To Be Clear, The Fed Dropping Guidance Was A Big Deal

542 views

So here we are the week after the Fed announced on April 9 that they’re just going to throw out that guidance that they’ve been spending the last three years meticulously articulating to the public, and we remain in a down market.

End of the world?

Hardly.

This is exactly what happened following the announcements of QE’s I, II, and III. The market continued to be slaughtered following the announcement, market “professionals” and “experts” lamented the end of global civilization and then…it stopped.

No, it didn’t just stop. It lampooned the detractors, dragging anyone short equities into obscene losses, while making those with blind faith quite wealthy.

What the Fed is really communicating here is that the game will remained rigged for as long as it takes. And since what the Fed is doing doesn’t seem to be making a difference (free money tends to get doled out to those closest to the trough, not those that actually need it), well then that’s just a another way of communicating that the game is going to be rigged forever, isn’t it?

Forever or until the guns come out.

So we’re seeing the monthly POMO purchases dropping another $10 billion and people are ever so afraid – but think about this rationally. From $80 billion a month, we were buying up $960 billion annually in effectively newly issued currency. That’s idiotic, QE I levels of program. I mean, QE II was only a $600 billion program, not counting the reinvestment of proceeds (which was really going to happen anyway, they just publicized it).

So $55 billion in new asset purchases are still on the table, which is for the moment still $660 billion every year. After the next $10 billion drop, we’ll still be at an annualized $540 billion every year. I mean, look, the numbers being thrown around here still equate to another QE II every 12 months.

I do some quick back of the envelope math and pretty quickly work out that QE III, from its inception on September 13, 2012, was somewhere in the neighborhood of $1.5 trillion.

So I’m supposed to lose my grip now that that’s being slowed to a “paltry” $600 billion? Let’s be straight here, just winding down QE III is going to be another QE II.

You know, because we’re winding it down permanently, really.

Or not, really.

Whatever…

And – oh yeah – your expectations that interest rates were rising next year are also premature. In a $17.4 trillion economy, a 1% rise in interest rates NOT materializing by itself is good for probably $150-200 billion a year worth of market forces. Multiply that by every percent financial institutions were expecting.

My point is this; right now everything is super scary, market short sellers are behaving like gigantic dicks, and The Fly’s comment section is haunted hourly by scum. But I’m thinking this is just the same story we’ve seen play out on at least three separate occasions already.

The fear is drawing everyone in. But the victory blow has already been struck – point Yellen.

But you can’t have a fox hunt without a fox; so we’re pressing downward. Make no mistake though, death awaits all short sellers. Before this is over, even just having too much cash on the sidelines will be grounds for humiliation, and short sellers should just actively start picking out that special “last rights” shotgun now.

BAS Is Returning 7% Today Alone

137 views

Although my 40% cash position may create the illusion that I am missing out, such a view would be misplaced. Careful allocation and selection on my part is gifting me full participation in today’s excess in spite of recent reservation.

BAS is up 7.29% at the time of this writing, as the natural gas cycle makes full leaps and bounds forward. As I told you it would transpire, this is where your money must be at for the next 10 years. Companies and partnerships like BAS and HCLP will grow at unprecedented rates, facilitating the United States of America back to Her rightful status as Greatest Country and Loan Superpower on planet Earth.

HCLP is also up 2% and taken altogether, my portfolio is up .9%.

As for the excitement about Yellen, I don’t fully understand the sentiment. If you go back and read or listen to anything from Yellen, it’s pretty clear she has been consistently more in favor of Federal Reserve supporting markets and the economy than Bernanke was.

Despite that, there is good reason to believe a deep pullback may come soon enough (first half of 2014). We can’t all be millionaires.

UPDATE If you followed my initial purchase of BAS on 8/16/2012, you are presently up 65% on the position. If you’ve been trading along with me inside The PPT, you are up far more.

Monetary Policy Remains Overwhelmingly Accommodative (And Outlook)

141 views

The fed decision to test the waters with a taper while I was away did surprise me, somewhat. Yet it did not phase me much and so I elected to remain on vacation, silent on the issue.

I would state now in hindsight that a $5B per month taper (with as much as another $5-10B in the works) would still put the Federal Reserve on path to add another ~$800B to its balance sheet in 2014. This remains colossal and would have the Fed assets outstanding at just under $5 Trillion by 2015.

