Category: zerohedge

Despite the world of mainstream media pundits proclaiming the US is recovering nicely and that a taper is priced in (and the warning that the 5Y auction gave this morning that it's not), markets are already reacting violently to the Fed's decision to announce a small 'taper' (and more dovish forward guidance)…

• *FED TAPERS QE TO $75 BLN MONTHLY PACE, STARTING IN JANUARY
• *FED SAYS `FURTHER MEASURED STEPS' POSSIBLE ON TAPERING
• *FED: EXCEPTIONALLY LOW RATES UNTIL JOBLESS FALLS WELL PAST 6.5%

We now leave it to Ben and his final press conference to explain his decision… and, of course, make sure everyone remembers "QE is for Main Street", 'tapering is not tightening' (despite Jim Bullard telling us it is), and just how effective 'forward guidance' is.

Pre-FOMC: S&P Fut 1771 (spiked pre-FOMC), 5Y 1.55%, 10Y 2.875%, VIX 16.5%, Gold $1236 (which was spiking pre-FOMC), EUR 1.376

Full red-line to follow…

 

As a reminder, here are the 4 reasons why the Fed was cornered into tapering… as we have noted numerous times before; the "taper" is all about economic cover for a forced move the Fed has to make:

1. Deficits are shrinking and the Fed has less and less room for its buying

 

2. Under the surface, various non-mainstream technicalities are breaking in the markets due to the size of the Fed's position (repo markets, bond specialness, and fail-to-delivers among them).

 

3. Sentiment is critical; if the public starts to believe (as Kyle Bass warned) that the central bank is monetizing the government's debt (which it clearly is), then the game accelerates away from them very quickly – and we suspect they fear we are close to that tipping point

 

4. The rest of the world is not happy. As Canada just noted, the US monetary policy will be discussed at the G-20

Simply put, they were cornered and needed to Taper sooner rather later…

 

and as Jim Bullard previously noted,

 

“Financial market reaction to the June and September FOMC meetings provides sharp evidence that changes in the expected pace of asset purchases have conventional monetary policy effects.

 

Using the pace of purchases as the policy instrument is just as effective as normal monetary policy actions would be in normal times”

 

Or – in other words:

Tapering Is Tightening

 

And as BAML noted previously, forward guidance is ineffective as,

…policy makers are finding it harder to convince markets that central bankers have more insight into the future course of the economy and policy than they actually do. Meanwhile, markets are learning that it can be painful to rely too heavily on forward guidance when the risk/reward of being long fixed income is asymmetrical when close to the zero lower bound.

Full Statement redline below:

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/cPjabKT6hnM/story01.htm Tyler Durden

Of the 68 “economists” (which incidentally none of which are “qualified”) that Bloomberg surveyed, 24 believe a taper is coming with the majority expecting a $10 billion cut in the asset-purchase program.

 

 

(h/t Not_Jim_Cramer)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZG4M-S8X8VI/story01.htm Tyler Durden

Of the 68 “economists” (which incidentally none of which are “qualified”) that Bloomberg surveyed, 24 believe a taper is coming with the majority expecting a $10 billion cut in the asset-purchase program.

 

 

(h/t Not_Jim_Cramer)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZG4M-S8X8VI/story01.htm Tyler Durden

.

 

 

 

 

 

 

 

 

.

 

 

 

 

 

.

 

 

 

.

 

 

 

.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Q32okFp5A3A/story01.htm williambanzai7

The rich continue to grow richer, and as David McWilliams (of Punk Economics) so eloquently explains in this brief clip, this has pushed the Fed into a corner. As the Federal Reserve gets a new chair and decides what to do next, whether to print $85 billion a month more or not, McWilliams examines the heist that is the new normal financialized economy – who gets all the loot and why today’s kidnappers wear Prada. “Wake up,” he blasts, explaining the uncomfortable reality of what happens when financial kidnappers dress up as loyal patriots and extort money in the name of the common good.

