“For all the talk about a recovery, pundits, especially those who peddle expensive newsletters, continue to forget one key distinction of the New Normal: there are those for whom the recovery has never been stronger, well under 10% of the population, i.e., the already wealthy whose net worth is allocated in financial assets. And then there is everyone else, that vast majority of Americans, who not only have not benefited by the Fed’s relentless balance sheet expansion and accompanying asset reflation but whose incomes just posted the first declinein real terms since 2012.

It is this latter segment that should be concerned by a recent survey conducted by the MacArthur Foundation titled “How Housing Matters”.

According to the survey during the past three years, over half of all U.S. adults (52%) have had to make at least one sacrifice in order to cover their rent or mortgage. Such sacrifices included getting an additional job, deferring saving for retirement, cutting back on health care and healthy foods, running up credit card debt, or moving to a less safe neighborhood or one with worse schools.

More disturbing, the survey also found that while there are some indicators that the American public’s views about the housing crisis are shifting toward the positive, large proportions of the public are not feeling the relief: seven in 10 (70%) believe we are still in the middle of the crisis or that the worst is yet to come. ……”

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“OITA, Japan—On the day of a closely eyed European Central Bank policy meeting, a Bank of Japan board member warned of the risk of Europe slipping into chronic deflation, adding that slower growth in Europe could muddy the prospects for global growth.

The remarks by Takehiro Sato on Thursday highlight the divergence in the trajectory of inflation in Japan and the euro zone, a difference that will likely play out in their central banks’ respective policy choices.

The BOJ doesn’t need to “make adjustments” to its current policy at present amid an absence of risks coming into play but the central bank is “carefully observing if Europe will fall into Japan-style deflation” and what action it takes, Mr. Sato said. He declined to suggest what, if any measures, the ECB might implement….”

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“FRANKFURT–Thursday’s ECB meeting is shaping up to be one of the most important in recent years. The bank’s president, Mario Draghi, put financial markets on high alert for June action four weeks ago when he said the ECB was “comfortable acting next time.”

Other officials have since struck a similar tone. Time is running out. Annual euro-zone inflation weakened last month to just 0.5%, far below the ECB’s target of just below 2%. Grim economic reports have led to widespread expectations that the ECB will unveil a package of stimulus measures Thursday but stop short of large-scale asset purchases.

What will the European Central Bank do Thursday?

The ECB is widely expected to reduce all three of its key interest rates, on deposits, normal bank loans and emergency lending by 10-15 basis points (though it could go a bit more on the emergency rate because that is the highest of the three). That would bring the main lending rate at which banks can tap the ECB for cash–currently 0.25%–close to zero. The deposit rate, currently zero, would turn negative (see the chart below to see why that’s necessary). The ECB may also extend its policy of making unlimited loans available to banks well into 2016 and unveil a targeted lending program to help steer money to the private sector.

Is there anything else in the toolkit?

Other possibilities include a suspension of its weekly absorption of bank funds–called sterilization–under a previous bond-purchase program. That would add as much as €165 billion to the banking system. It could also do more on the liquidity side by making cheap loans available at long maturities with no strings attached or announce their intention to buy some asset-backed securities at a later date.

Which of these is the biggest deal?….”

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“The S&P 500 is up nearly 10% since its 2014 low in the first week of February. The index, which tracks the largest stocks, is now at a record high, up 4.1% for the year.

Behind the rebound is a view that stocks will continue to benefit from robust earnings, low interest rates and scant inflation. If those conditions persist, the market’s climb could very well continue.

But it’s important to examine the issues that have the worrywarts up at night and the justification bears have for their downbeat outlooks.

Below are some critical investor concerns, with a 1 to 10 “worry level” ranking—1 being the least worried and 10 the most.

 

Earnings and the economy: worry level 8.

The U.S. economy just can’t seem to take off, and recent earnings have disappointed. On Thursday, government data showed the nation’s gross domestic product declined at an annual pace of 1% in the first quarter, worse than economists expected and the first time economic output contracted since the first quarter of 2011.

Meanwhile, profits for S&P 500 companies in the quarter rose about 2% from the same period a year earlier, below the previous quarter’s 8.5% rise.

Rising prices for Treasurys are a sign the bond market is more skeptical about growth than the equity market.