They may very well have tapered by $5B/month just because they were running out of things to buy…(laughter)

If I were to state things that concern me as potential impediments to the US economy and growth, they would list (1) consumer slowdown from budget impacts (pension, healthcare costs, rents/mortgage, increased retirement contributions, etc), (2) foreign existential shocks (EU breakup, Asian crisis, similar collapse that disrupts foreign trade) – where exactly did the EU government debt go and why is it now suddenly not an issue? Who is buying it (ECB, Fed, banking scheme, inter-government trade imbalances, etc)? And what stops non-payment concerns from popping up again in the future? and (3) the election of a Republican majority

But banking solvency just isn’t on that list right now. Neither is inflation, really, although long term prospects of an uncontrollable outbreak of inflation remains a viable possibility. With credit expansion in this country limited to growth of government balance sheets, deflationary pressure is set to commence…until it doesn’t. In the meantime, another ~$1 Trillion of free money to those closest to the trough will keep a major disruption of financial assets here at home as a low probability outcome. Of course, this bodes ill for the “wealth equality” lot, but they’re too dumb to call the system out on that, so we maintain the course.

Concerns aside, I am optimistic. Recessions don’t last forever, and my concerns are outweighed by hope in outlook. I am very long (no margin) and prepared to reap the rewards of economic growth. It’s been almost six years; the system has been on a hyperactive outlook for problems which greatly reduces the likelihood that a real “Black Swan” manages to crop up. It could still happen of course, but with hundreds of thousands of financial professionals calling bubbles as quickly as problems crop up, and a full time central banking staff armed with an unlimited supply of money attacking them at first sight, how exactly is a crisis supposed to materialize from all of this?

The only room for crisis in the US is rampant commodity/asset appreciation, which remains benign. That or an elsewise major shock to the consumer. Financial assets and liquidity issues are covered.

Now, that being said, historically we haven’t had a period longer than 10 years without a recession since at least 1789 (and probably not since long before that either – I just lack records to verify a more robust claim). I’d say the expectation of a correction since the Great Depression is 5-10 years with occasional 1-3 year shocks intermittently. We’re past the small shocks phase, which would put the expectation at right about where we’re at.

These times are unprecedented and the support the Fed is willing to lend the markets (unlike any time in recorded history) makes me think we blow through the averages. I want to say this ship will have the wind to sail to years seven, eight or nine, uninterrupted. We may even match the record holder of 10 or above.

However, it would be foolhardy to doubt another recession will most likely crop up before 2020. The ever growing levels of margin debt to buy equities may well be the first sign of the beginning of the final run before that. Of course it could be nothing.

My belief then is that a long commitment remains the way to go. I have been positively surprised by recent developments that have overridden prior comments on wanting to have a larger cash position by about this time (end of 2013) that I made late last year. However, as gains are taken, a portion should begun to be set aside, starting sometime mid 2014 to early 2015. This should create a reserve build-up of steadily marching intervals (10-20%, with a 1-2% increase every month topping out at around 40-50% of ones account value) sometime around late 2015 to early 2016.

At such time, a second hard look should be had. Earlier and exceptional strength should trigger a reassessment of these statements. Casual to quality growth does not necessarily change them. A major weakness (such as a shock of a GOP majority and fear of monetary policy interference) of course may necessitate a sudden course change.

My most hated places to invest are land/real estate (excluding multifamily or renting derived), oil companies (excluding natural gas predominated), and retail (excluding facilitation to the ultra-rich).

My favorite places center around natural gas production expansion, uranium, coal, multifamily REITs, and I remain interested in holding physical precious metals in a full position in the event an inflation shock from significant expansion in credit hits the economy.

I’m indifferent to the insurance market – especially health insurance. It could swing either way; they crawled into bed with the devil so it’s all political at this point. On the one hand, the entire market is shifting in wild and unpredictable ways. On the other, the feds are rigging the game in the insurance companies favor. Just stay away.

Yellen Is Come

107 views

Praise the heavens! Life up your voices and give thanks to our new Fed overlord!

Buy stocks and let not a drop of red hit the indices on this day. Even Tesla must trade higher, though it vexes me. Everything must end higher to celebrate and sanctify this glorious occasion.

