Watch Live: Senate Banking Committee ‘Grills’ Trump’s Fed Chair Nominee Jerome Powell

Update (11:45 am ET): As Powell’s testimony draws to a close, analysts at Stone & McCarthy noted that – as expected – the future Fed chair’s comments were “generally dovish”.
The hearing was largely free of surprises. As it neared its close, Powell offered his thoughts about the blockchain and digital currencies (one day they could impact the Fed’s policies, but right now they’re too small to matter), and the mysterious roots of low inflation (the Fed is still struggling to determine if it’s due to transitory factors, or some kind of fundamental shift.
Here’s Stone & McCarthy:
In his confirmation hearing before the Senate Banking Committee, Powell fielded questions mainly on the topics of raising interest rates, shrinking the balance sheet, and his views on “tailoring” regulation. Powell maintained the view that it is appropriate to gradually increase short-term rates against a backdrop of healthy, consistent growth with a strong labor market. He did not address inflation issues. He said GDP growth should be about 2.5% in 2017, and looking forward to “something pretty close to that” next year. Powell declined to specifically say if he would vote for another rate hike at the December 12-13 FOMC meeting. He did say “conditions are supportive” for another rate hike and “the case for raising rates at the next meeting is coming together”.

This post was published at Zero Hedge on Nov 28, 2017.

The Yellen Put – Friend Or Foe?

The term ‘Greenspan Put’ was coined after the stock market crash of 1987 and the subsequent bailout of Long Term Capital Management in 1998. The Fed under Chairman Alan Greenspan lowered interest rates following the fabled event of default and life continued.
The idea of the Greenspan Put was that lower interest rates would cure the market’s woes. Unfortunately, the FOMC has since fallen into a pattern whereby longer periods of low or even zero interest rates are used to address yesterday’s errors, but this action also leads us into tomorrow’s financial excess. As one observer on Twitter noted in an exchange with Minneapolis Fed President Neel Kashkari:
‘Central Bankers are much like the US Forest Service of old. Always trying to manage ‘nature’ and put out the little brush fires of the capitalist system, while they seem incapable of recognizing they are the root cause of major conflagrations as a result.’
When the Federal Open Market Committee briefly allowed interest rates to rise above 6% in 2000, the US financial system nearly seized up. Long-time readers of The Institutional Risk Analyst recall that Citigroup (C) reported an anomalous spike in loan defaults that sent regulators scrambling for cover. The FOMC dropped interest rates at the start of 2001 – nine months before the 911 terrorist attacks – and kept the proverbial pedal to the metal until June of 2004.

This post was published at Zero Hedge on Nov 27, 2017.

2017: The Year of the Bubbles

2017 may well go down in history as the year of the bubble.
We’ve talked a lot about the stock market bubble in recent months, but there are a whole slew of bubbles floating around out there – most of them created by loose monetary policy that has dumped billions of dollars of easy money into the world’s financial systems over the last eight years.
Even the Federal Reserve has taken notice of the stock market bubble and seems to be a bit spooked by the monster it created. According to the most recent FOMC minutes released by the Fed, several participants ‘expressed concerns about a potential buildup of financial imbalances,’ in light of ‘elevated asset valuations and low financial market volatility.’
But the stock market isn’t the only bubble that’s blown up over the last year. Earlier this month, Mint Capital strategist Bill Blain warned us about the bond bubble.

This post was published at Schiffgold on NOVEMBER 27, 2017.

FOMC Signals Dovish Inflation Concerns, Warns “Sharp Reversal” In Markets Could Damage Economy

With a dumping dollar and collapsing yield curve since November’s FOMC, all eyes are on the Minutes for any signals of The Fed hawkishly ignoring inflation concerns but instead a few Fed officials opposed near-term hikes (on the basis of weak inflation). Furthermore, several Fed officials warned of the potential for bubbles, “in light of elevated asset valuations and low financial market volatility, several participants expressed concerns about a potential buildup of financial imbalances.”
Bloomberg’s Brendan Murray highlights the key aspects of The Fed Minutes
Consistent with their expectation that a gradual removal of monetary policy accommodation would be appropriate, many participants thought that another increase in the target range for the federal funds rate was likely to be warranted in the near term if incoming information left the medium-term outlook broadly unchanged. Nearly all participants reaffirmed the view that a gradual approach to increasing the target range was likely to promote the Committee’s objectives of maximum employment and price stability.
A few other participants thought that additional policy firming should be deferred until incoming information confirmed that inflation was clearly on a path toward the Committee’s symmetric 2 percent objective.
Several participants indicated that their decision about whether to increase the target range in the near term would depend importantly on whether the upcoming economic data boosted their confidence that inflation was headed toward the Committee’s objective. A few participants cautioned that further increases in the target range for the federal funds rate while inflation remained persistently below 2 percent could unduly depress inflation expectations or lead the public to question the Committee’s commitment to its longer-run inflation objective.
In light of elevated asset valuations and low financial market volatility, several participants expressed concerns about a potential buildup of financial imbalances. They worried that a sharp reversal in asset prices could have damaging effects on the economy.

