Oil prices gained modestly on the day, with WTI rallying up to $58 ahead of tonight’s API inventory data, despite another tanker being seized (by Egypt this time).
“Given the continued presence of sanctions and tensions between the U.S. and Iran, the ongoing trade war between the U.S. and China, and the potential for an economic slowdown, oil prices are likely to remain volatile in the short term,” said Michael Laitkep, an analyst at Alerian, which tracks energy infrastructure companies.
But for tonight, and tomorrow morning, all eyes are on the fundamental side…
API
Crude -8.129mm (-2.5mm exp)
Cushing -754k
Gasoline -257k
Distillates +3.690mm
Crude inventories were expected to drop in the last week (after 3 previous weeks of draws) but the huge 8.1mm crude draw was a big surprise (everyone is ignoring the distillates build for now)…
WTI hovered around $58.00 ahead of the print, and exploded higher (above $59) on the huge draw…
The initial spike has faded a little after running the $59 stops…
“There is a strong case to paint a bullish as well as a bearish picture depending on one’s view on the general state of the world economy and politics,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.
Powell’s testimony will be watched closely for an indication of whether the Fed is likely to cut U.S. interest rates at its next meeting on July 31, with energy market hope for growth gains.
via ZeroHedge News https://ift.tt/2Jy0rhP Tyler Durden
We are about to open up a can of worms that could turn our entire country completely upside down by the time it is all said and done.
Billionaire Jeffrey Epstein’s horrific crimes have been well known for a very long time, and I have been writing about them for many years. In fact, there were some people that really, really didn’t like it when I wrote about Bill Clinton’s connections to Jeffrey Epstein and “the Lolita Express” during the 2016 presidential election. Flight records show that Bill Clinton took 26 trips on board Jeffrey Epstein’s infamous private plane, and Clinton also spent an enormous amount of time on Epstein’s secluded private “sex island” where underage girls were routinely abused. Of course Jeffrey Epstein had lots of other very famous friends as well, and it has been documented that his “black book” was absolutely filled with marquee names from Hollywood, Wall Street and Washington.
But despite everything that we knew about what was going on, for a very long time it looked like justice would never be served. Epstein got an absolutely ridiculous sweetheart deal from prosecutors in 2008, and none of his famous friends were ever charged with anything. They all probably thought that they had escaped the grasp of law enforcement forever, but this month everything has suddenly changed.
In recent days, authorities apprehended Epstein after his plane returned from an overseas trip, they raided his home, and they formally charged him with sex trafficking and conspiracy…
Fund manager Jeffrey Epstein used his wealth and power to sexually abuse dozens of young girls for years at one of the biggest mansions in Manhattan, paying them hundreds of dollars in cash for each encounter and hundreds more if they brought in more victims, U.S. prosecutors said.
Now, federal prosecutors are charging him with sex trafficking and conspiracy. They’re seeking to send him prison for years and seize that Manhattan home.
The indictment unsealed on Monday against the well-connected financier came days after his arrest upon returning from overseas and just hours after federal agents used a crowbar to enter the townhouse.
The U.S. Attorney’s Office for the Southern District of New York is prosecuting Epstein, and they don’t mess around. They win more than 90 percent of the cases that actually go to trial, and Epstein has good reason to be shaking in his boots at this point.
Maurene Comey, daughter of former FBI Director James Comey, is reportedly a prosecutor in the new criminal case against convicted pedophile Jeffrey Epstein. This details comes out of a new CNN report. The source is described as a person “with knowledge of the case.”
Will that turn out to be significant?
We shall see as this drama plays out.
In the legal community, everyone has an agenda, and the U.S. Attorney’s Office for the Southern District of New York certainly has an agenda in this case.
But what is their goal?
Why have they decided to pursue this specific case at this specific time?
Perhaps the primary goal is to nail Epstein to the wall once and for all. If Epstein is convicted of all the charges against him, he will spend the rest of his life in prison. And if that is all there is to this story, it won’t be an enormous national scandal.
