At the start of the year I was pretty convinced that we were into a new paradigm in regard to controlling interests affecting global economies. I'm less convinced today. It is true that we are witnessing what appears to be, for the first time in a long time, a lock-step move--upwards by the way--in global economic development but not because of fiscal or agreed economic reassessment. The controlling modifier in all regions is Central Bank activity, or lack of the same, with the slight and rather hesitant exception of the Fed earlier this year. But the ECB or the B of J? Or for that matter the Bank of England? I think not ol' so, we rather like it where we are.
Consequently, the only game in town is Jackson Hole and tomorrow is the day that has dominated talk all week: what will Janet say? Who knows. This situation is so fluid and so dominated and influenced by politics I suspect that Janet is probably not exactly sure what it is she should say. Then again, does she want another term as Chair, and if she does what does she say to convince The Donald that she deserves one? As to that, like everyone else, I'm sure she has no clue. But the world watches and waits as shall we.
Whatever happens I am afraid it is looking more and more as though the next couple of years, at least through the next U.S. Election cycle, that is is the Central Bankers who hold the Trump. Cards...every pun intended. This, IMHO, is not a good thing despite what has been so far this year a rather successful turnaround, especially in Europe. Does anyone really believe that the elected heads of the governments of France and Germany wield more influence over the European economy than does Mario Draghi? And in the U.K...well, perhaps it would be an easier question if one could determine just who it is the political leader of the U.K. To say that Ms. May has been a bit of a disappointment....well we are British you know a prone to understatement. Americans just might call her dim.
So we await The Janet. At 2.19% it is too low you know. There's a lot going on out there and somebody, hopefully it's Ms Yellen, had best start shooting in front of the duck despite the seemingly begine inflation data. Perhaps we'll have a better handle on where we go from here this time tomorrow...or not. Anyway it's still a wonderful summer in the Fly Over Zone.
Showing posts with label Janet Yellen. Show all posts
Showing posts with label Janet Yellen. Show all posts
Thursday, August 24, 2017
Tuesday, June 21, 2016
A STORM FOR ALL SEASONS
It lasted all of 15 minutes, but in that time about 2 inches of rain fell and one of our majestic Oaks was hit by a bolt of lighting that blew out, from the inside, about 30 feet of bark and wood. The only thing I have ever seen that matched it was a air burst from an artillery shell. Five foot long pieces of wood were propelled 30 meters in all directions, the TV was fried along with light sockets about the house and we were without power for 20 hours. But no one was injured. Anyone out side within 40 meters would probably have been killed. A hundred foot tree; at least 100 years old. Killed in an instant. Makes on realize how insignificant we really are in respect to the forces of nature.
I've been dealing with the aftermath all day but it's still all about BREXIT. 48 hours from now the verdict will be in, but in the meantime some remarkable event are being overshadowed. Rome just elected a female mayor who is about as anti establishment as one can be. And Turin as well. What's next? Juvo coming out in pink, horizontal stripes? The establishment is facing some serious difficulty in Europe aside from BREXIT that should be receiving more attention, but as it in many respects mirrors the Trump phenomena in the U.S. one can almost be assured that it will be mainly ignored by the mainstream media. But if the Leave side wins out...
Janet was up on the Hill today answering questions. Everyone was very nice and Janet said nothing except that she didn't expect a recession this year although growth had slowed. How growth can slow from damn near dead stop I leave for you to sort out as I am stumped. I think I'll go pray for my tree. It's more rewarding.
I've been dealing with the aftermath all day but it's still all about BREXIT. 48 hours from now the verdict will be in, but in the meantime some remarkable event are being overshadowed. Rome just elected a female mayor who is about as anti establishment as one can be. And Turin as well. What's next? Juvo coming out in pink, horizontal stripes? The establishment is facing some serious difficulty in Europe aside from BREXIT that should be receiving more attention, but as it in many respects mirrors the Trump phenomena in the U.S. one can almost be assured that it will be mainly ignored by the mainstream media. But if the Leave side wins out...
Janet was up on the Hill today answering questions. Everyone was very nice and Janet said nothing except that she didn't expect a recession this year although growth had slowed. How growth can slow from damn near dead stop I leave for you to sort out as I am stumped. I think I'll go pray for my tree. It's more rewarding.
Thursday, June 16, 2016
EMBARASSING, WASN'T IT?
Incoherent would not be too strong a word. She's a likeable lady to be sure and I suppose that in itself gives her more leeway than most, but despite of it her performance yesterday should truly strike fear into the hearts of those who believe (hope against hope?) that this economy is in capable hands.
She made no sense, no sense at all. In fact half of what she said had already been refuted by the economic numbers which had been released early in the week and in the day. Unemployment was down" sure if you completely ignore those who have simply given up. The REAL unemployment number is somewhat over 9% based on historical averages. Nearly 100 million Americans are no longer in the job market.
--Retail Sales are up. Rubbish. Retail sales have moved less that 2% since 2014.
--Manufacturing is slowing. In 10 of the last 12 months manufacturing numbers have slipped. It 's not slowing, it's stopped. Capacity utilization has fallen off a cliff. It was reported as so doing and she missed it..and those numbers were generated by the Fed!
--Inflation is lower than the Fed's target. Well of course it is as half the world is in recession as are ALL commodities...although nobody has talked about the cost of my food lately. Oops, sorry. That doesn't count in inflation figures.
