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Fed Dissenter Right On The Money

Lone FED Policy dissenter Minneapolis Federal Reserve Bank President Narayana Kocherlakota is right on the money. By accident. Kocherlakota believe the FED should keep interest rates low until unemployment hits 5.5% and the US Economy shows signs of sustained recovery. Raising rates or tightening before that would happen would not be a good idea. 

I agree with Kocherlakota, but not due to his reasoning. There is no sustained economic recovery. A distinction should be made between sustained economic recovery and a massive credit/speculation bubble. Unfortunately, the US Economy finds itself in the latter. By tightening now, the FED risks popping the bubble once again. Well, it will pop either way, sooner rather than later, but by tightening now the FED aids in the matter. 

This is further confirmed by our timing and mathematical work. The US Economy and our financial markets will go through a severe recession and a bear market between 2014-2017. If you would be interested in learning exactly when the bear market will start and it’s internal composition, please CLICK HERE. 

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Fed Dissenter Right On The Money  Google

Kocherlakota, Fed’s lone dissenter, blasts new rate guidance

WASHINGTON (Reuters) – The Federal Reserve should have promised to keep rates near zero until U.S. unemployment falls below 5.5 percent, as long as inflation and financial stability risks are contained, said the lone dissenter to the Fed’s policy decision this week.

By instead dropping its pledge to keep rates low until the jobless rate reaches a more healthy level, the Fed is sending the wrong message on both inflation and jobs, Minneapolis Federal Reserve Bank President Narayana Kocherlakota said in remarks released on Friday.

On Wednesday the Fed, in its first policy-setting meeting under Fed Chair Janet Yellen, said it would factor in a wide range of economic measures as it judged the correct timing for raising rates.

The U.S. central bank has kept rates near zero since December 2008, and the Fed had since December 2012 promised to keep them there until the unemployment rate fell to at least 6.5 percent, as long as inflation did not threaten to rise above 2.5 percent.

With unemployment now at 6.7 percent, and the Fed’s preferred gauge of inflation little more than half of its 2-percent target, policymakers decided to jettison what many said were becoming increasingly irrelevant guidelines.

But to Kocherlakota, one of the Fed’s most dovish policymakers, dropping any reference to those thresholds “does not communicate purposeful steps being taken to facilitate a more rapid increase of inflation back to the 2 percent target,” Kocherlakota said, and suggests “the committee views persistently sub-2-percent inflation as an acceptable outcome.”

It also creates uncertainty over economic growth prospects, he said, by giving little information about how fast the Fed wants the economy to return to full employment, and even about the level of unemployment it views as being consistent with full employment.

Kocherlakota has been pressing for the Fed to promise low rates until unemployment reaches the more normal level of 5.5 percent even before the Fed adopted the 6.5 percent unemployment threshold for considering any rate rise.

The promise, he said, should be contingent on inflation rising no more than a quarter of a percentage point above the Fed’s 2-percent target, a stipulation he repeated on Friday.

New in his proposal was a caveat that low rates would also be contingent on possible risks to financial stability remaining contained, a nod to the concern that some Fed officials have over the potential for sustained near-zero rates to foster unseen bubbles.

Kocherlakota said he agreed with one aspect of the Fed’s new policy: its stated intent to keep rates below normal levels for some time even after inflation and the labor market return to more normal levels.

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Russia Turns To China

After a massive assault on Russia by the Western powers, Russia moves forward with forging much closer ties with China. (see article below). Just as predicted on this blog. What most people don’t realize is that this is the beginning of the end. As I have outlined in my comprehensive report “Nuclear World War 3 Is Coming Soon.When, How & Why“, current geopolitical setup will lead to an eventual military alliance between Russia and China to counterbalance USA/NATO. Leading to an eventual war between the parties in 2029. Read the report for full understanding and decide for yourself.   

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Russia Turns To ChinaGoogle

 

Putin looks to Asia as West threatens to isolate Russia

MOSCOW (Reuters) – When President Vladimir Putin signed a treaty this week annexing Crimea to great fanfare in the Kremlin and anger in the West, a trusted lieutenant was making his way to Asia to shore up ties with Russia’s eastern allies.

Forcing home the symbolism of his trip, Igor Sechin gathered media in Tokyo the next day to warn Western governments that more sanctions over Moscow’s seizure of the Black Sea peninsula from Ukraine would be counter-productive.