The bond market is giving “a thumbs-down vote on economic growth,” says Peter Boockvar, chief market analyst at Lindsey Group.

Adds Daniel Alpert of Westwood Capital: “The bond and equity markets are expressing dramatically different views of the economy. When this happens, bonds typically have it right about 80% of the time.”

 

What the Fed might do: worry level 6.

A key reason stocks have done well since 2009: The Federal Reserve has kept interest rates low while buying huge volumes of bonds, trying to stimulate the economy. That’s forced investors to flee fixed-income investments and shift to equities.

But the Fed is paring its bond purchases and eventually will raise interest rates, raising questions about the market’s underpinnings…..”

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“Federal Reserve officials are starting to wonder whether a tranquillity that has descended on financial markets is a sign that investors have become unafraid of the type of risk that could lead to bubbles and volatility.

The Dow Jones Industrial Average, up a steady if unspectacular 1% since the beginning of the year, has consolidated big gains registered last year. The VIX, a measure of expected stock-market fluctuations based on options trading, has gone 74 straight weeks below its long-run average—a string of steadiness not seen since 2006 and 2007, before the financial crisis and recession.

Moreover, the extra return that bond investors demand on investment-grade corporate debt over low-risk Treasury bonds, at one percentage point, hasn’t been this low since July 2007. The lower this “spread,” the less risk-averse are bond investors.

The Fed’s growing worry—which could influence future interest rate decisions—is that if investors start taking undue risk it could lead to economic turbulence down the road.

“Volatility in the markets is unusually low,”William Dudley, president of the Federal Reserve Bank of New York and a member of chairwoman Janet Yellen‘s inner circle, said after a speech last week. “I am a little bit nervous that people are taking too much comfort in this low-volatility period. As a consequence, they’ll take more risk than really what’s appropriate.”

One example of increased risk taking: Issuance of low-rated U.S. dollar-denominated junk bonds last year hit a record $366 billion, more than twice the level reached in the years before the 2008 financial crisis, according to financial-data provider Dealogic.

Richard Fisher, president of the Federal Reserve Bank of Dallas, added to the chorus of concern over complacency in an interview Tuesday. “Low volatility I don’t think is healthy,” he said. “This indicates to me a little bit too much complacency that [interest] rates are going to stay at abnormally low levels forever.”

Many officials appear more inclined to talk about market risks than act to pre-empt them given the worry about cutting off a fragile recovery with early interest-rate hikes. Though risk-taking is on an upswing, they don’t see a buildup of serious threats to the broader stability of the financial system.

Fed officials are expected at their June meeting to keep gradually scaling back their purchases of mortgage and Treasury bonds and stick to the plan to keep short-term interest rates near zero, where they have been since the height of the financial crisis in late 2008…..”

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“Senator Elizabeth Warren is not shy about being a crusader for the middle class.

The senior Massachusetts lawmaker had some choice words for the rich in an online dialogue Monday with French economist Thomas Piketty on economic inequality. Theforum, hosted by The Huffington Post’s Ryan Grim, was organized by MoveOn, a liberal political action group.

Warren and Piketty have each just written best-selling books on income inequality. Warren authored a memoir called “A Fighting Chance,” which also discusses what Washington can do to help the middle class. Piketty analyzed data from 20 countries in his tome on income inequality and the concentration of wealth, entitled “Capital in the Twenty-First Century.”

Here is a list of choice quotes from Warren on how the rich have rigged the system.

On Piketty’s findings: Wealth does not trickle down. It trickles up. It trickles from everyone else to those who are rich.

On taxes: When people feel like we’re not all in this together, we’re not all sharing, we’re not all paying a fair share of our income or our wealth, then I think what you get is it all comes all unraveled. Everyone moves towards I will pay the least because he’s paying the least.

On small businesses: Small business owners pay and pay and pay on taxes because the loopholes aren’t as available to them. You look at Fortune 500 companies, companies that are profitable and end up paying zero in taxes.

On rewriting the rules…”

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“COPENHAGEN — If 120 to 150 celebrities were gathered at a hotel for a private three-day meeting, there would be no end to the media coverage, analysis, pictures, manufactured scandals, and ridiculous hype. Supposed “journalists” would have a field day. Just this weekend, about that many top globalists, whose decisions collectively affect the lives of virtually every person on the planet, gathered for the Bilderberg summit in the Danish capital. Establishment media outfits such as CNN, BBC, ABC, CBS, NBC, MSNBC, Fox, the New York Times, the Washington Post, the Associated Press, and others, however, were nowhere to be found.

