Looks Like Janet Yellen Is An Avid Reader Of My Blog

Janet Yellen continues to talk out both ends, confusing the markets in the process. On one hand, Janet sites strong employment, economic growth and the need for further tightening. On the other, she sites slowing housing market, geopolitical tensions and a possible small-cap bubble. On top of it all, the actual economic data coming out of various sectors presents us with another point of view (ex: GDP growth of 0.1% in Q1).

Wait What !?!?

I know, I know. The only reason Janet Yellen can’t make sense of it all is because the FED has no idea of where we are in the overall economic/market cycle. They are just as confused (if not more so) as most other market participants. Remember, the FED is a reactionary force.

The fundamental economic picture clears up, significantly so, once you bring cyclical and timing analysis into the picture. As I have mentioned before, very few bull markets last over 5-years. Particularly within the structured of the overall secular bear market of 2000-2017.

Once that is understood, it becomes evident that the US Economy is on the verge of a massive recession that will start in 2014/15 and accelerate into 2016. Tightening or not. The reason you see so much confusion is due to an “economic distribution/divergence” synonymous with the Economic/Financial market tops.

In short, expect the US Economy and Financial market to roll over shortly.

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Looks Like Janet Yellen Is An Avid Reader Of My Blog Google

Reuters: Yellen says U.S. economy still needs help, housing poses risk

WASHINGTON (Reuters) – Federal Reserve Chair Janet Yellen said on Wednesday the U.S. economy was still in need of lots of support given the “considerable slack” in the labour market, adding that the housing sector’s weakness and geopolitical tensions posed risks.

Even as she took note of “appreciable” improvements in the jobs market, Yellen told a congressional committee a high rate of long-term unemployment and a slow rise in worker pay suggested plenty of room for further job gains.

“A high degree of monetary accommodation remains warranted,” she told the congressional Joint Economic Committee.

Yellen said she expected the economy to expand at a “somewhat” faster pace than last year, but flagged weakness in the nation’s housing sector and the possibility of heightened geopolitical tensions or the re-emergence of financial stress in emerging markets as potential risks.

U.S. stocks slipped after her testimony was released but later steadied, while prices for U.S. government debt were little changed. The dollar rose against a range of currencies.

“The only new thing in it is housing,” said David Keeble, global head of interest rates strategy at Credit Agricole Corporate & Investment Bank in New York. “All the other comments could have been lifted from her recent speeches.”

EYE ON JOBS MARKET

In April, U.S. employers hired workers at the fastest clip in more than two years while the jobless rate hit a 5-1/2 year low of 6.3 percent. The drop in unemployment, however, reflected Americans giving up the hunt for work, extending a trend that has been an unfortunate hallmark of the economy’s recovery.

Yellen expressed faith that at least part of the decline in labour force participation could be reversed. She also said she had very little doubt that the share of Americans working part-time because they could not find full time work would also come down as the economy strengthened.

“Unemployment is a good indicator of the state of the labour market … But there are different things happening in the labour market we need to take account of,” she told the panel.

A week ago, the Fed reduced its monthly bond purchases to $45 billion (26.5 billion pounds) from $55 billion, keeping the stimulus program on a path to be fully wound down by year end. But it also stuck to its assessment that the economy would need near-zero interest rates for a “considerable time” after the asset purchases end – a message Yellen stuck with in her testimony.

HOUSING, GEOPOLITICS

In its policy statement last week, the Fed took note of the housing sector’s weakness, but Yellen went further in underscoring it as a concern in her testimony.

“The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery,” she said.

And for the first time since the Ukraine crisis emerged, Yellen cited geopolitics as a prominent economic risk. Ukraine appears to be sliding towards war after its deadliest week since a separatist uprising began in its mainly Russian-speaking east.

She also indicated concerns over potentially risky investment behaviour given the extended period of low rates.

“Some reach-for-yield behaviour may be evident,” Yellen said, pointing to the lower-rated corporate debt markets as an example.

She noted that issuance of syndicated leverage loans and high-yield bonds had expanded, while underwriting standards had loosened, though she said the increase risk-taking appeared modest – particularly at large banks and life insurers.

Yellen added that equity market valuations as a whole and residential real estate prices were within historical norms.

April 17, 2014December 1, 2014

Janet Yellen: Bubbles? What Bubbles?