--Corporate profits aren't bad, eh Janet? Not really, if you look at EPS but that's because with zero interest rates corporates have borrowed up to their gills and bought back stock. How much of those borrowings have gone into productive resources for future growth? Damn few.
--The banking sector world-wide stinks for a number of reasons but not the least of which is increased regulation and zero--or near-zero--interest rates. And not just the big guys. We lose damn near a bank a day here in the fly-over zone. Local guys tell me that Dodd/Frank has cost them $2 million annually just to fill out forms. These guys are a long way from being J.P. Morgan, Bubbala.
The list goes on and on but the real "crime" in all of this is how an institution can continue to institute and retain policies that have been so remarkably unproductive based upon forecasting that has been so spectacularly wrong. You have to be either above-average stupid which I doubt to be the case or so wedded to a particularly philosophy that makes it simply impossible to admit error. This Central Bank seems to be in lock-step with the Paul Krugmans of this world who as we all know has become merely a shill for this administration and its socio-political agenda. That would be fine if everyone admitted it, but they do not. In the face of failure they double-down. We now have $20 trillion in public debt, $14 trillion of which is in private hands. We also have nearly $15 trillion of private debt...does anyone care when Jamie Dimond expresses some concern about the amount of auto debt outstanding? We have also removed a substantial amount of liquidity from this market by dramatically reducing the ability of the former market makers to make markets and that falls not only on Congress but on the Fed as well. Mario Draghi speaks of the need for "fiscal and structural adjustment" but he too is a prisoner of himself. The Fed has uttered nary a word on the subject.
And yet the apologists remain in place. You're in safe hands with grandma. But grandma has lost control. This is a different world from the one learned at the knee of ol' J.M. Keynes. Mucking about with a 1/4 point move in the rate at which the Fed will lend overnight to banks means absolutely nothing in a global marketplace whose size and velocity is overwhelming. Practically nothing remains from that earlier time that is truly important except on thing: confidence. And when the world loses confidence in the Central Bank of the United States the risk is enormous. Yesterday's performance prettty much accomplished that.
She made no sense, no sense at all. In fact half of what she said had already been refuted by the economic numbers which had been released early in the week and in the day. Unemployment was down" sure if you completely ignore those who have simply given up. The REAL unemployment number is somewhat over 9% based on historical averages. Nearly 100 million Americans are no longer in the job market.
--Retail Sales are up. Rubbish. Retail sales have moved less that 2% since 2014.
--Manufacturing is slowing. In 10 of the last 12 months manufacturing numbers have slipped. It 's not slowing, it's stopped. Capacity utilization has fallen off a cliff. It was reported as so doing and she missed it..and those numbers were generated by the Fed!
--Inflation is lower than the Fed's target. Well of course it is as half the world is in recession as are ALL commodities...although nobody has talked about the cost of my food lately. Oops, sorry. That doesn't count in inflation figures.
--Corporate profits aren't bad, eh Janet? Not really, if you look at EPS but that's because with zero interest rates corporates have borrowed up to their gills and bought back stock. How much of those borrowings have gone into productive resources for future growth? Damn few.
--The banking sector world-wide stinks for a number of reasons but not the least of which is increased regulation and zero--or near-zero--interest rates. And not just the big guys. We lose damn near a bank a day here in the fly-over zone. Local guys tell me that Dodd/Frank has cost them $2 million annually just to fill out forms. These guys are a long way from being J.P. Morgan, Bubbala.
The list goes on and on but the real "crime" in all of this is how an institution can continue to institute and retain policies that have been so remarkably unproductive based upon forecasting that has been so spectacularly wrong. You have to be either above-average stupid which I doubt to be the case or so wedded to a particularly philosophy that makes it simply impossible to admit error. This Central Bank seems to be in lock-step with the Paul Krugmans of this world who as we all know has become merely a shill for this administration and its socio-political agenda. That would be fine if everyone admitted it, but they do not. In the face of failure they double-down. We now have $20 trillion in public debt, $14 trillion of which is in private hands. We also have nearly $15 trillion of private debt...does anyone care when Jamie Dimond expresses some concern about the amount of auto debt outstanding? We have also removed a substantial amount of liquidity from this market by dramatically reducing the ability of the former market makers to make markets and that falls not only on Congress but on the Fed as well. Mario Draghi speaks of the need for "fiscal and structural adjustment" but he too is a prisoner of himself. The Fed has uttered nary a word on the subject.
And yet the apologists remain in place. You're in safe hands with grandma. But grandma has lost control. This is a different world from the one learned at the knee of ol' J.M. Keynes. Mucking about with a 1/4 point move in the rate at which the Fed will lend overnight to banks means absolutely nothing in a global marketplace whose size and velocity is overwhelming. Practically nothing remains from that earlier time that is truly important except on thing: confidence. And when the world loses confidence in the Central Bank of the United States the risk is enormous. Yesterday's performance prettty much accomplished that.
Wednesday, June 15, 2016
A THOUGHT FROM OVER THERE
My bud, Gordon, who I have often mentioned is, in addition to being a rather successful denizen of the City, is one of the finest craftsman of the English language. I pass this on not because of the richness of the verse (tho it is rich), but because it explains a few things that most of us Over Here do not understand and should...if we can ever stop being among the most provincial nations on earth. Il Duce of course will never be taught, but you might compare this view with the nonsense he tried to preach to the British Public on his blessedly last visit.