The deafening lack of press coverage surrounding what many analysts say is perhaps one of the most important meetings of the year was not due to a lack of information about Bilderberg. This magazine and numerous reporters for alternative media outlets in the United States and Europe were there covering the summit. The Danish press was there, too, as were a handful of reporters for major European newspapers. A few government-funded media outlets from Russia, China, Iran, and other nations also reported on the summit. In the increasingly discredited and wildly mischaracterized American “mainstream” media, though, scarcely a word appeared about Bilderberg.

Incredibly, in attendance at the secrecy-obsessed gathering of globalists were numerous high-powered media executives and supposed “journalists” — from editors and publishers of major publications to influential columnists and corporate media magnates. All of them were mingling with over 100 figures representing the upper echelons of banking, politics, the Internet, business, war, government, foreign policy, the EU, NATO, military, spying, royalty, the Chinese Communist Party, and more. Naïve readers and viewers, though — for reasons that remain unclear, one in five Americans still trust the establishment media to keep them informed — were none the wiser…..”

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“Funding infrastructure through bonds doubles the price or worse. Costs can be cut in half by funding through the state’s own bank.

“The numbers are big. There is sticker shock,” said Jason Peltier, deputy manager of the Westlands Water District, describing Governor Jerry Brown’s plan to build two massive water tunnels through the California Delta. “But consider your other scenarios. How much more groundwater can we pump?”

Whether the tunnels are the best way to get water to the Delta is controversial, but the issue here is the cost. The tunnels were billed to voters as a $25 billion project. That estimate, however, omitted interest and fees. Construction itself is estimated at a relatively modest $18 billion. But financing through bonds issued at 5% for 30 years adds $24-40 billion to the tab. Another $9 billion will go to wetlands restoration, monitoring and other costs, bringing the grand total to $51-67 billion – three or four times the cost of construction.

A general rule for government bonds is that they double the cost of projects, once interest has been paid….”

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“Sen. Elizabeth Warren introduced her first bill, a simple proposal to give students the same loan rates as the nation’s biggest banks. Her proposal would allow the cut-rate loans for students for one year, to give Congress the time to come to agreement on a long-term solution to interest rates. Federal Stafford subsidized loan rates for new students are set to double on July 1 to 6.8 percent.

Here’s a snippet from her floor speech introducing the bill….”

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“US Treasury yields are on the verge of basing and resuming their long term bear trends, warns BofAML’s MacNeil Curry, as Treasury volatility (MOVE Index) appears poised for a reversal higher…

Via BofAML’s MacNeil Curry,

Treasury yields poised to base 

US Treasury yields are on the verge of basing and resuming their long term bear trends. While we need to see a 10yr yield close above 2.568% to confirm, we reiterate our comment: THE LONG-TERM BEAR TREND IS POISED TO EMERGE FROM HIBERNATION. While such a turn would be supportive of our bullish US $ view against the likes of € and CHF (we are long the US $ against both) , it should also help push many $/EMFX pairs higher as well. The reason being is that Treasury volatility is also poised for a significant turn to the topside. Indeed, a turn higher in US yields should be the catalyst for such a turn in vol. In such an environment, $/ZAR is particularly well placed to benefit as it has just resumed its long term bull trend. 

Chart of the week: 10yr Treasury yields at the basing zone

US 10yr Treasury yields have reached the 2.420%/2.346% basing zone. From this zone we look for a base and resumption of the long term bear trend…”

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Jeremy Siegel expects bond yields to rise if data comes in stronger

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“It’s been a week of celebrations for Henry Kissinger. On Tuesday he turned 91, on Wednesday he broke his personal best in the 400m hurdles, and on Thursday in Copenhagen, he’ll be clinking champagne flutes with the secretary general of Nato and the queen of Spain, as they celebrate 60 glorious years of Bilderberg. I just hope George Osborne remembered to pack a party hat.

Thursday is the opening day of the influential three-day summit and it’s also the 60th anniversary of the Bilderberg Group’s first meeting, which took place in Holland on 29 May 1954. So this year’s event is a red-letter occasion, and the official participant list shows that the 2014 conference is a peculiarly high-powered affair.

