Posts Tagged ‘FOMC’

THE MARKET IS FACING HEADWINDS

THE MARKET IS FACING HEADWINDS

Two businessmen kneeling on pavement, grabbing paper blowing in wind

Courtesy of Comstock Partners

(H/t Pragcap) 

The current market rally is not based on a self-sustained typical economic recovery, but on blind faith that the Fed can pull out a magic wand and cure everything with another round of quantitative easing (QE2).  As we pointed out last week, this a desperate attempt by the Fed to try non-conventional means to get the economy going again after a massive dose of conventional measures resulted in failure.  The members of the FOMC know this, but with further fiscal measures off the table, they are aware that they are the only game in town.  The Fed’s acknowledgement that the economy is in trouble is again highlighted by the latest Beige Book released yesterday.  The following are some excerpts from the report:

“National economic activity continued to rise, albeit at a modest pace..consumer spending was steady to up slightly, but consumers remained price-sensitive, and purchases were mostly limited to necessities and non-discretionary items..Housing markets remained weak..Most reports suggested overall home sales were sluggish or declining..Home inventories were elevated or rising..Conditions in the commercial real estate market were subdued, and construction was expected to remain weak.Reports suggested that rental rates continued to decline for most commercial property types..industry contacts appeared to believe that the commercial real estate and construction sectors would remain weak for some time..Hiring remained limited, with many firms reluctant to add to permanent payrolls, given economic softness..Future capital spending plans appeared to be limited”

So there you have an outline of the anemic economic picture in the Fed’s own words.  To be sure, they indicated some strong points as well.   But the weakness in consumer spending, housing, capital expenditures, commercial real estate and employment pretty much accounts for some 85% of the overall economy.

In addition some of the major problems that worried the market earlier have not really gone away.  The sovereign debt problems of the weaker EU nations have been papered over without being solved and are still lingering just beneath the surface.  The looming currency wars that were shoved down the road by the recent G-20 meeting are also a major threat to the global economy.

Furthermore the Chinese housing bubble previously highlighted by bearish investor Jim Chanos and others has now appeared on the front page of the New York Times.  A new district of the city of Ordos,…
continue reading


Tags: , , , , , , , , , , , , , , , ,




Raise Rates, Cowards

Raise Rates, Cowards

Courtesy of Joshua M. Brown, The Reformed Broker 

Here’s the deal, FOMC – I’m going to give you the intellectual cover you need to do what many people believe is impossible right now.  I’m going to help you get the jelly out of your spines.  Bear in mind that what I’m about to hit you with is coming from both street smarts and Street smarts; I ain’t the professor of nothing.

Benji, your "I’m a student of the Depression" rap is totally rate-arded at this point.  No one’s going to call you Hoover, you can stop now.

What should you do?  Pay close attention, because I choose my words very carefully and I never repeat myself…

The Move:

The Fed Funds target rate needs to go to 1% immediately. It should happen out of nowhere, not during one of your regularly scheduled FOMC slumber parties.  That’s how China rolls, nobody gets advance notice of nothing.  No jawboning, no telegraphing.   It just IS.

The Perception:

The statement should be something to the effect of "now that the recovery has firmly taken hold…"  Anyone who’s raised themselves up in the business world understands the concept of "Fake it til you Make it" and a lot of economic activity is based on perception and confidence.  Your woe-is-me rate policy gives me all the confidence of an airline pilot wearing two different shoes.…
continue reading


Tags: , , , , ,




Drunken Horses and Drunken Horses’ Asses in Academic Wonderland

Drunken Horses and Drunken Horses’ Asses in Academic Wonderland

Courtesy of Mish

The stock market and commodities are rallying once again over the upcoming QE announcement. Every bit of news, no matter how trivial, supportive of what everyone already knows (that QE is coming), gets market participants get more excited every time.

Will the actual announcement of what we all know result in the biggest sell-the-news event since the Fed’s interest rate cut in January of 2001?

While pondering that, please consider Fed Minutes Lend Weight to Stimulus

The minutes of the Sept. 21 meeting of the Federal Open Market Committee indicated that several officials “consider it appropriate to take action soon,” given persistently high unemployment and uncomfortably low inflation.

