Yet Another Theory Of The Fed (Or Why A “Major Policy Shift” Looms)

Take Bernanke, again. During his first FOMC stint from 2002 to 2005, the committee responded to a deflation ‘scare’ with successive rate cuts dropping the fed funds rate to a 45-year low of 1%. In just a few years time, people would see that boost to the credit markets as a mistake. And Bernanke was closely associated with it – he had long argued for fighting deflation with extreme measures. He then downplayed the risks of his preferred policies, as in his insistence that falling house prices were a ‘pretty unlikely possibility’ and subprime mortgage troubles were unlikely to result in significant ‘spillovers.’
So Bernanke was a central figure in the lead-up to the crisis, but you already knew that. Our point is that it had little effect on his reputation. Among mainstream economists and in the mainstream media, he’s currently basking in the admiration of his ‘courage to act.’ By comparison, his critics, mostly in the financial sector and outside the mainstream, point to his shortsightedness. Which perspective wins? As of today, the ‘hero tale’ dominates. Just as presidents need only act presidential to gain plaudits during wartime, central bankers need only act aggressively to gain plaudits during financial crises. In either case, it doesn’t matter what came before.
Why the Fed’s Priorities are Changing
With those ideas in mind (that we’re dealing with perceptions more than realities), let’s look at the reputational risks faced by today’s FOMC. We’ll argue that the current decade’s primary risk – the risk of a 1937-style relapse into recession – is fading in importance. Until recently, an echo recession similar to the one that snuffed out the mid-1930s recovery would have been a reputation killer. It would have led people to question whether the 2008 – 9 recession would morph into another Great Depression, after all.

This post was published at Zero Hedge on Sep 6, 2017.

EURUSD Dumps’n’Pumps After ECB QE Decision Delay, Inflation Cut Leaks Reported

Last week Reuters provided the outlet for leaked comments from The ECB (regarding QE) that sparked chaos in EURUSD. This week it is Bloomber who reports sources suggesting The ECB will cut inflation outlooks (pouring cold water on Draghi’s “reflationary forces” hoopla) and seemingly confirming The ECB will kick the can on the decision to taper QE into 2018.
As Bloomberg reports, ECB Governing Council has been presented with documents outlining multiple scenarios for adjusting quantitative easing, according to euro-area officials familiar with the matter.
Papers were put together by the ECB’s technical committees for the two-day meeting that starts Wednesday, and include different combinations for the size and duration of asset purchases, the people say

This post was published at Zero Hedge on Sep 6, 2017.

House Approves $8 Billion In Harvey Hurricane Relief Aid

Check out that new @cspan chyron. Also, the House is voting on Harvey aid. pic.twitter.com/24VIoOdSGe
— Katherine Scott (@KatherineBScott) September 6, 2017

With a several month debt ceiling extension now practically guaranteed absent some last minute diplomatic fiasco, moments ago the US House approved an $8 billion in Hurricane Harvey relief aid.
U. S. HOUSE OF REPRESENTATIVES APPROVES $8 BILLION IN AID FOR HURRICANE HARVEY RELIEF: RTRS

This post was published at Zero Hedge on Sep 6, 2017.

A Look at NYSE Margin Debt and the Market

Note: The NYSE has released new data for margin debt, now available through July.
The New York Stock Exchange publishes end-of-month data for margin debt on the NYX data 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. At the 1995 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.

This post was published at FinancialSense on 09/06/2017.

Fed Vice Chair Stan Fischer Unexpectedly Resigns “For Personal Reasons”

In a shocking announcement, the latest rat to abandon the sinking ship – because it is far less fun to navigate the world’s biggest economy when you are raising rates than when injecting trillions – Federal Reserve Vice Chairman Stanley Fischer has announces his decision to step down effective October 13 (Friday), citing “personal reasons” in letter of resignation to President Donald Trump. His term as vice chair was set to expire on June 12, 2018.
Fischer’s resignation increases vacancies on the Fed Board from three to four, with Yellen and Brainard and Powell remaining the only members on the Board. This could accelerate Senate confirmation of Randal Quarles to be Vice Chair for Supervision, which will be considered tomorrow in the Senate Banking Committee and looks likely to approved by the full Senate prior to Fischer’s planned departure, according to Goldman.
In his letter, Fischer praises America’s economic growth during his tenure, and says that “informed by the lessons of the recent financial crisis, we have built upon earlier steps to make the financial system stronger and more resilient and better able to provide the credit so vital to the prosperity” of the US.