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Well, the 'Sun' has come out this morning in full, front page, style for Brexit, and the Brexit poll lead has been widening. It is really fairly simple. Why does Britain need to be tied to an economy whose share of world trade continues to decline? Why is it right that more than half of the laws which govern Britain's citizens originate outside this country. And why is it sensible for EU citizens to have an unfettered right to migrate to Britain, irrespective of this country's capacity to absorb them?
This country is different from its neighbours. Its laws, traditions, institutions, and customs are all peculiar to it. The British are phlegmatic, practical, tolerant, self-deprecating, humorous, sceptical folk; we are not romantics like, say, the Italians, philosophers in the way of the French, dour social liberals like the Scandinavians, or disciplined operatives like the Germans (Britain in charge could not have brought itself to punish Greece, as Germany has). But that is not to say that we don't delight in these other nations, the spectacle of our sun-ripened and tattooed envoys to happily throwing up on Spanish beaches being only one example. However the point is that these different characteristics and traditions have created systems which are not really in tune with ours, and which, embodied as most of them are in the the statutes of the EU (as opposed to "Europe") sit badly with us.
Sadly, this morning the government has gone yet further in trying to terrorise the public into voting to Remain, by promising that a Brexit vote will be followed by an emergency budget to raise taxes and cut spending. Punishment, in other words, for voting the wrong way. After a point people cannot fight a government prepared to threaten actual damage to their standard of living in order to get their way. Contemptible as it is, it has a good chance of frightening voters into toeing the line.
Meanwhile, it is not only our politicians who have been damaged by this debate. A very large section of British voters has sturdily ignored the doom-laden economic piffle produced by the group thinkers at HM Treasury, the IMF, the Institute for Fiscal Studies, 13 former US Treasury Secretaries, the Bank of England, and so on and on. What price now a career as a professional economist, now that the entire country has pondered the thought that the economic theorising of Mark Carney or Larry Summers is largely nonsense?
Sinatra is surely right. We would indeed "get by" if we left the EU. More than that, I believe - after a hiccough or two - that we would flourish. Whether the government will allow it, is another matter.
The 17.59 from Charing X to Hastings has just lurched into motion. The old eyelids are slipping. Until next we talk...
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Although not the main point of the piece perhaps it's most telling commentary focuses upon the economic masters who run the show today. If there was ever a prime example of "Piffle" and nonsense more on display than that at Janey Yellen's press conference today I cannot think of it. Complete, total drivel, highlighting nothing more than the astoundingly incorrect economic forecasts of this Fed and the level of irrelevancy to which it has sunk. I leave you to ponder Gordie's words and perhaps apply some thoughts to our own situation Over Here. We will deal with Janet's chat in a full discussion tomorrow.
Oh, by the by, there will be no rate hike in June...and none for the rest of the year. Surprise.
-------------------------------------------
Well, the 'Sun' has come out this morning in full, front page, style for Brexit, and the Brexit poll lead has been widening. It is really fairly simple. Why does Britain need to be tied to an economy whose share of world trade continues to decline? Why is it right that more than half of the laws which govern Britain's citizens originate outside this country. And why is it sensible for EU citizens to have an unfettered right to migrate to Britain, irrespective of this country's capacity to absorb them?
This country is different from its neighbours. Its laws, traditions, institutions, and customs are all peculiar to it. The British are phlegmatic, practical, tolerant, self-deprecating, humorous, sceptical folk; we are not romantics like, say, the Italians, philosophers in the way of the French, dour social liberals like the Scandinavians, or disciplined operatives like the Germans (Britain in charge could not have brought itself to punish Greece, as Germany has). But that is not to say that we don't delight in these other nations, the spectacle of our sun-ripened and tattooed envoys to happily throwing up on Spanish beaches being only one example. However the point is that these different characteristics and traditions have created systems which are not really in tune with ours, and which, embodied as most of them are in the the statutes of the EU (as opposed to "Europe") sit badly with us.
Sadly, this morning the government has gone yet further in trying to terrorise the public into voting to Remain, by promising that a Brexit vote will be followed by an emergency budget to raise taxes and cut spending. Punishment, in other words, for voting the wrong way. After a point people cannot fight a government prepared to threaten actual damage to their standard of living in order to get their way. Contemptible as it is, it has a good chance of frightening voters into toeing the line.
Meanwhile, it is not only our politicians who have been damaged by this debate. A very large section of British voters has sturdily ignored the doom-laden economic piffle produced by the group thinkers at HM Treasury, the IMF, the Institute for Fiscal Studies, 13 former US Treasury Secretaries, the Bank of England, and so on and on. What price now a career as a professional economist, now that the entire country has pondered the thought that the economic theorising of Mark Carney or Larry Summers is largely nonsense?
Sinatra is surely right. We would indeed "get by" if we left the EU. More than that, I believe - after a hiccough or two - that we would flourish. Whether the government will allow it, is another matter.
The 17.59 from Charing X to Hastings has just lurched into motion. The old eyelids are slipping. Until next we talk...
-------------------------------------------------------
Although not the main point of the piece perhaps it's most telling commentary focuses upon the economic masters who run the show today. If there was ever a prime example of "Piffle" and nonsense more on display than that at Janey Yellen's press conference today I cannot think of it. Complete, total drivel, highlighting nothing more than the astoundingly incorrect economic forecasts of this Fed and the level of irrelevancy to which it has sunk. I leave you to ponder Gordie's words and perhaps apply some thoughts to our own situation Over Here. We will deal with Janet's chat in a full discussion tomorrow.