Now, with unemployment near 10 percent and with inflation well below the Fed’s unofficial goal of nearly 2 percent, the Fed is considering renewed intervention: creating money to buy long-term Treasury debt. That would put additional downward pressure on long-term rates, making credit even cheaper.

Former Fed officials interviewed on Tuesday appeared to be just as divided as the current ones.

“If you lead the horse to water and it won’t drink, just keep adding water and maybe even spike it,” said Robert D. McTeer, who was president of the Federal Reserve Bank of Dallas from 1991 to 2005 and is a well-known inflation “dove,” particularly attuned to the harm of joblessness. “You definitely don’t want to take the water away.”

H. Robert Heller, a Fed governor from 1986 to 1989, had the opposite view, urging the Fed to show restraint.

“I would do nothing,” he said, expressing concern that the Fed might appear to be “monetizing the debt,” or printing money to make it easier for the government to borrow and spend.

“If they start to monetize the federal debt, they will dig themselves a much deeper hole later on,” he said. “That’s what we learned from the 1970s, when the Fed undertook a very expansionary monetary policy. It took a double recession in the early 1980s to wring inflation out of the economy. We don’t want to repeat that.”

William C. Dudley, president of the Federal Reserve Bank of New York, recently raised the possibility that inflation could be allowed to run above the implicit target for some time in the future, to make up for inflation today being lower than desired. That could


continue reading


Tags: , , , , , , , , , ,




FOMC: No Change, Just Chillin’ Like Penicillin

FOMC: No Change, Just Chillin’ Like Penicillin

Courtesy of Joshua M Brown, The Reformed Broker 

NEW YORK - MAY 03:  Actress Roseanne Barr eats cookies onstage at the MTV Networks Upfront at the Paramount Theater May 3, 2005 In New York City.  (Photo by Scott Gries/Getty Images)

In the most surprising move since Rosanne replaced Becky with a different actress and just acted like we should all shut up and watch and not freak out or anything, the FOMC announced today that the Fed Funds target rate would remain at zero. 

I know, I’ll give you a moment for the shock to wear off.

Here’s the statement:

Information received since the Federal Open Market Committee met in August indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months. The Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be modest in the near term.

Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings.

I don’t have much else to add here.  I’m too busy counting up all those interest rate dollars piling up in my money market account. 

Source:

Board of Governors of the Federal Reserve 


Tags: , , , , ,




Back in the Soup

Back in the Soup

Courtesy of MIKE WHITNEY writing at CounterPunch

Pea Soup

On Tuesday, the Fed announced that it will reinvest the proceeds from maturing mortgage-backed securities into US Treasuries. The process is called Quantitative Easing. In theory, Q.E. increases inflation expectations so that consumers spend more before their money loses value and thus rev up the economy. That’s the theory.  But adding to bank reserves when the banks are already loaded to the gills, achieves nothing.  It doesn’t put money in the hands of people who will spend it, generate more economic activity or increase growth. It’s a big zero. Oddly enough, the Fed even admits this. According to an article in Bloomberg News, "The Central Bank posted a paper co-written by Seth Carpenter, associate director of the Fed’s monetary-affairs division, finding that the “quantity of reserve balances itself is not likely to trigger a rapid increase in lending.” No "increase in lending" means no credit expansion and no rebound. Thus, QE will have no real impact.

From the FOMC Statement:

"Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated…..

“The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability."

There’s not a glimmer of light in the Fed’s statement, and yet, "the Committee anticipates a gradual return to higher levels of resource utilization". But how? And on what is the Fed basing its prediction? Certainly not the data. Maybe tea leaves? The truth is the economy is in very bad shape and getting worse. This is from Wednesday’s New York Times:

"The government’s preliminary estimate for economic growth in the


continue reading


Tags: , , , , , , , , , , , , , ,




Kansas City Fed’s Hoenig: Monetary Policy Should Remain on Hold

Kansas City Fed’s Hoenig: Monetary Policy Should Remain on Hold

Courtesy of Jr. Deputy Accountant 

By "on hold" he means don’t buy any more crap assets, you asshats. I could be wrong on that interpretation but I’m pretty sure I’m up on my Fedspeak these days.