The chancellor, at his seventh Bilderberg, is spending the next three days deep in conference with the heads of MI6, Nato, the International Monetary Fund, HSBC, Shell, BP and Goldman Sachs International, along with dozens of other chief executives, billionaires and high-ranking politicians from around Europe. This year also includes a visit from the supreme allied commander Europe, and a return of royalty – Queen Sofia of Spain and Princess Beatrix of the Netherlands, the daughter of the Bilderberg founder Prince Bernhard.

Back in the 1950s, when Bernhard sent out the invitations, it was to discuss “a number of problems facing western civilization”. These days, the Bilderberg Group prefers to call them “megatrends”. The megatrends on this year’s agenda include: “What next for Europe?”, “Ukraine”, “Intelligence sharing” and “Does privacy exist?”

That’s an exquisite irony: the world’s most secretive conference discussing whether privacy exists. Certainly for some it does. It’s not just birthday bunting that’s gone up in Copenhagen: there’s also a double ring of three-metre (10ft) high security fencing. The hotel is teeming with security: lithe gentlemen in loose slacks and dark glasses, trying not to kill the birthday vibe. Or anyone else.

Already, two reporters have been arrested trying to interview the organisers of the conference in the Marriott hotel bar. It’s easy enough to keep your privacy intact when you’re employing so many people to guard it.

There’s something distinctly chilling about the existence of privacy being debated, in extreme privacy, by people such as the executive chairman of Google, Eric Schmidt, and the board member of Facebook Peter Thiel: exactly the people who know how radically transparent the general public has become.

And to have them discussing it with the head of MI6, Sir John Sawers, and Keith Alexander, the recently replaced head of the National Security Agency. And with people such as the head of AXA, the insurance and investment conglomerate – Henri de Castries. Perhaps no one is more interested in data collection and public surveillance than the insurance giants. For them, privacy is the enemy. Public transparency is a goldmine.

Back in 2010, Osborne proudly launched “the most radical transparency agenda the country has ever seen”. However, this transparency agenda doesn’t seem to extend to Osborne himself making a public statement about what he has discussed at this meeting. And with whom.

We know, from the agenda and list, that Osborne will be there with the foreign affairs ministers from Spain and Sweden, and the deputy secretary general of the French presidency. And from closer to home, the international development secretary, Justine Greening, and fellow Bilderberg veteran and shadow chancellor, Ed Balls.

We know that he’s scheduled to discuss the situation in Ukraine…..”

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“The deceptive Left-Right coalition to rewrite the Constitution by means of an Article V convention threatens our personal rights and freedoms.

Despite war, social upheaval, dem­ographic shifts, and economic ups and downs, the U.S. Constitution has endured for more than two centuries, securing the blessings of liberty for Americans. Now, however, a new threat emerges that seeks to radically alter the Constitution under the guise of amending it. Those seeking radical change to the Constitution look to co-opt it by invoking an Article V “convention for proposing amendments,” otherwise known as a constitutional convention.

Given out-of-control spending by Congress and a national debt of $17.5 trillion — and another estimated $129 trillion in unfunded liabilities — many Americans, especially conservatives, believe that adding a balanced budget amendment to the Constitution would restrain federal spending. Having little confidence in the ability of Congress to correct these financial woes, advocates for a balanced budget amendment (BBA) have once more turned their efforts to what the states can do, specifically the Article V convention process.

However, conservatives seeking a constitutional convention to propose a BBA would be surprised to learn that others, including extreme leftists, also want a convention to advance their own agendas, proposing radical changes with which conservatives would vigorously disagree. Leading convention advocates from both the Left and Right are actually working together to bring about a constitutional convention, even as key advocates on the Left publicly call for a “runaway” convention in order to make multiple and far-reaching changes to the Constitution.

Amending the Constitution

Article V is a one-paragraph article in the Constitution that includes two methods for proposing amendments. The first and only method used so far empowers Congress to propose an amendment “whenever two thirds of the both houses shall deem it necessary.”

The second method for proposing amendments, which has never been employed since the original Constitutional Convention of 1787, is through a constitutional convention called by Congress “on the application of the legislatures of two thirds of the several states.” Once the applications from 34 states are received, Congress is constitutionally bound to “call a convention for proposing amendments.”