This post was published at Zero Hedge on Nov 22, 2017.

Retail Sales (US) Are Exhibit #1

In January 2016, everything came to a head. The oil price crash (2nd time), currency chaos, global turmoil, and even a second stock market liquidation were all being absorbed by the global economy. The disruptions were far worse overseas, thus the global part of global turmoil, but the US economy, too, was showing clear signs of distress. A manufacturing recession had emerged which would only ever be the case on weak demand.
But the Fed just the month before had finally ‘raised rates’ for the first time in a decade, though after procrastinating all through 2015. Still, surely these wise, proficient technocrats wouldn’t be so careless and clueless as to act in this way during a serious downturn. After all, what are ‘rate hikes’ but the central bank’s shifting concerns toward a faster economy perhaps reaching the proportions of overheating.
The dissonance was striking, nowhere more so than at the Federal Reserve itself. On the day the FOMC voted for the first of what was supposed to be (by now) ten to fifteen increases (not just four) the central bank also released estimates on US Industrial Production that were negative year-over-year, a condition that just doesn’t happen outside of either a recession or a condition very close to one.
The mainstream sided easily and eagerly with the technocrats. Even as the Fed failed to act month after month, the word ‘transitory’ printed prominently in each article rationalizing why a manufacturing recession just wouldn’t matter, the media would claim how ‘strong’ and ‘resilient’ especially US consumers were.

This post was published at Wall Street Examiner on November 15, 2017.

“One Simple Reason The Yield Curve Is Collapsing”

The divergence between the ‘hope’ melt-up in stock markets and the ‘nope’ collapse of the US Treasury yield curve has never been so wide… and has never engendered so many excuses by commission-takers and asset-gatherers for why the latter is wrong and the former correct.
One thing is clear, as The Fed tightens rates, the market is increaingly insensitive to the next tightening as financial conditions have eased dramatically as the Fed tightens. Former fund manager Richard Breslow suspects ‘you ain’t seen nothing yet’ as the linkage between FOMC raising rates and a flattening yield curve suggests this tradable trend is far from over.
Via Bloomberg,
The yield curve in the Treasury market has continued on its flattening way. Look at a one-year chart and it shows a relentless, if at times choppy, move from its widest at the beginning of the period to today’s new tight. Everyone seems to have their theories why and what it means, giving clear proof that great minds can differ. And even the bond market isn’t simply well-established science. One thing that they do agree upon is the obvious: it’s been a clear, tradable trend. But before we start waxing eloquent on the historic magnitude of the move, keep in mind, this tightening absolutely pales in comparison to several others of the last 25 years.

This post was published at Zero Hedge on Nov 7, 2017.

The New Fed Next Year Could Be Off the Charts

Dudley to Quit. 5 Vacancies on the FOMC. No one knows what the Fed will look like.
The next slot on the Fed opens up: New York Fed President William Dudley will announce his retirement as soon as next week, ‘several people familiar with his plans’ told CNBC. He may stay on till his replacement is found and approved, likely to happen in the spring or summer next year. The New York Fed has already formed a search committee, the people said.
This is unexpected; his 10-year term will expire in 2019. He could have stayed on for the sake of stability. He is one of the most influential figures on the Fed’s policy-setting Federal Open Markets Committee (FOMC) and is considered a ‘dove.’
The 12-member FOMC is composed of:
The seven members of the Board of Governors which is in the process of being nearly completely turned over The president of the New York Fed who is retiring. And on a one-year rotating basis four presidents of the remaining 11 regional Federal Reserve Banks. The president of the New York Fed is special among the heads of the regional Fed banks: That person always serves as vice chair of the FOMC and, unlike the rest of them, votes at every meeting.
So next year the FOMC will be a different animal.

This post was published at Wolf Street on Nov 5, 2017.

