"Taper Tantrum" Talk Starts In Europe Two Days Into Q€
Tyler D.
03/11/2015
The ECB’s PSPP got off to a rather inauspicious start on Monday when the central bank admitted that the governing council “hasn’t agreed on how to treat losses” on bonds with negative yields. Clearly this is a problem given that: 1) quite a bit of core, shorter-dated paper already trades in negative territory, and 2) the purchases themselves will drive down yields across the board in what will quickly become a self-fulfilling prophecy. The only hint given as to how the ECB and NCBs intend to tackle the issue was this: “National central banks might try to avoid buying such securities for now.”
Then we learned that DOMO trades were going through in increments of between €15 and €50 million suggesting that a general lack of supply and/or liquidity may well stymy the entire enterprise. On that point, we said the following:
Needless to say, if the ECB is unable to meet its monthly asset purchase targets (which, at €15-50 million dribs and drabs, looks likely), expect chaos, as the market has spent the last several months front running PSPP and would be absolutely horrified if DOMO (Draghi-open-market-operations) has to be downsized.
On day two of PSPP the news continued to reinforce both the idea that “avoiding” negative-yielding assets will be quite difficult given the program’s scope and, relatedly, sourcing enough bonds to meet monthly targets is going to prove exceptionally difficult in some markets.
As for trying to avoid negative-yielding assets, it appears as though that effort lasted all of 24 hours. Here’s Bloomberg:
* Central banks said to buy German notes that have negative yields
* Central banks purchased 5Y securities, said three people with knowledge of the trades, who asked not to be identified because the transactions are confidential
In terms of sourcing enough purchasable bonds, Citi notes that if, in a pinch, the ECB expanded the issue cap all the way up to 50% (from 25%) in non-CAC bonds (NCBs can’t do this with paper that contains CAC clauses without obtaining a blocking minority), the central bank could add an additional €500 billion to the program:
However, Citi goes on to say that even with that option and even if the ECB adds other agencies to the list of eligible debt, core countries may still fall short of their targets resulting in “effective tapering”:
The third, and final concern on QE execution is that despite the agency and non-CAC bond options, some core NCBs may not be able to fulfill their QE quota. In that instance, we see the following evolution of events:
The core NCB quota is moved to the semi-core/periphery to prevent the effective tapering of QE. This is made more practical buy the localization of risks.
If that proves too controversial, perhaps with an eye on the German constitutional Court, then the ECB could move to cutting the depo rate further to maintain loose financial conditions and especially to prevent a taper tantram forcing EURUSD higher.
There are several interesting things to note there. First, only two days into DOMO and there’s already talk of a taper tantrum triggered by the core’s inability to source enough bonds to meet quotas (everyone saw this coming of course, including us). Second, as we noted last week, it does indeed look as though the ECB will have to cut rates further into negative territory — recall that JPMorgan thinks we’re headed all the way down to minus 3%.
The punchline to the whole thing is this: even though PSPP is so large that it literally cannot be implemented fully given supply constraints, in the new paranormal where QE programs are measured in terms of how large they are relative to a country’s GDP, the ECB’s effort here is just not enough to appease the market. From Citi:
...the size of the programme is small in terms of what is needed to achieve the stated objective of increasing medium-term inflation of “below but close to 2%”, especially when compared to the size of QE in other markets.
Lunes 16/03/15 Semana del Fed
Re: Lunes 16/03/15 Semana del Fed
por Fenix » Lun Mar 16, 2015 7:11 pm
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 16/03/15 Semana del Fed
por Fenix » Lun Mar 16, 2015 7:16 pm
Submitted by Tyler D.
03/11/2015
The Fed had multiple opportunities to let the air out of unsustainable asset bubbles by notching interest rates higher and tapering its asset purchases (QE).
The Federal Reserve blew it by not normalizing interest rates a long time ago. The consensus in financial circles is the exact opposite: the Fed has blown it in the past by nudging rates up too early.
Let's examine the idea that the Fed can't possibly go wrong keeping interest rates at near-zero for as long as it takes to create inflation (the Keynesian Cargo Cult's talisman) and push unemployment below 6% (mission accomplished).
One problem with this "keep interest rates low forever" strategy is that it leaves the Fed no room to lower rates in the next recession. By keeping interest rates at near-zero for six long years of "recovery," the Fed is now facing a global recession with no real policy option to lower rates.
The Fed blew it by waiting six long years to even discuss raising rates.
Let's consider the impact on the real economy of a 1% rise in the Fed funds rate. The move from 0% to 1% is not very large in terms of its impact on monthly payments for borrowers. Borrowers with poor credit are paying in excess of 15% right now on credit cards and subprime auto loans, and many student loans are in the 7%-8% range. A 1% increase isn't going to impact these borrowers much.
As for mortgages--if a buyer can't afford a 1% notch up in interest rates, he/she had no business taking the mortgage in the first place. If a borrower has to stretch to the maximum to qualify, they shouldn't be borrowing the money in the first place.
Those who plead for zero-interest rates forever are saying that the U.S. economy is so fragile that the slightest tick up in interest costs will collapse the entire "recovery." If the economy is that dependent on marginal borrowers, then the "recovery" is bogus: if "growth" is all based on extending more credit to marginal borrowers, it is an extremely fragile expansion that is doomed by the inevitability of marginal borrowers defaulting.
The Fed's "extend and pretend" has only increased the fragility of the economy and guaranteed a larger systemic crisis in the future. Zero interest rate policy (ZIRP) has only encouraged moral hazard and asset bubbles blown by soaring corporate debt and margin debt.
Another reason the consensus wants ZIRP Forever is to keep federal borrowing costs low, so the Treasury can borrow trillions of dollars at low rates of interest. If the costs of borrowing trillions more is low enough, there is no need for any politically painful debate about what the nation can afford: with nearly-free trillions, everything can be paid for with borrowed money.
What kinds of decisions are made when the federal credit card is unlimited? Poor decisions, of course--that's self-evident. No limits means no trade-offs or hard analysis of costs and benefits. This is a higher-order form of moral hazard, which means the consequences will not impact those taking the risks.
If you doubt this, give a teenager an unlimited credit card they don't have to pay and see how that works out.
A third reason the consensus wants ZIRP Forever is that higher rates will further strengthen the U.S. dollar as capital will flow to the safety and positive yield of U.S. bonds. In the consensus view, a rising U.S. dollar is anathema, as it means the U.S. loses the race to the bottom of currency devaluation.
But all those begging for a devalued currency forget that no nation ever debased itself to prosperity. Yes, there is a trade-off to a stronger currency: exports to other nations will become more expensive when priced in debased currencies. But exports are a relatively modest percentage of GDP, and the decline in exports will be offset to some degree by the gains in purchasing power, as imports will decline in price.
If history offers any lesson on strong currencies and race to the bottom devaluations of currency, it's that nations with strong currencies prosper in the long haul and those who attempt to live off cheaper exports decline over time.
The Fed also blew it by extending quantitative easing for almost six years, inflating asset bubbles that must now be deflated one way or another. Rather than let the stock and housing markets find their own levels and adjust to the realities of a post-bubble world, the Fed has done everything in its power to reflate assets bubbles, lest the bloated, corrupt banking sector suffer the losses it so richly deserves.
The consensus believes the magical-thinking fantasy that asset bubbles can remain inflated forever, if only the Fed keeps interest rates at zero forever and stands ready to buy trillions of dollars of bonds, mortgages and stocks at the first sign that the bubbles are in danger of popping. Is this realistic? is there even one example in all of human history of a credit-bubble expanding forever? Of course not, but since Wall Street and the entire financial industry is totally dependent on asset bubbles for its livelihood, realism will lose out to greed every time.
The Fed had multiple opportunities to let the air out of unsustainable asset bubbles by notching interest rates higher and tapering its asset purchases (QE). Instead, it waited until the next global recession is already starting to consider what should have been done long ago.
03/11/2015
The Fed had multiple opportunities to let the air out of unsustainable asset bubbles by notching interest rates higher and tapering its asset purchases (QE).
The Federal Reserve blew it by not normalizing interest rates a long time ago. The consensus in financial circles is the exact opposite: the Fed has blown it in the past by nudging rates up too early.
Let's examine the idea that the Fed can't possibly go wrong keeping interest rates at near-zero for as long as it takes to create inflation (the Keynesian Cargo Cult's talisman) and push unemployment below 6% (mission accomplished).
One problem with this "keep interest rates low forever" strategy is that it leaves the Fed no room to lower rates in the next recession. By keeping interest rates at near-zero for six long years of "recovery," the Fed is now facing a global recession with no real policy option to lower rates.
The Fed blew it by waiting six long years to even discuss raising rates.
Let's consider the impact on the real economy of a 1% rise in the Fed funds rate. The move from 0% to 1% is not very large in terms of its impact on monthly payments for borrowers. Borrowers with poor credit are paying in excess of 15% right now on credit cards and subprime auto loans, and many student loans are in the 7%-8% range. A 1% increase isn't going to impact these borrowers much.
As for mortgages--if a buyer can't afford a 1% notch up in interest rates, he/she had no business taking the mortgage in the first place. If a borrower has to stretch to the maximum to qualify, they shouldn't be borrowing the money in the first place.
Those who plead for zero-interest rates forever are saying that the U.S. economy is so fragile that the slightest tick up in interest costs will collapse the entire "recovery." If the economy is that dependent on marginal borrowers, then the "recovery" is bogus: if "growth" is all based on extending more credit to marginal borrowers, it is an extremely fragile expansion that is doomed by the inevitability of marginal borrowers defaulting.
The Fed's "extend and pretend" has only increased the fragility of the economy and guaranteed a larger systemic crisis in the future. Zero interest rate policy (ZIRP) has only encouraged moral hazard and asset bubbles blown by soaring corporate debt and margin debt.
Another reason the consensus wants ZIRP Forever is to keep federal borrowing costs low, so the Treasury can borrow trillions of dollars at low rates of interest. If the costs of borrowing trillions more is low enough, there is no need for any politically painful debate about what the nation can afford: with nearly-free trillions, everything can be paid for with borrowed money.
What kinds of decisions are made when the federal credit card is unlimited? Poor decisions, of course--that's self-evident. No limits means no trade-offs or hard analysis of costs and benefits. This is a higher-order form of moral hazard, which means the consequences will not impact those taking the risks.
If you doubt this, give a teenager an unlimited credit card they don't have to pay and see how that works out.
A third reason the consensus wants ZIRP Forever is that higher rates will further strengthen the U.S. dollar as capital will flow to the safety and positive yield of U.S. bonds. In the consensus view, a rising U.S. dollar is anathema, as it means the U.S. loses the race to the bottom of currency devaluation.
But all those begging for a devalued currency forget that no nation ever debased itself to prosperity. Yes, there is a trade-off to a stronger currency: exports to other nations will become more expensive when priced in debased currencies. But exports are a relatively modest percentage of GDP, and the decline in exports will be offset to some degree by the gains in purchasing power, as imports will decline in price.
If history offers any lesson on strong currencies and race to the bottom devaluations of currency, it's that nations with strong currencies prosper in the long haul and those who attempt to live off cheaper exports decline over time.
The Fed also blew it by extending quantitative easing for almost six years, inflating asset bubbles that must now be deflated one way or another. Rather than let the stock and housing markets find their own levels and adjust to the realities of a post-bubble world, the Fed has done everything in its power to reflate assets bubbles, lest the bloated, corrupt banking sector suffer the losses it so richly deserves.
The consensus believes the magical-thinking fantasy that asset bubbles can remain inflated forever, if only the Fed keeps interest rates at zero forever and stands ready to buy trillions of dollars of bonds, mortgages and stocks at the first sign that the bubbles are in danger of popping. Is this realistic? is there even one example in all of human history of a credit-bubble expanding forever? Of course not, but since Wall Street and the entire financial industry is totally dependent on asset bubbles for its livelihood, realism will lose out to greed every time.