 

“Today’s ransom is the billions of dollars in the form of QE; today’s hostage is the US economy which the kidnappers threaten to kill by a collapse in asset prices if they don’t get more and more free money… and who is paying the ransom… it is the Federal Reserve…

 

The message from Wall Street – the kidnapper – is: if you don’t give us what we want, we will killl the economy.”

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/J9lVzA4s6OQ/story01.htm Tyler Durden

The rich continue to grow richer, and as David McWilliams (of Punk Economics) so eloquently explains in this brief clip, this has pushed the Fed into a corner. As the Federal Reserve gets a new chair and decides what to do next, whether to print $85 billion a month more or not, McWilliams examines the heist that is the new normal financialized economy – who gets all the loot and why today’s kidnappers wear Prada. “Wake up,” he blasts, explaining the uncomfortable reality of what happens when financial kidnappers dress up as loyal patriots and extort money in the name of the common good.

 

“Today’s ransom is the billions of dollars in the form of QE; today’s hostage is the US economy which the kidnappers threaten to kill by a collapse in asset prices if they don’t get more and more free money… and who is paying the ransom… it is the Federal Reserve…

 

The message from Wall Street – the kidnapper – is: if you don’t give us what we want, we will killl the economy.”

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/J9lVzA4s6OQ/story01.htm Tyler Durden

The anxiety is palpable (despite the constant reassurance that it’s all priced in). Stocks are sliding back to unchanged (on the heels of AUDJPY weakness); VIX is flat at 2-month highs; bonds are notably weaker (not helped by the dismal 5Y auction); and gold and silver are oscillating (on the rise in the last few minutes).

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/5oI2BlSbcC4/story01.htm Tyler Durden

Context is key…

A greater-than $1 trillion (spending) budget heralded as a triumph on the basis that they raised $20 billion in additional revenue (oh and spent an additional $63 billion in anti-sequester outflows).

h/t Investors via The Burning Platform blog

And how the deal got done… Mother Jones explains… why military spending is the glue holding the budget deal together…

The House just passed the Ryan-Murray budget deal, signaling an unexpected end to the cycle of budget crises and fiscal hostage-taking. A few weeks ago, such an agreement seemed distant. Sequestration had few friends on the Hill, but the parties could not agree on how to ditch the automatic budget cuts to defense and domestic spending. Republicans had proposed increasing defense spending while taking more money from Obamacare and other social programs, while Democrats said they’d scale back the defense cuts in exchange for additional tax revenue. Those ideas were nonstarters: Following the government shutdown in October, Senate Majority Leader Harry Reid (D-Nevada) called the idea of trading Social Security cuts for bigger defense budgets “stupid.”

 

Which explains why Rep. Paul Ryan and Sen. Patty Murray’s deal craftily dodged taxes and entitlements while focusing on the one thing most Republicans and Democrats could agree upon: saving the Pentagon budget. Ryan’s budget committee previously declared the sequester “devastating to America’s defense capabilities.” Murray had warned of layoffs for defense workers in her state of Washington as well as cuts to combat training if sequestration stayed in place.

The chart above shows why military spending is the glue holding the budget deal together. It also shows how any remaining opposition to the bill in the Senate may bring together even stranger bedfellows than Ryan and Murray: progressive dove Bernie Sanders (I-Vt.) and sequestration fan Sen. Rand Paul (R-Ky.).

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZW1P8e4oTHc/story01.htm Tyler Durden

Context is key…

A greater-than $1 trillion (spending) budget heralded as a triumph on the basis that they raised $20 billion in additional revenue (oh and spent an additional $63 billion in anti-sequester outflows).

h/t Investors via The Burning Platform blog

And how the deal got done… Mother Jones explains… why military spending is the glue holding the budget deal together…

The House just passed the Ryan-Murray budget deal, signaling an unexpected end to the cycle of budget crises and fiscal hostage-taking. A few weeks ago, such an agreement seemed distant. Sequestration had few friends on the Hill, but the parties could not agree on how to ditch the automatic budget cuts to defense and domestic spending. Republicans had proposed increasing defense spending while taking more money from Obamacare and other social programs, while Democrats said they’d scale back the defense cuts in exchange for additional tax revenue. Those ideas were nonstarters: Following the government shutdown in October, Senate Majority Leader Harry Reid (D-Nevada) called the idea of trading Social Security cuts for bigger defense budgets “stupid.”