MW:

The Federal Reserve should resist the temptation to take more easing steps despite growing concerns in some quarters of a slowdown, said Thomas Hoenig, the president of the Kansas City Federal Reserve Bank on Wednesday. "I feel that monetary policy should remain on hold," Hoenig said in an interview on the CNBC cable television channel. The Kansas City Fed president said some weak data had not shaken his basic forecast of a modest recovery this year.

In case you don’t already know, Hoenig is the FOMC’s resident cockblocker and has dissented every month for the year. Unlike our buddy Janet Yellen who prefers the yes method. 


Tags: , , , , ,




Should Investors Boycott the Stock Market?

Should Investors Boycott the Stock Market?

Courtesy of Frederick Sheehan of AuContrarian Blog

Investing in stocks is marketed as believing in America. Imbedded is the assumption that buying stocks is a fair deal. An investor might make or lose money, but the same chance was taken by all participants.

Although they have received little notice, the recently released 2004 Federal Reserve Open Market Committee (FOMC) transcripts show how the Fed was channeling its attention and distorting markets for the benefit of favored institutional investors. (See AuContrarian.com "blog" The 2004 Fed Transcripts: A Methodical, Diabolical Destruction of America’s "Wealth".) The 2004 Transcripts were not so much a revelation as a confirmation. The Fed’s valiant attempt to prevent the economy from deflating (its claim at the time) by inflating asset markets is now a matter of public record. FOMC members explicitly stated they were working with hedge funds and pushing housing prices up.

We know how this ended. The Fed’s policy was successful until 2007. Then all asset prices collapsed, along with the institutions (banks and brokerages) that believed the Fed could prevent prices from ever falling. The backstop was known as the "Greenspan Put:" the belief that Chairman Greenspan’s Fed would always prevent market prices from falling.

A put option gives the buyer an option (a choice) to sell a security at a price previously negotiated with the seller. A put option is valuable if prices fall below the level of the negotiated price. An investor can buy a put with the right to sell the S&P 500 Index at 800. If the Index rises to 1100, the option is worthless. (Why sell it for $800 when it can be sold in the market for $1100?) If the S&P 500 Index falls to 600, the value of the put option is worth at least $200 to the owner of the put: the Index is trading for $600 but can be sold for $800. The put option is an insurance policy against a stock market collapse. The need for the average investor to understand such instruments will be discussed below.

The Greenspan Put begat the Bernanke Put, once the latter became chairman in 2006. Believers in the Put have reason for such faith. The 2004 transcripts show the FOMC toiled to fulfill this zeal. The zealots ignore the failure of the Put in 2007 and 2008.

The credit collapse of 2007 and…
continue reading


Tags: , , , , , , , , ,




“Never Even a Whisper” at Fed’s Open Market Committee Meetings

Another excellent article by George Washington on regulatory capture and willful blindness displayed by the Fed on an ongoing basis.  - Ilene 

"Never Even a Whisper" at Fed’s Open Market Committee Meetings

May Day Demonstrations

Courtesy of George Washington

Washington’s Blog

Ben Bernanke, William Dudley and Donald L Kohn are on the Fed’s Open Market Committee (FOMC).

They are also on the board of directors of the Bank for International Settlements (BIS) – often called the "central banks’ central bank". And Kohn is an alternate director for BIS.

Alan Greenspan, of course, was a BIS director for many years.

Dudley is also chairman of BIS’ Committee on Payment and Settlement Systems. (Tim Geithner – previously on the FOMC – previously held that post).

So there is clearly quite a bit of overlap between the two groups.

In addition, BIS’ chief economist – William White – and others within BIS – repeatedly warned the Federal Reserve and other central banks that they were setting the world economy up for a fall by blowing bubbles and then using "using gimmicks and palliatives" which "will only make things worse".