As per Bloomberg report below, Janet Yellen said nothing about the risk that her easy monetary policy will inflate asset bubbles. DUH!? What Bloomberg missed is that we are already in a massive bubble or bubbles. While the primary bubble is singular in nature….CREDIT……adjacent bubbles are too numerous to mention here (stock market, real estate, bonds, car loans, student debt, etc…) In fact, the situation we face today is not that dissimilar from the situation we had faced at 2007 top. It is almost identical and I challenge anyone to prove me otherwise.

Is the FED aware of these bubbles while hoping for the best or are they completely blind? Unfortunately, I continue to maintain it’s the latter. As I have mentioned before, their 2008 FED Minutes is a clear indication of that. They are a reactionary force at best, only able to correct the direction after the fact. Somehow, the markets believe that the FED possesses a supernatural power to control and to direct the markets. And that is why I continue to maintain that market participants with such a view will pay dearly for their misconception over the next few years.

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Janet Yellen: Bubbles? What Bubbles? Google

Bloomberg Writes: Dovish Sign? Janet Yellen Says Nothing About Asset Bubbles

Sometimes what’s not said is more important than what’s said. In a speech today, Federal Reserve chief Janet Yellen said nothing about the risk that easy monetary policy will inflate asset bubbles. Leaving that topic out of her speech could be taken as a sign that bubbles are not at the top of her list of concerns—which could make her more willing to keep interest rates low to strengthen economic growth.

Yellen certainly knows that asset bubbles are on the minds of investors and analysts. They’ve been a prime concern of one of her Federal Reserve Board colleagues, Jeremy Stein, who announced earlier this month that he will resign on May 28 to return to teaching at Harvard University.

She certainly had the time and opportunity to bring up bubbles. Her prepared remarks to the Economic Club of New York were 3,830 words long and were followed by extensive remarks in a question-and-answer session.

Last November, in her confirmation hearing for the Fed chairmanship, Yellen toldthe Senate Banking Committee that the Fed is devoting “a good deal of time and attention to monitoring asset prices in diferent sectors” to see if bubbles are forming. Even then she didn’t seem exceptionally worried. She said, “I don’t see evidence at this point in major sectors of asset-price misalignments, at least of a level that would threaten financial instability.”

The Financial Times’ Cardiff Garcia also made note of the curious incident today. He wrote, “In this speech, financial stability concerns weren’t raised at all.”

April 2, 2014April 2, 2014

Janet Yellen: Forget About Rate Hikes

As per report below, according to Janet Yellen’s indicators the US Economy is nowhere near where it should be for the rates to rise anytime soon. That is despite the stock market being up over 150% over the last 5 years. In fact, today’s ADP Job Report missed the mark for the 4th month in a row with 191,000 jobs created VS 195,000 expected. Becoming just another confirmation of what we have been saying all along here.

Forget about any rate increases over the next few years. That becomes more apparent when you look at our mathematical and timing work forecasts. Once again, they predict a sharp bear market between 2014-2017 and a subsequent deep recession in the US Economy. Under such circumstances, the FED will be looking for every possible avenue to re-inflate the markets instead of raising rates. In other words, as of today, most market participants are positioned in precisely the wrong way. If you would be interested in learning exactly when the bear market of 2014-2017 will start (to the day) and it’s internal composition, please Click Here.

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Janet Yellen: Forget About Rate Hikes Google

Bloomberg Writes: Yellen Jobs Dashboard Shows Rate Rise Far on Horizon: Economy

More than two-thirds of the gauges on Janet Yellen’s labor-market dashboard are still showing worse readings than before the recession, reinforcing her belief that the economy will need “extraordinary support” from the Federal Reserve for “some time to come.”

Only two of the nine indicators flagged by the new Fed chair — payroll growth and layoffs — are back to where they were in the four years leading up to the last economic downturn. The seven others, including joblessness, underemployment and labor-force participation, have yet to return to their 2004-to-2007 averages.

“The unemployment rate and a lot of these other series aren’t where the Fed thinks they need to be,” said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York and the top forecaster of unemployment over the past two years, according to data compiled by Bloomberg. Policy makers are “going to need a general sense that the labor market has entered a more sustainable path before they start to consider the possibility of raising interest rates.”

Yellen is using what she calls her “dashboard” of jobs data to justify the Fed’s easy-money policies and to argue that there’s still considerable slack in the labor market almost five years after the recession’s end. While the job market has strengthened considerably from the depths of the downturn, it is “not back to normal health,” the Fed chief said in a March 31 speech in Chicago.