The underlying message from the head of Russia’s biggest oil company, Rosneft, was clear: If Europe and the United States isolate Russia, Moscow will look East for new business, energy deals, military contracts and political alliances.

The Holy Grail for Moscow is a natural gas supply deal with China that is apparently now close after years of negotiations. If it can be signed when Putin visits China in May, he will be able to hold it up to show that global power has shifted eastwards and he does not need the West.

“The worse Russia’s relations are with the West, the closer Russia will want to be to China. If China supports you, no one can say you’re isolated,” said Vasily Kashin, a China expert at the Analysis of Strategies and Technologies (CAST) think thank.

Some of the signs are encouraging for Putin. Last Saturday China abstained in a U.N. Security Council vote on a draft resolution declaring invalid the referendum in which Crimea went on to back union with Russia.

Although China is nervous about referendums in restive regions of other countries which might serve as a precedent for Tibet and Taiwan, it has refused to criticize Moscow.

The support of Beijing is vital for Putin. Not only is China a fellow permanent member of the U.N. Security Council with whom Russia thinks alike, it is also the world’s second biggest economy and it opposes the spread of Western-style democracy.

Little wonder, then, that Putin thanked China for its understanding over Ukraine in a Kremlin speech on Tuesday before signing the treaty claiming back Crimea, 60 years after it was handed to Ukraine by Soviet leader Nikita Khrushchev.

Chinese President Xi Jinping showed how much he values ties with Moscow, and Putin in particular, by making Russia his first foreign visit as China’s leader last year and attending the opening of the Winter Olympics in Sochi last month.

Many Western leaders did not go to the Games after criticism of Russia’s record on human rights. By contrast, when Putin and Xi discussed Ukraine by telephone on March 4, the Kremlin said their positions were “close”.

A strong alliance would suit both countries as a counterbalance to the United States.

WARM EMBRACE, BUT NO BEAR HUG

But despite the positive signs from Beijing, Putin may find China’s embrace is not quite the bear hug he would like.

There is still some wariness between Beijing and Moscow, who almost went to war over a border dispute in the 1960s, when Russia was part of the Communist Soviet Union.

State-owned Russian gas firm Gazprom hopes to pump 38 billion cubic meters (bcm) of natural gas per year to China from 2018 via the first pipeline between the world’s largest producer of conventional gas to the largest consumer.

View gallery

Russian President Putin attends a business conference …

Russian President Vladimir Putin (L) attends a business conference in Moscow March 20, 2014. REUTERS …

“May is in our plans,” a Gazprom spokesman said, when asked about the timing of an agreement.

A company source said: “It would be logical to expect the deal during Putin’s visit to China.”

But the two sides are still wrangling over pricing and Russia’s cooling relations with the West could make China toughen its stance. Russian industry sources say Beijing targets a lower price than Europe, where Gazprom generates around half of its revenues, pays.

Upheaval at China National Petroleum Corp, at the centre of a corruption investigation, could cause also delays, and Valery Nesterov, an analyst with Sberbank CIB in Moscow, said China also needs time to review its energy strategy and take into account shale gas and liquefied natural gas (LNG).

“The bottom line is that the threat of sanctions on energy supplies from Russia has indirectly strengthened China’s position in the negotiations,” Nesterov said.

BOOSTING BUSINESS

Russia meets almost a third of Europe’s gas needs and supplies to the European Union and Turkey last year exceeded 162 bcm, a record high.

However, China overtook Germany as Russia’s biggest buyer of crude oil this year thanks to Rosneft securing deals to boost eastward oil supplies via the East Siberia-Pacific Ocean pipeline and another crossing Kazakhstan.

If Russia is isolated by a new round of Western sanctions – those so far affect only a few officials’ assets abroad and have not been aimed at companies – Russia and China could also step up cooperation in areas apart from energy.

CAST’s Kashin said the prospects of Russia delivering Sukhoi SU-35 fighter jets to China, which has been under discussion since 2010, would grow.

China is very interested in investing in infrastructure, energy and commodities in Russia, and a decline in business with the West could force Moscow to drop some of its reservations about Chinese investment in strategic industries.

“With Western sanctions, the atmosphere could change quickly in favor of China,” said Brian Zimbler Managing Partner of Morgan Lewis international law firm’s Moscow office.