However, it could also be possible that the U.S. Attorney’s Office for the Southern District of New York wants to use Epstein to get to one or more of his famous friends, and that is where things could get very “interesting”.
Second, what should we make of reporting that Epstein’s prosecution is being overseen by the Public Corruption Unit of the SDNY? Short answer: It’s too soon to say. It could mean that a public official is being investigated or will be charged with Epstein. That could be a minor public figure or a major one. It could mean that SDNY is investigating misconduct in the plea that Epstein was given in 2008. Or it could mean none of those things.
After everything that Epstein went through in 2008, you would think that he would clean up his life and get rid of all the stuff that got him into so much trouble in the first place.
But when authorities raided his home, they discovered a “vast trove” of photographic evidence…
Prosecutors said a search of Epstein’s Manhattan mansion after his arrest turned up a ”vast trove” of nude photos of what appeared to be underage girls. Officials said in court papers that the pictures included some on CDs with handwritten labels, including “Misc nudes 1,” “Girl pics nude” and the names of specific young women.
It has also previously been reported that in the old days Epstein would actually record “the sordid orgies he threw for VIPs at his luxury homes using cameras hidden in the walls of guest bedrooms”, but it is not known if those recordings still exist or if authorities were able to find any such recordings when they raided Epstein’s home.
In any event, there is clearly an enormous amount of evidence against Epstein already, and that means his only hope of avoiding prison for the rest of his life is to cooperate with authorities.
And as former federal prosecutor Elie Honig has pointed out, Epstein’s former friends from Hollywood, Wall Street and Washington should be quite scared right now…
We do not know if Epstein will cooperate, but even if he does not, others will very likely be implicated. It seems clear from the indictment that others helped Epstein run his alleged sex trafficking operation and otherwise participated in it. At least some of those names will come out in court proceedings, public filings, potentially trial and perhaps additional indictments. And it’s worth noting that the Epstein case is being handled by the SDNY’s Public Corruption Unit — in my experience, human trafficking cases usually are handled elsewhere in the office — which strongly suggests that public officials could be under a microscope here. Anybody who helped Epstein in any way needs to get a lawyer and get scared.
Of course Epstein could choose to sacrifice himself and protect his friends by not talking, but that isn’t likely to happen. In fact, Jack Posobiec is reporting that Epstein’s lawyers have already made it clear to the SDNY that their client will cooperate as long as he can get a reduced sentence…
SCOOP: Epstein’s lawyer has already made a proffer to SDNY. Epstein will agree to cooperate with the investigation, including giving up the names of individuals that paid for activities with underage girls in exchange for a maximum sentence not to exceed 5 years
This news comes just days after a judge ordered the unsealing of nearly 2,000 pages of records related to a civil case that could reveal how he and his accused accomplice Ghislaine Maxwell allegedly trafficked underage girls
The documents that will be unsealed are from a defamation case that was settled after Epstein entered a guilty plea guilty to a single charge of soliciting and procuring a person under age 18 for prostitution.
Records in the defamation case contained descriptions of sexual abuse by Epstein along with new allegations of sexual abuse by ‘numerous prominent American politicians, powerful business executives, foreign presidents, a well-known prime minister and other world leaders.’
We will talk about who some of those individuals might be in the second part of this series which I will post later tonight on The Most Important News.
I have been writing about corruption in the political world for a long time, but this could be the scandal of all scandals.
So stay tuned, because I believe that things are about to get extremely interesting.
via ZeroHedge News https://ift.tt/2XBwpn3 Tyler Durden
US Stocks briefly popped (S&P into the green) on China trade talk headlines (around 1400ET) but that did not last but – as usual – a buying panic arrived at around 1530ET lifting everything on no news, desperate to get the Dow green, but failed…
For a sense of that late-day idiocy in context…
What a fucking joke!