The Fed had multiple opportunities to let the air out of unsustainable asset bubbles by notching interest rates higher and tapering its asset purchases (QE). Instead, it waited until the next global recession is already starting to consider what should have been done long ago.
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 16/03/15 Semana del Fed
por Fenix » Lun Mar 16, 2015 7:28 pm
Venezuela Begins Liquidating Its Gold
Submitted by Tyler D.
03/11/2015 - 10:07
In an attempt to secure some stability, i.e., funds, now that Venezuela is no longer able to tap Chinese bailout loans as last-recourse funding, Reuters reported that Venezuela's central bank is in talks with Wall Street banks to create a gold swap that would allow it to monetize some $1.5 billion of the metal held as international reserves, according to government sources familiar with the operation. Under the swap, the central bank would provide 1.4 million troy ounces in exchange for cash.
Wall Street Bonuses Rose 2% in 2014 To $172,860: 427% Increase In 20 Years
Submitted by Tyler D.
03/11/2015
Finally some good news for brokers of ultra-luxury Manhattan real estate. Following the recent freeze in the most expensive housing segment in NYC in which "deals slowed to a trickle" as a result of the soaring US Dollar, and the crack down on offshore illegal wealth, it appeared that the final housing bubble left in the US that has yet to pop, that which focuses on properties $5 million and higher, was on the edge. Its day or reckoning may be delayed, however, following news that the most traditional buyer of high-end Manhattan real estate, Wall Street bankers themselves, may be finally coming back following a 2% increase in Wall Street bonuses in 2014, which pushed the average bonus to $172,860.
IMF Approves $17.5 Billion Ukraine Bailout
Submitted by Tyler D.
03/11/2015 - 12:59
To summarize: Greek pensioners are now paying the IMF, which is paying Kiev, which is paying Gazprom, which is paying Putin.
Zombie Banks Finance Buybacks, Dividends With Preferreds They May Never Redeem
Tyler Durden's picture
Submitted by Tyler D.
03/11/2015
The idea of the “zombie bank” has become rather ubiquitous since 2008 and in a landscape characterized by both multi-billion dollar legal settlements stemming from crisis-era malfeasance (the public utility vs. bankruptcy trade-off) and hopelessly depressed NIM thanks to artificially suppressed rates, we’re not surprised that a bit of creativity is required to keep both regulators and shareholders pacified. As Reuters notes, one preferred (pardon the pun) route for banks of late has been a simple version of left-to-right pocket accounting:
Big U.S. banks, including JPMorgan Chase & Co (JPM.N) and Citigroup Inc(C.N), are expected to win Federal Reserve backing on Wednesday to buy back more shares and increase their dividends in the coming year, but the approvals may be as much about the institutions’ financial engineering as any improvement in their health.
Much of the money for buybacks and higher dividends is coming from the banks issuing securities known as preferred shares. These shares are a type of equity that pays regular, relatively high dividends. To investors they look a lot like bonds that pay interest. But for regulators, preferred shares serve as a cushion against any future losses, in part because they never have to be repaid.
Critics of the strategy question how sustainable it is, as banks essentially take money from one set of investors and give it to another, and at an added cost.
Issuing preferred shares to pay for common share dividends and buybacks is a symptom of a "zombie banking system," said veteran banking analyst David Hendler of independent research firm Viola Risk Advisors.
"Banks should be building capital from normal lending and trading profits," he added.
Yes, they probably should, but as we noted above, generating income from “normal lending” is a bit difficult given ZIRP-squeezed margins and with Volcker, the government is effectively looking to cut-off one of Wall Street’s most lucrative businesses, so what’s a TBTF firm to do? One solution is to take advantage of investors’ epic hunt for yield by simply issuing preferreds which has the dual benefit of shoring up capital cushions while simultaneously funding buybacks and dividends — even if it's fairly costly.
Here’s Reuters again:
Citigroup, for example, issued $3.7 billion of preferred shares in 2014 and has publicly disclosed plans to issue $4 billion of preferred shares this year and another $4 billion to $6 billion before 2019.
Veteran bank analyst Mike Mayo, who is at brokerage CLSA, estimates that the bank will ask to return roughly $7 billion of extra capital annually to shareholders in the coming year. “The preferred gives them an extra cushion” over minimum capital requirements to make the payouts, Mayo said.
Selling preferred shares to boost payouts to common shareholders can't go on forever without banks improving their results enough to boost their capital levels significantly.
Mayo expects that next year Citigroup will come up with additional excess capital from a planned sale of assets, including its OneMain personal lending unit.
JPMorgan issued nearly $9 billion of preferred shares this past year and other banks have said they expect to issue more. JPMorgan said in February that the sales will go toward satisfying pending requirements that big banks have enough capital to absorb losses in a financial crisis.
At least we know that Citi’s sale of OneMain to Springleaf will serve to make the bank better capitalized even as it creates a giant subprime consumer loan securitization machine. Perhaps the best part about the whole thing however is this:
Declared dividends for all of JPMorgan's preferreds amounted to $1.1 billion in 2014, compared with $6.1 billion in common dividends. For common shareholders, the preferred dividends were subtracted from the company's reported net income, leaving $20.6 billion for common equity and reducing earnings per share by about 30 cents, or 5 percent. That in itself can hold back a bank's share price.
That may be true, but as long as banks can offset the hit to their bottom line occasioned by paying preferred dividends by using cash from selling preferred shares to buy back common, all is well. What a truly virtuous circle.
Submitted by Tyler D.
03/11/2015 - 10:07
In an attempt to secure some stability, i.e., funds, now that Venezuela is no longer able to tap Chinese bailout loans as last-recourse funding, Reuters reported that Venezuela's central bank is in talks with Wall Street banks to create a gold swap that would allow it to monetize some $1.5 billion of the metal held as international reserves, according to government sources familiar with the operation. Under the swap, the central bank would provide 1.4 million troy ounces in exchange for cash.
Wall Street Bonuses Rose 2% in 2014 To $172,860: 427% Increase In 20 Years
Submitted by Tyler D.
03/11/2015
Finally some good news for brokers of ultra-luxury Manhattan real estate. Following the recent freeze in the most expensive housing segment in NYC in which "deals slowed to a trickle" as a result of the soaring US Dollar, and the crack down on offshore illegal wealth, it appeared that the final housing bubble left in the US that has yet to pop, that which focuses on properties $5 million and higher, was on the edge. Its day or reckoning may be delayed, however, following news that the most traditional buyer of high-end Manhattan real estate, Wall Street bankers themselves, may be finally coming back following a 2% increase in Wall Street bonuses in 2014, which pushed the average bonus to $172,860.
IMF Approves $17.5 Billion Ukraine Bailout
Submitted by Tyler D.
03/11/2015 - 12:59
To summarize: Greek pensioners are now paying the IMF, which is paying Kiev, which is paying Gazprom, which is paying Putin.
Zombie Banks Finance Buybacks, Dividends With Preferreds They May Never Redeem
Tyler Durden's picture
Submitted by Tyler D.
03/11/2015
The idea of the “zombie bank” has become rather ubiquitous since 2008 and in a landscape characterized by both multi-billion dollar legal settlements stemming from crisis-era malfeasance (the public utility vs. bankruptcy trade-off) and hopelessly depressed NIM thanks to artificially suppressed rates, we’re not surprised that a bit of creativity is required to keep both regulators and shareholders pacified. As Reuters notes, one preferred (pardon the pun) route for banks of late has been a simple version of left-to-right pocket accounting:
Big U.S. banks, including JPMorgan Chase & Co (JPM.N) and Citigroup Inc(C.N), are expected to win Federal Reserve backing on Wednesday to buy back more shares and increase their dividends in the coming year, but the approvals may be as much about the institutions’ financial engineering as any improvement in their health.
Much of the money for buybacks and higher dividends is coming from the banks issuing securities known as preferred shares. These shares are a type of equity that pays regular, relatively high dividends. To investors they look a lot like bonds that pay interest. But for regulators, preferred shares serve as a cushion against any future losses, in part because they never have to be repaid.
Critics of the strategy question how sustainable it is, as banks essentially take money from one set of investors and give it to another, and at an added cost.
Issuing preferred shares to pay for common share dividends and buybacks is a symptom of a "zombie banking system," said veteran banking analyst David Hendler of independent research firm Viola Risk Advisors.
"Banks should be building capital from normal lending and trading profits," he added.
Yes, they probably should, but as we noted above, generating income from “normal lending” is a bit difficult given ZIRP-squeezed margins and with Volcker, the government is effectively looking to cut-off one of Wall Street’s most lucrative businesses, so what’s a TBTF firm to do? One solution is to take advantage of investors’ epic hunt for yield by simply issuing preferreds which has the dual benefit of shoring up capital cushions while simultaneously funding buybacks and dividends — even if it's fairly costly.
Here’s Reuters again:
Citigroup, for example, issued $3.7 billion of preferred shares in 2014 and has publicly disclosed plans to issue $4 billion of preferred shares this year and another $4 billion to $6 billion before 2019.
Veteran bank analyst Mike Mayo, who is at brokerage CLSA, estimates that the bank will ask to return roughly $7 billion of extra capital annually to shareholders in the coming year. “The preferred gives them an extra cushion” over minimum capital requirements to make the payouts, Mayo said.
Selling preferred shares to boost payouts to common shareholders can't go on forever without banks improving their results enough to boost their capital levels significantly.
Mayo expects that next year Citigroup will come up with additional excess capital from a planned sale of assets, including its OneMain personal lending unit.
JPMorgan issued nearly $9 billion of preferred shares this past year and other banks have said they expect to issue more. JPMorgan said in February that the sales will go toward satisfying pending requirements that big banks have enough capital to absorb losses in a financial crisis.
At least we know that Citi’s sale of OneMain to Springleaf will serve to make the bank better capitalized even as it creates a giant subprime consumer loan securitization machine. Perhaps the best part about the whole thing however is this:
Declared dividends for all of JPMorgan's preferreds amounted to $1.1 billion in 2014, compared with $6.1 billion in common dividends. For common shareholders, the preferred dividends were subtracted from the company's reported net income, leaving $20.6 billion for common equity and reducing earnings per share by about 30 cents, or 5 percent. That in itself can hold back a bank's share price.
That may be true, but as long as banks can offset the hit to their bottom line occasioned by paying preferred dividends by using cash from selling preferred shares to buy back common, all is well. What a truly virtuous circle.
Última edición por Fenix el Lun Mar 16, 2015 7:33 pm, editado 1 vez en total
- Fenix
- Mensajes: 16334
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Re: Lunes 16/03/15 Semana del Fed
por Fenix » Lun Mar 16, 2015 7:31 pm
Goldman's Cohn Slams Fed's Fisher: A Soaring Dollar Is Not Positive For US Jobs, Companies
Tyler D.
03/11/2015
Who knows what to believe? Aside, that is, from the fact that the world appears to believe that it's better to have a weaker currency than stronger currency.. apart, that is, from Larry Kudlow and The Fed's Richard Fisher...
As Reuters reports,
Sharp gains in the U.S. dollar are good for the U.S. labor market, a top Federal Reserve official said on Friday, downplaying a crescendo of complaints from top executives over the dent to their profits.
"CEOs that have international operations complain about it," Dallas Fed President Richard Fisher told Reuters in an interview. "I hear from every one of them - it offsets their powerful earnings here domestically."
Fisher takes those complaints with a grain of salt.
"It brings to my mind the vision of Edward Munch’s painting 'The Scream'," he said, adding, "It's not the end of the world."