Russia-China trade turnover grew by 8.2 percent in 2013 to $8.1 billion but Russia was still only China’s seventh largest export partner in 2013, and was not in the top 10 countries for imported goods. The EU is Russia’s biggest trade partner, accounting for almost half of all its trade turnover.

DILEMMA FOR JAPAN, SUPPORT IN INDIA

Sechin, whose visit also included India, Vietnam and South Korea, is a close Putin ally who worked with him in the St Petersburg city authorities and then the Kremlin administration, before serving as a deputy prime minister.

In Tokyo, he offered Japanese investors more cooperation in the development of Russian oil and gas.

Rosneft already has some joint projects with companies from Japan, the world’s largest consumer of LNG, and Tokyo has been working hard under Prime Minister Shinzo Abe to improve ties with Moscow, despite a territorial dispute dating from World War Two.

But Japan faces a dilemma over Crimea because it is under pressure to impose sanctions on Moscow as a member of the Group of Seven advanced economies.

It does not recognize the referendum on Crimea’s union with Russia and has threatened to suspend talks on an investment pact and relaxation of visa requirements as part of sanctions.

Closer ties are being driven by mutual energy interests. Russia plans to at least double oil and gas flows to Asia in the next 20 years and Japan imports huge volumes of fossil fuel to replace lost energy from its nuclear power industry, shut down after the 2011 Fukushima disaster.

Oil imports from Russia rose almost 45 percent in 2013 and accounted for about 7 percent of supplies.

But if the dilemma is a tough one for Japan, it is unlikely to cause Putin much lost sleep.

“I don’t think Putin is worried much by about what is said in Japan or even in Europe. He worries only about China,” said Alexei Vlasov, head of the Information and Analytical Center on Social and Political Processes in the Post-Soviet Space.

Putin did take time, however, to thank one other country apart from China for its understanding over Ukraine and Crimea – saying India had shown “restraint and objectivity”.

He also called Indian Prime Minister Manmohan Singh to discuss the crisis on Tuesday, suggesting there is room for Russia’s ties with traditionally non-aligned India to flourish.

Although India has become the largest export market for U.S. arms, Russia remains a key defense supplier and relations are friendly, even if lacking a strong business and trade dimension, due to a strategic partnership dating to the Soviet era.

Putin’s moves to assert Russian control over Crimea were seen very favorably in the Indian establishment, N. Ram, publisher of The Hindu newspaper, told Reuters. “Russia has legitimate interests,” he added.

For Putin, the Crimea crisis offers a test case for ideas he set out in his foreign policy strategy published two years ago as he sought a six-year third term as president.

He said at the time he wanted stronger business ties with China to “catch the Chinese wind in the sails of our economy”. But he also said Russia must be “part of the greater world” and added: “We do not wish to and cannot isolate ourselves.”

Two years on, he is closer to securing the first goal, but it is not yet clear how his population feels he has done on the second

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Guillotine Sales Booming In Europe

Earlier we initiated coverage and issued a BUY recommendation on Guillotine International, Inc (Nasdaq: HEADOFF) on anticipated surge in sales here in the USA. To our surprise, sales first initiated their surge in the Eurozone  where unemployment remains at 12%. With forecasted decline in the unemployment rate of only 1% over the next four years we expect this sales trend to continue.

Further, with the bear market of 2014-2017 and global recession just around the corner we anticipate the sale of GI new “5 Heads At Once” model to do very well around the globe. Particularly, with youth unemployment at close to 50% in both Spain and Greece, we expect to see triple digit growth in such markets. With the company selling at 1X it Book Value, it’s a Strong Buy. 

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Guillotine Sales Booming In Europe Google

‘Dire’ consequences loom for jobless Europe

While there are reasons for “cautious optimism” as the euro zone shows signs of economic recovery, high unemployment in the region will fall by just one percentage point in the next four years and in some areas it will spike before dipping, a new study finds.

Stubbornly high unemployment rates not only pose a real threat to the recovery, as consumer demand will remain subdued, but young people are also at risk of spending less time in employment, creating potentially “dire” consequences for businesses.

Unemployment in the euro zone is currently sitting close to a record high of 12 percent, and is forecast to fall at a very slow rate over the next two years before reaching 11 percent by 2018, according to the spring EY Eurozone Forecast (EEF).