This post was published at Zero Hedge on Sep 6, 2017.

Republicans Furious As Trump Sides With Democrats On Short-Term Debt Limit Extension

It appears President Trump has found a new ally in Congress: the Democrats whose plan – derided earlier by Paul Ryan – to keep any ‘fix’ for the debt-ceiling, short-term; was approved over the Republicans’ howls of objection. As The Hill reports, President Trump agreed with top congressional Democrats at a White House meeting to fund the government and raise the debt ceiling through Dec. 15. despite objections from virtually all GOP leaders.
“In the meeting, the President and Congressional leadership agreed to pass aid for Harvey, an extension of the debt limit, and a continuing resolution both to December 15, all together,” Senate Minority Leader Charles Schumer (D-N. Y.) and House Minority Leader Nancy Pelosi (D-Calif.) said in a joint statement.
While the report give the impression of delightful civility, the reality was rather different, as Trump concluded a deal with Schumer, Pelosi et al behind Ryan and McConnell’s backs. Politico’s Jake Sherman reports that:
I am told by multiple sources Rs are furious. The Democratic ploy – to keep debt limit short term – worked. It took just a few hours.
TRUMP also agreed to extend government funding until December 15, setting up a wild final month of the year.

This post was published at Zero Hedge on Sep 6, 2017.

A Look Inside The “Basket” Holding The “Market’s Big Puzzle”

In a front page article, the WSJ takes aim at the “biggest market puzzle” of our times: the bizarre disconnect between growth and inflation, where on one hand government reports of strong, coordinated, global economic growth and tumbling unemployment (at least in the US and Japan) are offset by the complete lack of concurrent reflation. Some examples:
The U. S. economy grew 3% in Q2, but in July CPI was up only 1.7% from the prior year; Eurozone inflation, similarly, remains stuck at 1.5% despite the bloc’s accelerated recovery. Japan’s economy grew 4% in the same quarter – its longest expansion streak since 2006 – yet inflation has failed to move above zero, where it has been stuck for the past two decades. Aside from the now widely accepted reality that the Phillips curve is now broken…
… and the all too real possibility that either growth or inflation is being measured – and reported – incorrectly, whether accidentally or for political or market manipulation purposes, this disconnect suggests that something is very wrong with conventional economic theory: after all “when growth is strong, people demand more products and companies need to offer better pay to hire more workers, and so prices go up.” And, as the WSJ points out, if this relationship is indeed broken, “the consequences are vast for economic policy-making and financial markets.”

This post was published at Zero Hedge on Sep 6, 2017.

Global Equity Markets Jittery Amid Worries On Several Fronts

This is a syndicated repost courtesy of Money Morning – We Make Investing Profitable. To view original, click here. Reposted with permission.
(Kitco News) – World stock markets were mostly weaker overnight, on a bevy of concerns in the marketplace. The historically turbulent months of September and October for equities are starting out in just such a manner. A recent spate of weaker-than-expected economic data coming out of the U. S. and European Union have many thinking their central banks will back off on tightening their monetary policies any time soon.
Also, Hurricane Irma is bearing down on the Caribbean and later on this week is likely to hit Florida. Irma is the strongest hurricane in recorded history. And then there’s the ongoing North Korea-U. S. crisis that appears to be getting worse. All of the above have stock market investors and traders in a risk-averse mood. U. S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins.
Financial stocks around the world were under pressure from dovish comments from U. S. Federal Reserve Governor Lael Brainard, who said Tuesday the Fed should wait until annual inflation hits 2.0% before raising interest rates again.

This post was published at Wall Street Examiner by Jim Wyckoff ‘ September 6, 2017.

Australia’s Dystopian Future: A Nation Of High-Rise Renters

Authored by James Fernyhough via TheNewDaily.com,
Young Australians are increasingly likely to live most of their lives in high-density rented accommodation – and that’s not necessarily such a bad thing.
That was one of the more controversial findings of a major study into the housing market released in recent days.
The Committee for Economic Development of Australia (CEDA) concluded that capital city home ownership would continue to be unaffordable for at least the next four decades.
It was grim news for many young Australians, particularly those who have bought into the Aussie dream of owning their own house and backyard in a spacious suburb.
But the study argued that a lower level of home ownership, and/or a greater level of high-density living, need not be a bad thing.
In fact, examples from overseas – and even some in Australia – suggest it could be a positive. But this would require a massive shift in policy and, more importantly, attitude.