As Spiegel wrote last July:

White and his team of experts observed the real estate bubble developing in the United States. They criticized the increasingly impenetrable securitization business, vehemently pointed out the perils of risky loans and provided evidence of the lack of credibility of the rating agencies. In their view, the reason for the lack of restraint in the financial markets was that there was simply too much cheap money available on the market…

As far back as 2003, White implored central bankers to rethink their strategies, noting that instability in the financial markets had triggered inflation, the "villain" in the global economy…

In the restrained world of central bankers, it would have been difficult for White to express himself more clearly…

It was probably the biggest failure of the world’s central bankers since the founding of the BIS in 1930. They knew everything and did nothing. Their gigantic machinery of analysis kept spitting out new scenarios of doom, but they might as well have been transmitted directly into space…

In their report, the BIS experts derisively described the techniques of rating agencies like Moody’s and Standard & Poor’s as "relatively crude" and noted that "some caution is in


continue reading


Tags: , , , , , , , ,




Hoenig: What about zero?

Hoenig: What about zero?

metallic zero

Courtesy of Edward Harrison at Credit Writedowns 

Below is a link to the speech Thomas Hoenig, president of the Reserve Bank of Kansas City, gave today in Santa Fe, NM.  The critical part of his speech was:

Under this policy course, the FOMC would initiate sometime soon the process of raising the federal funds rate target toward 1 percent. I would view a move to 1 percent as simply a continuation of our strategy to remove measure that were originally implemented in response to the intensification of the financial crisis that erupted in the fall of 2008. In addition, a federal funds rate of 1 percent would still represent highly accommodative policy. From this point, further adjustments of the federal funds rate would depend on how economic and financial conditions develop.

As I have been saying, the pressure to normalize both fiscal and monetary policy will be too great to bear in the U.S. I see zero rates as a distortion that needs to end. See Niels’ piece When the Facts Change about how this creates echo bubbles. On the other hand, fiscal stimulus, especially for job creation, is something I have advocated in the past (but have since moved away from). Irrespective of whether you think all this stimulus is a good thing, we are likely to see less of it.

Source

What about Zero (pdf) – Thomas Hoenig, KC Fed

Pragcap’s docstock (prior post) here.


Tags: , , , ,




St. Louis Fed: US Deflation No Longer A Risk

St. Louis Fed: US Deflation No Longer A Risk

Courtesy of Mish

Crowds Gather For New York's Annual Thanksgiving Day Parade

If you think the Fed is a contrarian indicator, your hair may be standing straight up after you read this: James Bullard a voting member of the Fed says US deflation no longer seen as a risk.

The US has escaped the danger of a Japanese-style deflationary trap, according to James Bullard, a voting member of the Federal Reserve’s key policy-setting committee. Mr Bullard, president of the Federal Reserve Bank of St Louis, told the Financial Times in an interview that his preoccupation throughout 2009 had been deflation, but the risk had “passed”.

Last week’s Fed meeting produced a dissenting vote for the first time in a year when Thomas Hoenig, president of the Kansas City Fed and a rate hawk, argued that financial conditions no longer warranted a policy of holding rates at “exceptionally low levels . . . for an extended period”.

Mr Bullard, who is considered a centrist member of the FOMC, said he was happy to continue with the current guidance, but he did have some sympathy for Mr Hoenig’s argument that “if you come off zero and you move up a little bit, it’s still a very easy policy. You’ve still got a very large balance sheet and you’re still at very low interest rates.”

The broader post-crisis economy was “on track” with its recovery, he said. “It’s not a real strong recovery but that’s what we had predicted anyway. But it will be above-average growth for the first half of 2010 and we’ll probably see some positive jobs growth in the first part of 2010 here.”

When the Fed does come to raise rates it may have to switch from its traditional benchmark of targeting the federal funds rate to targeting a repurchase rate because of the upheaval in the two markets over the last two years.

Be prepared for a massive slide and a resumed deflationary credit crunch. If you need a reason, look no further than Massive Layoffs Coming in NYC, Nevada, California, Colorado, Arizona, Everywhere.

Mike "Mish" Shedlock

 


Tags: , , , , , ,




 
 
 

Phil's Favorites

Will the Supremes Save Democracy From Minority Rule?

 

Will the Supremes Save Democracy From Minority Rule?

Courtesy of  and

This post first appeared on BillMoyers.com.