Figures from European Union’s statistics agency show approximately 19.175 million are without a job across the euro zone and in Greece, unemployment is set to climb to 28 percent this year before it falls by 3 percent in 2018.

Youth unemployment in both Greece and Spain have reached a staggering 50 percent, presenting “major concerns” in terms of social tensions, education and labor mobility, the EEF said.

“In countries such as Spain, where half of young people remain out of work, with little prospect of a job, the risk of a “lost generation” is very real,” the report found.

“This waste of human capital, alongside a lack of fixed capital investment, means that productive capacity is lost over time and sustainable growth becomes more difficult. The consequences for businesses could be dire.”

Within the 18 member states, unemployment differs “wildly”, with Austria set for a jobless rate of 4.6 percent in 2014-18, unemployment in Greece is still projected to be close to 25 percent in 2018.

Young people who spend significant period of time out of work tend to spend less time in employment and on average earn lower wages over the rest of their lives according to the study.

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Warning: Real Estate Market Begins Its Decline

National Real Estate Propaganda Group (aka The National Association of Realtors) February report is beyond laughable.  Let’s take a look…

U.S. home resales dropped slightly in February to a 19 month-low as cold weather and a shortage of homes for sale continued to sideline potential buyers.

Damn, I forgot about that snow storm in California. In terms of shortage….. call Citi, Blackstone, Wells, Chase, Freddie, Fannie, etc… they should have at least a Million units of your inventory sitting on their balance sheet.  

Even though temperatures remained chilly in February, pinching sales, a modest improvement in inventory on the market indicates buyers are expected to jump in soon.

Sure, millions of buyers are sitting on the side line, waiting to jump in. Whatever makes you guys sleep better at night. 

If you want the truth, stop reading this BS and read my comprehensive Real Estate Report showing you exactly when, how & why our real estate market is about to crash……again. 

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Warning: Real Estate Market Begins Its Decline   Google

Existing Home Sales Edge Down to 19-Month Low in February

U.S. home resales dropped slightly in February to a 19 month-low as cold weather and a shortage of homes for sale continued to sideline potential buyers.

The National Association of Realtors said on Thursday home sales dropped 0.4 percent to an annual rate of 4.60 million units, the lowest level since July 2012, and in line with economists’ expectations. January’s sales pace was unrevised at 4.62 million.

Even though temperatures remained chilly in February, pinching sales, a modest improvement in inventory on the market indicates buyers are expected to jump in soon.

“The weather surely cannot get any worse,” NAR economist Lawrence Yun told reporters. “The new supply will help tame price growth.”

The median existing home price rose 9.1 percent in February to $189,000 from the same month in 2013.

Mortgage rates have risen almost a full percentage point in the past year and the increase in house prices has far outpaced income growth, making home-buying less affordable.

In addition, there has been a shortage of homes for sale on the market. Home resales have declined in six of the last seven months, having peaked in July.

The number of previously-owned homes available for sale at the end of February represented a 5.1 months’ supply, still tepid but up from 4.9 months’ worth in January. A healthy market has about a six-to-seven month supply.

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Brilliant or Stupid? Trade Of The Week

A trader bought 150,000 bullish contracts on the VIX expiring in May with a strike price of 22, ($7.95 Million) while selling the same number of May 30 calls in a strategy known as a call spread, according to New York-based Miller Tabak & Co. 

Perhaps this is one of my subscribers. When you can  predict and time the market with great precision (as we can), this trade makes a lot of sense. While I will not comment on the trade directly, it does make a lot of sense if the Bear Market is about to start with a vengeance. As per my work on this blog, the bear market of 2014-2017 is, indeed, about to start. If you would be interested in learning exactly when it starts and it’s exact composition (exact up/down moves during the duration of the bear market) please CLICK HERE.  

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Brilliant or Stupid? Trade Of The Week  Google

 

VIX Trader Pays $8 Million on Bet Gauge to Rally 60% by May

An investor paid about $7.95 million for a trade that will pay off if the Chicago Board Options Exchange Volatility Index rallies at least 60 percent by May.

The trader bought 150,000 bullish contracts on the VIX expiring in May with a strike price of 22, while selling the same number of May 30 calls in a strategy known as a call spread, according to New York-based Miller Tabak & Co. The trade cost 53 cents to put on for each contract and it will profit if the volatility gauge rises above 22.53 from the current level around 14, data compiled by Bloomberg show. It has a maximum payoff if the VIX more than doubles to 30.