Oh, by the by, there will be no rate hike in June...and none for the rest of the year. Surprise.
Wednesday, February 10, 2016
LAID AN EGG
Which is what Janet did in her testimony before the House this morning. Of course she had very little to say so she stuck to the script outlined here yesterday which seemed to please no one and frustrate a few. Having seen how poorly this went, she may revise her approach tomorrow before the Senate who will probably be out for bear in some cases which is really too bad inasmuch the current situation is certainly not all her fault. So I'm going to reserve overall comment until she finishes up tomorrow except for one point which took up a good deal of time in her testimony.
She received a number of questions as to whether the Fed would consider negative interest rate if the economic picture did not improve and as to whether the Fed had the legal authority to institute the same. She didn't say yes but she didn't say no either which is indicative as to how bad things really are when a really bright lady like her could consider something so stupid. She also stated she wasn't sure that there was legal authority for such a move but that it had been explored and continues to be explored. That is a really bad sign because when anyone in D.C. starts looking for legal cover it means things are getting serious. If this begins to sink in, we could be in for a really bad time given the manner in which I am sure the markets will react.
Speaking of reaction, after floating round for a bit, equities sold off hard at the end of the session. Of greater interest was the fact that there was a $23 billion auction of a new ten year note that went off easily at a yield of 1.73% which must have seen like a gift to the entire world, hence bids from non-U.S. sources were heavily in the majority or so I am told. So there we are 1.73% on-the-run at issue and by the end of the day the damn thing was yielding 1.67%! I think it sunk in: if she thinks the kind of conversations had up on the hill today are going steepen this curve she had best think again. People are not interested in yield; they are interested in preservation and that ain't good. Let's see how she does tomorrow.
She received a number of questions as to whether the Fed would consider negative interest rate if the economic picture did not improve and as to whether the Fed had the legal authority to institute the same. She didn't say yes but she didn't say no either which is indicative as to how bad things really are when a really bright lady like her could consider something so stupid. She also stated she wasn't sure that there was legal authority for such a move but that it had been explored and continues to be explored. That is a really bad sign because when anyone in D.C. starts looking for legal cover it means things are getting serious. If this begins to sink in, we could be in for a really bad time given the manner in which I am sure the markets will react.
Speaking of reaction, after floating round for a bit, equities sold off hard at the end of the session. Of greater interest was the fact that there was a $23 billion auction of a new ten year note that went off easily at a yield of 1.73% which must have seen like a gift to the entire world, hence bids from non-U.S. sources were heavily in the majority or so I am told. So there we are 1.73% on-the-run at issue and by the end of the day the damn thing was yielding 1.67%! I think it sunk in: if she thinks the kind of conversations had up on the hill today are going steepen this curve she had best think again. People are not interested in yield; they are interested in preservation and that ain't good. Let's see how she does tomorrow.
Wednesday, June 17, 2015
CHANNELING ALAN
Janet was wonderful today. Greenspan, if he watched, must have been smiling like a proud parent. She spoke for an hour at her press conference and said absolutely nothing which I am sure drove the bond guys nuts although I haven't gotten my usual blast from Mad Max which is a regular occurrence after a Janet chat.
Look guys, she doesn't want to tighten...I've been telling you that for a year and she and her Landsmen will keep finding excuses to keep putting it off. Today was the new one involving Greece and Europe testing the waters of the theory that a Fed tightening might exacerbate the all ready troubled situation. That is of course rubbish; whatever domestic monetary effect the mess Over There might have has already been priced in long ago, but the fact remains that guys like Max don't give a toss for all of the macro gobbly-gook: they just want to know when. How much really doesn't matter because they just want to see direction and timing and when you get right down to it with the Fed Funds rate at zero there is only one way it can go and incremental moves at this level are meaningless unless she conjures up the spirit of Tall Paul c.1979 and that ain't gonna happen. Actually, when one gets right down to it you have to wonder if the Funds rate means anything at all with excess reserves up the ying-yang at the Fed and the reinvestment rate way above zero. Now if they stopped paying interest...nah, don't even think about it. This is getting to be a Mug's game but the bond guys love to play it. Of course, if the levels are not correct (whatever that means) being the result of every central bank in the world mucking about in the markets and we have a real surprise other than interest rate movements (terrorist event?) with the liquidity that isn't out there it's going to look like Apocalypse Now, so it might be a good idea to get things moving early on towards normalization (whatever that means). But what do I know.
Well, I'll tell ya. I know a couple of things that Janet doesn't. Like when she was asked today about Starr, she kida of sluffed off the question with a "Well, if we can't do it it can get done under Dodd/Frank." Ah, wrong Janet. It can't get done under Dodd/Frank and if that is your attitude, should the need arise, there will be no solution. Better think that one over and correct the record with some form of nonsense like, "People will all work together to achieve...blah, blah." But more importantly, isn't it a bit troubling when the Chairperson of the Fed isn't really sure who is going to do what to who next time a Lehman or an AIG pops up? Or is that just me being silly again?
Finally, on the subject of Starr, The WSJ had two really good op ed pieces today, both on course but on different tacks. Worth a read.