Fisher, who plans to retire from his post in March, holds views that are often far from those at the Fed's core. Still, the former hedge-fund manager says he feels his views are heard at the policy-setting table.
"The more income and investment flows we get, the better it is for our companies big and small to go out and hire American workers," Fisher said. "And it does help on the consumption side, if, for example, oil is denominated in dollars, it just helps us have cheaper goods."
While a stronger dollar does hurt net exports, he said, it puts less of a damper on U.S. job creation than it may have in the past because the U.S. economy has become less export driven.
* * *
And then there's Goldman's President Gary Cohn...
"the effects of the soaring dollar are just starting
to be felt; for US exports, manufacturing, and jobs - it is not going to
be positive."
Once again The Fed remains in a world of its own. Or perhaps this explains it...
"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"
Tyler D.
03/11/2015
Who knows what to believe? Aside, that is, from the fact that the world appears to believe that it's better to have a weaker currency than stronger currency.. apart, that is, from Larry Kudlow and The Fed's Richard Fisher...
As Reuters reports,
Sharp gains in the U.S. dollar are good for the U.S. labor market, a top Federal Reserve official said on Friday, downplaying a crescendo of complaints from top executives over the dent to their profits.
"CEOs that have international operations complain about it," Dallas Fed President Richard Fisher told Reuters in an interview. "I hear from every one of them - it offsets their powerful earnings here domestically."
Fisher takes those complaints with a grain of salt.
"It brings to my mind the vision of Edward Munch’s painting 'The Scream'," he said, adding, "It's not the end of the world."
Fisher, who plans to retire from his post in March, holds views that are often far from those at the Fed's core. Still, the former hedge-fund manager says he feels his views are heard at the policy-setting table.
"The more income and investment flows we get, the better it is for our companies big and small to go out and hire American workers," Fisher said. "And it does help on the consumption side, if, for example, oil is denominated in dollars, it just helps us have cheaper goods."
While a stronger dollar does hurt net exports, he said, it puts less of a damper on U.S. job creation than it may have in the past because the U.S. economy has become less export driven.
* * *
And then there's Goldman's President Gary Cohn...
"the effects of the soaring dollar are just starting
to be felt; for US exports, manufacturing, and jobs - it is not going to
be positive."
Once again The Fed remains in a world of its own. Or perhaps this explains it...
"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 16/03/15 Semana del Fed
por Fenix » Lun Mar 16, 2015 7:47 pm
7 Signs That A Stock Market Peak Is Happening Right Now
Tyler D.
03/11/2015
Is this the end of the last great run for the U.S. stock market? Are we witnessing classic “peaking behavior” that is similar to what occurred just before other major stock market crashes? Throughout 2014 and for the early stages of 2015, stocks have been on quite a tear. Even though the overall U.S. economy continues to be deeply troubled, we have seen the Dow, the S&P 500 and the Nasdaq set record after record. But no bull market lasts forever – particularly one that has no relation to economic reality whatsoever.
This false bubble of financial prosperity has been enjoyable, and even I wish that it could last much longer. But there comes a time when we all must face reality, and the cold, hard facts are telling us that this party is about to end. The following are 7 signs that a stock market peak is happening right now…
#1 Just before a stock market crash, price/earnings ratios tend to spike, and that is precisely what we are witnessing. The following commentary and chart come from Lance Roberts…
The chart below shows Dr. Robert Shiller’s cyclically adjusted P/E ratio. The problem is that current valuations only appear cheap when compared to the peak in 2000. In order to put valuations into perspective, I have capped P/E’s at 30x trailing earnings. The dashed orange line measures 23x earnings which has been the level where secular bull markets have previously ended. I have noted the peak valuations in periods that have exceeded that 30x earnings.
markets are cheap - StreetTalkLive
At 27.85x current earning the markets are currently at valuation levels where previous bull markets have ended rather than continued. Furthermore, the markets have exceeded the pre-financial crisis peak of 27.65x earnings. If earnings continue to deteriorate, market valuations could rise rapidly even if prices remain stagnant.
#2 The average bull market lasts for approximately 3.8 years. The current bull market has already lasted for six years.
#3 The median total gain during a bull market is 101.5 percent. For this bull market, it has been 213 percent.
#4 Usually before a stock market crash we see a divergence between the relative strength index and the stock market itself. This happened prior to the bursting of the dotcom bubble, it happened prior to the crash of 2008, and it is happening again right now…
The first technical warning sign that we should heed is marked by a significant divergence between the relative strength index (RSI) and the market itself. This is noted by a declining pattern of lower highs in the RSI as stocks continue to make higher highs, a sign that the market is “topping out”. In the late ‘90s this divergence persisted for many years as the tech bubble reached epic valuation levels. In 2007 this divergence lasted over a much shorter period (6 months) before the market finally peaked and succumbed to massive selling. With last month’s strong rally to new records, we now have a confirmed divergence between the long-term relative strength index and the market’s price action.
#5 In the past, peaks in margin debt have been very closely associated with stock market peaks. The following chart comes from Doug Short, and I included it in a previous article…
Margin Debt
#6 As I have discussed previously, we usually witness a spike in 10 year Treasury yields just about the time that the stock market is peaking right before a crash.
Well, according to Business Insider, we just saw the largest 5 week rate rally in two decades…
Lots of guys and gals went home this past weekend thinking about the implications of the recent rise in the 10-year Treasury bond’s yield.
Chris Kimble notes it was the biggest 5-week rate rally in twenty years!
#7 A lot of momentum indicators seem to be telling us that we are rapidly approaching a turning point for stocks. For example, James Stack, the editor of InvesTech Research, says that the Coppock Guide is warning us of “an impending bear market on the not-too-distant horizon”…
A momentum indicator dubbed the Coppock Guide, which serves as “a barometer of the market’s emotional state,” has also peaked, Stack says. The indicator, which, “tracks the ebb and flow of equity markets from one psychological extreme to another,” is also flashing a warning flag.
The Coppock Guide’s chart pattern is flashing a “double top,” which suggests that “psychological excesses are present” and that “secondary momentum has peaked” in this bull market, according to Stack.
“All of this is just another reason for concern about an impending bear market on the not-too-distant horizon,” Stack writes.
So if we are to see a stock market crash soon, when will it happen?
Well, the truth is that nobody knows for certain.
It could happen this week, or it could be six months from now.
In fact, a whole lot of people are starting to point to the second half of 2015 as a danger zone. For example, just consider the words of David Morgan…
“Momentum is one indicator and the money supply. Also, when I made my forecast, there is a big seasonality, and part of it is strict analytical detail and part of it is being in this market for 40 years. I got a pretty good idea of what is going on out there and the feedback I get. . . . I’m in Europe, I’m in Asia, I’m in South America, I’m in Mexico, I’m in Canada; and so, I get a global feel, if you will, for what people are really thinking and really dealing with. It’s like a barometer reading, and I feel there are more and more tensions all the time and less and less solutions. It’s a fundamental take on how fed up people are on a global basis. Based on that, it seems to me as I said in the January issue of the Morgan Report, September is going to be the point where people have had it.”
Time will tell if Morgan was right.
But without a doubt, lots of economic warning signs are starting to pop up.
One that is particularly troubling is the decline in new orders for consumer goods. This is something that Charles Hugh-Smith pointed out in one of his recent articles…
The financial news is astonishingly rosy: record trade surpluses in China, positive surprises in Europe, the best run of new jobs added to the U.S. economy since the go-go 1990s, and the gift that keeps on giving to consumers everywhere, low oil prices.
So if everything is so fantastic, why are new orders cratering? New orders are a snapshot of future demand, as opposed to current retail sales or orders that have been delivered.
Posted below is a chart that he included with his recent article. As you can see, the only time things have been worse in recent decades was during the depths of the last financial crisis…
Charles Hugh-Smith New Orders
To me, it very much appears that time is running out for this bubble of false prosperity that we have been living in.
Tyler D.
03/11/2015
Is this the end of the last great run for the U.S. stock market? Are we witnessing classic “peaking behavior” that is similar to what occurred just before other major stock market crashes? Throughout 2014 and for the early stages of 2015, stocks have been on quite a tear. Even though the overall U.S. economy continues to be deeply troubled, we have seen the Dow, the S&P 500 and the Nasdaq set record after record. But no bull market lasts forever – particularly one that has no relation to economic reality whatsoever.
This false bubble of financial prosperity has been enjoyable, and even I wish that it could last much longer. But there comes a time when we all must face reality, and the cold, hard facts are telling us that this party is about to end. The following are 7 signs that a stock market peak is happening right now…
#1 Just before a stock market crash, price/earnings ratios tend to spike, and that is precisely what we are witnessing. The following commentary and chart come from Lance Roberts…
The chart below shows Dr. Robert Shiller’s cyclically adjusted P/E ratio. The problem is that current valuations only appear cheap when compared to the peak in 2000. In order to put valuations into perspective, I have capped P/E’s at 30x trailing earnings. The dashed orange line measures 23x earnings which has been the level where secular bull markets have previously ended. I have noted the peak valuations in periods that have exceeded that 30x earnings.
markets are cheap - StreetTalkLive
At 27.85x current earning the markets are currently at valuation levels where previous bull markets have ended rather than continued. Furthermore, the markets have exceeded the pre-financial crisis peak of 27.65x earnings. If earnings continue to deteriorate, market valuations could rise rapidly even if prices remain stagnant.
#2 The average bull market lasts for approximately 3.8 years. The current bull market has already lasted for six years.
#3 The median total gain during a bull market is 101.5 percent. For this bull market, it has been 213 percent.
#4 Usually before a stock market crash we see a divergence between the relative strength index and the stock market itself. This happened prior to the bursting of the dotcom bubble, it happened prior to the crash of 2008, and it is happening again right now…
The first technical warning sign that we should heed is marked by a significant divergence between the relative strength index (RSI) and the market itself. This is noted by a declining pattern of lower highs in the RSI as stocks continue to make higher highs, a sign that the market is “topping out”. In the late ‘90s this divergence persisted for many years as the tech bubble reached epic valuation levels. In 2007 this divergence lasted over a much shorter period (6 months) before the market finally peaked and succumbed to massive selling. With last month’s strong rally to new records, we now have a confirmed divergence between the long-term relative strength index and the market’s price action.
#5 In the past, peaks in margin debt have been very closely associated with stock market peaks. The following chart comes from Doug Short, and I included it in a previous article…
Margin Debt
#6 As I have discussed previously, we usually witness a spike in 10 year Treasury yields just about the time that the stock market is peaking right before a crash.
Well, according to Business Insider, we just saw the largest 5 week rate rally in two decades…
Lots of guys and gals went home this past weekend thinking about the implications of the recent rise in the 10-year Treasury bond’s yield.
Chris Kimble notes it was the biggest 5-week rate rally in twenty years!
#7 A lot of momentum indicators seem to be telling us that we are rapidly approaching a turning point for stocks. For example, James Stack, the editor of InvesTech Research, says that the Coppock Guide is warning us of “an impending bear market on the not-too-distant horizon”…
A momentum indicator dubbed the Coppock Guide, which serves as “a barometer of the market’s emotional state,” has also peaked, Stack says. The indicator, which, “tracks the ebb and flow of equity markets from one psychological extreme to another,” is also flashing a warning flag.
The Coppock Guide’s chart pattern is flashing a “double top,” which suggests that “psychological excesses are present” and that “secondary momentum has peaked” in this bull market, according to Stack.
“All of this is just another reason for concern about an impending bear market on the not-too-distant horizon,” Stack writes.
So if we are to see a stock market crash soon, when will it happen?
Well, the truth is that nobody knows for certain.
It could happen this week, or it could be six months from now.