“It was one of the largest VIX trades we’ve seen in a while and an interesting way to put on a tail-risk hedge,” Lillian Seidman, an options strategist at Miller Tabak, said in an interview. “This is a play on the VIX shooting through its high not seen for the last couple of years.”

The VIX, an options-based measure of the price to protect against losses in the Standard & Poor’s 500 Index (SPX), soared 26 percent to 17.82 last week, while the benchmark equity gauge fell 2 percent for the biggest drop in seven weeks on concern that the standoff in the Crimea region between Ukraine and Russia could worsen. Almost $1.7 trillion was erased from global equities between March 6 and the end of last week, data compiled by Bloomberg show.

Share Rebound

Stocks rallied today after President Vladimir Putin said Russia wishes no harm to Ukraine. U.S. and European leaders condemned Russia’s push to annex Crimea and promised further sanctions as early as this week in the worst dispute since the Cold War.

The VIX, which hasn’t closed above 22 since the end of 2012, slumped 7.2 percent to 14.52 today. The gauge has fallen about 19 percent in the past two days for the biggest slide in more than a month. The May 22 and 30 VIX calls were the most-traded options contracts across U.S. exchanges today.

“Someone’s opening a new position in these VIX options,” Fred Ruffy, a Chicago-based senior options strategist at Trade Alert LLC, said in a phone interview. “It’s a view that volatility may spike over the next couple of months.”

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Time To Short Chinese and Hong Kong Developers?

I would stay out of this trade unless you are there on the ground, in either China or Hong Kong, involved in the industry and have a good pulse on timing. There is no doubt that China/HK are in a massive property development, credit and shadow banking bubble that will eventually blow sky high. Yet, to get the timing right is always incredibly hard. Especially, when you have the Chinese government willing to go to an extent that they have done thus far. Too much risk, very limited upside. 

Plus, there are plenty of short opportunities here in the US. As a matter of fact, it’s getting close to short sellers paradise. FB, GOOG, TSLA, TWTR and hundreds of other stocks are selling at incredibly high valuations. Not that dissimilar to 2000 top (Yeah, I know….it’s different this time). When the bear market of 2014-2017 starts, many of the speculative stocks will easily decline 50-80%. Much better than trying to squeeze 30-40% out of highly speculative Chinese developers.

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Time To Short Chinese and Hong Kong Developers?  Google

Short Sellers Target Chinese Developers as Rout Deepens

Stock traders have doubled bearish bets against some of the biggest Chinese developers amid growing concern that a weaker real-estate market will curb property sales just as borrowing costs surge.

Short interest in Evergrande Real Estate Group Ltd. (3333), the nation’s fourth-largest developer by market value, was at 8.4 percent of shares outstanding on March 17, up from 3.2 percent a year ago, according to data compiled by Bloomberg and Markit Group Ltd. It touched a record 8.6 percent on March 4. Wagers against Guangzhou R&F Properties Co. (2777) and Agile Property Holdings Ltd. (3383) have both reached the highest since December 2012.

Investors are bracing for losses as lenders pull back from the industry and local governments take steps to rein in home values in the second-largest economy. Yields on the dollar debt of Evergrande and Agile surged this week as a closely-held developer with 3.5 billion yuan ($566 million) of debt collapsed, while data showed property prices in some of China’s largest cities rose last month at the slowest pace since 2012.

“I see more downside in the share prices,” said Peter Elston, the Singapore-based head of Asia-Pacific strategy at Aberdeen Asset Management Plc, which oversees about $321 billion. “When property companies get into trouble, generally the weak companies start to get into trouble first. If property price weakness starts to become more pronounced, that’s going to impact the broader market.”

Defaults Spread

The Hang Seng China Enterprises Index added 0.2 percent at the close in Hong Kong. Evergrande shares fell 1.8 percent and Agile rose 0.2 percent. The Shanghai Composite Index slipped 0.2 percent. The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. rose 1 percent to 98.18 yesterday.

The collapse of Zhejiang Xingrun Real Estate Co. emerged less than two weeks after the first on-shore bond default by a Chinese company. Shanghai Chaori Solar Energy Science & Technology Co.’s missed coupon payment on March 7 may have been China’s “Bear Stearns moment,” prompting investors to reassess credit risks as they did after the U.S. securities firm was rescued in 2008, according to Bank of America Corp.

