Unbelievable: Yellen Downplays Deflation; Repeats Inflation Risks

In prepared statements just released, Janet Yellen acknowledged the fact that the fucking world has been falling apart, and the financial system is in tatters.

“Financial conditions in the United States have recently become less supportive of growth,” Yellen said in testimony prepared for delivery Wednesday before the House Financial Services Committee in Washington. “These developments, if they prove persistent, could weigh on the outlook for economic activity and the labor market.”

Big fucking deal. Any normal person with half a brain would say that now.

Here is the real horseshit.

The Fed chair repeated her projections that inflation will eventually move back toward the bank’s 2 percent target, downplaying concerns over declines in inflation expectations. She attributed the drop in market-based measures of inflation expectations to technical reasons, citing changes in risk and liquidity premiums in the market for U.S. Treasuries. Survey-based measures of expectations are low but “reasonably stable,” Yellen said.

So the drop in inflation expectations are ‘technical reasons’?

She’s leaving the door open for a March hike, as unbelievable as that may seem.

“The FOMC anticipates that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate,” Yellen said, repeating language from the committee’s January statement almost verbatim.

Yellen noted that U.S. economic growth in 2015 slowed to an estimated 1.75 percent, restrained especially by the impact of a strengthened dollar on exporters. Still, she said, household spending had gotten a boost from lower fuel prices and steady jobs growth, a trend she expected will continue.

“Ongoing employment gains and faster wage growth should support the growth of real incomes and therefore consumer spending, and global economic growth should pick up over time, supported by highly accommodative monetary policies abroad,” Yellen said.

Futures have pared gains, from +150 to +90 and treasury yields have gone lower since these ridiculous statements were released.

If the FOMC delayed the start of policy normalization for too long, it might have to tighten policy relatively abruptly in the future to keep the economy from overheating and inflation from significantly overshooting its objective.

The FOMC anticipates that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate. In addition, the Committee expects that the federal funds rate is likely to remain, for some time, below the levels that are expected to prevail in the longer run…Of course, monetary policy is by no means on a preset course. The actual path of the federal funds rate will depend on what incoming data tell us about the economic outlook, and we will regularly reassess what level of the federal funds rate is consistent with achieving and maintaining maximum employment and 2 percent inflation.

FML

Markets are in rally mode this morning, ahead of Chair Yellen’s testimony. It’s a bit of a risk for buyers, since Yellen has done nothing to indicate a stubbornness and wanton disregard for markets or sentiment, ever since becoming Chair.

Nevertheless, the stage is set for what looks like an explosive move to the upside.

First and foremost, DB is sharply higher. This is the poster child for distressed banks. It needs to rally fast and furious.

Check.

Oil is higher.

Check.

Gold is lower. There can be no arks or safe haven rallies, if equities are gonna bounce.

Check.

The ark is taking on some water. It may need to come in for some repairs.

Check.

NASDAQ futures are sharply higher.

All Yellen has to do now is sound rational by acknowledging current risks and the market will go on a two week 10% rippage to the upside.

If she fails to please, we’ll descend into anarchy.

Happy trading.

This man is out of his fucking mind. Or, maybe he’s not. Maybe central bankers are out of their minds. Either way, the specter of  -4.5% rates, to me, is a great perversion of decency, an injurious policy harking back to medieval days.

Having studied the lack of fallout in Switzerland, where the benchmark rate is minus 0.75 percent, Malcolm Barr and Bruce Kasman reckon the trick lies in a tiered system as already deployed by the Bank of Japan and in some places of Europe, whereby only a portion of reserves are subjected to negative rates.

On that basis, they estimate if the ECB just focused on reserves equivalent to 2 percent of gross domestic product it could slice the rate it charges on bank deposits to minus 4.5 percent. That compares with minus 0.3 percent today and the minus 0.7 percent JPMorgan says it could reach by the middle of this year.

The Bank of Japan’s lower bound on a similar basis may be minus 3.45 percent, while Sweden’s is likely minus 3.27 percent, the economists said. Should they also go negative, the Fed could cut to minus 1.3 percent and the Bank of England to minus 2.69 percent in JPMorgan’s view, reflecting how the ratio of reserves to assets is higher in their economies than elsewhere.

Out of Ammunition

Concentrating on 25 percent of reserves would allow the ECB to cut to minus 4.64 percent and the Fed to minus 0.78 percent. Making no change to the current regime would allow Draghi to lop to minus 1.36 percent, they said.

Easing the fall is that the JPMorgan economists bet that banks are unlikely to be able to pass on the cost of the policy to borrowers, reducing potential repercussions. They also see limited pressure on bank profits or for a need to stash cash.

This sums it up:

“It appears to us there is a lot of room for central banks to probe how low rates can go,” they said. “While there are substantial constraints on policymakers, we believe it would be a mistake to underestimate their capacity to act and innovate.”

Swiss 2 yr bonds are yielding -0.93%.

Shares of Deutsche Bank are higher by 12% in Germany today, continuining the rally after the FT reported the company might buy back some of their bonds. Their COCO bonds are trading high 60’s/low 70’s, on par with Amazonian banks in the jungles of Brazil and Greece.

Not everyone agrees with the assesssment of the market, when it comes to DB. James Bevan from CCLA believes there is ample liquidity, with a modicum of currency risk.