Look guys, she doesn't want to tighten...I've been telling you that for a year and she and her Landsmen will keep finding excuses to keep putting it off. Today was the new one involving Greece and Europe testing the waters of the theory that a Fed tightening might exacerbate the all ready troubled situation. That is of course rubbish; whatever domestic monetary effect the mess Over There might have has already been priced in long ago, but the fact remains that guys like Max don't give a toss for all of the macro gobbly-gook: they just want to know when. How much really doesn't matter because they just want to see direction and timing and when you get right down to it with the Fed Funds rate at zero there is only one way it can go and incremental moves at this level are meaningless unless she conjures up the spirit of Tall Paul c.1979 and that ain't gonna happen. Actually, when one gets right down to it you have to wonder if the Funds rate means anything at all with excess reserves up the ying-yang at the Fed and the reinvestment rate way above zero. Now if they stopped paying interest...nah, don't even think about it. This is getting to be a Mug's game but the bond guys love to play it. Of course, if the levels are not correct (whatever that means) being the result of every central bank in the world mucking about in the markets and we have a real surprise other than interest rate movements (terrorist event?) with the liquidity that isn't out there it's going to look like Apocalypse Now, so it might be a good idea to get things moving early on towards normalization (whatever that means). But what do I know.
Well, I'll tell ya. I know a couple of things that Janet doesn't. Like when she was asked today about Starr, she kida of sluffed off the question with a "Well, if we can't do it it can get done under Dodd/Frank." Ah, wrong Janet. It can't get done under Dodd/Frank and if that is your attitude, should the need arise, there will be no solution. Better think that one over and correct the record with some form of nonsense like, "People will all work together to achieve...blah, blah." But more importantly, isn't it a bit troubling when the Chairperson of the Fed isn't really sure who is going to do what to who next time a Lehman or an AIG pops up? Or is that just me being silly again?
Finally, on the subject of Starr, The WSJ had two really good op ed pieces today, both on course but on different tacks. Worth a read.
Wednesday, May 14, 2014
SEND IN THE CLOWNS
It would be nice, perhaps even useful, if the policy makers wandering around Washington today could get together every once in a while and compair notes. A couple of days ago Janet Yellen was waxing poetic about her concern for the increase in risk in the banking sector as a result of bank lending to M & A transactions and to private equity firms which supposedly were inherently risky clients. Actually, banks have done pretty well over the years with such clients because the structure of most transactions is such that banks are in a pretty good position among the debt holders; they are in fact the preferred lenders. They also get out first and depending on the state of the markets, often before the expiration of their commitments keeping the substantial up-front fees while losing the risk which supposedly justified said fees. But, with this Fed composed more and more of proponents of the theory that banks take deposits and make good old C & I loans, this stuff does look risky. Forget about the fact that losses in this area have been historically no higher than any other sector of lending and in fact probably lower. Each transaction is unique; each is subject to individual risk assessment; each is individually structured and of considerable importance, there is diversity of sectors.
Now one area of lending that has caused problems in the past and which has probably been the home of most losses is real estate. It's sector lending pure and simple and when things go wrong they go wrong all at once and all over the place. There is no diversity whatsoever. The bubble bursts and good-bye asset values. The other bad thing about real estate is that the proclivity of the sector to "bubble-up" is a result of excess liquidity which, resulting in the unnatural ease with which to finance transactions, drives up demand which in turn drives up prices to uneconomic levels which results in, well, can you say 2007/08?
Anyway, while Janet was warning about too much risk in bank lending (while continuing to pump scads of liquidity into the system), comes the newly installed boss of Fanny and Freddie announcing that these institutions along with a couple of other are about to formulate a new set of rules, loosening credit to home buyers, abandoning the tightening measures which were put in place to avoid the insanity lending of year 2000 and on. One could almost hear Barney Frank lisping and spitting all over the House conference room saying, "I think I'll roll the dice on this one." It seems that The Leader and the geniuses around him have come to believe that the slow growth of the housing sector is playing a major roll in the lack of growth in the economy.
Now I know that I can be accused of being too critical at time regarding the folks in charge of running this show, but it seems to me that if you want to get a pretty good idea of why there is a reluctance on the part of business and industry to invest, you might want to ask yourself who the hell is in charge here and what is the fiscal and economic policy of this administration? You simply cannot have the Federal Reserve which becomes less independent as each day, pass warning about risk in the system where historically there has been acceptable risk and a political appointee mandating policies in a sector that together have produced the most enormous losses in the nation's financial history. And the policies are exactly the same as those which have been condemned for the past five years! Are we now saying that the financial institutions of this country are to be directed by their regulators as to their activities on the basis of political concerns? Europe, here we come and one can see just how that has worked out--or not as the case may be--and continues to reap havoc even as of this date. Where are the clowns? Don't bother they're here.
Off to see granddaughter #1 graduate from high school. Back next week. God! I feel old.
Now one area of lending that has caused problems in the past and which has probably been the home of most losses is real estate. It's sector lending pure and simple and when things go wrong they go wrong all at once and all over the place. There is no diversity whatsoever. The bubble bursts and good-bye asset values. The other bad thing about real estate is that the proclivity of the sector to "bubble-up" is a result of excess liquidity which, resulting in the unnatural ease with which to finance transactions, drives up demand which in turn drives up prices to uneconomic levels which results in, well, can you say 2007/08?