Evergrande’s dollar bonds fell yesterday, sending the yield to 10.86 percent, the highest level on record, DBS Bank Ltd. prices show. Short interest in Guangzhou R&F, a developer based in the southern Chinese city, has surged to 7.3 percent from 3.3 percent a year ago. The company’s shares fell to their lowest level since October 2012 on March 17.

Bond Yields

Agile Property’s short interest increased to 2.3 percent from 1.3 percent a year ago. Shares have tumbled 55 percent from a high in January 2013. Yields on its February 2017 notes jumped 20 basis points to 7.46 percent yesterday, the highest since they were sold last month, according to Australia & New Zealand Banking Group Ltd. prices.

“The market is concerned about the financial risks of the property industry,” Chen Li, a China equity strategist at UBS AG who has an underweight rating on the property industry, said in a phone interview yesterday. “Some investors are betting that some developers would have credit defaults and financing difficulty as homes sales are slowing and mortgage rates are rising.”

An Evergrande spokesman said the company can’t comment before earnings. An Agile spokesman declined to comment. Two phone calls to Guangzhou R&F’s investment relations officer Vanessa Wang weren’t answered.

Stock Valuations

Recent declines mean Chinese property stocks are approaching attractive levels, according to Calibre Asset Management Ltd. The Shanghai Property Index fell 10 percent this year through yesterday, sending the gauge’s valuation to 1.1 times net assets, the lowest since Bloomberg began tracking the data in 1998.

“As we rely on fund managers to time the market in the long run, recent conversations indicate they are looking at buying,” Norman Chan, the Hong Kong-based head of investment at Calibre Asset Management, said by phone. “I suspect in a big down day, none of them will want to be a hero, but the current level seems to be the level they will start considering.”

History also shows mistiming bets on Chinese real-estate companies can burn short sellers, said John-Paul Smith, a global emerging-market equities strategist at Deutsche Bank AG.

Short interest in Guangzhou R&F reached a record 19.9 percent on July 30, 2012. Shares surged 48 percent in the next six months. Agile climbed 13 percent four months after bearish wagers rose to a record 9.5 percent on March 13, 2012.

Significant Downside

“If you remember in 2012, a lot of funds shorted those stocks and were very badly burnt,” Smith said by phone. “Fundamentally, I would be fairly negative. I would be very hesitant to recommend people to step in and short them as timing is always very difficult with these things.”

The default of Zhejiang Xingrun may signal difficult times ahead for smaller Chinese developers, which face a “rapidly deteriorating” credit environment, uncertain sales outlook and intensifying competition, Standard & Poor’s Ratings Services said yesterday.

“We think there’s a significant downside in this sector,” said Samuel Le Cornu, who helps oversee $1 billion at Macquarie Investment Management. “We haven’t bought anything for the last five years and I can’t see that changing.”

The Macquarie Asia New Stars Fund had an annualized return of 32.5 percent during the past five years, outperforming 99 percent of peers, according to data compiled by Bloomberg.

Second Homes

At least 10 Chinese cities stepped up measures to cool local property markets at the end of last year, with Shenzhen, Shanghai and Guangzhou raising the minimum down payments for second homes to 70 percent from 60 percent.

China’s households piled into real estate in recent years as they sought returns beyond the regulated caps on savings deposits. With the nation’s stock market failing to keep pace with economic growth, property offered an alternative, along with trusts that channeled credit to borrowers outside the official banking system.

The implications of falling home prices would be “enormous” because Chinese buyers see property as an investment, Aberdeen’s Elston said. “The prospect of them losing money is a pretty serious eventuality.”

 

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Is Putin Right About America?

z21

It’s a sad day for America when I actually agree with what Russian Mafia Cartel Leader Mr. Putin has to say about American Politics. How far down the shit hole have we fallen? 

Russian President Vladimir Putin accused the United States on Monday of being guided in its foreign policy not by international law but by the “rule of the gun.”

“Our Western partners headed by the United States prefer not to be guided by international law in their practical policies, but by the rule of the gun,” he told a joint session of parliament.

“They have come to believe in their exceptionalism and their sense of being the chosen ones. That they can decide the destinies of the world, that it is only them who can be right.”