Article V also outlines two modes of ratification. The amendments proposed, either by Congress or at a constitutional convention, can only become part of the Constitution once they have been “ratified by the legislatures of three fourths of the several states, or by conventions in three fourths thereof, as the one or the other mode of ratification may be proposed by the Congress.”

Back to the Future

Well-meaning conservatives who advocate for a constitutional convention fail to recognize that once Congress convenes a convention it cannot be undone and no predetermined rules or limitations, adopted by either Congress or the states, will have any bearing on what the convention delegates may choose to do or propose. As the representatives of the sovereign will of the people-at-large in each state, convention delegates would have free latitude to propose any changes they see fit, including the writing of an entirely new constitution, along with changes to the mode of ratification, so as to guarantee the adoption of their amendments. This scenario is known as a “runaway” convention, and it is not without historical precedent.

The Continental Congress originally tasked the delegates assembled at the Philadelphia Constitutional Convention of 1787 with “the sole and express purpose of revising the Articles of Confederation.” At the time, the Articles of Confederation (AOC) was the law of the land. Article XIII of the Articles of Confederation specifically stipulated that “any alterations” made to them must be unanimously “confirmed by the legislatures of every State.” (Emphasis added.)

Both of these mandates were clearly exceeded. The delegates chose to replace the Articles with an entirely new federal constitution. They also altered the mode of ratification from being “confirmed by the legislatures of every State,” in Article XIII of the AOC, to “the legislatures of three fourths of the several states, or by conventions in three fourths thereof,” in Article V of the new Constitution. (Emphasis added.)

On September 13, 1788, with only 11 of the 13 states having ratified the new Constitution, the Continental Congress passed a resolution declaring that it “had been ratified.” North Carolina and Rhode Island had not yet ratified and would not do so until nearly a year and a half later. On May 29, 1790, Rhode Island became the 13th and final state to ratify the Constitution. The new Constitution replacing the AOC was adopted before being “confirmed by the legislatures of every State,” as Article XIII required. With such precedent, who can say it will not happen again?

Call a Convention….”

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[youtube://http://www.youtube.com/watch?v=pD7Uv_JL4HQ#t=59 450 300]

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“Let’s take another look at debt. We’ve probably all gotten so used to huge debt numbers that we’re losing sight of what they actually mean. In the following article, Tyler Durden made me rethink both the debt issue and the perverse consequences of 7 years of zero interest policies (ZIRP) and/or ultra low interest rates. The destruction to society is far greater than anyone seems to be willing to let on. But that doesn’t make it any less real. Here goes:

According to the most recent CapitalIQ data, the single biggest buyer of stocks in the first quarter were none other than the companies of the S&P500 itself, which cumulatively repurchased a whopping $160 billion of their own stock in the first quarter! Should the Q1 pace of buybacks persist into Q2 which has just one month left before it too enters the history books, the LTM period as of June 30, 2014 will be the greatest annual buyback tally in market history. And now for the twist. Unlike traditional investors who at least pretend to try to buy low and sell high, companies, who are simply buying back their own stock to reduce their outstanding stock float, have virtually zero cost considerations: if the corner office knows sales and Net Income (not EPS) will be weak in the quarter, they will tell their favorite broker to purchase $X billion of their shares with no regard for price.

The only prerogative is to reduce the amount of shares outstanding and make the S in EPS lower, thus boosting the overall fraction in order to beat estimates for one more quarter. Compounding this indiscriminate buying frenzy is that ever more companies (coughaaplecough… and IBM of course) are forced to issue debt in order to fund their repurchases. So since the cash flow statement merely acts as a pass-through vehicle and under ZIRP companies with Crap balance sheets are in fact rewarded (as even Bloomberg noted earlier) the actual risk of the company mispricing its stock buyback entry point is borne by the bond buyer who in chasing yield (with other people’s money) serves as the funding source for these buybacks.

Corporations buy back their own shares in order to fool investors about their performance numbers. It’s a profitable undertaking for them because they can borrow at next to nothing. A very simple calculation: if we buy and borrow $1 billion worth, what’s the effect on our balance sheet? How about $10 billion? The essence: there is a reason junk bonds are so popular: there are no ‘normal’ yields left because of central banks’ ZIRP. That’s not to say Apple issues junk, but the principle is the same. Bond buyers, e.g. money market funds, will buy anything. VIX volatility is ultra low, everyone’s doing it, what could go wrong? Well, the answer to that question might to a large extent lie in private and public debt numbers. If only because much of the money corporations borrow to do buybacks has in turn also been borrowed.