This is the Dow’s 3rd down day in a row – its worst streak of losses since March…
Defensives once again dominated the price action…
Boeing swings intraday prompted the Dow’s volatility as Qatar headlines spiked (on Trump hope) and then dumped (on reality) shares…
The analog remains…
Treasury yields were higher across the curve with the short-end continuing to underperform (but 30Y remains lower on the week)…
10Y Yields could not break above Friday’s spike highs…
The Dollar extended its recent gains, erasing all losses since the FOMC statement…
The peso plunged today as the mexican finmin unexpectedly quit…
Cable tumbled back below 1.25, its lowest since April 2017…
Bitcoin pushed back above $12500…
Cryptos did get hit late on however…
Silver outperformed gold for the second day in a row, copper was crushed…
Spot gold tested back up to $1400 once again…but was unable to hold it…
Finally, anyone who “can’t see the recession” coming to the U.S. isn’t looking at a key indicator, according to David Rosenberg, Gluskin Sheff & Associates Inc.’s chief economist and strategist. As Bloomberg reports, Rosenberg featured a gauge compiled by the Federal Reserve Bank of New York in a Twitter post Monday.
The monthly indicator is based on the gap between yields on three-month Treasury bills and 10-year notes, and shows recession probabilities over 12 months. The latest reading was 32.9%, a 12-year high. Adding insult to injury was the OECD leading indicator is now the lowest since the global economy was trying its utmost to climb out of the Great Recession in late summer 2009.
via ZeroHedge News https://ift.tt/2S4w723 Tyler Durden
With over $13 trillion in global notional debt trading with a negative yield, it will hardly come as a surprise that there is a line of investors stretching around the block for even the least fundamentally sound bonds which still offer a modest positive yield, such as those which for the past 2 years were only purchased by the ECB. We are of course talking bout Italian bonds, and not just any variety, but 50-year bonds issue offered by Europe’s financial problem child.
The frenzied demand for Italian bonds that won’t be repaid in most investors’ lifetimes (they mature in 2067) – or perhaps ever, if Italy defaults on its debt – was such that they attracted demand of over €17.5 billion for the €3 billion offering, making them roughly 6x oversubscribed, despite a yield of just 2.9%, almost a full percent lower than what this paper yielded in late 2018.
To Bloomberg this represents the “latest example of the intense hunt for yield spurred by dovish monetary bets. even as the stronger-than-expected U.S. jobs report on Friday clouds the case for aggressive monetary easing.”
Meanwhile, as Italian bond yields tumble on expectations that the ECB will restart its QE in the coming months, Europe is slowly collapsing under Albert Edwards’ ice age, and the number of corporate junk bonds trading with a sub-zero handle in euros now stands at 14, compared to zero at the start of the year. Even emerging-market issuers are joining the not-so-exclusive negative yield club, while a whopping 27% of Europe’s investment grade bonds are now trading with a negative yield sign.
Not even Wall Street expected the kind of panicked buying that has emerged in recent weeks: “Coming into the year we were expecting a rally following the fourth quarter sell-off,” said Jens Vanbrabant, head of European loans and high yield at Wells Fargo Asset Management. “But that rally morphed into a yield-grab.”
“In a world where the outstanding pool of positively-yielding European government debt for fund managers to invest in is shrinking all the time, this is where the price goes,” SocGen’s Kit Juckes told Bloomber. “I think yields are more likely to fall further than rise from here.”
Taking advantage of the frenzied yield grab, Italy is also issuing 3- and 7-year notes as Italy’s premium over German bunds touched the lowest level in over a year last week. Both Spain and France also auctioned debt at record-low borrowing costs last Thursday. Investors are turning to peripheral euro-area bonds as the yields on German bunds last week dipped below the ECB’s -0.4% deposit rate for the first time ever.
But wait, there’s more because with not a hint of hawkishness around the globe, money managers are now making a killing on debt that won’t mature for nearly 100 years. The result: bond investors making stunning returns of 19% on average by holding on to 100-year debt from the three most prominent issuers: Argentina, Mexico and state-controlled Petroleo Brasileiro SA. That’s almost double the gain for the benchmark emerging-market debt index.