Anyway, while Janet was warning about too much risk in bank lending (while continuing to pump scads of liquidity into the system), comes the newly installed boss of Fanny and Freddie announcing that these institutions along with a couple of other are about to formulate a new set of rules, loosening credit to home buyers, abandoning the tightening measures which were put in place to avoid the insanity lending of year 2000 and on. One could almost hear Barney Frank lisping and spitting all over the House conference room saying, "I think I'll roll the dice on this one." It seems that The Leader and the geniuses around him have come to believe that the slow growth of the housing sector is playing a major roll in the lack of growth in the economy.
Now I know that I can be accused of being too critical at time regarding the folks in charge of running this show, but it seems to me that if you want to get a pretty good idea of why there is a reluctance on the part of business and industry to invest, you might want to ask yourself who the hell is in charge here and what is the fiscal and economic policy of this administration? You simply cannot have the Federal Reserve which becomes less independent as each day, pass warning about risk in the system where historically there has been acceptable risk and a political appointee mandating policies in a sector that together have produced the most enormous losses in the nation's financial history. And the policies are exactly the same as those which have been condemned for the past five years! Are we now saying that the financial institutions of this country are to be directed by their regulators as to their activities on the basis of political concerns? Europe, here we come and one can see just how that has worked out--or not as the case may be--and continues to reap havoc even as of this date. Where are the clowns? Don't bother they're here.
Off to see granddaughter #1 graduate from high school. Back next week. God! I feel old.
Wednesday, May 7, 2014
QUICK STUDY
Janet gave her joint committee testimony today up on the Hill. Nobody in the room or watching understood a word she said which is exactly as it should be. Girl is right up to speed.
She explained while tapering will continue the liquidity grab bag will remain open as while there are signs that the recovery is improving it is still not where it should be but it should be better by the end of the year without inflation which means there will be no requirement to raise rates that she can see at this time so if there are no questions about any of this I'm prepared to sit here for the allotted time and listen to blubbering blabber which she did. Hell of a show, Janet.
This coupled with Putin indicating that he was not about to gobble up substantial portions of the Ukraine tomorrow calmed fears all over the world and equities shot up 117 points. All is well…except that the Chinese and the Vietnamese are ramming each other's ships in the South China Sea over a Chinese Oil Rig. Now THAT'S one I could watch all day long but I guess it's not a happy event. It is, however, one that can--and will--be easily ignored. Things are looking up.
In that case, I feel just fine about heading out to Virginia tomorrow for a few days of Grandparenting. The authorities know where to find me in an emergency and THIS TIME my lap top will be on the dashboard of my car…in a manner of speaking. Back Tuesday or before if needed.
She explained while tapering will continue the liquidity grab bag will remain open as while there are signs that the recovery is improving it is still not where it should be but it should be better by the end of the year without inflation which means there will be no requirement to raise rates that she can see at this time so if there are no questions about any of this I'm prepared to sit here for the allotted time and listen to blubbering blabber which she did. Hell of a show, Janet.
This coupled with Putin indicating that he was not about to gobble up substantial portions of the Ukraine tomorrow calmed fears all over the world and equities shot up 117 points. All is well…except that the Chinese and the Vietnamese are ramming each other's ships in the South China Sea over a Chinese Oil Rig. Now THAT'S one I could watch all day long but I guess it's not a happy event. It is, however, one that can--and will--be easily ignored. Things are looking up.
In that case, I feel just fine about heading out to Virginia tomorrow for a few days of Grandparenting. The authorities know where to find me in an emergency and THIS TIME my lap top will be on the dashboard of my car…in a manner of speaking. Back Tuesday or before if needed.
Wednesday, December 18, 2013
SO SHOOT ME
OK, I got it wrong, the Fed tapered. Starting in January, $5 billion comes off the amount of bond purchases…whoope-damn-do. Forward guidance remains extremely dovish with the discount rate targeted to remain at between 0.00%-0.25% for all of 2014. Now what "forward guidance" does is beyond me, as the factors that enter into the creation of such a beast can change in an instant but all in all it was the nicest of Christmas presents to the stock market as the DOW closed up some 297 points. Free money forever!
The more interesting question is if you're talking about $5 billion out of $80 billion a month, whatsupwiththat especially since it was revealed that the vote to taper was 9-1. So I ask, 9-1 for WHAT and with what conditions attached? I bet the answer is that this compromise having more to do with the future make-up of the Board than good, solid, central bank economics.
There are a couple of open seats. Lael Brainard, late of the Treasury, gets the international seat. Ms. Brainard is frightfully bright and well-educated and loathed--wait, that's a strong word--let's say intensely disliked by almost all who know her. She is a pure political animal of the "Yes sir, yes sir, three bags full sir" variety. Owned and operated by White House Inc. She also, it was reported, made it very clear that the Vice Chairmanship was to be hers. As my cousin Guido, now retired from the family business might have said, "This broad got some stones." Guido was never an anthropological wiz. Enter Stanley Fisher.
Mr. Fisher, in regard to the QEs has publicly been in the camp of "It can't hurt but it doesn't do much either." Nothing new there. But Stanley Fisher as the Vice Chair expressing such views is a whole different kettle of fish. Now there isn't anyone on that Board without a pretty fair sized ego, but a disagreement with Stan Fisher, no matter how small is not a winning strategy. Stan has also been around long enough to realize that conditions change very rapidly and I wouldn't be the least bit surprised if his views in regard to future guidance are similar to mine. I was in the room where in a discussion of the financial condition of the Republic of Colombia late in the last century, we were reminded by my good friend--let's call him Bobby C.--that the country's financial condition could flip overnight depending upon the disposition of the latest container load. I doubt if anyone in that room has forgotten that little excerpt from Life Lessons Learned.