When you follow the dots, you must wonder where there is still any ‘money’ left that has not been borrowed. You may even want to wonder whether you have any of it. And you might ask how it is possible that while any and all borrowing is supposed to be collateralized, it’s hard to find ‘hard’ collateral anywhere in the cycle. We can understand that when a Chinese state owned enterprise uses one load of iron ore, bought with credit, as collateral for the next one, something’s amiss. But do we also understand that in our own economies, despite the huge existing debt, and because of ZIRP policies, there is more borrowing instead of less, as would seem to be the smart thing to do. ZIRP thus leads to more debt, and – inevitably – exponentially more bad debt. You can’t heal a sick economy with more debt if it already has historically high levels of it, but that’s still exactly what central bankers claim they try to do.

First, a Daily Mail graph from 2012 gives an indication of total debt numbers for a handful of countries

And if you think that looks bad (not that it doesn’t, mind you), there’s this 2011 Haver/Morgan Stanley one we’ve seen before here:

In which total debt for the US, but even more for Japan and especially the UK, are much higher than in the first graph. This may largely be due to underestimating debts in the financial sector, though it’s hard to say. And for the argument I’m trying to make, it doesn’t even matter all that much. Though I would like to say that it’s crazy that we have no better insight in bank debt than we have. We’re asked to recognize that some of our banks are so big they could bring down our entire economies, but we’re not supposed to know how close they are to doing just that. Honesty would kill us, apparently. The 2nd graph shows a huge, 600% of GDP, debt for the UK, but only perhaps 100% for the US. Oh, really? Let’s see the books.

What’s a little easier to figure out concerning all this debt are the household and government parts. Here’s a comparison:

Let’s take the US as an example. There are 300 million Americans, so about 100 million families…..”

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[youtube://http://www.youtube.com/watch?v=oMy_92XXS_4#t=183 450 300]

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“The fact the market is making new highs on the backs of fewer and fewer stocks is a huge sign of distress that investors should beware of, according to Mark Newton, chief technical analyst at Greywolf Execution Partners.

That kind of top-heavy upward trajectory often leads to trouble, he told CNBC and Yahoo’s Talking Numbers. In fact, the one-month daily average of stocks hitting 52-week highs is approximately 26, down sharply from about 101 at the same time in 2013.

“If you look at the breadth, we’ve seen a pretty amazing amount of deterioration just since last May,” Newton noted. “It’s dramatically down from what we’ve seen over the last year. And, that is a concern.”

Newton said he is looking for a summer pullback in the market because stocks are “the most overbought we’ve been since 2007.”

“We could have a pullback between the months of July and September/October. That historically is a seasonal time of weakness.”

Steve Cortes, founder of Veracruz TJM, also urged caution on grounds that fundamentals are weak.

“Total stock market capitalization — the value of all stocks put together — as a percentage of total U.S. GDP are right back near the highs last seen in the year 2000,” Cortes told Talking Numbers. “Stocks as a percentage of the economy are incredibly expensive.”

Anthony Mirhaydari, founder of Mirhaydari Capital Management, predicted in a column for Investor Place that the current stock market rally will not last.

He said housing looks good, but other fundamentals in the economy look weak….”

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“The bond market, unparalleled in predicting shifts in the U.S. economy over the decades, has a message: interest rates aren’t going to rise as high as even the Federal Reserve’s own forecast.

From bond yields to futures and swaps, traders see little chance the economy will strengthen enough over the course of its expansion to compel the Fed to lift its overnight rate beyond about 3.3 percent. That’s less than the historical average of 4.25 percent that New York Fed President William Dudley said would be consistent with the central bank’s current target for inflation and compares with its long-term estimate of 4 percent.

The divergence reflects deepening concern among bond investors that tepid wage growth and a lack of inflation will persist for years to come, and hold back growth as the Fed moves to end its unprecedented monetary stimulus. Lower peak rates will also reduce the likelihood of any selloff in longer-term Treasurys, which have rewarded holders this year with the biggest returns in two decades.