Main Laggards

The biggest laggards have been long-term unemployment and participation. More than a third of the jobless have been out of work for more than 26 weeks, while the share of the working-age population in the labor force is at an almost 36-year low.

“The indicators are mixed,” said Roberto Perli, a partner at Cornerstone Macro LP in Washington and a former central bank economist. “That allows the Fed to stay the course” and keep interest rates low.

Yellen’s console of statistics has pluses and minuses. While it provides a broader picture of the labor market than focusing on the unemployment rate alone, it can confuse investors about the Fed’s intentions because it introduces additional variables without making clear how much weight the central bank is giving to each statistic.

“The market is more vulnerable to surprise in some of these other labor-market data,” LaVorgna said.

Some economists, including Michelle Girard of RBS Securities in Stamford, Connecticut, also worry that the instrument panel overestimates the amount of slack in the labor market and includes gauges that aren’t susceptible to changes in Fed policy.

The Fed is projected to begin raising interest rates in the third quarter of next year, according to the median estimate of 65 economists in a Bloomberg survey conducted March 7-12.

Jobs Report

Yellen, 67, will get an update on five of the indicators — joblessness, payrolls, underemployment, long-term unemployment and labor-force participation — on April 4 when the government releases employment data for March. The other four gauges — measuring the rate of hiring, layoffs, quits and job openings — are included in the monthly labor turnover summary, next out on April 8.

Chris Collins doesn’t need a basketful of statistics to tell him the labor market isn’t working. The 37-year-old operating engineer in Henderson, Nevada, has been unemployed since April 2013, when his last construction project ended.

“I try to stay upbeat, because sometimes that’s all you have to hold onto is the hope that there’s going to be a big project that breaks loose and you’re going to get back to work and get back on your feet,” said Collins, who specializes in heavy-machinery operation, including work with cranes and paving. “In the meantime, I’m looking outside the industry, just trying to find something to put a little change in the pocket and help my family.”

Threshold Discarded

Fed policy makers put the focus on a broad range of economic and labor-market data last month after junking their strategy for guiding financial markets based on an unemployment threshold. Under its previous plan, the Fed pledged not to consider raising its benchmark interest rate, now zero to 0.25 percent, at least until the jobless rate fell to 6.5 percent.

In place of that quantitative guidance, the central bank adopted a more qualitative approach, saying on March 19 it “will take account of a wide range of information” in deciding when to raise rates.

Policy makers abandoned their jobless marker after unemployment fell faster than they had projected, hitting 6.7 percent in February. Much of the decline was due to Americans dropping out of the labor force, rather than more hiring. Yellen and most Fed policy makers reckon that the long-run sustainable jobless rate is between 5.2 percent and 5.6 percent.

Readings Improving

At a press conference after the March 18-19 policy meeting, Yellen said most of the labor-market statistics she looks at are getting better. “If you ask about my dashboard, the dial on virtually all of those things is moving in the direction of improvement,” she said.

Economists are expecting further gains with the release of jobs data on April 4. Payrolls are projected to have risen 200,000 in March, according to the median prediction of economists surveyed by Bloomberg. That compares with a monthly average of 194,250 last year and 161,800 between 2004 and 2007. Still, total payrolls remain 666,000 below the pre-recession peak.

March unemployment is forecast to come in at 6.6 percent, down from 6.7 percent in February and a 26-year high of 10 percent in October 2009. It averaged 5 percent from 2004 to 2007.

Slack Exaggerated

Long-term joblessness hasn’t shown nearly as much improvement. At 37 percent, the share of unemployed who have been out of work for 27 weeks or longer still is almost twice its pre-recession average. It reached 45.3 percent in April 2010, its highest level in government records dating to 1948.

This gauge is “probably the most controversial” on Yellen’s dashboard, said Dean Maki, chief U.S. economist for Barclays Plc. in New York. That’s because it may exaggerate the amount of excess manpower in the labor market.

When people are out of work for so long, they tend to become less active in seeking a job, and employers consider them less suitable for hiring, according to studies by economists at Princeton University, Columbia University and the Boston Fed.

That suggests that wages could pick up as the labor market improves, even if the share of long-term unemployment stays high, Maki said.