So what we have I think is a compromise looking to the new disposition of the Board; one which puts off possibly contentious issue for some point down the road. It was also made fairly clear by the Chairman in his remarks today that we should stop looking at things like the employment rate or the job rate as triggers for a change in Fed policy. However, the inflation rate, which remains below 2.00% is highly important to this Board (N.B. to readership: do these guys ever shop). In short, I don't think much of anything happened today other than the table being set for the next round of players. Of course, everybody got a wee bit suckered. The Fed figured out that the tapering of the bond buying spree, whilst it had little effect during it's existence, was scaring the hell out of the markets and therefore the announcement of the continuation of the Money for Everybody posture was necessary. Bingo. Got it right. Now everyone is focused on interest rates. We understand those, right? But here's one thing: the 10 year hardly moved. Why? I haven't a clue, but it has been my experience that if you want to know what's happening, watch the bond market. I guess nothing happened.
And as for Stanley Fisher. I'm pretty sure the fix was in somewhere with someone. From the standpoint of someone like me looking for reasons why Mr. Fisher would want or need this job much less take it it looks like madness, yet as some guy I once knew said, yet there's method in it. We will probably never know the goings-on that brought this rather remarkable event to fruition, but I'm convinced--based on a whole bunch of conversations and pure supposition on my part--that Stan didn't ask for this job but was convinced to accept it. The wags in D.C. are saying The Leader is delighted; I think The Leader got bagged and we know The Leader does not talk to Republicans. Then again, I'm delighted which of course is what really counts.
The more interesting question is if you're talking about $5 billion out of $80 billion a month, whatsupwiththat especially since it was revealed that the vote to taper was 9-1. So I ask, 9-1 for WHAT and with what conditions attached? I bet the answer is that this compromise having more to do with the future make-up of the Board than good, solid, central bank economics.
There are a couple of open seats. Lael Brainard, late of the Treasury, gets the international seat. Ms. Brainard is frightfully bright and well-educated and loathed--wait, that's a strong word--let's say intensely disliked by almost all who know her. She is a pure political animal of the "Yes sir, yes sir, three bags full sir" variety. Owned and operated by White House Inc. She also, it was reported, made it very clear that the Vice Chairmanship was to be hers. As my cousin Guido, now retired from the family business might have said, "This broad got some stones." Guido was never an anthropological wiz. Enter Stanley Fisher.
Mr. Fisher, in regard to the QEs has publicly been in the camp of "It can't hurt but it doesn't do much either." Nothing new there. But Stanley Fisher as the Vice Chair expressing such views is a whole different kettle of fish. Now there isn't anyone on that Board without a pretty fair sized ego, but a disagreement with Stan Fisher, no matter how small is not a winning strategy. Stan has also been around long enough to realize that conditions change very rapidly and I wouldn't be the least bit surprised if his views in regard to future guidance are similar to mine. I was in the room where in a discussion of the financial condition of the Republic of Colombia late in the last century, we were reminded by my good friend--let's call him Bobby C.--that the country's financial condition could flip overnight depending upon the disposition of the latest container load. I doubt if anyone in that room has forgotten that little excerpt from Life Lessons Learned.
So what we have I think is a compromise looking to the new disposition of the Board; one which puts off possibly contentious issue for some point down the road. It was also made fairly clear by the Chairman in his remarks today that we should stop looking at things like the employment rate or the job rate as triggers for a change in Fed policy. However, the inflation rate, which remains below 2.00% is highly important to this Board (N.B. to readership: do these guys ever shop). In short, I don't think much of anything happened today other than the table being set for the next round of players. Of course, everybody got a wee bit suckered. The Fed figured out that the tapering of the bond buying spree, whilst it had little effect during it's existence, was scaring the hell out of the markets and therefore the announcement of the continuation of the Money for Everybody posture was necessary. Bingo. Got it right. Now everyone is focused on interest rates. We understand those, right? But here's one thing: the 10 year hardly moved. Why? I haven't a clue, but it has been my experience that if you want to know what's happening, watch the bond market. I guess nothing happened.
And as for Stanley Fisher. I'm pretty sure the fix was in somewhere with someone. From the standpoint of someone like me looking for reasons why Mr. Fisher would want or need this job much less take it it looks like madness, yet as some guy I once knew said, yet there's method in it. We will probably never know the goings-on that brought this rather remarkable event to fruition, but I'm convinced--based on a whole bunch of conversations and pure supposition on my part--that Stan didn't ask for this job but was convinced to accept it. The wags in D.C. are saying The Leader is delighted; I think The Leader got bagged and we know The Leader does not talk to Republicans. Then again, I'm delighted which of course is what really counts.
Wednesday, November 13, 2013
LET'S MAKE A DEAL
Janet Yellen made her first appearance before Congress today as The Chosen One. In a performance that could have been scripted by the head of equities at J.P.Morgan (if The Leader and his cronies didn't hate Jamie so much), The sum of WHICH was, the economy is doing much better. The economy is still under performing. The Fed does not want--and should not want--to do anything to interrupt the improvement. In short it was a Bob Barker moment: "FREE MONEY! The whole damn world, COME ON DOWN!"