“The market’s pricing in an extraordinarily slow Fed,” Margaret Kerins, the Chicago-based head of fixed-income strategy at Bank of Montreal, one of 22 primary dealers that trade with the central bank, said by telephone on May 20. “Potential growth is a huge determinant of that long-term rate and most people are buying into the idea of lower potential growth.”

BMO forecasts the central bank’s benchmark Federal funds target rate will peak at 3.75 percent. The Montreal-based bank’s estimate for the terminal rate, as it’s known in the bond market, was 4 percent at the start of 2014.

Mixed Signals

While economists say the Fed will keep its benchmark rate between zero and 0.25 percent until 2015, traders are already weighing in on how high it will ultimately go.

In the Fed’s “dot plot” of interest-rate projections released on March 19, the median year-end estimate was 1 percent for 2015 and 2.25 percent for 2016.

The market’s view is about 0.63 percent and 1.64 percent, based on the implied yield premium of Eurodollars, the world’s most actively traded short-term interest rate futures, over swaps priced to the Fed funds effective rate in those years.

The Fed’s “long-run” forecast is also 0.7 percentage points higher than traders foresee by 2019. The rate on a one-year interest-rate swap traded five years forward, another proxy for short-term rates, fell to 3.4 percent this month, data compiled by Bloomberg show.

“The market clearly doesn’t believe in the Fed’s forecasts,” Thomas Costerg, an economist at Standard Chartered Plc, said in a May 21 telephone interview from New York.

Fed Skeptics…”

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“Merger-and-acquisition activity is back in a big way, as evidenced by AT&T’s blockbuster move this week to acquire DirecTV. The cash companies are putting to work this year, though, is providing more immediate benefit to wealthy investors than it is to the broader economy.

In the years that followed the shock of the 2008 financial crisis, companies understandably sought to accumulate huge amounts of cash — and remained quite loath to deploy it, even though it was earning virtually no interest at the bank. They also strengthened their balance sheets by paying off short-term debts, borrowing for longer periods and cutting back on costs.

Precautionary behavior was an important reason for the hoarding — after all, who knew when another credit crunch might come? But it also has other explanations. 

As I argued earlier this year, weaker global growth, tax policy uncertainties and the increasing “winner-take-all” nature of major investment commitments all played a role. Judging from the amount of cash held overseas, companies’ unwillingness to pay repatriation taxes also mattered.

More recently, pressure from shareholders — including the threat of activist involvement — has prompted companies to change their cash management practices. In 2013, they did so by authorizing an unprecedented $600 billion in share buybacks, as well as increasing dividend payments.

Then came this year’s notable pickup in M&A activity, including record-setting “jumbo deals” of at least $10 billion each.

On the surface, the deployment of cash should be good news for the real economy.

Unfortunately, the manner in which it has happened isn’t yet supportive enough for growth and jobs….”

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”  “Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.” – Ben Bernanke

“The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.” – Alan Greenspan

There you have it – the wisdom of two Ivy League educated economists who are primarily liable for the death of the American middle class. They now receive $250,000 per speaking engagement from the crooked financial parties their monetary policies benefited; write books to try and whitewash their legacies of failure, fraud, and hubris; and bask in the glow of the corporate mainstream media propaganda storyline of them saving the world from financial Armageddon. Never have two men done so much damage to so many people, so quickly, and are not in a prison cell or swinging from a lamppost. Their crimes make Madoff look like a two bit marijuana dealer.

The self-proclaimed Great Depression “expert” Ben Bernanke peddles pabulum about inflation being too low and posing dire risk to the economy, but is blasé that swelling the Federal Reserve balance sheet debt from $900 billion in 2008 to $4.4 trillion today with his digital printing press poses any systematic risk to the country and its citizens. Either his years in academia have blinded him to the reality of his actions upon the lives of real people living in the real world, or his real constituents have not been the American people, but the Wall Street bankers that pulled his puppet strings over the last eight years.

Now that he has passed the Control-P button to Yellen, he is reaping the rewards of bailing out Wall Street and further enriching them with QEfinity. Ben earned a whopping $200,000 per year as Federal Reserve chairman. He now rakes in $250,000 per speech from the very financial interests who benefited from his traitorous monetary machinations. I don’t think he will be invited to speak at any little league banquets by formerly middle class parents whose standard of living has been declining since the 1980s. Is it a requirement that every Federal Reserve chairperson lie, obfuscate, misinform, hide the truth, and do the exact opposite of what they say they will do?

