Posts Tagged ‘Philly Fed’

Open Dissent at the Fed: Charles Plosser (Philly Fed) Opposes QE2; Thomas Hoenig (Kansas City) attends Tea Party

Open Dissent at the Fed: Charles Plosser (Philly Fed) Opposes QE2; Thomas Hoenig (Kansas City) attends Tea Party

Courtesy of Mish

An open battle exists at the Fed concerning Bernanke’s second round of Quantitative Easing (QE2).

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Hoenig Attends Tea Party

Bloomberg reports Fed Dissenter Hoenig Wages Lonely Campaign Against Easy Credit

Thomas M. Hoenig, dressed in a gray suit, white shirt with French cuffs, and baby-blue tie, faces an edgy crowd of 150 people in a hotel meeting room in suburban Lenexa, Kan. A large “Kansas City Tea Party” banner covers a table at the door. Attendees wear anti-tax stickers on their lapels. This is not an after-dinner speech for which most central bankers would volunteer.

Hoenig smiles at his audience and begins: “This is a support-the-Fed rally, right?”

Dead silence. Then the room erupts in laughter. Disarmed, the Tea Partiers listen politely as Hoenig defends the Federal Reserve as an indispensible institution, even if at the moment, he says, it happens to be heading in the wrong direction.

And, by the way, if it were up to him (though it’s not, really) he would break up the biggest Wall Street banks.

This is Tom Hoenig’s moment, and it’s a strange one. In Washington, he is the burr in Fed Chairman Bernanke’s saddle: the rogue heartland banker who keeps dissenting alone — for the sixth straight time on Sept. 21 — to protest the Fed’s rock- bottom interest-rate policy. Hoenig warns that the Bernanke majority is setting the country up for an as-yet-unknown asset bubble: the next dot-com or subprime craze. He can’t tell yet where the boom-and-bust will materialize, but he can feel it coming, like a Missouri wheat farmer senses in his bones the storm that’s just over the horizon.

In abundant speeches and articles, Hoenig has condemned the political influence of the financial elite. “We’ve had a Treasury Secretary from Goldman Sachs under a Democratic President and a Treasury Secretary from Goldman Sachs under a Republican President. The outcomes were not good,” Hoenig says while being driven to a luncheon talk at an affordable housing conference in Topeka, Kan.

Hoenig harbors powerful misgivings over not dissenting more often and more forcefully during the Greenspan years. “He regrets going along with the votes when Alan Greenspan was chairman to get rates so low and keeping them so low so long,” says his


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Market Commentary From David Rosenberg: Just Call It “Deflationary Growth”

Market Commentary From David Rosenberg: Just Call It "Deflationary Growth"

Courtesy of Tyler Durden

If the way to classify the September stock move as "a confounding ramp on disappointing economic news" gets you stumped, here is Rosenberg to provide some insight. Just call is "deflationary growth or something like that." And as for the NBER’s pronouncement of the recession being over, Rosie has a few words for that as well: "this recovery, with its sub 1% pace of real final sales, goes down as the weakest on record."

It’s a real commentary that the National Bureau of Economic Research (NBER) decision on the historical record mattered more than the actual economic data. The National Association of Home Builders’ (NAHB) housing market index is the latest data point in an array of September releases coming in below expected:

  • Philly Fed index: actual -0.7 versus 0.5 expected
  • Empire manufacturing index: actual 4.14 versus 8 expected
  • NAHB: actual 13 versus 14 expected
  • University of Michigan Consumer Sentiment: actual 66.6 versus 70 expected

It’s early days yet, and these are only surveys, but it would seem as though the economy remains very sluggish as we head towards the third-quarter finish line.

It is truly difficult to come up with an explanation for the breakout, which in turn makes it difficult to ascertain its veracity. If we are seeing a re-assessment or risk or a major asset allocation move, then why did Treasury yields rally 4bps (and led lower by the “real rate”, which is a bond market proxy for “real growth expectations”)?

If it was a pro-growth move, why did copper sell off and the CRB flatten? And where is the volume? Still lacking? So we have a breakout with little or no confirmation. All we can see is that many sentiment measures have swung violently to the upside in recent weeks and the VIX index is all the way back to 21x —- somewhat contrary negative signposts for the bulls.

But the price action is undeniable and the bulls are in fact winning the battle in September, a typically negative seasonal month, after a bloody August. The fact that bonds rallied yesterday is a tad bizarre and perhaps the explanation, if there is one, is that the equity market is enamoured with the cash leaving the corporate balance sheet in favour of dividend payouts and share buybacks and


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Initial Jobless Claims Jump while Philly Fed Signals Economic Contraction

Initial Jobless Claims Jump while Philly Fed Signals Economic Contraction

Courtesy of Rom Badilla, at Bondsquawk.com

Falling Businessman

The Philadelphia Federal Reserve released its manufacturing survey for August, which suggests economic contraction and may lead the Federal Reserve to promote additional stimulus measures.  The Philadelphia Federal Reserve Outlook survey or simply “Philly Fed” for August plummets to a negative reading of 7.7 versus economists’ surveys of +7.0.  This marks the third consecutive decline after the outlook survey peaked in May at 21.40.