There will be no tapering, soft child. That was just a ruse to speed up the confirmation process. Rather, we must have more intervention. It is both just and right, as you are too feeble and weak to be entrusted the hard task of survival alone.

Prepare the offering stone, for the new Bearded One. Do not question where she keeps her beard, unless you beckon to feel the cold, loveless kiss of the back of her hand.

Those of us that have made horrible decisions are entitled to free money, to aid us in the process of unwinding those discretions. In fact, if I were to lose the possessions I rightfully took (executive privilege) with borrowed funding, it would be nothing shy of a travesty of justice.

In truth, the only horrible decision is refusing to make horrible decisions. Load up on stolen property, with Yellen’s blessing and 3% funding. Then keep it for yourself. The finest trimmings are available to you. Buy GM stock, on triple margin, funded with credit card debt. It is your birth right.

Of Course Yellen Brought The Sugar

163 views

I don’t know what idiots started the rumors that Yellen was a hawk, but they should have their reputations destroyed on live television. I can’t think of a single moment when Yellen skewed hawkish in Fed minutes or anywhere else in the body of her work over the last 5 years.

Consider this speech titled Perspectives On Monetary Policy she delivered last June to the Boston Economic Club.

She starts off:

Economic Conditions and the Outlook

In my remarks tonight, I will describe my perspective on monetary policy. To begin, however, I’ll highlight some of the current conditions and key features of the economic outlook that shape my views. To anticipate the main points, the economy appears to be expanding at a moderate pace. The unemployment rate is almost 1 percentage point lower than it was a year ago, but we are still far from full employment. Looking ahead, I anticipate that significant headwinds will continue to restrain the pace of the recovery so that the remaining employment gap is likely to close only slowly. At the same time, inflation (abstracting from the transitory effects of movements in oil prices) has been running near 2 percent over the past two years, and I expect it to remain at or below the Federal Open Market Committee’s (the FOMC’s) 2 percent objective for the foreseeable future. As always, considerable uncertainty attends the outlook for both growth and inflation; events could prove either more positive or negative than what I see as the most likely outcome. That said, as I will explain, I consider the balance of risks to be tilted toward a weaker economy.

She then goes on for some time, eventually remarking on the tools the Fed has been using to try and correct the sluggish economic recovery:

The Conduct of Policy with Unconventional Tools

Now turning to monetary policy, I will begin by discussing the FOMC’s reliance on unconventional tools to address the disappointing pace of recovery. I will then elaborate my rationale for supporting a highly accommodative policy stance.

As you know, since late 2008, the FOMC’s standard policy tool, the target federal funds rate, has been maintained at the zero lower bound. To provide further accommodation, we have employed two unconventional tools to support the recovery–extended forward guidance about the future path of the federal funds rate, and large-scale asset purchases and other balance sheet actions that have greatly increased the size and duration of the Federal Reserve’s portfolio.

Yellen then launches into a long explanation of the rationale for “Highly Accomodative Policy”, describing the statistical indicators and rules based decision making she likes to use to determine how accomodative policy should be extended. Finally, she wraps up her speech as such:

…On the one hand, our unconventional tools have some limitations and costs. For example, the effects of forward guidance are likely to be weaker the longer the horizon of the guidance, implying that it may be difficult to provide much more stimulus through this channel. As for our balance sheet operations, although we have now acquired some experience with this tool, there is still considerable uncertainty about its likely economic effects. Moreover, some have expressed concern that a substantial further expansion of the balance sheet could interfere with the Fed’s ability to execute a smooth exit from its accommodative policies at the appropriate time. I disagree with this view: The FOMC has tested a variety of tools to ensure that we will be able to raise short-term interest rates when needed while gradually returning the portfolio to a more normal size and composition. But even if unjustified, such concerns could in theory reduce confidence in the Federal Reserve and so lead to an undesired increase in inflation expectations.

On the other hand, risk management considerations arising from today’s unusual circumstances strengthen the case for additional accommodation beyond that called for by simple policy rules and optimal control under the modal outlook. In particular, as I have noted, there are a number of significant downside risks to the economic outlook, and hence it may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest.