In fact, a whole lot of people are starting to point to the second half of 2015 as a danger zone. For example, just consider the words of David Morgan…
“Momentum is one indicator and the money supply. Also, when I made my forecast, there is a big seasonality, and part of it is strict analytical detail and part of it is being in this market for 40 years. I got a pretty good idea of what is going on out there and the feedback I get. . . . I’m in Europe, I’m in Asia, I’m in South America, I’m in Mexico, I’m in Canada; and so, I get a global feel, if you will, for what people are really thinking and really dealing with. It’s like a barometer reading, and I feel there are more and more tensions all the time and less and less solutions. It’s a fundamental take on how fed up people are on a global basis. Based on that, it seems to me as I said in the January issue of the Morgan Report, September is going to be the point where people have had it.”
Time will tell if Morgan was right.
But without a doubt, lots of economic warning signs are starting to pop up.
One that is particularly troubling is the decline in new orders for consumer goods. This is something that Charles Hugh-Smith pointed out in one of his recent articles…
The financial news is astonishingly rosy: record trade surpluses in China, positive surprises in Europe, the best run of new jobs added to the U.S. economy since the go-go 1990s, and the gift that keeps on giving to consumers everywhere, low oil prices.
So if everything is so fantastic, why are new orders cratering? New orders are a snapshot of future demand, as opposed to current retail sales or orders that have been delivered.
Posted below is a chart that he included with his recent article. As you can see, the only time things have been worse in recent decades was during the depths of the last financial crisis…
Charles Hugh-Smith New Orders
To me, it very much appears that time is running out for this bubble of false prosperity that we have been living in.
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 16/03/15 Semana del Fed
por Fenix » Lun Mar 16, 2015 7:51 pm
Which States Have The Most Student Debt
Tyler D.
03/11/2015
Just under two years ago, we presented a full breakdown of the student loan bubble, broken down by state, in which among other things, we found that Washington D.C. stuck out like a sore thumb as the "students" residing in it had on average just under $40,000 in student loans.
Yesterday, as part of Obama's most reent push to change the bankruptcy law and promote legislation that facilitates the reduction or outright forgiveness of student debt, the White House provided a full state-by-state breakdown of where the 43.2 million borrowers on the hook for some $1.135 trillion in student loans.
But before we present the results, it will likely come as no surprise to anyone that once again, it is the students in the nation's capital, the District of Columbia, where the debt burden is once again heaviest: As Bloomberg recaps, "at an average of $40,855 per borrower, the student loans of debtors in the nation's capital are 140 percent higher than the national average of $28,400, and they exceed by more than $10,000 what borrowers owe in Geor gia, the state with the second-highest student debt level."
Here is state breakdown, ranked by highest to lowest average per student debt. One wonders how much clearer the unprecedented student debt fraud taking place in D.C. has to be before someone actually investigates.
Some more details on the 10 most troubled states, courtesy of Bloomberg:
Washington, D.C.
* Average student debt load per person: $40,855
* Number of borrowers: 140,000
* Student loan default rate: 11.4 percent
* Median household income: $61,365
Geo rgia
* Average student debt load per person: $30,443
* Number of borrowers: 1,454,000
* Student loan default rate: 14.5 percent
* Median household income: $47,958
Maryland
* Average student debt load per person: $30,064
* Number of borrowers: 829,000
* Student loan default rate: 11.2 percent
* Median household income: $69,826
Virginia
* Average student debt load per person: $28,467
* Number of borrowers: 1,058,000
* Student loan default rate: 10.0 percent
* Median household income: $66,015
South Carolina
* Average student debt load per person: $28,271
* Number of borrowers: 649,000
* Student loan default rate: 13.7 percent
* Median household income: $43,437
Florida
* Average student debt load per person: $27,907
* Number of borrowers: 2,457,000
* Student loan default rate: 15.4 percent
* Median household income: $47,114
Vermont
* Average student debt load per person: $27,637
* Number of borrowers: 96,000
* Student loan default rate: 8.6 percent
* Median household income: $54,982
Alabama
* Average student debt load per person: $27,591
* Number of borrowers: 591,000
* Student loan default rate: 14.2 percent
* Median household income: $43,196
Colorado
* Average student debt load per person: $27,562
* Number of borrowers: 793,000
* Student loan default rate: 15.3 percent
* Median household income: $60,727
New York
* Average student debt load per person: $27,478
* Number of borrowers: 2,821,000
* Student loan default rate: 10.1 percent
* Median household income: $51,554
That's the breakdown by most debt per student. Additionally, below we show another perhaps just as interesting series, one showing the total number of student borrowers by state. As the chart below shows, we wish student debt collectors the best of luck in the states of California, Texas, New York, Florida, and Pennsylvania.
Tyler D.
03/11/2015
Just under two years ago, we presented a full breakdown of the student loan bubble, broken down by state, in which among other things, we found that Washington D.C. stuck out like a sore thumb as the "students" residing in it had on average just under $40,000 in student loans.
Yesterday, as part of Obama's most reent push to change the bankruptcy law and promote legislation that facilitates the reduction or outright forgiveness of student debt, the White House provided a full state-by-state breakdown of where the 43.2 million borrowers on the hook for some $1.135 trillion in student loans.
But before we present the results, it will likely come as no surprise to anyone that once again, it is the students in the nation's capital, the District of Columbia, where the debt burden is once again heaviest: As Bloomberg recaps, "at an average of $40,855 per borrower, the student loans of debtors in the nation's capital are 140 percent higher than the national average of $28,400, and they exceed by more than $10,000 what borrowers owe in Geor gia, the state with the second-highest student debt level."
Here is state breakdown, ranked by highest to lowest average per student debt. One wonders how much clearer the unprecedented student debt fraud taking place in D.C. has to be before someone actually investigates.
Some more details on the 10 most troubled states, courtesy of Bloomberg:
Washington, D.C.
* Average student debt load per person: $40,855
* Number of borrowers: 140,000
* Student loan default rate: 11.4 percent
* Median household income: $61,365
Geo rgia
* Average student debt load per person: $30,443
* Number of borrowers: 1,454,000
* Student loan default rate: 14.5 percent
* Median household income: $47,958
Maryland
* Average student debt load per person: $30,064
* Number of borrowers: 829,000
* Student loan default rate: 11.2 percent
* Median household income: $69,826
Virginia
* Average student debt load per person: $28,467
* Number of borrowers: 1,058,000
* Student loan default rate: 10.0 percent
* Median household income: $66,015
South Carolina
* Average student debt load per person: $28,271
* Number of borrowers: 649,000
* Student loan default rate: 13.7 percent
* Median household income: $43,437
Florida
* Average student debt load per person: $27,907
* Number of borrowers: 2,457,000
* Student loan default rate: 15.4 percent
* Median household income: $47,114
Vermont
* Average student debt load per person: $27,637
* Number of borrowers: 96,000
* Student loan default rate: 8.6 percent
* Median household income: $54,982
Alabama
* Average student debt load per person: $27,591
* Number of borrowers: 591,000
* Student loan default rate: 14.2 percent
* Median household income: $43,196
Colorado
* Average student debt load per person: $27,562
* Number of borrowers: 793,000
* Student loan default rate: 15.3 percent
* Median household income: $60,727
New York
* Average student debt load per person: $27,478
* Number of borrowers: 2,821,000
* Student loan default rate: 10.1 percent
* Median household income: $51,554
That's the breakdown by most debt per student. Additionally, below we show another perhaps just as interesting series, one showing the total number of student borrowers by state. As the chart below shows, we wish student debt collectors the best of luck in the states of California, Texas, New York, Florida, and Pennsylvania.
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 16/03/15 Semana del Fed
por Fenix » Lun Mar 16, 2015 8:02 pm
Beijing, You Have A Big Problem - In Ten Charts
Tyler D.
03/11/2015
Back in September, when we observed that the "Chinese Commodity Crash Continues", we remarked that a full-blown deflationary episode is upon China as manifested by tumbling commodity prices (because with fixed investment accounting for well over 50% of Chinese GDP, the marginal price of the commodities that are used in capital investment tell us all we need to know about the true state of the Chinese economy), which would likely lead to a ripple effect on not only the prices of China's most demanded commodities, but on every hard asset around the globe.
With oil plunging roughly 50% since then, this modest forecast, which was obvious to anyone who didn't have voluntary blinders before their eyes, has now come true.
So where is China now?
Well, as we showed last Friday merely when looking at the recent dramatic capital outflows out of China driven to a great extend by the relentless surge in the dollar, a "QE In China Now Appears Inevitable." But it is not just rate differentials and capital flows that confirm that China's economy may be headed for a mini (in the words of Deutsche Bank) or a full blown hard-landing.
One thing that is far more disturbing than China's inability to create shadow debt at its historic pace (as a result of an unprecedented accumulation in non-performing loans) which to many is the primary culprit for the ongoing deterioration in China's outright economic growth, goalseeked as it may be by the Beijing politburo, was a statement by the Minister of Human Resources and Social Security Yin Weimin, reported by China Radio International, which paints a more dire picture for the world's largest (?) economy.
From CRI:
A top official says the Chinese government's employment goals will be difficult to meet because of the country's economic slowdown. Yin Weimin is the Minister of Human Resources and Social Security.
"I think we need to work hard to achieve the target of creating over 10 million jobs, as cited in Premier Li Keqiang's government work report. About 15 million young students need to find jobs this year. Half of them are college graduates, and the rest are those graduating from vocational, technical, or middle schools, as well as surplus labor force in the rural areas seeking employment in towns and cities."
The minister has also stated that the government will gradually raise the official retirement age, which is as low as 50 for some female workers, but stressed that any policy changes will be phased in over five years. As for China's state pension, Yin says finances are not dire, for the moment, but warned about challenges ahead.
"The pension fund faces tremendous pressure in terms of breaking even in the future. The balance not only involves some system factors like salary level but also factors beyond the system. For example, the aging population, urbanization, and economic development. And aging has a huge influence on the fund balance." By 2050, the number of Chinese over the age of 60 will rise to 39 percent of the population, from 15 percent now.
This is about as close to gloom and doom that China will ever come.
But one doesn't even have to dig hard to find proof just how bad the situation in China has become now that the credit creation machinery is sputtering and the government has to come outright and deny rumors of QE:
* CHINA MOF OFFICIAL SAYS NO SUCH THING AS CHINA QE: SEC. JOURNAL
We'll see about that in 6-12 months, but for now here is a quick and dirty visual summary why Beijing, you now have a very big problem:
First, the one everyone knows about: GDP.
Of course, GDP in China is whatever the Beijing politicians say it is (very much like in the US), so we dig deeper.
First, Consumer Sentiment:
Perhaps driven by, or resulting in, a collapse in retail sales:
... as well as stagnant and declining auto sales (watch out GM).
But it's not just the consumer though. The very heart of China's capital intensive economy - fixed asset investment - is now in V-Fib.
The chart above explains why demand for global commodities will continue to decline for the foreseeable future. The chart below, on the other hand, confirms Yin Weimin worries about a labor slow down: with Industrial Production slowing, there will be far less end-demand for manufacturing production and labor.
And all this leading us to the most important chart of all: home prices in China, which are crashing...
... at a pace faster than in what happened to US housing in the immediate aftermath of the Lehman collapse!
And the reason why this is such a problem for China is that unlike the US where the bulk of household wealth is in financial assets (i.e., the market), in China it is the reverse: nearly three quarters of all household assets are in real estate: real estate which is deflating, if not crashing, at an unprecedented pace.
Finally, here is a chart which leaves even us speechless. If indeed Chinese rail freight is indicative of underlying economic trends, then the hard landing is already here.
Tyler D.