The Japanese Yen carry trade is always a topic of interest. Whenever the Yen strengthens, people get all panicky and shriek in horror, worrying about apocalyptic downward moves in the NIKKEI. Well, considering the NIKKEI was off 900+ last night and another 600+ tonight, I think it’s fair to say the Japanese market has crashed.

Look at the action in the usd/jpy cross over the past 8 days. Stunning.

Japanese bonds are now negative yielding, all the way to 10 yr durations.

This is extremely disconcerting for people who hoped the Bank of Japan’s actions would spur some buying interest in Japanese equities. The exact opposite has occurred. Yen has soared, bonds have soared and equities have literally crashed.

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Year to date, companies with positive free cash flow, totalling 2,544 names, are down a median of 11.58%. Here is the screen.

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I don’t know what’s funnier, Ghost Face Killers response to Shkreli or Maria’s seriousness in interviewing Ghost for this absurd topic.

Here is Maria’s interview.

Here is Ghost’s full ‘welfare cheese and fried bologna’ response to Shkreli.

‘Give us back that medicine…holla at me…5,000% bro.’

It looked great, the numbers that is.

Check it out:

via Briefing.com

• Reports Q1 (Dec) earnings of $1.63 per share, excluding non-recurring items, $0.17 better than the Capital IQ Consensus of $1.46; revenues rose 13.8% year/year to $15.24 bln vs the $14.8 bln Capital IQ Consensus. Global success of Star Wars: The Force Awakens drove record quarterly operating income at both Studio Entertainment and Consumer Products & Interactive Media
• Media Networks revenues for the quarter increased 8% to $6.3 billion, reflecting higher advertising and affiliate revenues, and segment operating income decreased 6% to $1.4 billion. Advertising revenue growth was due to an increase in units sold and higher rates, partially offset by lower ratings. Affiliate revenue growth was due to contractual rate increases, partially offset by a decline in subscribers and unfavorable foreign currency translation impacts.

Initially, the stock took off and all of the bull slapped on their Mickey ears, while shoving Twizzlers into each others mouths, until this one sentence was release from the bowels of the dungeons of Bob Iger’s catacomb.

Cable Networks revenues for the quarter increased 9% to $4.5 billion and operating income decreased 5% to $1.2 billion due to a decrease at ESPN

ESPN is the main source of worry for the company. Since it sucked, so will the stock, henceforth, for as long as the earth remains in rotaion.

DIS is down 3.5% in after hours sadness.

The fuck out of here, Solar City.

I don’t even know what that title is supposed to mean. But it’s over, 100%. In the Obama administration, all forms of energy get smoked out. Whether it be coal, windmills, natural gas, oil, biofuels or solar, that shit gets decimated.

Before the year is out, we will resort to the ancient form of energy, fire, for our everyday needs.

Via Briefing.com

• Reports Q4 (Dec) earnings of $0.04 per share, which may not be comparable to the Capital IQ Consensus of ($2.59); revenues rose 60.8% year/year to $115.48 mln vs the $105.67 mln Capital IQ Consensus.
  • MW Installed: Record 272 MW, up 54% year-over-year (Guidance 280-300 MW)
  • MW Deployed: 253 MW, up 44% year-over-year
  • Value of MW Deployed under Energy Contracts: $3.64 per watt at a 6% discount rate ($3.32 per watt contracted and $0.32 per watt estimated renewal)
  • Cost per Watt: $2.71 per watt, down 5% year-over-year;
  • Asset Financing in Q4 2015: $2.40 per watt.
  • As of December 31, 2015, unrestricted Cash and Investments totaled $394 million, as compared to $418 million on September 30, 2015. Thequarterly decline in cash of $137 million.
  • Residential has consistently performed above expectations over the last year, and missed guidance largely on commercial installations.
  • Going forward, plan on removing from guidance any large projects with construction deadlines late in the quarter.

Guidance

• Co issues downside guidance for Q1, sees EPS of ($2.65)-($2.55) vs. ($2.36) Capital IQ Consensus Estimate.
• Looking ahead to 2016, continue to target 1.25 GW Installed. Though the ITC extension certainly provides more tailwinds to growth, the primary focus is goal of generating positive cash by year-end.
• “Though we are projecting a lower rate of growth in 2016 than in years past, our guidance still implies over 40% annual growth in 2016, a rate of growth that would be the envy of most industries and companies in this country”.
• For Q1 2016 expect to install 180 MW, representing growth of 18% y/y, and a 34% decline as compared to Q4 2015. This represents a higher-than-usual seasonal slowdown that have historically experienced after strong fourth quarters
• Expect installations—and cash generation—to ramp throughout 2016.
• For Q1 2016, expect GAAP Operating Expenses of $230-240 mln.

A multitude of solar stocks are getting poleaxed, alongside Elon Musk’s stupid solar panel company. Word has it, now that TSLA and SCTY have been destroyed, Elon will move back to S. Africa to raise zebra and hunt near extinct animals for sport.

SCTY is down about 60% in 2016, thus far, and lower by more than 30% in after-hours trade.

In tonight’s episode of “Hey, I’m Peter Schiff and I fornicate with gold bars at night”, Peter discussed the vagrancy of the Fed and how it messed up and how QE4 is coming. Peter also believes, under any and all circumstances, whether it be space alien invasion of Earth, great depressions, war, pestilence: gold will trade higher.

If you don’t believe gold will trade much higher, clearly, according to Peter, you’re a fucking moron idiot. In that order.

Gold is up 12%, year to date.