Conclusion
In my remarks this evening I have sought to explain why, in my view, a highly accommodative monetary policy will remain appropriate for some time to come. My views concerning the stance of monetary policy reflect the FOMC’s firm commitment to the goals of maximum employment and stable prices, my appraisal of the medium term outlook (which is importantly shaped by the persistent legacy of the housing bust and ensuing financial crisis), and by my assessment of the balance of risks facing the economy. Of course, as I’ve emphasized, the outlook is uncertain and the Committee will need to adjust policy as appropriate as actual conditions unfold. For this reason, the FOMC’s forward guidance is explicitly conditioned on its anticipation of “low rates of resource utilization and a subdued outlook for inflation over the medium run.”23 If the recovery were to proceed faster than expected or if inflation pressures were to pick up materially, the FOMC could adjust policy by bringing forward the expected date of tightening. In contrast, if the Committee judges that the recovery is proceeding at an insufficient pace, we could undertake portfolio actions such as additional asset purchases or a further maturity extension program. It is for this reason that the FOMC emphasized, in its statement following the April meeting, that it would “regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.”

Her “one hand” of comment seems to be the closest she comes, throughout the entire length of this speech, to suggesting that there could be drawbacks to “Highly Accomodative Policy”. That’s it; more of a formality than anything. Hell, she immediately says she disagrees with that point of view. The entire content of the speech was “we can do more.”

Yellen has consistently been on the record stating, “we can do more.”

Yellen has pushed for “we can do more.”

This was only a year ago. The recovery hasn’t dramatically improved since then. And this speech is just one example of Yellen being on the record dismissing concerns that Fed policy might become a double edged sword.

Yellen strikes me as the kind of Fed head that will be prone to taking Fed policy too far, into the danger zones of monetary interventionism, if anything. She believes in the notion that the Fed can actively micro-manage accomodative policy, with limited trade offs. While she is very much aware of the long term unpredictability of monetary policy tools, she is dismissive of the concerns.

And yesterday, Yellen was so kind to remind the people labelling her a hawk that they don’t know what they’re talking about. Those comments had no support from any observable Yellen comments or actions.

Appropriately, I really don’t think any taper is coming at any point over the next several years. Or, under Yellen’s discretion, any Fed actions, when taken in aggregate, will skew net dovish, with new programs more than overcompensating any individual restraining or contractionary policy move.

Sure Let’s Default. I’m All In

990 views

Alright, it seems like the benevolent Tea Part folk have decided to share their complete inability to grasp simple concepts with the world, by forced contrition on the populace. It is time to eat our peas. Following the line of Obama’s hatred for those damn jet plane flying 1%-ers, the Tea Party have chosen to one up him, by destroying the 1% in its entirety. An unfortunate and slight side effect may be to destroy the other 99% of the country in the process, but hey…sometimes sacrifices must be born for the good of everyone. So making moves for the ill of everyone is the only logical course of action.

In an attempt to honor Argentina’s dim witted socialist president Fernández de Kirchner for her blood clot, the Tea Party have magnanimously extended a show of us revisiting that countries darkest moment, a point from which it has never recovered: elective default.

Remember that one time the global economy nearly collapsed because a single line of business for US banks bet large sums of money that non-creditworthy citizens would default at abnormally low rates in exchange for paper thin margins on those loans?

Well the entire global economy and all of finance has bet gargantuan sums of money that this non-creditworthy country will never default for no fucking margins.

By all means, how do you think this ends?

Frankly, I don’t care anymore, and am all in. Lay your neck under the axe, and taunt these pussies with all your hatred. See if they have the sack to swing.

What’s the alternative? You can turn all short doubling your money with the end of civilization, just in time to burn it to stay warm? You can barter that paper desperately for some precious metals that aren’t for sale? You can get shot by rioters and have it taken off your corpse?

Because if we actually default, it’ll be to late to go out and prepare. Just think of all the mechanisms that are tied to treasuries. There will be bank failures. And a slow, agonizing process as US spending on interest careens towards $1 trillion annually.

In the meantime, staying in our means would require we basically slash in half one of the following:

The entire defense budget OR
The entire non-defense budget

The point of the matter is that if we default, this place is going to get so screwed up anyway, what does it matter? At some point if the decision were not reversed, the man you know as Cain Hammond Thaler would simply cease to exist. His 9th floor office would be deserted; the only clue that he was ever there at all being an empty safe that used to house his silver and firearms and row upon row of cleaned out bookshelves.

I would simply take up my favorite pocket watch and walking stick, and slip away into the night…never to be heard from again.