03/11/2015
Back in September, when we observed that the "Chinese Commodity Crash Continues", we remarked that a full-blown deflationary episode is upon China as manifested by tumbling commodity prices (because with fixed investment accounting for well over 50% of Chinese GDP, the marginal price of the commodities that are used in capital investment tell us all we need to know about the true state of the Chinese economy), which would likely lead to a ripple effect on not only the prices of China's most demanded commodities, but on every hard asset around the globe.
With oil plunging roughly 50% since then, this modest forecast, which was obvious to anyone who didn't have voluntary blinders before their eyes, has now come true.
So where is China now?
Well, as we showed last Friday merely when looking at the recent dramatic capital outflows out of China driven to a great extend by the relentless surge in the dollar, a "QE In China Now Appears Inevitable." But it is not just rate differentials and capital flows that confirm that China's economy may be headed for a mini (in the words of Deutsche Bank) or a full blown hard-landing.
One thing that is far more disturbing than China's inability to create shadow debt at its historic pace (as a result of an unprecedented accumulation in non-performing loans) which to many is the primary culprit for the ongoing deterioration in China's outright economic growth, goalseeked as it may be by the Beijing politburo, was a statement by the Minister of Human Resources and Social Security Yin Weimin, reported by China Radio International, which paints a more dire picture for the world's largest (?) economy.
From CRI:
A top official says the Chinese government's employment goals will be difficult to meet because of the country's economic slowdown. Yin Weimin is the Minister of Human Resources and Social Security.
"I think we need to work hard to achieve the target of creating over 10 million jobs, as cited in Premier Li Keqiang's government work report. About 15 million young students need to find jobs this year. Half of them are college graduates, and the rest are those graduating from vocational, technical, or middle schools, as well as surplus labor force in the rural areas seeking employment in towns and cities."
The minister has also stated that the government will gradually raise the official retirement age, which is as low as 50 for some female workers, but stressed that any policy changes will be phased in over five years. As for China's state pension, Yin says finances are not dire, for the moment, but warned about challenges ahead.
"The pension fund faces tremendous pressure in terms of breaking even in the future. The balance not only involves some system factors like salary level but also factors beyond the system. For example, the aging population, urbanization, and economic development. And aging has a huge influence on the fund balance." By 2050, the number of Chinese over the age of 60 will rise to 39 percent of the population, from 15 percent now.
This is about as close to gloom and doom that China will ever come.
But one doesn't even have to dig hard to find proof just how bad the situation in China has become now that the credit creation machinery is sputtering and the government has to come outright and deny rumors of QE:
* CHINA MOF OFFICIAL SAYS NO SUCH THING AS CHINA QE: SEC. JOURNAL
We'll see about that in 6-12 months, but for now here is a quick and dirty visual summary why Beijing, you now have a very big problem:
First, the one everyone knows about: GDP.
Of course, GDP in China is whatever the Beijing politicians say it is (very much like in the US), so we dig deeper.
First, Consumer Sentiment:
Perhaps driven by, or resulting in, a collapse in retail sales:
... as well as stagnant and declining auto sales (watch out GM).
But it's not just the consumer though. The very heart of China's capital intensive economy - fixed asset investment - is now in V-Fib.
The chart above explains why demand for global commodities will continue to decline for the foreseeable future. The chart below, on the other hand, confirms Yin Weimin worries about a labor slow down: with Industrial Production slowing, there will be far less end-demand for manufacturing production and labor.
And all this leading us to the most important chart of all: home prices in China, which are crashing...
... at a pace faster than in what happened to US housing in the immediate aftermath of the Lehman collapse!
And the reason why this is such a problem for China is that unlike the US where the bulk of household wealth is in financial assets (i.e., the market), in China it is the reverse: nearly three quarters of all household assets are in real estate: real estate which is deflating, if not crashing, at an unprecedented pace.
Finally, here is a chart which leaves even us speechless. If indeed Chinese rail freight is indicative of underlying economic trends, then the hard landing is already here.
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 16/03/15 Semana del Fed
por Fenix » Lun Mar 16, 2015 8:10 pm
This Is What A World Addicted To Debt Looks Like
Tyler D.
03/11/2015 18:00
As we spelled out explicitly and succinctly late last month, there is one overriding and extremely simple reason why seemingly every central bank in the developed world is bound and determined to move heaven and earth in the pursuit of generating a “healthy” level of inflation. With 9 countries sitting on debt-to-GDP ratios of 300%+, it’s either inflate the debt away or be crushed under the sheer weight of it.
Below is a map showing just where all of the red ink is concentrated and as The Telegraph notes, “not one developed economy (and only five emerging markets) has managed to reduce debt-to-GDP ratios which include both household and government debt. When taken together, this total debt mountain has grown by $57 trillion since 2007, far outpacing global growth.”
Click image for interactive version
More from The Telegraph:
This explosion in public debt levels has come about as countries have been unable to "inflate away" their liabilities. Instead, a global deflationary spiral has amplified the amount of countries owe and the interest they pay to service these debts.
By and large, the story of the world economy has been one in which emerging markets have loaded on debt, while the developed world has struggled to reduce the burdens it amassed in the wake of banking bail-outs and years of stagnant economic growth.
... and here's what Europe would look like if country size approximated debt loads...
Plunge Protection Exposed: Bank Of Japan Stepped In A Stunning 143 Times To Buy Stocks, Prevent Drop
Tyler D.
03/11/2015
Since 2010, The Bank of Japan has 'openly' - no conspiracy theory here - been a buyer of Japanese stock ETFs. Their bravado increased as the years passed and Abe pressured them from their independence to 'show' that his policies were working to the point that in September 2014, The BoJ bought a record amount of Japanese stock ETFs taking its holdings to over 1.5% of the entire market cap, surpassing Nippon Life as the largest individual holder of Japanese stocks. However, as WSJ reports, The BoJ has now gone full intervention-tard - buying Japanese stocks on 76% of the days when the market opened lower.
As The Wall Street Journal reports,
The Bank of Japan’s aggressive purchasing of stock funds has helped Japanese shares climb to multiyear highs in recent months. But some within the central bank are growing uncomfortable about the fast-paced rally and the bank’s own role in fueling it.
Since Gov. Haruhiko Kuroda took office in March 2013 and introduced monetary easing of what he called a “different dimension,” the central bank has sharply increased its buying of baskets of stocks known as exchange-traded funds. By directly underpinning the market, officials have tried to encourage private investors to follow suit and put more money in stocks in the hope of stimulating the economy and increasing inflation.
During the past two years, the central bank entered the stock market roughly once every three days, picking up a total of ¥2.8 trillion ($23 billion) of ETFs that track Japan’s major stock indexes, according to Bank of Japan records. That distinguishes it from the U.S. Federal Reserve and European Central Bank, both of which have bought bonds to pump up the economy but haven’t directly bought stocks.
Analysts say the bank’s action has been a significant driver of Japan’s stock-market rally in recent months, combined with hefty purchases by the $1.1 trillion Government Pension Investment Fund. Their buying has often countered selling pressure from individuals in the market and made up for a weaker appetite among foreign investors.
The central bank has stepped in mostly when market sentiment was weak. Three-quarters of the central bank’s buying occurred on days when the benchmark Topix index opened lower, according to a Wall Street Journal analysis of BOJ data.
So much for independence...
BOJ officials used to be cautious about purchasing ETFs, worried that it could distort market activities and put the central bank’s own financial health at risk. But under pressure from politicians following the global financial crisis, the bank changed its stance in late 2010.
“We led the cows to water, but they didn’t drink it, even though we told them it tasted good,” Miyako Suda, who was a board member then, wrote in a 2014 book discussing monetary easing at that time. “So we thought we should drink it ourselves, showing them it was tasty.”
What a joke!!
Tyler D.
03/11/2015 18:00
As we spelled out explicitly and succinctly late last month, there is one overriding and extremely simple reason why seemingly every central bank in the developed world is bound and determined to move heaven and earth in the pursuit of generating a “healthy” level of inflation. With 9 countries sitting on debt-to-GDP ratios of 300%+, it’s either inflate the debt away or be crushed under the sheer weight of it.
Below is a map showing just where all of the red ink is concentrated and as The Telegraph notes, “not one developed economy (and only five emerging markets) has managed to reduce debt-to-GDP ratios which include both household and government debt. When taken together, this total debt mountain has grown by $57 trillion since 2007, far outpacing global growth.”
Click image for interactive version
More from The Telegraph:
This explosion in public debt levels has come about as countries have been unable to "inflate away" their liabilities. Instead, a global deflationary spiral has amplified the amount of countries owe and the interest they pay to service these debts.
By and large, the story of the world economy has been one in which emerging markets have loaded on debt, while the developed world has struggled to reduce the burdens it amassed in the wake of banking bail-outs and years of stagnant economic growth.
... and here's what Europe would look like if country size approximated debt loads...
Plunge Protection Exposed: Bank Of Japan Stepped In A Stunning 143 Times To Buy Stocks, Prevent Drop
Tyler D.
03/11/2015
Since 2010, The Bank of Japan has 'openly' - no conspiracy theory here - been a buyer of Japanese stock ETFs. Their bravado increased as the years passed and Abe pressured them from their independence to 'show' that his policies were working to the point that in September 2014, The BoJ bought a record amount of Japanese stock ETFs taking its holdings to over 1.5% of the entire market cap, surpassing Nippon Life as the largest individual holder of Japanese stocks. However, as WSJ reports, The BoJ has now gone full intervention-tard - buying Japanese stocks on 76% of the days when the market opened lower.
As The Wall Street Journal reports,
The Bank of Japan’s aggressive purchasing of stock funds has helped Japanese shares climb to multiyear highs in recent months. But some within the central bank are growing uncomfortable about the fast-paced rally and the bank’s own role in fueling it.
Since Gov. Haruhiko Kuroda took office in March 2013 and introduced monetary easing of what he called a “different dimension,” the central bank has sharply increased its buying of baskets of stocks known as exchange-traded funds. By directly underpinning the market, officials have tried to encourage private investors to follow suit and put more money in stocks in the hope of stimulating the economy and increasing inflation.
During the past two years, the central bank entered the stock market roughly once every three days, picking up a total of ¥2.8 trillion ($23 billion) of ETFs that track Japan’s major stock indexes, according to Bank of Japan records. That distinguishes it from the U.S. Federal Reserve and European Central Bank, both of which have bought bonds to pump up the economy but haven’t directly bought stocks.
Analysts say the bank’s action has been a significant driver of Japan’s stock-market rally in recent months, combined with hefty purchases by the $1.1 trillion Government Pension Investment Fund. Their buying has often countered selling pressure from individuals in the market and made up for a weaker appetite among foreign investors.
The central bank has stepped in mostly when market sentiment was weak. Three-quarters of the central bank’s buying occurred on days when the benchmark Topix index opened lower, according to a Wall Street Journal analysis of BOJ data.
So much for independence...
BOJ officials used to be cautious about purchasing ETFs, worried that it could distort market activities and put the central bank’s own financial health at risk. But under pressure from politicians following the global financial crisis, the bank changed its stance in late 2010.
“We led the cows to water, but they didn’t drink it, even though we told them it tasted good,” Miyako Suda, who was a board member then, wrote in a 2014 book discussing monetary easing at that time. “So we thought we should drink it ourselves, showing them it was tasty.”
What a joke!!
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 16/03/15 Semana del Fed
por Fenix » Lun Mar 16, 2015 8:19 pm
The European Union's (Other) Deflationary Driver - Job Computerisation
Submitted by Tyler D.
03/11/2015
The computerisation of European jobs - who will win and who will lose from the impact of new technology onto old areas of employment?
Currency Wars... Are Not Working
Tyler D.
03/11/2015 18:50
While none of the current batch of currency-devaluing Central Bankers would admit that their policies are designed to weaken the currency, enhance competitiveness, and hail a new bright future of growth for their nation (by printing money), it is clear that is the chosen textbook-based path chosen. However, as the following charts show, it's not working...