Behind the headlines, components that represent economic growth were especially weak.  Specifically, New Orders dropped further into negative territory to -7.1 from a prior month’s reading of -4.3.  Inventories fell from +4.5 in July to -11.6 while the Number of Employees component dropped from 4.0 to an August reading of -2.7.

Inflation expectations should remain subdued and keep bond yields in check as price pressures fall, judging by some of the Philly Fed components.  Prices Paid dropped from +13.1 in July to +11.8.  In addition, the Prices Received component continues to drive deeper into negative territory.  The Prices Received component fell to -12.5 following prints of -6.5 and -8.4 in June and July, respectively.

The Philadelphia Fed numbers carry significant weight since the index is heavily correlated to the ISM manufacturing index and the index of industrial production, which both measure the health of U.S. economic activity.  ISM Manufacturing should it fall below 50 in the coming months may lead the Federal Reserve to act in providing stimulus measures via Quantitative Easing.

The number of people in the U.S. filing for employment benefits increased last week according to the Department of Labor. Initial Jobless Claims for the week ending August 14 jumped to 500k people.  The number of people who recently became unemployed and are now accessing government benefits was revised upward in the previous week by four thousand to 488k.  The increase, which the highest reading since November of 2009, highlights the beginning of deterioration of the employment landscape in the last few weeks as economists were expecting a reading of 478k.  Furthermore, the 4-week moving average, which is used to smooth out volatility to establish a better reading of trends, continues to inch higher to 482,500 people and is on the higher end of the recent range of 450-500k that has been established since last November.  With this in mind, the number is…
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58 out of 58 Economists Overoptimistic on Philly Fed Manufacturing Estimate; Median Forecast +7 Actual Result -7.7, a “Veritable Disaster”

58 out of 58 Economists Overoptimistic on Philly Fed Manufacturing Estimate; Median Forecast +7 Actual Result -7.7, a "Veritable Disaster"

Courtesy of Mish 

Pencil popping balloon

They may call economics the "dismal science" but it would be hard pressed to find a more optimistic lot than economists, anywhere in private industry.

Fresh on the heels of a perfect 42 of 42 overoptimistic predictions on weekly claims (Please see Weekly Unemployment Claims Hit 500,000, Exceed Every Economist’s Estimate; No Lasting Improvement for 9 Months), a perfect 58 out of 58 Economists were overoptimistic regarding the Philly Fed Manufacturing survey.

Unexpected Shrinkage

Bloomberg reports Factories in Philadelphia Area Unexpectedly Shrink

Manufacturing in the Philadelphia region unexpectedly shrank in August for the first time in a year as orders and sales slumped, a sign factories are being hurt by the U.S. economic slowdown.

The Federal Reserve Bank of Philadelphia’s general economic index fell to minus 7.7 this month, the lowest reading since July 2009, from 5.1 in July. Readings less than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

Economists forecast the measure would rise to 7, according to the median of 58 projections in a Bloomberg News survey. Estimates ranged from minus 6 to 10.

The Philadelphia Fed’s survey was in sync with a report this week from the Fed Bank of New York. The bank’s so-called Empire State Index increased less than forecast, as orders and sales cooled.

Forecast for "More Modesty"!

“We expect the recovery that we’ve seen in our business to continue, but in a more moderate pace than we’ve experienced in the first half,” Chief Financial Officer Nicholas Fanandakis said on a conference call with analysts.

Fed policy makers last week voted to keep the benchmark interest rate at a record low and made their first attempt to shore up a recovery they said was likely to be “more modest” than earlier anticipated.

Philly Fed Business Outlook Survey

With that undoubtedly overoptimistic "modest recovery" out of the way, please consider actual results from the Philly Fed Business Outlook Survey.

Results from the Business Outlook Survey suggest that regional manufacturing activity weakened in August, after two months of slowing activity. Indexes for general activity, new orders, and shipments all registered negative readings this month.

Firms also reported declines in employment and work hours. The survey’s broad indicators


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Philly Fed Manufacturing Index Barely Positive, Future Expectations Overly Optimistic

Philly Fed Manufacturing Index Barely Positive, Future Expectations Overly Optimistic

Courtesy of Mish

The Philly Fed manufacturing index slowed for a second consecutive month and is nearly, but not quite in contraction. New orders and prices received are already in contraction.

Please consider the latest Philly Fed Business Outlook Survey.

Results from the Business Outlook Survey suggest that regional manufacturing activity continues to expand in July but has slowed over the past two months.

Large Gap Between Current Conditions and Expectations 6 Months from Now

History shows gaps narrow over time and most of the time are in sync, except at turning points.