To Be Clear, The Fed Dropping Guidance Was A Big Deal

542 views

So here we are the week after the Fed announced on April 9 that they’re just going to throw out that guidance that they’ve been spending the last three years meticulously articulating to the public, and we remain in a down market.

End of the world?

Hardly.

This is exactly what happened following the announcements of QE’s I, II, and III. The market continued to be slaughtered following the announcement, market “professionals” and “experts” lamented the end of global civilization and then…it stopped.

No, it didn’t just stop. It lampooned the detractors, dragging anyone short equities into obscene losses, while making those with blind faith quite wealthy.

What the Fed is really communicating here is that the game will remained rigged for as long as it takes. And since what the Fed is doing doesn’t seem to be making a difference (free money tends to get doled out to those closest to the trough, not those that actually need it), well then that’s just a another way of communicating that the game is going to be rigged forever, isn’t it?

Forever or until the guns come out.

So we’re seeing the monthly POMO purchases dropping another $10 billion and people are ever so afraid – but think about this rationally. From $80 billion a month, we were buying up $960 billion annually in effectively newly issued currency. That’s idiotic, QE I levels of program. I mean, QE II was only a $600 billion program, not counting the reinvestment of proceeds (which was really going to happen anyway, they just publicized it).

So $55 billion in new asset purchases are still on the table, which is for the moment still $660 billion every year. After the next $10 billion drop, we’ll still be at an annualized $540 billion every year. I mean, look, the numbers being thrown around here still equate to another QE II every 12 months.

I do some quick back of the envelope math and pretty quickly work out that QE III, from its inception on September 13, 2012, was somewhere in the neighborhood of $1.5 trillion.

So I’m supposed to lose my grip now that that’s being slowed to a “paltry” $600 billion? Let’s be straight here, just winding down QE III is going to be another QE II.

You know, because we’re winding it down permanently, really.

Or not, really.

Whatever…

And – oh yeah – your expectations that interest rates were rising next year are also premature. In a $17.4 trillion economy, a 1% rise in interest rates NOT materializing by itself is good for probably $150-200 billion a year worth of market forces. Multiply that by every percent financial institutions were expecting.

My point is this; right now everything is super scary, market short sellers are behaving like gigantic dicks, and The Fly’s comment section is haunted hourly by scum. But I’m thinking this is just the same story we’ve seen play out on at least three separate occasions already.

The fear is drawing everyone in. But the victory blow has already been struck – point Yellen.

But you can’t have a fox hunt without a fox; so we’re pressing downward. Make no mistake though, death awaits all short sellers. Before this is over, even just having too much cash on the sidelines will be grounds for humiliation, and short sellers should just actively start picking out that special “last rights” shotgun now.

BAS Is Returning 7% Today Alone

137 views

Although my 40% cash position may create the illusion that I am missing out, such a view would be misplaced. Careful allocation and selection on my part is gifting me full participation in today’s excess in spite of recent reservation.

BAS is up 7.29% at the time of this writing, as the natural gas cycle makes full leaps and bounds forward. As I told you it would transpire, this is where your money must be at for the next 10 years. Companies and partnerships like BAS and HCLP will grow at unprecedented rates, facilitating the United States of America back to Her rightful status as Greatest Country and Loan Superpower on planet Earth.

HCLP is also up 2% and taken altogether, my portfolio is up .9%.

As for the excitement about Yellen, I don’t fully understand the sentiment. If you go back and read or listen to anything from Yellen, it’s pretty clear she has been consistently more in favor of Federal Reserve supporting markets and the economy than Bernanke was.

Despite that, there is good reason to believe a deep pullback may come soon enough (first half of 2014). We can’t all be millionaires.

UPDATE If you followed my initial purchase of BAS on 8/16/2012, you are presently up 65% on the position. If you’ve been trading along with me inside The PPT, you are up far more.

Monetary Policy Remains Overwhelmingly Accommodative (And Outlook)

141 views

The fed decision to test the waters with a taper while I was away did surprise me, somewhat. Yet it did not phase me much and so I elected to remain on vacation, silent on the issue.

I would state now in hindsight that a $5B per month taper (with as much as another $5-10B in the works) would still put the Federal Reserve on path to add another ~$800B to its balance sheet in 2014. This remains colossal and would have the Fed assets outstanding at just under $5 Trillion by 2015.