Massive devaluation in Japan... economic growth expectations slowing...
Massive devaluation in Europe... economic growth expectations slowing...
And then there's The US...
(though note the last few weeks' surge in the USD has sparked some deterioration in the economic outlook).
Clearly the answer to Japan and Europe's problem is more devaluation...
"Monetarism Hasn't Worked Anywhere" - Reality On China, Finally
Tyler D.
03/11/2015 20:55
China remains an export economy no matter how hard they try to convince the world they are moving otherwise. The idea of creating internal “demand” as a means to extricate marginal changes from everybody else is undoubtedly a good idea, even a noble one, but the reality of China as it exists top-down isn’t conducive for such a transformation. Further, that just isn’t realistic under the global conditions that have persisted since the Great Recession was declared over.
In that respect, there isn’t much to separate what is occurring now from the Great Recession itself. Certainly there exist positive numbers in economic accounts where deeply negative numbers predominated during the “event”, but the major factors that inaugurated the dislocation remain especially unsolved and more often than not misunderstood. China’s predicament falls into that category.
The idea of reform, to reiterate, is as much a rebuke against orthodox monetary economics as it is of China. The Chinese did in 2009 as the textbook says, and embarked upon tremendous “stimulus”, both monetary and fiscal, which “aggregate demand” “should” have led to rebirth. Even if it didn’t, the re-igniting of the global economy from all the other central banks following the same textbook should have resolved any lingering deficiency. “Extend and pretend” is as much about time as anything, and even massive imbalances can be covered and eventually removed by robust and sustained economic advance.
Instead, monetarism hasn’t worked anywhere, leaving little sustainable “aggregate demand” to sustain all the massive financial imbalances created for it. That is the most poignant reckoning out of the PBOC’s reform ideas, that in order to gain even the smallest fit of “demand”, even artificially, it takes an inordinately large asset bubble. Such massive inefficiency is highly problematic in so many ways, but not the least of which under these conditions where bubbles exist almost everywhere without the requisite recovery in economic function and activity.
ABOOK March 2015 China US Imports
Therefore the entire point of “reform” in China is an assault on the senses of mainstream commentary as well as theory. Janet Yellen says that the US is booming, even if the data doesn’t agree, so who is the PBOC to proclaim otherwise? Further, orthodox economists tell us over and over that there are no asset bubbles and that monetarism is not just most effective it is the only option – we know this because a credentialed economist is on TV almost all the time and is quoted in almost every mainstream news item in order to reinforce the narrative.
Reality has a way of mugging even the most hardened ideological positions, in particular where ambiguity has been totally drained. The past six months’ data on China, PMI’s aside of course, has left little optimism about anything except unfounded hope for monetary softening. The economic figures were the worst since the Great Recession, and even worse than that drastic decline in a lot of cases, by far. Retail sales were the lowest since 2001, as was “fixed asset investment”, an important indication of Chinese economic fervor. Industrial production fell to 6.8% growth, well below the 7.8% “analysts” were expecting, to yet another new “cycle” low.
ABOOK March 2015 China IP
It is clear now that this is not a “transitory” problem, so the implications for much more than China are becoming undeniable. Even Reuters has finally conceded to connecting the dots:
The Chinese economy has had a rough ride in the last 15 months as a property downturn compounded slackening growth in foreign and domestic demand and persistent industrial overcapacity. A widening corruption crackdown also has weighed on everything from investment to retail sales. [emphasis added]
It’s surely not a winning endorsement of “global growth” which would at least include the US “miracle.” Further, the same article seems to have finally appreciated what the PBOC is undertaking in that context.
Policymakers have cut interest rates twice since November, and in early February reduced the amount of cash that banks must hold as reserves (RRR), freeing up fresh liquidity to flow into the economy to offset rising outflows of capital.
But because those adjustments so far have been largely defensive in nature, economists say, they haven’t translated into lower real interest rates or increased investment. Chinese companies are cautious about expanding in the face of weak business prospects, and bankers are wary of a spike in non-performing loans.
That is the entire point of “reform”, as the PBOC has no interest in maintaining bubble imbalances anymore. Their entire focus is “defensive” because they have little choice under these conditions. That means accepting the economy as it is on its own, as bad as that may get, in order to at least attempt to restore financial sanity and even a little discipline. These are all anathema to orthodox monetarism, which is why most economists simply cannot grasp the point of the endeavor. As if to leave no doubt about that last point, Reuters quotes a credentialed economist who is clearly confined by the bubble of such narrow theory.
“Activity data surprised the market on the downside by a large margin, suggesting that China’s first quarter GDP growth could likely fall to below 7 percent,” ANZ economist Li-Gang Liu said in a research note.
“In our view, the extremely weak data at the beginning of the year suggest that China needs to engage in more aggressive policy easing, and we see that a reserve requirement ratio (RRR) cut will be imminent,” he said, adding that stimulus measures rolled out since last year seem to have had limited effect.
ABOOK March 2015 China US Imports2
Good luck with that; the PBOC has already proven it is accepting of this reductive growth trend, as is the government and its continually lowered GDP “target.” “Aggressive policy easing” will be left for those economies where monetary awakening remains, as ever, nothing but a mathematical inequality.
Submitted by Tyler D.
03/11/2015
The computerisation of European jobs - who will win and who will lose from the impact of new technology onto old areas of employment?
Currency Wars... Are Not Working
Tyler D.
03/11/2015 18:50
While none of the current batch of currency-devaluing Central Bankers would admit that their policies are designed to weaken the currency, enhance competitiveness, and hail a new bright future of growth for their nation (by printing money), it is clear that is the chosen textbook-based path chosen. However, as the following charts show, it's not working...
Massive devaluation in Japan... economic growth expectations slowing...
Massive devaluation in Europe... economic growth expectations slowing...
And then there's The US...
(though note the last few weeks' surge in the USD has sparked some deterioration in the economic outlook).
Clearly the answer to Japan and Europe's problem is more devaluation...
"Monetarism Hasn't Worked Anywhere" - Reality On China, Finally
Tyler D.
03/11/2015 20:55
China remains an export economy no matter how hard they try to convince the world they are moving otherwise. The idea of creating internal “demand” as a means to extricate marginal changes from everybody else is undoubtedly a good idea, even a noble one, but the reality of China as it exists top-down isn’t conducive for such a transformation. Further, that just isn’t realistic under the global conditions that have persisted since the Great Recession was declared over.
In that respect, there isn’t much to separate what is occurring now from the Great Recession itself. Certainly there exist positive numbers in economic accounts where deeply negative numbers predominated during the “event”, but the major factors that inaugurated the dislocation remain especially unsolved and more often than not misunderstood. China’s predicament falls into that category.
The idea of reform, to reiterate, is as much a rebuke against orthodox monetary economics as it is of China. The Chinese did in 2009 as the textbook says, and embarked upon tremendous “stimulus”, both monetary and fiscal, which “aggregate demand” “should” have led to rebirth. Even if it didn’t, the re-igniting of the global economy from all the other central banks following the same textbook should have resolved any lingering deficiency. “Extend and pretend” is as much about time as anything, and even massive imbalances can be covered and eventually removed by robust and sustained economic advance.
Instead, monetarism hasn’t worked anywhere, leaving little sustainable “aggregate demand” to sustain all the massive financial imbalances created for it. That is the most poignant reckoning out of the PBOC’s reform ideas, that in order to gain even the smallest fit of “demand”, even artificially, it takes an inordinately large asset bubble. Such massive inefficiency is highly problematic in so many ways, but not the least of which under these conditions where bubbles exist almost everywhere without the requisite recovery in economic function and activity.
ABOOK March 2015 China US Imports
Therefore the entire point of “reform” in China is an assault on the senses of mainstream commentary as well as theory. Janet Yellen says that the US is booming, even if the data doesn’t agree, so who is the PBOC to proclaim otherwise? Further, orthodox economists tell us over and over that there are no asset bubbles and that monetarism is not just most effective it is the only option – we know this because a credentialed economist is on TV almost all the time and is quoted in almost every mainstream news item in order to reinforce the narrative.
Reality has a way of mugging even the most hardened ideological positions, in particular where ambiguity has been totally drained. The past six months’ data on China, PMI’s aside of course, has left little optimism about anything except unfounded hope for monetary softening. The economic figures were the worst since the Great Recession, and even worse than that drastic decline in a lot of cases, by far. Retail sales were the lowest since 2001, as was “fixed asset investment”, an important indication of Chinese economic fervor. Industrial production fell to 6.8% growth, well below the 7.8% “analysts” were expecting, to yet another new “cycle” low.
ABOOK March 2015 China IP
It is clear now that this is not a “transitory” problem, so the implications for much more than China are becoming undeniable. Even Reuters has finally conceded to connecting the dots:
The Chinese economy has had a rough ride in the last 15 months as a property downturn compounded slackening growth in foreign and domestic demand and persistent industrial overcapacity. A widening corruption crackdown also has weighed on everything from investment to retail sales. [emphasis added]
It’s surely not a winning endorsement of “global growth” which would at least include the US “miracle.” Further, the same article seems to have finally appreciated what the PBOC is undertaking in that context.
Policymakers have cut interest rates twice since November, and in early February reduced the amount of cash that banks must hold as reserves (RRR), freeing up fresh liquidity to flow into the economy to offset rising outflows of capital.
But because those adjustments so far have been largely defensive in nature, economists say, they haven’t translated into lower real interest rates or increased investment. Chinese companies are cautious about expanding in the face of weak business prospects, and bankers are wary of a spike in non-performing loans.
That is the entire point of “reform”, as the PBOC has no interest in maintaining bubble imbalances anymore. Their entire focus is “defensive” because they have little choice under these conditions. That means accepting the economy as it is on its own, as bad as that may get, in order to at least attempt to restore financial sanity and even a little discipline. These are all anathema to orthodox monetarism, which is why most economists simply cannot grasp the point of the endeavor. As if to leave no doubt about that last point, Reuters quotes a credentialed economist who is clearly confined by the bubble of such narrow theory.
“Activity data surprised the market on the downside by a large margin, suggesting that China’s first quarter GDP growth could likely fall to below 7 percent,” ANZ economist Li-Gang Liu said in a research note.
“In our view, the extremely weak data at the beginning of the year suggest that China needs to engage in more aggressive policy easing, and we see that a reserve requirement ratio (RRR) cut will be imminent,” he said, adding that stimulus measures rolled out since last year seem to have had limited effect.
ABOOK March 2015 China US Imports2
Good luck with that; the PBOC has already proven it is accepting of this reductive growth trend, as is the government and its continually lowered GDP “target.” “Aggressive policy easing” will be left for those economies where monetary awakening remains, as ever, nothing but a mathematical inequality.
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Lunes 16/03/15 Semana del Fed
por admin » Vie Mar 20, 2015 12:49 pm
La inflación baja podría dilatar o moderar un alza de tasas en EE.UU.
La economía estadounidense estará mejor posicionada para la próxima recesión si las tasas de interés son más altas cuando comience el bajón. Paradójicamente, la mejor forma de lograrlo podría ser mantener las tasas bajas ahora.
Luego de la reunión de la Reserva Federal el miércoles, las razones para empezar a subir las tasas desde cero parecen sólidas. La economía ha estado creciendo de forma constante, aunque no espectacular, durante seis años. El desempleo cayó a 5,5% y se ubica dentro del rango que muchos economistas consideran “pleno empleo”.
El aguafiestas es la inflación, que fue de menos 0,2% en enero. Sin tomar en cuenta alimentos y energía, usando el índice de precios para consumo personal, el indicador predilecto de la Fed, la tasa de inflación fue de 1,3% en doce meses.