What do you think guys? Is Putin right on the money. Have we become a nation of trigger happy warmongers who see no fault of our own? 

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Is Putin Right About America?  Google

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Fed Warns: Much Higher Interest Rates In 2016

I will give Janet Yellen one thing. She has been consistent with her haircut. 

As the article below indicates, a lot of people anticipate the FED to start raising interest rates around 2015-2016. Not going to happen. If anything, the FED will be cutting interest rates (if there is anything to cut) and flooding the market with cheap credit….again. Here is why. 

As I have already illustrated, a number of times, the FED is a reactionary force and not a market maker. For instance, Bernanke was worried about the housing acceleration and thought the economy was doing great as late as Q2 of 2008. Mind you, the recession was already in full swing at that juncture. What FEDs analysis of today’s market environment is rather simple. They see the continuation of today’s expansion for the foreseeable future. Even thought most of it has been driven by their own credit and speculation. 

As my mathematical and timing work indicates, we are on a verge of a severe Bear Market that will play out between 2014-2017. During this time the US Economy will slip back into a recession, leaving the FED with no option but to cut interest rates again. If you would like to know exactly when the bear market will start as well as it’s internal composition (all the ups/downs within the bear market) as well as where it’s going to complete….please CLICK HERE. 

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Fed Warns: Much Higher Interest Rates In 2016 Google

The Federal Reserve isn’t going to tell us when it expects to start raising interest rates. It isn’t going to draw a line in the sands of economic data – a minimum unemployment rate, a minimum rate of inflation. It’s done with all of that.

But the Fed is preserving another window on its plans. Since 2012, it has published the expectations of its senior officials about the year of the first Fed funds rate increase. It is scheduled to publish the latest batch of forecasts on Wednesday afternoon.

And those forecasts are likely to carry the same message as the latest round of changes in the Fed’s policy statement: Settle in. This is going to take a little explaining.

This chart from BNP Paribas shows the evolution of the forecasts. (There are 19 seats on the Federal Open Market Committee, but there have been vacancies at some meetings, so the chart gives percentages rather than counting heads.)

A majority of Fed officials has bet on 2015 since September 2012 — the month when the Fed changed its policy statement to read, “Exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.”

When the Fed replaced that guidance just a few months later with an economic target – 6.5 percent unemployment – Ben S. Bernanke, who was then the chairman, was at pains to emphasize the timetable had not changed. And the dots did not move.

Lately, however, the number of Fed officials betting on 2016 has been rising, and it seems likely to rise again on Wednesday. Charles Evans, the president of the Federal Reserve Bank of Chicago, walked into the 2016 camp earlier this month.

The BNP chart reflects that move; other analysts say a larger shift is possible.

“We believe that Chair Yellen is probably one of the 2016 dots,” Sven Jari Stehn, a Goldman Sachs economist, wrote in a recent analysis. “If that is true, other participants, especially the governors, might decide to shift in her direction.”

The Fed is dismantling its stimulus campaign – arguably it has been retreating for almost a year now, since Mr. Bernanke roiled financial markets last summer – but the slow drift of the forecast is a reminder that it is moving very slowly.

The Fed may reinforce that message on Wednesday by emphasizing in its statement that even when it does start to raise rates, that too will happen very slowly.

Finally, it’s worth looking at one other part of the forecast. Fed officials are also asked to predict the long-run level of interest rates – basically, to define normal. Before the recession, normal was about 4 percent. But in recent forecasts, a growing number of officials – four in September, six in December – have predicted that interest rates will not return all the way to 4 percent. They’re basically saying this recovery won’t just take a very long time, but that it will remain incomplete.

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What I Would Like To Hear From The FED Chair Yellen

Earlier today Daily Ticker published an article “What markets want to hear from Fed Chair Yellen this week” (see below). Because you know, whatever lies come out of her mouth will determine what the stock market will do and/or what path the economy will take. What a bunch of nonsense. Here is what I would like to hear come out of her mouth.

Dear American People,

Since 1987, myself,  Mr. Greenspan and Mr. Bernanke worked tirelessly to destroy the American economy. Instead of following prudent monetary policy we flooded our markets with massive amounts of cheap credit every chance we got in 1994, 1998, 2001-06, 2008-today. We worked overtime to blow bubble after bubble to give a perception that the US Economy is doing great. We thought that by simply adding more credit into the system we could swipe all of the bad debt and zombie businesses under the carpet in order to continue rapid economic growth. Yet, it didn’t work. Instead of fixing the system, we have distorted to an extent unimaginable just 10 years ago.  