“There’s been a scramble for any bond with some spread – the longer, the better,” said Guido Chamorro, a senior investment manager at Pictet in London, who’s overweight Mexico century bonds. His emerging-market debt fund has topped 75% of peers this year, according to data compiled by Bloomberg.
That said, following Friday’s sharp spike in yields – which has since subsided – questions emerged if the world was facing the mother of all VaR shocks as virtually everyone is now long record duration; still as Bloomberg adds, with intensely bullish bond bets built into cross-asset funds, “the bar for a tantrum is looking low, as traders eye make-or-break pronouncements from U.S. monetary officials.”
This all can change tomorrow if Powell throws markets another curve ball and shift the Fed’s posture back to hawkish:
“The question is whether this week Powell will try to calibrate expectations,” said BlackRock’s head of economic research Elga Bartsch. “We think a 100 basis points of insurance rate cuts between now and next summer is very ambitious and that means the U.S. government bond market is probably likely to be the most exposed.”
As for century bonds, which are among the riskiest debt securities in the world, they would “get slaughtered” if the Fed shocks markets by not lowering borrowing costs at the end of July, according to Hari Hariharan, chief executive officer of NWI Management. Is he really worried this will happen? No: he likes Petrobras’s 100-year debt on the possibility of bond buybacks.
Not worried about a hawkish surprise is also Tina Vandersteel, money manager at GMO in Boston, who prefers Mexico’s 100-year securities over Argentina’s for the same reason as Chamorro. Assuming a global monetary ice age isn’t fully priced in, yet, century bonds would be the bonds that benefit the most as interest rates across the entire world sink into negative territory.
Why is everyone so confident that there is nothing to be worried about? Zsolt Papp, money manager at JPMorgan Asset Management in London explained it best: “The Fed will likely remain accommodative. That’s good for EM and century bonds.”
This, as Goldman admitted yesterday, is the crux of the issue: the Fed is no longer in charge, and instead the market is dictating terms to the central banks, and the market’s message is clear – lower rates, more liquidity, making the rich richer while eradicating savers and the entire global middle class.
via ZeroHedge News https://ift.tt/2S2Opki Tyler Durden
In that piece, I shared many lesser known, but extremely bizarre facts about Jeffrey Epstein and the people around him. I also noted that it appeared his real job was to run a blackmail operation to ensnare some of the most wealthy and powerful people on earth. I alluded to the possibility that he was collecting this priceless information on behalf of a third party, and then just today we learn the following via the Daily Beast:
“Is the Epstein case going to cause a problem [for confirmation hearings]?” Acosta had been asked. Acosta had explained, breezily, apparently, that back in the day he’d had just one meeting on the Epstein case. He’d cut the non-prosecution deal with one of Epstein’s attorneys because he had “been told” to back off, that Epstein was above his pay grade. “I was told Epstein ‘belonged to intelligence’ and to leave it alone,” he told his interviewers in the Trump transition, who evidently thought that was a sufficient answer and went ahead and hired Acosta. (The Labor Department had no comment when asked about this.)…
Twitter has suspended prominent gun-rights activist and researcher, John R. Lott Jr over a Tweet about the New Zealand mass murder that killed a group of Muslims as they attended Mosque.
When Lott logged onto Twitter, the platform greeted him with a message stating that one of his Twitter posts violated the company’s rules although the social media platform did not list and the exact reason why the Tweet violated their terms of service. The tech giant hasn’t responded to Lott’s appeal as of this writing.
.@Twitter locked @JohnRLottJr‘s account for tweeting about the NZ mosque killer. The killer’s manifesto does state he did the attack b/c it would lead to more gun control & he is a socialist, environmentalist, who hates capitalist & free trade.
details:https://t.co/g6tNi8e2j5pic.twitter.com/pIVtBmMLXk
The Tweet that Twitter flagged was from March 15th of this year. It is unclear whether the tweet was flagged manually or by machine learning. Google has come under fire recently for a Project Veritas Investigation that showed the tech giant allegedly rigging their algorithmic software to help left-wing presidential candidates. Since this Tweet is almost four months old it seems likely this was flagged manually.