Eso está muy por debajo de la meta de 2% de la Fed. La inflación en niveles tan bajos es preocupante, no por el presente sino por el futuro no tan distante. Ese es el motivo por el que la Fed debe avanzar con sumo cuidado en su camino hacia la normalización de las tasas de interés.
Por ahora, dada la mejor salud de la economía estadounidense, la perspectiva de que la inflación baja se convierta en una deflación perjudicial —en la que caen los salarios y los precios— es remota.
De todos modos, si la inflación baja se arraiga, Estados Unidos podría ingresar a la próxima recesión con tasas de interés incómodamente cercanas a cero, lo que le dejaría al banco central pocas municiones para contraatacar. Eso podría agravar la recesión y provocar el tipo de estancamiento del que Japón intenta escapar desde hace más de dos décadas.
¿En qué sentido la inflación baja entorpece la labor de la Fed? El banco central influye en el gasto a través de la tasa de interés real, es decir la tasa nominal menos la inflación. Históricamente, una tasa de interés real de 2% ha mantenido a la economía cerca de su capacidad plena sin generar presiones sobre los precios. Eso significa que una inflación de 2% implicaba que la meta de la Fed para su tasa de referencia de fondos federales promediaba 4%. Eso le daba a la Fed cuatro puntos porcentuales de municiones para responder a las crisis. Podía, si era necesario, reducir las tasas reales a 2% negativo al reducir la tasa de fondos federales a cero.
Janet Yellen, presidenta de la Reserva Federal de EE.UU. (AP Photo/Susan Walsh) Associated Press
Si la inflación, por otro lado, es de apenas 1,5% y las tasas reales promedian 2%, eso le da a la Fed sólo 3,5 puntos de municiones convencionales y una tasa real mínima de menos 1,5%. Además, la tasa real necesaria para mantener la economía con empleo pleno ahora probablemente sea menor a 2%, lo que dejaría a la Fed con incluso menos municiones convencionales en cuanto a tasas de interés.
Si creemos lo que dicen los mercados financieros, este escenario es muy factible. Los bonos indexados a la inflación incorporan en sus precios una inflación de sólo 1,25% en cinco años, y los mercados de futuros fijan sus precios asumiendo que las tasas a corto plazo seguirán alrededor de 3% en ese entonces. Para ese momento, la expansión de la economía estadounidense ya cumpliría 11 años y sería hora de una recesión.
La mayoría de las recesiones son causadas porque el banco central sube drásticamente las tasas para combatir presiones inflacionarias, algo que parece improbable si la inflación se mantiene estancada en sus actuales niveles. La presidenta de la Fed, Janet Yellen, indicó que las tasas comenzarán a subir recién cuando la Fed esté razonablemente confiada en que la inflación se encamina a la meta de 2%.
Hay buenos motivos para pensar que lo está. Gran parte de la caída reciente refleja la caída de los precios del petróleo y la apreciación de 14% del dólar frente a una canasta de monedas desde junio pasado, lo cual abarata las importaciones. A no ser que el petróleo siga cayendo y el dólar siga subiendo a ese ritmo, esos efectos se desvanecerán y la inflación repuntará. En tanto, mientras el desempleo sigue cayendo, los salarios deberían acelerarse, impulsando tanto el consumo como los costos de las empresas. Finalmente, a diferencia de los inversionistas, las familias prevén que la inflación regrese a 2%.
Sin embargo, los bancos centrales de todo el mundo se han sorprendido una y otra vez por la persistencia de la inflación baja. A comienzos de 2012, la Fed fijó su meta oficial en 2% y predijo que la inflación básica para el cuarto trimestre de 2014, la que excluye las variaciones en los precios de los alimentos y la energía, se ubicaría en torno a 1,8%. Fue de 1,4%.
A fines de 2013, personal del Banco Central Europeo proyectó una inflación de 1,3% para este año. Ahora es de menos 0,3%, y la inflación básica es apenas 0,7%. Hace dos años, el nuevo gobernador del Banco de Japón se comprometió a reducir la inflación, que entonces era negativa, a 2% en dos años. Luego de un breve aumento, volvió a caer a cerca de cero (sin tomar en cuenta los efectos de un impuesto al consumo y la energía).
Exactamente por qué la inflación baja es tan persistente es un tanto difícil de explicar. Podría reflejar la caída de los precios de los commodities o la menor capacidad de los trabajadores para conseguir salarios más altos. De cualquier modo, el fenómeno sugiere que la Fed debería ser cuidadosa al asumir que la inflación regresará a 2% por sí sola.
Una forma de lograr que esto suceda es permitir que el desempleo caiga debajo de niveles que en su momento se consideraban de “pleno empleo”, es decir, debajo de 5%. Si las relaciones pasadas se mantienen, eso debería generar salarios y gasto de consumo más sólidos, y por lo tanto una mayor inflación.
Eso no significa necesariamente retrasar el comienzo de los aumentos de tasas. Como señala Lewis Alexander de Nomura Securities, la trayectoria de las tasas luego del primer aumento es más importante que la fecha del aumento, y considerando los vientos en contra que ha presentado el dólar para el crecimiento y la inflación, la Fed puede normalizar las tasas de una manera mucho más pausada de lo que sugieren las proyecciones oficiales. Esta podría ser la mejor forma de conseguir que las tasas nunca necesiten volver a estar en cero durante tanto tiempo.
La economía estadounidense estará mejor posicionada para la próxima recesión si las tasas de interés son más altas cuando comience el bajón. Paradójicamente, la mejor forma de lograrlo podría ser mantener las tasas bajas ahora.
Luego de la reunión de la Reserva Federal el miércoles, las razones para empezar a subir las tasas desde cero parecen sólidas. La economía ha estado creciendo de forma constante, aunque no espectacular, durante seis años. El desempleo cayó a 5,5% y se ubica dentro del rango que muchos economistas consideran “pleno empleo”.
El aguafiestas es la inflación, que fue de menos 0,2% en enero. Sin tomar en cuenta alimentos y energía, usando el índice de precios para consumo personal, el indicador predilecto de la Fed, la tasa de inflación fue de 1,3% en doce meses.
Eso está muy por debajo de la meta de 2% de la Fed. La inflación en niveles tan bajos es preocupante, no por el presente sino por el futuro no tan distante. Ese es el motivo por el que la Fed debe avanzar con sumo cuidado en su camino hacia la normalización de las tasas de interés.
Por ahora, dada la mejor salud de la economía estadounidense, la perspectiva de que la inflación baja se convierta en una deflación perjudicial —en la que caen los salarios y los precios— es remota.
De todos modos, si la inflación baja se arraiga, Estados Unidos podría ingresar a la próxima recesión con tasas de interés incómodamente cercanas a cero, lo que le dejaría al banco central pocas municiones para contraatacar. Eso podría agravar la recesión y provocar el tipo de estancamiento del que Japón intenta escapar desde hace más de dos décadas.
¿En qué sentido la inflación baja entorpece la labor de la Fed? El banco central influye en el gasto a través de la tasa de interés real, es decir la tasa nominal menos la inflación. Históricamente, una tasa de interés real de 2% ha mantenido a la economía cerca de su capacidad plena sin generar presiones sobre los precios. Eso significa que una inflación de 2% implicaba que la meta de la Fed para su tasa de referencia de fondos federales promediaba 4%. Eso le daba a la Fed cuatro puntos porcentuales de municiones para responder a las crisis. Podía, si era necesario, reducir las tasas reales a 2% negativo al reducir la tasa de fondos federales a cero.
Janet Yellen, presidenta de la Reserva Federal de EE.UU. (AP Photo/Susan Walsh) Associated Press
Si la inflación, por otro lado, es de apenas 1,5% y las tasas reales promedian 2%, eso le da a la Fed sólo 3,5 puntos de municiones convencionales y una tasa real mínima de menos 1,5%. Además, la tasa real necesaria para mantener la economía con empleo pleno ahora probablemente sea menor a 2%, lo que dejaría a la Fed con incluso menos municiones convencionales en cuanto a tasas de interés.
Si creemos lo que dicen los mercados financieros, este escenario es muy factible. Los bonos indexados a la inflación incorporan en sus precios una inflación de sólo 1,25% en cinco años, y los mercados de futuros fijan sus precios asumiendo que las tasas a corto plazo seguirán alrededor de 3% en ese entonces. Para ese momento, la expansión de la economía estadounidense ya cumpliría 11 años y sería hora de una recesión.
La mayoría de las recesiones son causadas porque el banco central sube drásticamente las tasas para combatir presiones inflacionarias, algo que parece improbable si la inflación se mantiene estancada en sus actuales niveles. La presidenta de la Fed, Janet Yellen, indicó que las tasas comenzarán a subir recién cuando la Fed esté razonablemente confiada en que la inflación se encamina a la meta de 2%.
Hay buenos motivos para pensar que lo está. Gran parte de la caída reciente refleja la caída de los precios del petróleo y la apreciación de 14% del dólar frente a una canasta de monedas desde junio pasado, lo cual abarata las importaciones. A no ser que el petróleo siga cayendo y el dólar siga subiendo a ese ritmo, esos efectos se desvanecerán y la inflación repuntará. En tanto, mientras el desempleo sigue cayendo, los salarios deberían acelerarse, impulsando tanto el consumo como los costos de las empresas. Finalmente, a diferencia de los inversionistas, las familias prevén que la inflación regrese a 2%.
Sin embargo, los bancos centrales de todo el mundo se han sorprendido una y otra vez por la persistencia de la inflación baja. A comienzos de 2012, la Fed fijó su meta oficial en 2% y predijo que la inflación básica para el cuarto trimestre de 2014, la que excluye las variaciones en los precios de los alimentos y la energía, se ubicaría en torno a 1,8%. Fue de 1,4%.
A fines de 2013, personal del Banco Central Europeo proyectó una inflación de 1,3% para este año. Ahora es de menos 0,3%, y la inflación básica es apenas 0,7%. Hace dos años, el nuevo gobernador del Banco de Japón se comprometió a reducir la inflación, que entonces era negativa, a 2% en dos años. Luego de un breve aumento, volvió a caer a cerca de cero (sin tomar en cuenta los efectos de un impuesto al consumo y la energía).
Exactamente por qué la inflación baja es tan persistente es un tanto difícil de explicar. Podría reflejar la caída de los precios de los commodities o la menor capacidad de los trabajadores para conseguir salarios más altos. De cualquier modo, el fenómeno sugiere que la Fed debería ser cuidadosa al asumir que la inflación regresará a 2% por sí sola.
Una forma de lograr que esto suceda es permitir que el desempleo caiga debajo de niveles que en su momento se consideraban de “pleno empleo”, es decir, debajo de 5%. Si las relaciones pasadas se mantienen, eso debería generar salarios y gasto de consumo más sólidos, y por lo tanto una mayor inflación.
Eso no significa necesariamente retrasar el comienzo de los aumentos de tasas. Como señala Lewis Alexander de Nomura Securities, la trayectoria de las tasas luego del primer aumento es más importante que la fecha del aumento, y considerando los vientos en contra que ha presentado el dólar para el crecimiento y la inflación, la Fed puede normalizar las tasas de una manera mucho más pausada de lo que sugieren las proyecciones oficiales. Esta podría ser la mejor forma de conseguir que las tasas nunca necesiten volver a estar en cero durante tanto tiempo.