The Supreme Court now has the power to put a decisive end to extreme gerrymandering — if Justice Anthony Kennedy and the four liberal-leaning justices can craft a clear and manageable standard to identify when partisan mapmakers go too far.

But what if it doesn't? What happens if Kennedy sides with the conservative justices, who in the oral arguments for ...



more from Ilene

Zero Hedge

One River CIO "We're Willing Participants In Our Own Demise"

Courtesy of ZeroHedge. View original post here.

With the world's focus falling on Beijing this week, where president Xi Jinping give a glowing account of China's future during the 19th Party Congress, boasting that “the banner of scientific socialism with Chinese characteristics is now flying high and proud for all to see," not all are impressed by China's vision of the world in which China sees itself as increasingly taking over from the US as the world's superpower. And it's not just stories about China's neverending behind the scenes bailouts of anything that may telegraph a hard landing for...



more from Tyler

ValueWalk

Moody's Says Hartford Could Default As Early As November

By Gary St. Fleur. Originally published at ValueWalk.

The historic headquarters of insurance giants like Aetna, and Cigna, Hartford Connecticut now faces a potential financial catastrophe.

On Thursday, October 19, it was announce that the likelihood of Hartford Connecticut, to meet its obligations for the month grows continually bleak. Moody’s has produced a press release stating their position that Hartford Connecticut is likely to default by month’s end.

]]> Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

...

more from ValueWalk

Digital Currencies

An Evening in Wonderland

 

An Evening in Wonderland

Courtesy of 

 

 

You walk halfway across Rivington Street and in the middle of the block there’s an alley leading north, and then, inexplicably, it curves northwest. It’s remarkable in that on the Isle of Manhattan there aren’t any alleys. And this one is whimsical. Lights are strung overhead and artwork decorates the sides of the buildings as you make your way through. And then, at the end of Freemans Alley, you come to a tucked away restaurant in the back corner. It’s called Freemans (what else?).

If the setting for last night&rs...



more from Bitcoin

Chart School

Gold Cycle Update

Courtesy of Read the Ticker.

Why has gold not fallen below $1000 (well so far), what is the golden canary telling us?

Previous Posts:
SP500 Kitchin Cycle says trouble brewing - Update
SP500 How much higher ?

In short, the old heads out there know there is a ying for a yang! Currently the SP500 screaming higher, massive debt, low very !VIX. But as well all know this wont last forever, and the flip side could be very scary. Hence the hedge into metals, and building of the 4.5 year gold base, and as a ...

more from Chart School

Insider Scoop

There Could Be 109% Upside In uniQure As Company Advances Gene Therapy Into Clinical Trials

Courtesy of Benzinga.

Related QURE 32 Stocks Moving In Friday's Mid-Day Session Wall Street's M&A Chatter From October 19: Uniqure, Ulta, Sally Beauty,...

http://www.insidercow.com/ more from Insider

Mapping The Market

Puts things in perspective

Courtesy of Jean-Luc

Puts things in perspective:

The circles don't look to be to scale much!

...

more from M.T.M.

Biotech

Circadian rhythm Nobel: what they discovered and why it matters

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

Circadian rhythm Nobel: what they discovered and why it matters

Courtesy of Sally Ferguson, CQUniversity Australia

Today, the “beautiful mechanism” of the body clock, and the group of cells in our brain where it all happens, have shot to prominence. The 2017 Nobel Prize in Physiology or Medicine has been awarded to Jeffrey C. Hall, Michael Rosbash and Michael W. Young for their work on describing the molecular cogs and wheels inside our biological clock.

In the 18th century an astronomer by the name of Jean Jacques d'Ortuous de Ma...



more from Biotech

Members' Corner

Day of Last Dances

News today has been relentlessly terrible. A horrific mass murder happened last night in Las Vegas. (Our politician's abject failure to address gun control is beyond sickening.) And today, reports that Tom Petty died of a heart attack, followed by reports that Tom Petty is not dead, and now reports confirming that Tom Petty has passed away. 

...

more from Our Members

OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



more from OpTrader

Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



more from Promotions

Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



more from Kimble C.S.

All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

more from David



FeedTheBull - Top Stock market and Finance Sites



About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>