you can see, the Nikkei has already dropped 65 points and, at $5 per point, per contract that's a gain of $325 per contract for our Members and the Egg McMuffins are paid for already this morning (stop is now 16,650 to lock in $250)! The other levels are the same ones we've been watching all week and we're still looking for the S&P in particular to give us 2,120, on the way to 2,035.
Don't forget though, I'm an outlier in my prediction and our confidence in a rate hike today was shaken by yet another downward adjustment to our GDP outlook by the Atlanta Fed yesterday – from 3.5% to 2.9%, which is a 20% downgrade in GDP outlook since the beginning of the month – that's a very scary trend!
by ilene - September 20th, 2016 2:07 pm
Courtesy of John Mauldin at Mauldin Economics
Yellen’s Jackson Hole speech was widely reported, so I’ll spare you the summary.
What wasn’t widely reported was her Footnote 8. Yellen cited approving a mathematical formula that could put interest rates on autopilot. The Fed hasn’t yet followed the rule, but its presence in Yellen’s paper suggests its use is on the table.
Footnote 8 lays the groundwork for negative rates
For Yellen to adopt any fixed rule would be a major strategy shift. She has declined to use the so-called “Taylor Rule” favored by some economists, claiming the Fed should be flexible but “data-dependent.”
The rule described in Yellen’s Footnote 8 uses variables like core PCE inflation, the Fed’s inflation target, and the unemployment rate to calculate an optimal Federal Funds rate target. If the Fed had been following the rule during the last recession, they would have dropped rates to -9%.
Yes, you read that right, -9%.
As a point of reference, the ECB right now is at -0.4%. Europe is now experiencing all kinds of bizarre consequences.
Yet, here’s our own Fed chair bringing up a method that would send rates far lower.
To be fair, Yellen didn’t say she endorses this idea or wants to adopt it. She concedes it would have been impossible to drop rates that far in 2008.
So why even bring it up?
A generous interpretation: Yellen wanted to demonstrate that the Fed’s control over interest rates has limits as a tool for stimulating economic growth. And in her speech, she does go on from there to talk about other policy tools.
Still, it was no accident that she mentioned the rule for autopilot rates. This was another in a series of small nods to the idea that negative rates might be appropriate in some situations.
The Fed’s muddled assumptions
The Yellen Fed’s mental status gets clearer every day. They think that their crazed ideas—ZIRP, QE, Operation Twist, and the rest—are what brought the economy back from the brink of collapse. Last December’s one-and-done rate hike was the victory lap. They think everything is fine now and