The key question which we will get to in a minute is "Will the gap narrow by future expectations falling or current conditions rising?"

Philly Fed Components

click on chart for sharper image

Note that prices received is in contraction for a second consecutive month. That is not good for profits to say the least. Also note that new orders are falling. That is also not good for profits.

Yet, the overall diffusion index is 5.1 now vs. +25.0 six months from now, new orders expectations -4.3 now vs. 17.9 six months from now, and prices received -6.5 now vs. 10.1 six months from now.

Also note that Employees and Workweek were both in contraction last month but are now barely positive with expectations higher again.

Where To From Here?

If manufactures are ramping up production, even modestly, in expectations for a better second half, they are going to regret it.

Data suggests durable goods sales are about to collapse.

I made the case for a significant manufacturing slowdown in Expect Second-Half Housing and Durable Goods Crash. Please take a look.

Manufacturers may be more optimistic six months from now, but consumer attitudes suggest something dramatically different. Ramping up production is the wrong thing to do.

Mike "Mish" Shedlock


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Phil's Favorites

5 COVID-19 myths politicians have repeated that just aren't true

 

5 COVID-19 myths politicians have repeated that just aren't true

The purveyors of these myths aren’t doing the country any favors. Brendan Smialowski/AFP/Getty Images

Courtesy of Geoffrey Joyce, University of Southern California

The number of new COVID-19 cases in the U.S. has jumped to around 50,000 a day, and the virus has killed more than 130,000 Americans. Yet, I still hear myths about the infection that has created the worst public health crisis in A...



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Biotech/COVID-19

5 COVID-19 myths politicians have repeated that just aren't true

 

5 COVID-19 myths politicians have repeated that just aren't true

The purveyors of these myths aren’t doing the country any favors. Brendan Smialowski/AFP/Getty Images

Courtesy of Geoffrey Joyce, University of Southern California

The number of new COVID-19 cases in the U.S. has jumped to around 50,000 a day, and the virus has killed more than 130,000 Americans. Yet, I still hear myths about the infection that has created the worst public health crisis in A...



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ValueWalk

Hedge Funds And The Spirit Of The PPP Program

By Jacob Wolinsky. Originally published at ValueWalk.

Letter to the editor: I had noted a few months ago that many of these firms getting the PPP loans were not ‘in the spirit’ of the program.

Q2 2020 hedge fund letters, conferences and more

The Spirit Of The PPP Program

Without any real 'oversight' the compliance part of these loans seems - - - questionable --- on some.  I am not sure how it all really works, but the American public likely believes these funds should have gone to the 'small business', with waiters, waitresses, or bartenders who obviously couldn't work.  This was th...



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Zero Hedge

DoJ, FTC Investigating TikTok Over Child Privacy Violations

Courtesy of ZeroHedge View original post here.

Update (1840ET): Not long after President Trump confirmed that the administration is "looking into" banning TikTok, Reuters has reported that the DoJ and FTC are, in fact, looking into probing TikTok over allegations the company violated a 2019 agreement where it promised to protect children's privacy.

And instead of citing the usual anonymous sources, the report cited officials from various nonprofit groups who claimed that officials from the DoJ and FTC had met with them over compla...



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The Technical Traders

Credit/Investments Turned Into End-User Risk Again

Courtesy of Technical Traders

Continuing our research from Part I, into what to expect in Q2 and Q3 of 2020, we’ll start by discussing our Adaptive Dynamic Learning predictive modeling system and our belief that the US stock market is rallied beyond proper expectation levels.  The Adaptive Dynamic Learning (ADL) modeling systems attempts to identify price and technical indicator DNA markers and attempts to map our these...



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Kimble Charting Solutions

Here's Why QQQ and Large Cap Tech Stocks May Rally Another 10%!

Courtesy of Chris Kimble

The long-term trend for large-cap tech stocks remains strongly in place.

And despite the steep rally out of the March lows, the index may be headed 10 percent higher.

Today’s chart highlights the $QQQ Nasdaq 100 ETF on a “monthly” basis. As you can see, the large-cap tech index touched its lower up-trend channel support in March at (1) before reversing higher.

It may now be targeting the top of the trend channel at (2), which also marks the 261.8 Fibonacci extension (based on 2000 highs and 2002 lows). That Fib level is $290 on $QQQ.

If so, this upside target for $QQQ is still 10% above current prices. Stay tuned!

This article was first written ...



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Chart School

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Courtesy of Read the Ticker

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Comment: Crash in perspective - its Bad, and not over!



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Lee's Free Thinking

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

 

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Courtesy of  

The COVID 19 pandemic is, predictably, worsening again in much of the US. Only the Northeast, and to a lesser extent some Midwestern states, have been consistently improving. And that trend could also reverse as those states fully reopen.

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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

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No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

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Economic Data Scheduled For Friday

Courtesy of Benzinga

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Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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