Ahead, Not Behind

This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
Back in September, the FOMC announced that it was in October going to start normalizing its balance sheet. The policy statement issued that day included all the usual qualifications of ‘solid’, ‘strengthen’, and ‘picked up.’ The near-term risks to the economy, it was written, ‘appear roughly balanced.’
Not all was well with the economic situation, however, as the central bank’s policymaking body continues to wrestle with inflation. They might wish for political relief to their dual mandate, but in this case they have no choice but to live with the results – especially since they are largely of their own making. After mentioning economic risks, the statement then throws out there, ‘but the Committee is monitoring inflation developments closely.’

This post was published at Wall Street Examiner on November 3, 2017.

Stocks and Precious Metals Charts – Hi Ho Nickel?

Put another nickel in
In the nickelodeon
All I want is having you
And music, music, music.
Teresa Brewer, Music, Music, Music
“A nickel’s not worth a dime anymore.”
Yogi Berra
The FOMC did nothing with rates, but remarked that in their judgement the growth in the economy has changed from ‘moderate’ to ‘solid.’ The market is looking for a rate increase at the December meeting.
I am solidly willing to speculate that the Fed will flip their judgement faster than a flapjack in a NJ diner in the not too distant future. But let’s see what happens.
The markets are widely pricing in a rate increase from the Bank of England this week. Let’s see if they get it.

This post was published at Jesses Crossroads Cafe on 01 NOVEMBER 2017.

Treasurys Gain, Curve Flattens After Refunding Auction Sizes Remain Unchanged

When previewing today’s FOMC announcement, we said that at least according to some, this morning’s refunding announcement may have a bigger impact on the market as there is less consensus (and more confusion) about what would be unveiled. As JPM analyst Jay Barry told Bloomberg, the quarterly refunding announcement at 8:30am ET Wednesday ‘has the possibility to be a bigger event for markets in the morning than the Fed statement in the afternoon’ as participants are divided on whether the Treasury will announce increases to coupon auction sizes Wednesday, or wait until the 1Q refunding announcement in February:
‘There’s a dispersion of views because of the pivot the Treasury Department has had over last few years,’ specifically toward portfolio metrics and aiming to extend the weighted average maturity of the portfolio. Merely reversing the cuts that have been made to 2Y and 3Y auctions since 2013 wouldn’t serve that objective. ‘If they don’t get announced tomorrow, it’s a muted rally, and if they do, it’s a muted steepening.’
Furthermore, as Bloomberg summarizes, going into today’s announcement, market participants were divided leading into the announcement with most seeing no increase immediately to auction sizes just yet, seeing only bill auction changes for now: Barclays, NatWest, Bank of America, Credit Agricole, Jefferies, Stone & McCarthy Research Associates and Citigroup all saw no change; JPMorgan Chase, among other, looked for small increases across maturities.
Well, moments ago the US Treasury reported the breakdown of the refunding auctions, which led to Treasuries promptly paring some early losses (and leading to the predicted muted curve flattening) after the Treasury Department maintained its coupon auction sizes over the next three months, while the refunding statement did not comment on ultra-long issuance.

This post was published at Zero Hedge on Nov 1, 2017.

Previewing Today’s Fed Policy Decision

While normally Wednesday’s Fed meeting would be the week’s biggest market-moving event, this time – smack in the middle of the busiest earnings week of the year – it may not even make the top three, buried ahead of the coming news of the next Fed Chair (in which Trump is set to unveil Jerome Powell on Thursday), and the GOP tax bill (which just saw its Wednesday release delayed by one day). One can make the argument that tomorrow’s fully priced in FOMC announcement is also secondary to not only Friday’s jobs report, which may help decide who is right, the Fed’s “dots” or the market, but also to tomorrow’s Treasury refunding announcement.
In fact, the latter is precisely what JPM analyst Jay Barry claimed earlier today, saying the “quarterly refunding announcement at 8:30am ET Wednesday ‘has the possibility to be a bigger event for markets in the morning than the Fed statement in the afternoon’ and since market are ‘priced for a December hike,’ the FOMC meeting isn’t likely to alter expectations in a way that would move the market. Where there is confusion is in the Treasury market, where market participants are divided on whether the Treasury will announce increases to coupon auction sizes Wednesday, or wait until the 1Q refunding announcement in February: ‘There’s a dispersion of views because of the pivot the Treasury Department has had over last few years,’ specifically toward portfolio metrics and aiming to extend the weighted average maturity of the portfolio. Merely reversing the cuts that have been made to 2Y and 3Y auctions since 2013 wouldn’t serve that objective.
‘If they don’t get announced tomorrow, it’s a muted rally, and if they do, it’s a muted steepening, but I think it’s all small because the numbers we’re talking about are only $1 billion month, and because Treasury has been clear in communicating that financing needs are moving higher over the medium term’

This post was published at Zero Hedge on Nov 1, 2017.