- admin
- Site Admin
- Mensajes: 164292
- Registrado: Mié Abr 21, 2010 9:02 pm
Re: Lunes 16/03/15 Semana del Fed
por admin » Lun Mar 23, 2015 11:22 am
Crude Oil 46.80 0.23 0.49%
Brent Crude 55.45 0.13 0.23%
Gold 1185.4 0.8 0.07%
Silver 16.845 -0.038 -0.23%
E-mini DJIA 18086 53 0.29%
E-mini S&P 500
Brent Crude 55.45 0.13 0.23%
Gold 1185.4 0.8 0.07%
Silver 16.845 -0.038 -0.23%
E-mini DJIA 18086 53 0.29%
E-mini S&P 500
- admin
- Site Admin
- Mensajes: 164292
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Re: Lunes 16/03/15 Semana del Fed
por admin » Lun Mar 23, 2015 11:23 am
Bullard de la Fed dice dólar cerca de valor justo, sendero es poco claro
LONDRES (Reuters) - El índice dólar no está lejos de su valor justo pero no está claro cuánto más se apreciará la moneda estadounidense contra el euro, dijo el presidente de la Reserva Federal de St Louis James Bullard el lunes.
Hablando en el canal de noticias financieras CNBC, Bullard apuntó a los preparativos del lanzamiento de la flexibilización cuantitativa (QE, por sus siglas en inglés) del Banco Central Europeo este mes como un factor que alentó la escalada de 25 por ciento del dólar contra el euro.
La QE del BCE "es un acontecimiento mayor en los mercados financieros globales y la preparación de eso llevó a una depreciación del euro y un fortalecimiento del dólar no es nada sorprendente", dijo.
"Todo eso fue descontado en los mercados, por lo que creo que no está claro, en este punto, dónde irán los tipos de cambio del dólar frente al euro".
Dijo también que una salida de Grecia del euro sería posible, pero resultaría muy dolorosa para la propia Grecia.
Una salida griega del euro "es mucho más manejable de lo que habría sido hace un par de años y por eso creo que se podría hacer pero no creo que sea aconsejable tratar de ir por ese camino", dijo a CNBC en una entrevista.
"Grecia enfrentaría un futuro muy diferente y yo diría malo si fuera en esa dirección pero no creo que el derrame a los mercados internacionales sería lo que hubiera sido" anteriormente, consideró.
La semana pasada, la Fed avanzó un paso más hacia aplicar lo que sería la primera subida de tasas de interés desde el 2006 pero rebajó sus proyecciones de crecimiento e inflación, indicando que no tiene prisa para elevar el costo del crédito a niveles más normales.
Bullard, quien desde hace algún tiempo pide que la Fed suba las tasas más pronto que tarde, dijo que él no había cambiado su visión en general, y que solo alteró el sendero de su propia proyección de las tasas para reflejar que la política no se había movido tan rápido como él preveía.
"No me puse más moderado, solo que el comité (de política monetaria del banco central) no actuó en marzo", dijo.
En el último encuentro del panel de la Fed "hubo cierta moderación porque hay dudas. Hacia el verano (boreal) vamos a ver cómo entran los datos y seremos capaces de hacer un movimiento pero no necesariamente tenemos que hacerlo", agregó.
LONDRES (Reuters) - El índice dólar no está lejos de su valor justo pero no está claro cuánto más se apreciará la moneda estadounidense contra el euro, dijo el presidente de la Reserva Federal de St Louis James Bullard el lunes.
Hablando en el canal de noticias financieras CNBC, Bullard apuntó a los preparativos del lanzamiento de la flexibilización cuantitativa (QE, por sus siglas en inglés) del Banco Central Europeo este mes como un factor que alentó la escalada de 25 por ciento del dólar contra el euro.
La QE del BCE "es un acontecimiento mayor en los mercados financieros globales y la preparación de eso llevó a una depreciación del euro y un fortalecimiento del dólar no es nada sorprendente", dijo.
"Todo eso fue descontado en los mercados, por lo que creo que no está claro, en este punto, dónde irán los tipos de cambio del dólar frente al euro".
Dijo también que una salida de Grecia del euro sería posible, pero resultaría muy dolorosa para la propia Grecia.
Una salida griega del euro "es mucho más manejable de lo que habría sido hace un par de años y por eso creo que se podría hacer pero no creo que sea aconsejable tratar de ir por ese camino", dijo a CNBC en una entrevista.
"Grecia enfrentaría un futuro muy diferente y yo diría malo si fuera en esa dirección pero no creo que el derrame a los mercados internacionales sería lo que hubiera sido" anteriormente, consideró.
La semana pasada, la Fed avanzó un paso más hacia aplicar lo que sería la primera subida de tasas de interés desde el 2006 pero rebajó sus proyecciones de crecimiento e inflación, indicando que no tiene prisa para elevar el costo del crédito a niveles más normales.
Bullard, quien desde hace algún tiempo pide que la Fed suba las tasas más pronto que tarde, dijo que él no había cambiado su visión en general, y que solo alteró el sendero de su propia proyección de las tasas para reflejar que la política no se había movido tan rápido como él preveía.
"No me puse más moderado, solo que el comité (de política monetaria del banco central) no actuó en marzo", dijo.
En el último encuentro del panel de la Fed "hubo cierta moderación porque hay dudas. Hacia el verano (boreal) vamos a ver cómo entran los datos y seremos capaces de hacer un movimiento pero no necesariamente tenemos que hacerlo", agregó.
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Re: Lunes 16/03/15 Semana del Fed
por admin » Lun Mar 23, 2015 11:25 am
Se postula primer candidato oficial a la presidencia de EE.UU.
Ted Cruz, cuyo padre es cubano, durante una reunión con empresarios el 16 de marzo. Associated Press
El senador de Texas Ted Cruz, cuyo enfoque combativo en la política ha ayudado a guiar el ala derechista del Partido Republicano, entró el lunes en la carrera presidencial de Estados Unidos de 2016, dando inicio al debate en las primarias entre los aspirantes republicanos que buscan recuperar la Casa Blanca.
“Me postulo para presidente”, dijo Cruz en un mensaje de Twitter, TWTR +1.34% convirtiéndose en el primero de los principales candidatos de cualquiera partido en entrar en la carrera, lo cual eleva su visibilidad nacional.
El anuncio de Cruz marca el comienzo de la batalla al interior del Partido Republicano que está dividido entre el equilibrio de ideología y pragmatismo, y que no sabe con certeza quién debe liderarlo. La candidatura de Cruz es anunciada en momentos en que encuestas recientes indican que ninguno de los aspirantes se ha convertido en una opción de consenso y puente entre las facciones del partido.
Cruz plantará su bandera en el extremo derecho de lo que se espera se convierta en un campo lleno de aspirantes con espectro ideológico que abarca desde los centristas, como el gobernador de Nueva Jersey, Chris Christie ; el libertario senador de Kentucky Rand Paul y los conservadores sociales como Mike Huckabee, ex gobernador de Arkansas.
Cruz representa una marca de conservadores ideológicos que contrasta con el ex gobernador de Florida, Jeb Bush, quien ha dicho que un candidato presidencial exitoso debe estar dispuesto a “perder las primarias”, para tener éxito con el electorado más centrista en las elecciones generales.
Ted Cruz, cuyo padre es cubano, durante una reunión con empresarios el 16 de marzo. Associated Press
El senador de Texas Ted Cruz, cuyo enfoque combativo en la política ha ayudado a guiar el ala derechista del Partido Republicano, entró el lunes en la carrera presidencial de Estados Unidos de 2016, dando inicio al debate en las primarias entre los aspirantes republicanos que buscan recuperar la Casa Blanca.
“Me postulo para presidente”, dijo Cruz en un mensaje de Twitter, TWTR +1.34% convirtiéndose en el primero de los principales candidatos de cualquiera partido en entrar en la carrera, lo cual eleva su visibilidad nacional.
El anuncio de Cruz marca el comienzo de la batalla al interior del Partido Republicano que está dividido entre el equilibrio de ideología y pragmatismo, y que no sabe con certeza quién debe liderarlo. La candidatura de Cruz es anunciada en momentos en que encuestas recientes indican que ninguno de los aspirantes se ha convertido en una opción de consenso y puente entre las facciones del partido.
Cruz plantará su bandera en el extremo derecho de lo que se espera se convierta en un campo lleno de aspirantes con espectro ideológico que abarca desde los centristas, como el gobernador de Nueva Jersey, Chris Christie ; el libertario senador de Kentucky Rand Paul y los conservadores sociales como Mike Huckabee, ex gobernador de Arkansas.
Cruz representa una marca de conservadores ideológicos que contrasta con el ex gobernador de Florida, Jeb Bush, quien ha dicho que un candidato presidencial exitoso debe estar dispuesto a “perder las primarias”, para tener éxito con el electorado más centrista en las elecciones generales.
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Re: Lunes 16/03/15 Semana del Fed
por admin » Lun Mar 23, 2015 4:38 pm
Dimite el presidente del fondo de rescate bancario de Grecia
ATENAS (EFE Dow Jones)—El presidente del fondo de rescate de la banca griega, Christos Sclavounis, dimitió el lunes, según anunciaron dos fuentes del Gobierno del país.
“El Gobierno de Grecia acepta su renuncia y se prevé que el Ministerio de Finanzas anuncie a su sustituto en el Fondo Helénico de Estabilidad Financiera”, dijo una de las fuentes del Gobierno.
El Fondo Helénico de Estabilidad Financiera es el vehículo de rescate de los bancos griegos que se creó en 2010 para recapitalizar a las entidades del país.
La dimisión se produce dos meses después de la llegada al poder del Syriza.
El fondo recibió 48.200 millones de euros entre 2012 y 2014 para ser inyectados en los bancos del país, que utilizaron más de 37.300 millones de euros. El importe restante, unos 10.900 millones de euros, siguen sin ser utilizados. Esta cantidad podría haber sido usada como colchón de capital, según una petición del anterior Gobierno a sus acreedores internacionales a finales del año pasado.
Pero tras las elecciones de enero y el acuerdo del nuevo Gobierno de ampliar su programa de rescate en cuatro meses, esos 10.900 millones de euros fueron devueltos al fondo de rescate de la zona euro. Este dinero podría ser utilizado si los bancos griegos necesitasen una nueva recapitalización y tras la aprobación por parte de los ministro de Finanzas de la zona euro.
ATENAS (EFE Dow Jones)—El presidente del fondo de rescate de la banca griega, Christos Sclavounis, dimitió el lunes, según anunciaron dos fuentes del Gobierno del país.
“El Gobierno de Grecia acepta su renuncia y se prevé que el Ministerio de Finanzas anuncie a su sustituto en el Fondo Helénico de Estabilidad Financiera”, dijo una de las fuentes del Gobierno.
El Fondo Helénico de Estabilidad Financiera es el vehículo de rescate de los bancos griegos que se creó en 2010 para recapitalizar a las entidades del país.
La dimisión se produce dos meses después de la llegada al poder del Syriza.
El fondo recibió 48.200 millones de euros entre 2012 y 2014 para ser inyectados en los bancos del país, que utilizaron más de 37.300 millones de euros. El importe restante, unos 10.900 millones de euros, siguen sin ser utilizados. Esta cantidad podría haber sido usada como colchón de capital, según una petición del anterior Gobierno a sus acreedores internacionales a finales del año pasado.
Pero tras las elecciones de enero y el acuerdo del nuevo Gobierno de ampliar su programa de rescate en cuatro meses, esos 10.900 millones de euros fueron devueltos al fondo de rescate de la zona euro. Este dinero podría ser utilizado si los bancos griegos necesitasen una nueva recapitalización y tras la aprobación por parte de los ministro de Finanzas de la zona euro.
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Re: Lunes 16/03/15 Semana del Fed
por admin » Mié Mar 25, 2015 8:56 am
DJIA 17949.59 -61.55 -0.34%
Nasdaq 4969.43 -25.30 -0.51%
S&P 500 2088.82 -2.68 -0.13%
Russell 2000 1259.23
Nasdaq 4969.43 -25.30 -0.51%
S&P 500 2088.82 -2.68 -0.13%
Russell 2000 1259.23
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