They may very well have tapered by $5B/month just because they were running out of things to buy…(laughter)

If I were to state things that concern me as potential impediments to the US economy and growth, they would list (1) consumer slowdown from budget impacts (pension, healthcare costs, rents/mortgage, increased retirement contributions, etc), (2) foreign existential shocks (EU breakup, Asian crisis, similar collapse that disrupts foreign trade) – where exactly did the EU government debt go and why is it now suddenly not an issue? Who is buying it (ECB, Fed, banking scheme, inter-government trade imbalances, etc)? And what stops non-payment concerns from popping up again in the future? and (3) the election of a Republican majority

But banking solvency just isn’t on that list right now. Neither is inflation, really, although long term prospects of an uncontrollable outbreak of inflation remains a viable possibility. With credit expansion in this country limited to growth of government balance sheets, deflationary pressure is set to commence…until it doesn’t. In the meantime, another ~$1 Trillion of free money to those closest to the trough will keep a major disruption of financial assets here at home as a low probability outcome. Of course, this bodes ill for the “wealth equality” lot, but they’re too dumb to call the system out on that, so we maintain the course.

Concerns aside, I am optimistic. Recessions don’t last forever, and my concerns are outweighed by hope in outlook. I am very long (no margin) and prepared to reap the rewards of economic growth. It’s been almost six years; the system has been on a hyperactive outlook for problems which greatly reduces the likelihood that a real “Black Swan” manages to crop up. It could still happen of course, but with hundreds of thousands of financial professionals calling bubbles as quickly as problems crop up, and a full time central banking staff armed with an unlimited supply of money attacking them at first sight, how exactly is a crisis supposed to materialize from all of this?

The only room for crisis in the US is rampant commodity/asset appreciation, which remains benign. That or an elsewise major shock to the consumer. Financial assets and liquidity issues are covered.

Now, that being said, historically we haven’t had a period longer than 10 years without a recession since at least 1789 (and probably not since long before that either – I just lack records to verify a more robust claim). I’d say the expectation of a correction since the Great Depression is 5-10 years with occasional 1-3 year shocks intermittently. We’re past the small shocks phase, which would put the expectation at right about where we’re at.

These times are unprecedented and the support the Fed is willing to lend the markets (unlike any time in recorded history) makes me think we blow through the averages. I want to say this ship will have the wind to sail to years seven, eight or nine, uninterrupted. We may even match the record holder of 10 or above.

However, it would be foolhardy to doubt another recession will most likely crop up before 2020. The ever growing levels of margin debt to buy equities may well be the first sign of the beginning of the final run before that. Of course it could be nothing.

My belief then is that a long commitment remains the way to go. I have been positively surprised by recent developments that have overridden prior comments on wanting to have a larger cash position by about this time (end of 2013) that I made late last year. However, as gains are taken, a portion should begun to be set aside, starting sometime mid 2014 to early 2015. This should create a reserve build-up of steadily marching intervals (10-20%, with a 1-2% increase every month topping out at around 40-50% of ones account value) sometime around late 2015 to early 2016.

At such time, a second hard look should be had. Earlier and exceptional strength should trigger a reassessment of these statements. Casual to quality growth does not necessarily change them. A major weakness (such as a shock of a GOP majority and fear of monetary policy interference) of course may necessitate a sudden course change.

My most hated places to invest are land/real estate (excluding multifamily or renting derived), oil companies (excluding natural gas predominated), and retail (excluding facilitation to the ultra-rich).

My favorite places center around natural gas production expansion, uranium, coal, multifamily REITs, and I remain interested in holding physical precious metals in a full position in the event an inflation shock from significant expansion in credit hits the economy.

I’m indifferent to the insurance market – especially health insurance. It could swing either way; they crawled into bed with the devil so it’s all political at this point. On the one hand, the entire market is shifting in wild and unpredictable ways. On the other, the feds are rigging the game in the insurance companies favor. Just stay away.

Yellen Is Come

107 views

Praise the heavens! Life up your voices and give thanks to our new Fed overlord!

Buy stocks and let not a drop of red hit the indices on this day. Even Tesla must trade higher, though it vexes me. Everything must end higher to celebrate and sanctify this glorious occasion.

There will be no tapering, soft child. That was just a ruse to speed up the confirmation process. Rather, we must have more intervention. It is both just and right, as you are too feeble and weak to be entrusted the hard task of survival alone.