To be able to post again, Twitter requires that Lott deletes the offending post. Lott told AmmoLand that removing the Tweet is something he is not willing to consider. He is asking everyone to retweet the screenshots that the CPRC shared on their Tweeter feed and Tweet at Twitter CEO, Jack Dorsey, and Twitter Support.
Twitter claims that they do not use political affiliation when enforcing their rules. That is at odds with their actions such as when Twitter removes groups like the Proud Boys, but organizations like Rose City Antifa, the group that attacked police and journalist in Portland, OR last weekend, still are free to use the platform to organize their violent protest.
When AmmoLand News reached out to Twitter to see why the company decided to ban the Proud Boys but let Rose City Antifa operate on their site, Director for Global Policy Communications, Ian Plunkett, stated that the Marxist group was “not currently in violation of our policies.”
Twitter did not give AmmoLand News an exact reason why Lott’s account was locked, but in the statement that Twitter gave to AmmoLand, it seems like the Social Media company is accusing Lott of glorifying violence.
The statement given to AmmoLand by Twitter reads:
“We don’t comment on individual accounts for privacy and security reasons, but for background, it’s against our policies to share content that glorifies violence on Twitter, including directly linking to that information. Additionally, we enforce the Twitter Rules impartially for all users, regardless of their background or political affiliation.”
AmmoLand’s follow up questions to Twitter about how exactly Lott’s Tweet glorified violence were not returned. The company also did not explain how his Tweet differs from reports by NBC, CBS, New York Times, various other news organization. Lott’s Tweet was factually accurate and easily verifiable.
As of now, Twitter still has Lott’s account lock although readers can see screenshots of the Tweet on the CPRC’s Twitter Feed.
via ZeroHedge News https://ift.tt/2NGMcMY Tyler Durden
Six months after the worst year for hedge funds since 2011, the 2 and 20 community is enjoying a renaissance of sorts, with the hedge funds universe reporting the best first half performance since 2009, as equity managers piggybacked on surging stocks. According to Hedge Fund Research, funds rose 5.7% from January through June, with equity funds were the best-performing broad strategy, gaining almost 9% in the period, if still underperforming the S&P significantly.
Using a trite cliche, Rob Christian, head of investment research at K2 Advisors, told Bloomberg TV that “it’s a stock-picking market, definitely” even though what he really meant is that it’s a dovish central bank-picking market as the main reason for the stock surge in 2019 had everything to do with the surprise dovish reversal by the Fed, which is now expected to cut rates in three weeks, something that has “been most favorable for equity long-short managers, and particularly managers with a growth tilt.”
Courtesy of Bloomberg, this is how some of the more notable hedge funds did in the first half.
Of course, as noted above, the hedge fund gain pales in comparison to the S&P 500 Index, which returned almost 19% in this year’s first six months. Furthermore, one did not have to pay 2% of assets and 20% of the upside to some billionaire if one simply had bought SPY ETFs on January 1, thanks to central banks who for the past decade have been the market’s chief risk officers, springing to action when there is a risk of even a modest 10% correction.
Activist hedge funds did better, rising 11.4% in the first half according to HFR. And while the broader strategy of event-driven managers rose a more modest 6.6% this year, some notable outliers, wuch as Bill Ackman who had lost money for four straight years, exploded higher gaining 45%.
Among the big winners were also David Einhorn, whose fund had its worst year in 2018 but was up 18% in the first half. Macro funds also shown, with Brevan Howard posting its best first half since 2009, following last year’s rebound.
“Global macro has come back to life very quietly,” K2’s Christian said. Ex-Brevan Howard partner Ben Melkman saw his hedge fund, Light Sky Macro, beat his former employer this year, making 12.5% after two years of losses. Still, macro managers in general rose about 3% in the first half, remaining the worst-performing strategy, according to HFR.