The participation rate also may be giving the Fed an inflated view of the number of potential workers available, said Girard, chief U.S. economist for RBS in Stamford, Connecticut. At 63 percent in February, it’s near an almost 36-year low of 62.8 percent in December and down from a 66.1 percent average in the four years ending in December 2007.

Rejoining Workforce

While some of the drop in participation comes from the retirement of Baby Boomers, a “significant amount” is due to labor market slack, Yellen said on March 31. “Some of these workers may rejoin the labor force in a stronger economy,” she said.

Girard disagreed. “In 2012 and 2013, the bulk of the labor force exits were retirements,” she said. “We’re highly skeptical that these individuals will be pulled back into the labor market even if economic conditions improve.”

“I’m not saying there is no slack” in the labor market, Girard added. “My concern is that some of these measures may not reflect the amount of slack the Fed thinks they do.”

March 18, 2014March 18, 2014

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.

“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!

February 24, 2014February 24, 2014

Warning: The US Economy Is Flying Blind…About To Crash

Over the last couple of years I have argued, sometimes passionately, that the Federal Reserve doesn’t really know what is going on within our own economy and our financial markets. Not only that, but I have also argued that they are a bunch of idiots and fools who believe that they can somehow control our financial markets.

If recently released transcripts, generated during the 2008 meltdown don’t prove my point of view without a shadow of a doubt, I don’t know what will. Here are just a few quick points from the said transcripts.

They didn’t even realize recession was happening until the 4th quarter of 2008. By that point the stock market has completed 80% of its down move. In fact, for most of 2008 they thought the recession “could be avoided”.

—-Hello???? Was anyone home??? Recession started in Q4 of 2007.

Bernanke talked about pent-up demand for housing as late as January 2008.
Bernanke was worried about inflation as late as January 2008.
Throughout Q1 of 2008 they have held a generally rosy view of the world and the US Economy

Here are the links to two great articles about the transcripts if you would like to learn more. Click Here and/or Click Here

The lesson here is twofold.

First, anyone who believes that the FED can either control, anticipate or predict financial markets and/or the economy is even a bigger fool. Neither Bernanke nor Yellen can predict the economy even if it hit them in the face with a brick. All they can do is look at past data and say “Oh, look, according to this data recession started in Q4 of 2007”. What a waste of time and money.

Second, they will always be behind the ball. They will always be a reactionary force as opposed to market makers. Take today’s environment for example. They are cutting QE and talking about raising the interest rates at exactly the wrong time. The damage from their crazy liquidity party has already been done. The worst thing they can do now is cut it. The faster they do it the faster the markets will collapse.

Why is any of this important?

Well, if you rely on FED to make money in the stock market and/or run your own business it becomes incredibly important. As such, no one should rely on any action by the FED as an investment indicator. It is as simple as that.

This brings us to financial markets and my premise that financial markets behave exactly as they should. Many people would argue that it was the FED’s actions that put the bottom in at the March of 2009 juncture, ensuring a subsequent and massive stock market rally.

WRONG.

Don’t confuse cause and effect. It was the market that made the FED’s look good and not the other way around. The market was structured to bottom on March 6th, 2009 at 6,469 and then have a subsequent 5-year market rally. It was the mid-cycle bottom (half point of bear market) and I predicted it as early as January of that year. I was 1 day and 100 points away. Close enough. I know I have shown this chart before, but let’s take another look.

If you perform the type of 3-dimensional analysis that I do you would know that the move between 2003 bottom and 2009 bottom would be IDENTICAL to the move between 1994 bottom and 2002 bottom. And so it was, exhibiting a variance of 22 3-dimensional units (equivalent to a few trading days or 100 points).

Any analyst working with this information would know that as soon as 2007 top was confirmed that the next move down would be exactly 8,130 3-dimensional units. Once the market developed further, the same analyst would be able to pin point the exact bottom with amazing precision and that is what I want you to understand without a shadow of a doubt. The stock market is not volatile or random, it is exact and precise.

Same thing applies to today’s market. In last week’s forecast I identified a turning point in February. While I am not yet at liberty to discuss this turning point (available to premium subscribers only), it clearly explains the market action we have witnessed over the last couple of days. By concentrating on mathematics and 3-dimensional analysis one can pick out turning points with a precision of a surgeon.

It is just my hope that the points above will force you to re-examine your reliance on the FED while eliminating your sense of false security.

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Warning: The US Economy Is Flying Blind…About To Crash Google