“It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.” – Ben Bernanke – October 2007

Greenspan, Bernanke and Yellen have always been worried about deflation, while even the government suppressed CPI calculation reveals that inflation has risen by 108% since the day Greenspan assumed office in August 1987. The dollar has lost 52% of its purchasing power in the last 27 years of Fed induced bubbles and busts. And these scholarly academic bozos have been worried about deflation the entire time. Since Nixon closed the gold window in 1971 and unleashed the two headed inflation loving gargoyle of debt issuing bankers and feckless self-serving politicians upon the American people, the dollar has lost 83% of its purchasing power (even using the bastardized BLS figures).

Any critical thinking person with their eyes open knows the official inflation figures have been systematically understated since the 1980’s by at least 3% per year. Should the average American be more worried about deflation or inflation, based upon what has occurred during the 100 years of the Federal Reserve controlling our currency?

I’m sure Greenspan is content and proud, as he succeeded through his own endeavors in rewarding, encouraging and propagating excessive risk taking by the Wall Street cabal during his 19 year reign of error. He exited stage left as the biggest bubble in history, created by his excessively low interest rate policy, blew up and destroyed the 401ks and home values of the middle class. This was the second bubble under his monetary guidance to burst. The third bubble created by these Keynesian acolytes of easy money will burst in the near future, further impoverishing what remains of the middle class and hopefully igniting a long overdue revolution.

Greenspan’s pathetic excuse for a career has benefitted those who owned him, while leaving a trail of casualties that circles the globe. His inflationary dogma, Wall Street enriching doctrine and Keynesian motivated schemes have drained the savings and confiscated the wealth of the middle class through persistent and devastating inflation. And it was done by a man who knew exactly what he was doing.

“Under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth… The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit… In the absence of the gold standard, there is no way to protect savings from confiscation through inflation” – Alan Greenspan – 1966

The abandonment of the gold standard in 1971 set in motion four decades of consumer debt accumulation on an epic scale, currency debauchment, and real wage stagnation. The consumer debt accumulation was a consequence of the American middle class being lured into debt by the Too Big To Trust Wall Street banks and their corporate media propaganda machine, as a fallacious response to stagnating real wages when their jobs were shipped to China by mega-corporations using wage arbitrage to boost quarterly profits, their stock prices, and executive bonuses.

The bottom four quintiles have made no progress over the last four decades on an inflation adjusted basis. The middle quintile, representing the middle class, has seen their real household income grow by less than 20% over the last 43 years. And this is using the understated CPI. In reality, even with two spouses working today versus one in 1971, real household income is lower today than it was in 1971.

The more recent data, during the Greenspan/Bernanke inflationary era, is even more disconcerting and destructive. Real median household income has grown at an annualized rate of less than 0.5% over the last thirty years. During the bubblicious years from 2000 through 2014, while Wall Street used control fraud and virtually free money provided by the Fed to siphon off hundreds of billions of ill-gotten profits from the economy, the average middle class family saw their income drop and their debt load soar. This is crony capitalism success at its finest.

The oligarchs count on the fact math challenged, iGadget distracted, Facebook focused, public school educated morons will never understand the impact of inflation on their daily lives…..”

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“The stock market is in the midst of a correction, closely followed investor Dennis Gartman told CNBC on Wednesday.

“I think the process began several weeks ago … [with] the Nasdaq,” the publisher of The Gartman Letter said in a “Squawk Box” interview. “We’re in a correction right now.”

A correction is defined as…”

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Source

“People around the world view the US as the greatest threat to peace; voted three times more dangerous than any other country. The data confirm this conclusion:

• Since WW2, Earth has had 248 armed conflicts. The US started 201 of them.
• These US-started armed attacks have killed ~30 million and counting; 90% of these deaths are innocent children, the elderly and ordinary working civilian women and men.
• The US has war-murdered more than Hitler’s Nazis.
• US official reports now confirm all “reasons” the US told for curren armed attacks were known to be false as they were told.
• These lie-started US wars are not even close to lawful (here and here recently).
• US wars and rhetoric for more wars continue a long history of lie-began US Wars of Aggression. Themost decorated US Marine general in his day warned all Americans of this fact of lie-started wars for 1% plunder.”

[youtube://http://www.youtube.com/watch?v=MeE3-rOG7i4 450 300]

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