The Swamp Wins: Trump Expected to Nominate Powell to Replace Yellen

In the end Donald Trump will get what he wanted, a ‘low interest rate person’ who also happened to be a ‘Republican.’ Jerome Powell is expected to replace Janet Yellen in an announcement later this week. If so, this means Trump will ensure that, while the stationary at the Eccles Building will change, the monetary policy guiding it likely will not.
The fact that, in naming Powell, Trump is picking an Obama-appointed Fed Governor for his most important nominations is itself quite fitting. While we have long known that bad monetary policy is bipartisan, Powell’s nomination serves as a particularly useful illustration of how little has changed in Washington since the Bush Administration.
Of course, just as Trump received his loudest applause from Washington for doing his best impersonation of his two predecessors, the President is already being praised for making a ‘grown up’ decision when it comes to the Fed. While his awareness optics likely prevented him from ever truly considering reappointing Janet Yellen – – the preferred choice of the DC and NY – Powell’s nomination ensures that Trump’s scathing criticism of the monetary orthodox has been predictably discarded alongside a number of his most exciting campaign promises.
Now we will see how else Trump squanders his historic opportunity to rearrange the Fed. The administration has signaled that its plans to form a policy consensus with its remaining Fed choices – as opposed to opening FOMC meetings into some truly spirited debate.

This post was published at Ludwig von Mises Institute on October 31, 2017.

US Futures Rebound After Disappointing Chinese, European Data

Yesterday’s sharp Chinese selloff is now a distant memory after the BTFDers emerged, and this morning U. S. equity futures are once again levitating as the FOMC begins its two-day policy meeting, following an uneventful BOJ announcement on Tuesday morning which left all QE parameters unchanged. Asian stocks traded mixed steady while European shares climb.
The key event overnight was the BOJ meeting, in which the central bank maintained QQE with Yield Curve Control and kept NIRP unchanged at -0.1% as expected. The decision to keep QQE with YCC was made by 8-1 vote, with Kataoka the sole dissenter again who suggested the BoJ needs to buy JGBs so that 15yr yield stays below 0.2%, while Kataoka also commented that the BoJ should ease if domestic factors lead to delays in reaching the inflation target. In terms of changes to its outlook forecasts, the BoJ raised FY 17/18 Real GDP growth forecast to 1.9% from 1.8%, while it cut Core CPI forecasts to 0.8% from 1.1% for FY 17/18 and to 1.4% from 1.5% for FY 18/19
Asian shares rose in afternoon trading, with the MSCI Asia Pacific Index gaining 0.1 percent to 168.29 and ignoring the overnight miss across the board in Chinese PMIs…

This post was published at Zero Hedge on Oct 31, 2017.

Asian Metals Market Update: October-30-2017

Traders will try to guess the pace of interest rate hikes next year through the FOMC meet and US October NFP this week. The December interest rate hike has already been factored in by the markets. I do not think that change in Federal Reserve chairman will alter the interest rate hike strategy for next year. There is no central bank chief in the world who can do a Volcker on interest rates and the economy. All central bank chiefs like bubbles to be formed. I do not expect more than four interest rate hikes by the Federal Reserve in the next fifteen months.
Asian demand for gold and silver will be on the higher side.

This post was published at GoldSeek on 30 October 2017.