 

Which explains why Rep. Paul Ryan and Sen. Patty Murray’s deal craftily dodged taxes and entitlements while focusing on the one thing most Republicans and Democrats could agree upon: saving the Pentagon budget. Ryan’s budget committee previously declared the sequester “devastating to America’s defense capabilities.” Murray had warned of layoffs for defense workers in her state of Washington as well as cuts to combat training if sequestration stayed in place.

The chart above shows why military spending is the glue holding the budget deal together. It also shows how any remaining opposition to the bill in the Senate may bring together even stranger bedfellows than Ryan and Murray: progressive dove Bernie Sanders (I-Vt.) and sequestration fan Sen. Rand Paul (R-Ky.).

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZW1P8e4oTHc/story01.htm Tyler Durden

87-year-old Lew Manchester has just returned from a 3-week trip touring Buddhist temples in Laos and cruising the Mekong Delta in Vietnam. His 61-year-old daughter Lee lives year-round in the basement of her friend’s Cape Cod cottage, venturing into the winter cold to get to the bathroom. As Bloomberg reports, Lew is making the most of his old age. Lee is paring back and lightening her load as she looks ahead to her later years. Both worked all their lives, both saved what they could. “Timing is everything and my dad’s timing with jobs, real estate and retirement benefits was better,” said Lee. A rising tide of graying baby boomers is less secure financially and has a lower standard of living than their aged parents.

Via Bloomberg,

The median net worth for U.S. households headed by boomers aged 55 to 64 was almost 8 percent lower, at $143,964, than those 75 and older in 2011, according to Census Bureau data. Boomers lost more than other groups in the stock market and housing bust of 2008, and many also lost their jobs in the aftermath at a critical point in their productive years.

 

…

 

“Baby boomers are the first generation without the safety net of pensions and other benefits their parents have,” said Alicia Munnell, director of the Center for Retirement Research at Boston College. “They’re facing a much more challenging old age.”

 

…

 

Lee said she harbors no resentment for her dad, who she credits with instilling her with a strong work ethic. “I was never allowed to dream,” she said. “My parents and then my husband expected me to work, and I couldn’t really think about what I most wanted to do.”

 

…

 

Lee is hardly the only baby boomer who didn’t save enough, worked for companies without 401(k) accounts or lost significant amounts in the financial crisis. Today, her retirement savings of $120,000 are right at the median 401(k) balance for households headed by baby boomers, according to 2011 data from the Center for Retirement Research at Boston College.

 

That will provide just $4,800 a year to boomers when they turn 65, assuming they take out 4 percent annually, the limit financial planners say should be withdrawn to assure retirees don’t run out of money in their lifetimes.

 

…

 

Had boomers like Lee been thriftier, they would have still been hurt by a shift to 401(k) accounts from pensions in the 1980s. Thirty-seven percent of the elderly in the U.S. collect pensions, which provide some guaranteed income until they die. Fewer than 10 percent of boomers collect pensions, and that number is quickly shrinking.

 

…

 

“She has never complained to me about not having enough money,” he said. “But if she needs it, I’ll advance it.”

 

Lee, who has repaid the money she borrowed, avoids dwelling on her difficulties during her weekly calls to her dad.

 

“I know he’ll help me if I fall off the ledge, but he taught me to be self-sufficient,” she said.

 

…

 

“It’s liberating finally getting to a point in my life where I don’t need a lot of stuff,” she said. “I felt like I was getting rid of the baggage of life that I’d kept dragging behind me and which was just weighing me down.”

 

…

 

Lee doesn’t regret downsizing her life. She has more time than ever to enjoy the outdoors, read and spend time with her friends.

 

“There’s so much pressure to keep up, to keep buying things, to stay on the treadmill always hoping to have more,” she said. “Well, less can be better.”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/c9pfGvWHRmU/story01.htm Tyler Durden