Prepare the offering stone, for the new Bearded One. Do not question where she keeps her beard, unless you beckon to feel the cold, loveless kiss of the back of her hand.

Those of us that have made horrible decisions are entitled to free money, to aid us in the process of unwinding those discretions. In fact, if I were to lose the possessions I rightfully took (executive privilege) with borrowed funding, it would be nothing shy of a travesty of justice.

In truth, the only horrible decision is refusing to make horrible decisions. Load up on stolen property, with Yellen’s blessing and 3% funding. Then keep it for yourself. The finest trimmings are available to you. Buy GM stock, on triple margin, funded with credit card debt. It is your birth right.

Of Course Yellen Brought The Sugar

163 views

I don’t know what idiots started the rumors that Yellen was a hawk, but they should have their reputations destroyed on live television. I can’t think of a single moment when Yellen skewed hawkish in Fed minutes or anywhere else in the body of her work over the last 5 years.

Consider this speech titled Perspectives On Monetary Policy she delivered last June to the Boston Economic Club.

She starts off:

Economic Conditions and the Outlook

In my remarks tonight, I will describe my perspective on monetary policy. To begin, however, I’ll highlight some of the current conditions and key features of the economic outlook that shape my views. To anticipate the main points, the economy appears to be expanding at a moderate pace. The unemployment rate is almost 1 percentage point lower than it was a year ago, but we are still far from full employment. Looking ahead, I anticipate that significant headwinds will continue to restrain the pace of the recovery so that the remaining employment gap is likely to close only slowly. At the same time, inflation (abstracting from the transitory effects of movements in oil prices) has been running near 2 percent over the past two years, and I expect it to remain at or below the Federal Open Market Committee’s (the FOMC’s) 2 percent objective for the foreseeable future. As always, considerable uncertainty attends the outlook for both growth and inflation; events could prove either more positive or negative than what I see as the most likely outcome. That said, as I will explain, I consider the balance of risks to be tilted toward a weaker economy.

She then goes on for some time, eventually remarking on the tools the Fed has been using to try and correct the sluggish economic recovery:

The Conduct of Policy with Unconventional Tools

Now turning to monetary policy, I will begin by discussing the FOMC’s reliance on unconventional tools to address the disappointing pace of recovery. I will then elaborate my rationale for supporting a highly accommodative policy stance.

As you know, since late 2008, the FOMC’s standard policy tool, the target federal funds rate, has been maintained at the zero lower bound. To provide further accommodation, we have employed two unconventional tools to support the recovery–extended forward guidance about the future path of the federal funds rate, and large-scale asset purchases and other balance sheet actions that have greatly increased the size and duration of the Federal Reserve’s portfolio.

Yellen then launches into a long explanation of the rationale for “Highly Accomodative Policy”, describing the statistical indicators and rules based decision making she likes to use to determine how accomodative policy should be extended. Finally, she wraps up her speech as such:

…On the one hand, our unconventional tools have some limitations and costs. For example, the effects of forward guidance are likely to be weaker the longer the horizon of the guidance, implying that it may be difficult to provide much more stimulus through this channel. As for our balance sheet operations, although we have now acquired some experience with this tool, there is still considerable uncertainty about its likely economic effects. Moreover, some have expressed concern that a substantial further expansion of the balance sheet could interfere with the Fed’s ability to execute a smooth exit from its accommodative policies at the appropriate time. I disagree with this view: The FOMC has tested a variety of tools to ensure that we will be able to raise short-term interest rates when needed while gradually returning the portfolio to a more normal size and composition. But even if unjustified, such concerns could in theory reduce confidence in the Federal Reserve and so lead to an undesired increase in inflation expectations.

On the other hand, risk management considerations arising from today’s unusual circumstances strengthen the case for additional accommodation beyond that called for by simple policy rules and optimal control under the modal outlook. In particular, as I have noted, there are a number of significant downside risks to the economic outlook, and hence it may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest.