The Big Macro Play Ahead

At NFTRH, we are about major macro turning points above all else. Of course, it is often years between these turning points or points of significant change so we are also about the here and now, and managing the trends, Old Turkey style.*
Since we are all learning all the time, I have no problem admitting to you that while right and bullish on commodities and stocks in 2009, after becoming bullish on the precious metals in Q4 2008, I completely ignored Old Turkey due to my inner biases. The result has been that after taking excellent profits from the precious metals bull, personally, I have greatly under performed the stock market bull despite holding a bullish analytical view for the majority of the post-2012 period.
Undeterred and ever plucky, we move forward. Currently, I play the bullish stock market like millions of other casino patrons, but this is as a trader and portfolio balancer, with the goal always to be in line with the macro backdrop of currency moves (I’ve been very long the US dollar for a few months now) and Treasury/Government bond yields and yield relationships.
This week something happened that has gotten me geeked out like at no other time since Q4 2008, when it was time to put the real precious metals fundamental view (as opposed to commonly accepted gold bug versions) to the test and go all-in. This week, assuming it is confirmed by remaining active through the FOMC next week, we got a short-term signal in Treasury bond yields that starts the clock ticking on a big macro decision point, which may include an end to the stock mania and the beginning of a sustained bull phase in the gold sector, among other things.
But first, we need to understand that the macro moves at an incredibly slow pace and one challenge I have had is to manage what I see clearly out ahead with the extended periods of intact current trend that seem to take forever to change. We as humans (and quants, algos, black boxes, casino patrons and mom & pop) are increasingly encouraged to try to compute massive amounts of information in real time and distill a market view from that at any given time, all at the behest of an overly aggressive financial media that wants to harvest your over exposed, bloodshot eyeballs on a daily, no hourly basis.

This post was published at GoldSeek on 27 October 2017.

Stocks and Precious Metals Charts – FANG’d

“Und der Haifisch, der hat Zhne
und die trgt er im Gesicht
und Macheath, der hat ein Messer
doch das Messer sieht man nicht.”
Berthold Brecht, Die Moritat von Mackie Messer, 1928
The results after the bell last night from the usual big cap tech suspects lit a fire until the Nasdaq 100, as you can see from the chart below.
That is the look of real pain for the big cap tech bears.
There will be an FOMC meeting next week. President Trump has also indicated that he will be naming the next Fed Chair.
And as usual with the beginning of a new month, we will be having a Non-Farm Payrolls Report on Friday November 3.
Have a pleasant weekend.

This post was published at Jesses Crossroads Cafe on 27 OCTOBER 2017.

Asian Metals Market Update: October-26-2017

Traders will start taking positions for next week’s FOMC meet. Everything is factored in traders before the FOMC on interest rate trend and US economic growth. US housing numbers failed to add gains to the US dollar. This makes me believe that short sellers need to be careful in gold and silver. Gold and silver investment demand is seen from Europe. Asian gold investment demand is more or less zilch at the moment. Asians are looking for a price reversal for investment. Technically short term gold and silver are in a neutral zone. I will prefer to call it as a cyclical trend.
Interest rates are not expected to rise in next week’s FOMC meet. Only there will be a reconfirmation of a December interest rate hike. All is well with the US economy as well as the global economy. There are signs of a small crash in global stock markets anytime. This is not happening. The longer it takes for global stock markets to see a short term correction, the longer will be the next big correction. I know all central banks and politicians do not like a correction in stock markets. All the central banks policies are stock market friendly instead of being employment friendly. But central needs to let the stock market correct on its own so that a bubble does not form. The current global circumstances envisages a continued bull run in global stock markets for the next six months to next nine months. The whole worlds stock markets cannot continue to rise endlessly for a long period of time. A few stock markets will burst. Once that starts, gold and bitcoin will zoom. For the first time I have added bitcoin as a safe haven. Bitcoins and crypto currencies will get safe haven status as time progresses.

This post was published at GoldSeek on 26 October 2017.

A Big Decision Is Coming

Fed decision day is coming. Not the Federal Open Market Committee (FOMC) decision (although that one is coming November 1). No, we’re talking about THE decision, which will make the policy decisions at future FOMC meetings all the more riveting for the capital markets.
THE decision we are referring to is going to be made by President Trump and it involves selecting an individual to be the next Chairman of the Federal Reserve Board of Governors.
It is possible that the next person is the current person. Janet Yellen’s term as Fed Chairman ends on February 3, 2018, yet her reappointment is in question.
Soon enough, the president will be providing everyone with an answer as to whether Ms. Yellen will get the opportunity to take another turn as Fed chair or be forced to cede that post to another individual.
THE decision, according to news reports, is expected to be made sometime before the president departs on November 3 for an 11-day trip to Asia and Hawaii.
Other than Ms. Yellen, leading candidates include Fed Governor Jerome Powell, former Fed Governor Kevin Warsh, National Economic Council Director Gary Cohn, and Stanford University economist John Taylor whose eponymous Taylor Rule has been praised and derided through the years as a potential guideline for setting monetary policy.

This post was published at FinancialSense on 10/23/2017.