This post was published at Zero Hedge on Sep 6, 2017.

Physical Gold In Vault Is ‘True Hedge of Last Resort’ – Goldman Sachs

– Physical gold is ‘the true currency of the last resort’ – Goldman Sachs
– ‘Gold is a good hedge against geopolitical risks when the event leads to a debasement of the dollar’
– Trump and Washington risk bigger driver of gold than risks such as North Korea
– Recent events such as N. Korea only explain fraction of 2017 gold price rally
– Do not buy gold futures rather ‘physical gold in a vault’ is the ‘true hedge’
What’s increasing the demand for gold? Is it Kim Jon-Un’s calls for nuclear war? Trump’s tough tweets on government and trade and unleashing ‘fire and fury’ on North Korea? The threat of World War III?
Possibly not, according to Jeff Currie of Goldman Sachs. This is more to do with the market mechanics underlying such events.
Currie released a note arguing that gold’s strong performance of late is less to do with the current perceived risk in the geopolitical sphere and instead from the currency debasement that arises from central banks printing money.

This post was published at Gold Core on September 6, 2017.

Trump: “Now Is Not The Time To Talk To North Korea”

President Trump spoke yesterday with UK Prime Minister Theresa Theresa May about North Korea and “agreed that this latest reckless act only strengthens the world’s determination to confront” growing threat from that nation, according to White House readout, adding that “now is not the time to talk to North Korea.”
***
Separately, Trump also spoke with Australia Prime Minister Malcom Turnbull yesterday about North Korea’s claimed test of hydrogen bomb. The two leaders confirmed “their two countries will intensify joint efforts to denuclearize North Korea” according to the White House readout.

This post was published at Zero Hedge on Sep 6, 2017.

September Macro Update: Employment Growth Slows Further

Summary: The macro data from the past month continues to mostly point to positive growth. On balance, the evidence suggests the imminent onset of a recession is unlikely.
The bond market agrees with the macro data. The yield curve has ‘inverted’ (10-year yields less than 2-year yields) ahead of every recession in the past 40 years (arrows). The lag between inversion and the start of the next recession has been long: at least a year and in several instances as long as 2-3 years. On this basis, the current expansion will last well into 2018 at a minimum.

This post was published at FinancialSense on 09/05/2017.

Why You Should Use a Realtor When Selling a Home

Selling a house has never been easy. There are so many things that need to be done right from getting the house ready for sale to meeting all potential buyers among other things. If you are selling on your own, you will certainly end up neglecting other duties. The process is not only tedious but also frustrating. The good news, however, is that there are so many realtors out there that can sell your house on your behalf. But why should you work with real estate agents?
Setting the price
The sale of a home starts with the setting of the price. The price has to be reasonable. It should be based on a valuation report and matched with the prevailing market trends. A real estate agent has up-to- date information on what is happening in the real estate market. He also has more knowledge on financing, pricing as well as terms and conditions of the competing properties in the local marketplace. This enables him to set the most reasonable and competitive price that helps you sell fast while at the same time making a profit. The real estate agent may also recommend some changes to your home in order to enhance salability.
Marketing
Marketing calls for more than just the ‘for sale’ sign outside your house. This sign will only interest people who frequent the area. A realtor knows how to grab the attention of potential buyers. He will use multiple listing services and leverage other cooperative marketing networks. He will also use open houses for the agents among other things. The goal is to get your house in the eyes of as many ready buyers as possible. Relators such as Henderson NV Realtors know when and where to advertise.

This post was published at ZenTrader on Sept 5, 2017.

Thanks, Mnuchin: Lego Slashes 1,400 Jobs As Sales Of “Batman” Toy Sets Falter

Lego cemented its status as a vaunted turnaround story with the success of the ‘Lego’ movies which – fun fact – were produced by Treasury Secretary Steve Mnuchin.
But after nearly a decade of expansion, the company announced Tuesday that it will be cutting 1,400 jobs as it struggles with weak demand for a new line of ‘Batman’ play sets that’s contributing to its worst downturn in more than a decade. The cuts, the company’s first in 10 years, would be tantamount to letting 8% of its workforce go. The move came after Europe’s largest toymaker said Tuesday that sales in the first half fell 5 percent to 14.9 billion kroner.
‘We’re losing momentum and we’re losing productivity,’ Chairman Jorgen Vig Knudstorp said on a conference call. ‘We have built an increasingly complex organization. This could ultimately lead to stagnation or decline.’ According to Bloomberg, Lego is suffering its biggest crisis since 2003 and 2004, when the maker of colorful plastic bricks reported record losses. After a turnaround led by Knudstorp that transformed the struggling brand into the world’s most-profitable toymaker, sales have slumped anew as children spend more time on digital devices. Predictably, the shift has created tumult in the C-suite amid rapid executive turnover.