Conclusion
In my remarks this evening I have sought to explain why, in my view, a highly accommodative monetary policy will remain appropriate for some time to come. My views concerning the stance of monetary policy reflect the FOMC’s firm commitment to the goals of maximum employment and stable prices, my appraisal of the medium term outlook (which is importantly shaped by the persistent legacy of the housing bust and ensuing financial crisis), and by my assessment of the balance of risks facing the economy. Of course, as I’ve emphasized, the outlook is uncertain and the Committee will need to adjust policy as appropriate as actual conditions unfold. For this reason, the FOMC’s forward guidance is explicitly conditioned on its anticipation of “low rates of resource utilization and a subdued outlook for inflation over the medium run.”23 If the recovery were to proceed faster than expected or if inflation pressures were to pick up materially, the FOMC could adjust policy by bringing forward the expected date of tightening. In contrast, if the Committee judges that the recovery is proceeding at an insufficient pace, we could undertake portfolio actions such as additional asset purchases or a further maturity extension program. It is for this reason that the FOMC emphasized, in its statement following the April meeting, that it would “regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.”

Her “one hand” of comment seems to be the closest she comes, throughout the entire length of this speech, to suggesting that there could be drawbacks to “Highly Accomodative Policy”. That’s it; more of a formality than anything. Hell, she immediately says she disagrees with that point of view. The entire content of the speech was “we can do more.”

Yellen has consistently been on the record stating, “we can do more.”

Yellen has pushed for “we can do more.”

This was only a year ago. The recovery hasn’t dramatically improved since then. And this speech is just one example of Yellen being on the record dismissing concerns that Fed policy might become a double edged sword.

Yellen strikes me as the kind of Fed head that will be prone to taking Fed policy too far, into the danger zones of monetary interventionism, if anything. She believes in the notion that the Fed can actively micro-manage accomodative policy, with limited trade offs. While she is very much aware of the long term unpredictability of monetary policy tools, she is dismissive of the concerns.

And yesterday, Yellen was so kind to remind the people labelling her a hawk that they don’t know what they’re talking about. Those comments had no support from any observable Yellen comments or actions.

Appropriately, I really don’t think any taper is coming at any point over the next several years. Or, under Yellen’s discretion, any Fed actions, when taken in aggregate, will skew net dovish, with new programs more than overcompensating any individual restraining or contractionary policy move.

Sure Let’s Default. I’m All In

990 views

Alright, it seems like the benevolent Tea Part folk have decided to share their complete inability to grasp simple concepts with the world, by forced contrition on the populace. It is time to eat our peas. Following the line of Obama’s hatred for those damn jet plane flying 1%-ers, the Tea Party have chosen to one up him, by destroying the 1% in its entirety. An unfortunate and slight side effect may be to destroy the other 99% of the country in the process, but hey…sometimes sacrifices must be born for the good of everyone. So making moves for the ill of everyone is the only logical course of action.

In an attempt to honor Argentina’s dim witted socialist president Fernández de Kirchner for her blood clot, the Tea Party have magnanimously extended a show of us revisiting that countries darkest moment, a point from which it has never recovered: elective default.

Remember that one time the global economy nearly collapsed because a single line of business for US banks bet large sums of money that non-creditworthy citizens would default at abnormally low rates in exchange for paper thin margins on those loans?

Well the entire global economy and all of finance has bet gargantuan sums of money that this non-creditworthy country will never default for no fucking margins.

By all means, how do you think this ends?

Frankly, I don’t care anymore, and am all in. Lay your neck under the axe, and taunt these pussies with all your hatred. See if they have the sack to swing.

What’s the alternative? You can turn all short doubling your money with the end of civilization, just in time to burn it to stay warm? You can barter that paper desperately for some precious metals that aren’t for sale? You can get shot by rioters and have it taken off your corpse?

Because if we actually default, it’ll be to late to go out and prepare. Just think of all the mechanisms that are tied to treasuries. There will be bank failures. And a slow, agonizing process as US spending on interest careens towards $1 trillion annually.

In the meantime, staying in our means would require we basically slash in half one of the following:

The entire defense budget OR
The entire non-defense budget

The point of the matter is that if we default, this place is going to get so screwed up anyway, what does it matter? At some point if the decision were not reversed, the man you know as Cain Hammond Thaler would simply cease to exist. His 9th floor office would be deserted; the only clue that he was ever there at all being an empty safe that used to house his silver and firearms and row upon row of cleaned out bookshelves.

I would simply take up my favorite pocket watch and walking stick, and slip away into the night…never to be heard from again.

Previous Posts by Mr. Cain Thaler