Particularly, our efforts backfired when instead of inflation and dollar devaluation we ended up in a credit default deflationary environment. An environment where we have destroyed the middle class for the benefit of the “Top 1%”. Now, there is no way out. We will have to go through a lot of economic pain to work such imbalances out of our economic system. I am truly sorry about this.  

That’s what I would like to hear. We can all dream….right? 

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What I Would Like To Hear From The FED Chair Yellen  Google

What markets want to hear from Fed Chair Yellen this week

Federal Reserve watchers are expecting the Federal Open Market Committee to announce an additional taper of $10 billion to its monthly bond-buying program Wednesday. The Fed started to reduce its bond purchases in January as it gauged the economy to be strong enough to withstand the move.

Janet Yellen will also answer reporters’ questions Wednesday in her first press conference as Fed Chair since taking over from Ben Bernanke in February. She does not want to “rock the boat” says BNP economist Julia Coronado, and will likely signal that the Fed has no intention of altering course as it gradually reins in the stimulus program known as “quantitative easing.” The Fed’s balance sheet has ballooned to above $4.1 trillion as a result of its monthly purchases of Treasuries and mortgage-backed securities, up from $869 billion in August 2007.

Like other economists, Coronado says the Fed may also reduce the threshold it has set for beginning to raise short-term interest rates. The Fed has linked that to a jobless rate of 6.5% or so. But the unemployment rate has already fallen to 6.7%, and with the Fed likely to keep rates close to 0 into 2015, an adjustment in the target rate seems necessary.

Related: Jobs better-than-expected but “the labor market is still weak”: NYT’s Greenhouse

“The Fed will abandon those numerical thresholds,” Coronado explains in the video above. “At least half of the decline in the unemployment rate is due to falling labor participation, a sign of weakness.” But the jobs report was not the “decisive factor” in the change, she adds.

“The Fed never reacts to just one data point and it’s willing to look through a lot of the weakness we’ve seen in hiring and other data reflective of the severe winter weather,” Coronado says.

Even as the Fed further reduces its stimulus program, Coronado argues that $55 billion in monthly bond purchases is “still a lot of money” to inject into the economy. That stimulus will keep the markets “resilient” and prolong higher interest rates for a lot longer.

What will Yellen’s first press conference be like? Watch the video to find out!

 

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Inflation….What Inflation?

Core inflation dropped to a 10 Year low of 1.1% Y-O-Y or 0.1% in February. Bad news for Gold Bugs expecting Zimbabwe type of an inflationary environment. I have been a strong proponent, since about 2002, that we are in a deflationary environment as opposed to an inflationary one. Massive bad debt we have in our system must be liquidated, which is deflationary. The reason we see resemblance of inflation is due purely to FED’s efforts.

By pumping a tremendous amount of credit into our financial system the FED was able to create an illusion of inflation. However, most of this inflation went right into the stock market and the real estate market. Creating massive bubbles in both today and in 2007. Today’s low CPI is another confirmation of that. As the FED slows QE even further it won’t be long before net positive CPI number turns into a negative one. 

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Inflation….What Inflation?  Google

The Labor Department has released its latest report on retail inflation via the Consumer Price Index (CPI). Prices in February were up 0.1% on the headline CPI. Core inflation, excluding food and energy, rose by 0.1% as well. Bloomberg had estimates of 0.1% on the headline and 0.1% on the core inflation reading.

The end result is that prices were up only 1.1% from a year ago. What stands out here is that this is the weakest 12-month gain in about six months, but furthermore it remains well under the Federal Reserve’s inflation target of 2% — the same day that an FOMC meeting is starting. The core inflation was up by 1.6% from a year ago.

Food prices were up by 0.4%, but energy prices were down by -0.5%. The gain in food was the most in over two years, which may be partly driven by that West Coast drought. Lower gasoline prices around the country offset higher heating bills in the Midwest and Northeast.

Stock futures surged Tuesday morning on Putin’s comments that he does not want to enter other parts of Ukraine. Tuesday’s CPI report has not taken any noticeable gains away.