This post was published at Zero Hedge on Sep 5, 2017.

Why North Korea Won’t Stop

North Korea has indeed conducted its sixth nuclear test. The US Geological Service and the China Earthquake Administration recorded a 6.3 magnitude earthquake as a result of the detonation on Sept. 3, followed by a 4.1 magnitude quake due to a suspected cave collapse resulting from the explosion. It’s unclear at this time how much radiation and other radionuclide (unstable atoms released with excess nuclear energy) indicators have escaped into the atmosphere, but US and Japanese aircraft specialized in tracking nuclear radiation are already airborne. Numerous ground-based Comprehensive Nuclear-Test-Ban Treaty monitoring stations are attempting to collect sample data to further assess the test as well.
Don’t miss Todd Mariano: Turkey Greater Risk than North Korea
So far, all data points to a much larger explosion than any previous North Korean nuclear test. Based on the magnitude of the explosion, the yield of the device could easily surpass the 100 kiloton-level, underlying the strong likelihood that a much more powerful hydrogen bomb was tested.

This post was published at FinancialSense on 09/05/2017.

We Looked into the Effects of Hurricane Harvey and Here’s What We Found

Unless you’ve been away from a TV, computer or smartphone for the past week, you’ve likely seen scores of pictures and videos of the unprecedented devastation that Hurricane Harvey has brought to South Texas and Louisiana. As a Texan by way of Canada, I’d like to take a moment to reflect on the human and economic impact of this storm, one of the worst natural disasters to strike the U. S. in recorded history.
Below are some key data points and estimates that help contextualize the severity of Harvey and its aftermath.
$503 Billion
In a previous Frank Talk, ’11 Reasons Why Everyone Wants to Move to Texas,’ I shared with you that the Lone Star State would be the 12th-largest economy in the world if it were its own country – which it initially was before joining the Union in 1845. Following California, it’s the second-largest economy in the U. S. A huge contributor to the state economy is the Houston-Woodlands-Sugar Land area, which had a gross domestic product (GDP) of $503 billion in 2015, according to the U. S. Bureau of Economic Analysis. Not only does this make it the fourth-largest metropolitan area by GDP in the U. S., but its economy is equivalent to that of Sweden, which had a GDP of $511 billion in 2016.

This post was published at GoldSeek on Wednesday, 6 September 2017.

Satellite Images Reveal Numerous Landslides Around North Korea Test Site After Nuclear Test

Commercial satellite images taken one day after North Korea conducted its largest nuclear test to date (currently estimated to have been around 120 kilotons, or 8 times the yield of the bomb dropped on Hiroshima), show numerous landslides throughout the Punggye-ri Nuclear Test Site and beyond, 38 North reveals.
The area of these surface disturbances, which include numerous areas of pre-existing gravel and scree fields that have apparently been lofted in place from the tremors, is centered about Mt. Mantap at an elevation of 2205 meters.
According to the authors, these disturbances are more numerous and widespread than what they have seen from any of the five previous tests North Korea conducted, which would be in keeping with the increased power of the latest test. That said, there does not appear to be any evidence of a collapse crater, as might have been suggested from the strong, post-test tremor. Unfortunately, the resolution of this imagery is presently insufficient to show any other damage, (e.g. to buildings at the base of the mountain in the support areas), although it is sufficient to justify concerns that the entire site may have become unstable following the test, as some Chinese scientists have suggested (more on that shortly).
Figure 1A is a pre-test image acquired on September 1, 2017 for comparison with Figure 1B, which is the post-test image acquired on September 4, 2017. This overview provided is unannotated so as not to obscure any part of the image to assist in that comparison. Figure 2A is a close-up of one portion of the slope between the North Portal and the mountain peak showing a number of small landslides going down into a stream bed.

This post was published at Zero Hedge on Sep 5, 2017.