Do not look for any change in Fed policy until March or even later if this health care fiasco has any effect on the economy. Washington is a Walter Lantz cartoon: That's All Folks!
Do not look for any change in Fed policy until March or even later if this health care fiasco has any effect on the economy. Washington is a Walter Lantz cartoon: That's All Folks!
Wednesday, August 14, 2013
AN EARLY FALL (FROM GRACE?)
Just a remarkable day in the Fly-Over Zone. Middle of August and the temperature never rose above 70F under a cloudless sky. True football weather which, thank goodness, is just around the corner. A glorious day...but not for Jamie Dimon who was called out--though not by name--by the U.S. Attorney in New York as he announced indictments of two J.P. Morgan employees in the "London Whale" imbroglio.
Jamie has gotten himself trashed by one of many applications of the Law of Large Numbers. The loss suffered by his bank was a VERY LARGE number to all but perhaps the Warren Buffetts of this world and people take notice. The larger the number, the higher up goes the blame game and $6 billion gets you pretty much to the top. Jamie also made the killer mistake of under-stating and under-playing the loss, perhaps even finding a bit of humor in the entire affair before he was in full possession of all the facts and that is a real no-no, completely unappreciated by the regulators and the cops on the beat. Is he going to recover? No, not completely. Once the myth of invincibility is gone, it never comes back. Jamie is now an ordinary, very bright and very capable guy if there is such a thing, but the minute you start to believe the hype the Gods have a funny way of adjusting reality. I actually feel a bit sorry for the guy and I never thought I'd be saying that. I wonder who is next in the blame game environment in which we live?
The other guy I'm beginning to feel sorry for is Larry Summers. Now as we all know, Larry is not God's first Nice Guy creation, but the manner in which he got trashed today by NYT columnist Maureen Dowd had to be a classic. Mo must be going through another bad relationship or something because this was most vicious I Hate Men rant in quite a while, focusing on Summers but involving Bob Rubin and even Bill Clinton as well, as the responsible parties in the Crash of '08. Of course she doesn't know what she's talking about but I must say it was a kick to have that mob attacked by Mo in the Times. The girls are really pulling out all the stops to get Janet Yellen the Chairgirlship, and speaking of Janet, her guys at her bank in San Francisco didn't, IMHO, help her a lot in releasing a study which concluded the all the QEs and balance sheet build-up don't have an effect one way or the other. Their boss is a BIG supporter of the program you see, and that and being a nice person are the two most quoted reason for the support she receives from the street. The study also states that there is a kind of direct linkage between Fed directional other-speak and market reaction, which of course isn't the case and which hobbles the entire argument, but Fed studies and the Real World are generally not found in space occupied by Real People. Nevertheless, it wasn't helpful but then again neither is the battle royal going on over who is the next person to occupy what is now the most influencial financial position around. I say now because with a continued effort to infuse even higher levels of stupidity into the selection process, this administration seems bound and determined to belittle the Fed and present it as just another political component run by a political hack. Only thing I can compair this to is a day in the 60ies in August in the Mid West. Weird.
Jamie has gotten himself trashed by one of many applications of the Law of Large Numbers. The loss suffered by his bank was a VERY LARGE number to all but perhaps the Warren Buffetts of this world and people take notice. The larger the number, the higher up goes the blame game and $6 billion gets you pretty much to the top. Jamie also made the killer mistake of under-stating and under-playing the loss, perhaps even finding a bit of humor in the entire affair before he was in full possession of all the facts and that is a real no-no, completely unappreciated by the regulators and the cops on the beat. Is he going to recover? No, not completely. Once the myth of invincibility is gone, it never comes back. Jamie is now an ordinary, very bright and very capable guy if there is such a thing, but the minute you start to believe the hype the Gods have a funny way of adjusting reality. I actually feel a bit sorry for the guy and I never thought I'd be saying that. I wonder who is next in the blame game environment in which we live?
The other guy I'm beginning to feel sorry for is Larry Summers. Now as we all know, Larry is not God's first Nice Guy creation, but the manner in which he got trashed today by NYT columnist Maureen Dowd had to be a classic. Mo must be going through another bad relationship or something because this was most vicious I Hate Men rant in quite a while, focusing on Summers but involving Bob Rubin and even Bill Clinton as well, as the responsible parties in the Crash of '08. Of course she doesn't know what she's talking about but I must say it was a kick to have that mob attacked by Mo in the Times. The girls are really pulling out all the stops to get Janet Yellen the Chairgirlship, and speaking of Janet, her guys at her bank in San Francisco didn't, IMHO, help her a lot in releasing a study which concluded the all the QEs and balance sheet build-up don't have an effect one way or the other. Their boss is a BIG supporter of the program you see, and that and being a nice person are the two most quoted reason for the support she receives from the street. The study also states that there is a kind of direct linkage between Fed directional other-speak and market reaction, which of course isn't the case and which hobbles the entire argument, but Fed studies and the Real World are generally not found in space occupied by Real People. Nevertheless, it wasn't helpful but then again neither is the battle royal going on over who is the next person to occupy what is now the most influencial financial position around. I say now because with a continued effort to infuse even higher levels of stupidity into the selection process, this administration seems bound and determined to belittle the Fed and present it as just another political component run by a political hack. Only thing I can compair this to is a day in the 60ies in August in the Mid West. Weird.
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