Looking at a more granular breakdown, Bank of America notes that a few months ago there was a big shift that has persisted: stocks are now more differentiated than sectors, suggesting less macro, and more micro. Among Growth funds (the best performing style group) 234bps of alpha came from their top 10 vs. bottom 10 stock bets. But sector allocation was less important, and sector bets detracted 13bps of alpha. Even headline risk has been less sector specific – e.g., analysts highlight that trade/tariffs can have very different effects on stocks based on sourcing, exports, etc.
Not everyone had a great 6 months, however: across all categories, mid-cap managers saw the weakest hit rate overall, whereas small caps were the only size group with 50%+ hit rate (54%).
Like in large caps, Core and Value funds struggled within mid and small: Core posted a 17% hit rate in mid and 42% in small, and Value funds posted a 25% hit rate for mid cap and 47% for small cap funds.
As usual there was an outlier, and in 2019 it was the quant funds that have had a miserable performance so far; according to Bank of America, quants ended the 1H with just 17% beating the market, with the average quant fund trailing the Russell 1000 by 2%, an underperformance that was attributable in part to whipsawed factor returns.
Quant funds’ higher exposure to Value factors also detracted from alpha: as has been the case for much of the centrally-planned recovery. value was the worst performing factor group YTD despite a June comeback.
via ZeroHedge News https://ift.tt/30vY71P Tyler Durden
Just hours ago, we reported that passenger vehicle sales in China showed their first tepid signs of recovery after a historic and record-breaking plunge in the country over the last two years. In that article, we pointed out that the “recovery” was only due to dealers looking to blowout inventory – at massive discounts up to 50% – to prepare for new emission standards that start on July 1.
We concluded by questioning whether or not the relief would be short lived. We stated:
To say the least, it should be interesting to see how sales numbers respond for the month of July.
Now, it looks as though we are already starting to get an idea – and it also looks as though the “recovery” may already be over.
China-based auto stocks in Hong Kong dropped overnight after Geely issued a profit warning and other investors are worried about China based manufacturers preparing to issue similar warnings.
Geely said that its first half 2019 net profit likely fell by 40% and it cut its 2019 sales target. The stock was the worst performer on Hong Kong’s Hang Seng index last year.
In response, Guangzhou Automobile also fell as much as 5.8% and Dongfeng Motor dropped as much as 3%. Great Wall Motor was down as much as 4.2% at one point and BAIC Motor fell 2.7%.
Recall, Jefferies said in a note Monday morning that the country’s planned stimulus for the auto industry could help along cities and provinces whose economies are heavily reliant on the auto industry.
For instance, as a result of planned subsidies, residents in places like Hunan’s capital Changsha who buy a locally produced car could get as much as 20,000 yuan in subsidies, analyst Patrick Yuan said. SAIC-VW, GAC-Mitsubishi, GAC-FCA, and BYD all have plants in Changsha. The city’s sales represent about 1.2% of China’s total market.
via ZeroHedge News https://ift.tt/30qLzc4 Tyler Durden
Bill Clinton is lying about his involvement with arrested pedophile Jeffrey Epstein, according to investigative journalist Conchita Sarnoff – who first revealed the former president’s extensive flights on Epstein’s “lolita express” in a 2010 Daily Beast exposé.
Clinton claimed in a Monday statement that he only took “a total of four trips on Jeffrey Epstein’s airplane” in 2002 and 2003, and that Secret Service accompanied him at all times.
According to Sarnoff’s research as well as flight logs obtained by Fox News in 2016, that’s a complete lie.
Sarnoff, who heads up the Alliance to Rescue Victims of Trafficking and the author of “Trafficking,” told Fox News Monday evening: “I know from the pilot logs and these are pilot logs that you know were written by different pilots and at different times that Clinton went, he was a guest of Epstein’s 27 times,” adding “many of those times Clinton had his Secret Service with him and many times he did not.”
“I’m saying, sadly, that he is not telling the truth,” added Sarnoff.
“First of all, Gerald Lefcourt, who was one of Epstein’s attorneys back during the original arrest and the original investigation, wrote a letter which has been made public … In that letter, Gerald Lefcourt claims that Epstein was one of the original funders of Clinton Global Initiative. He gave President Clinton four million dollars, according to a source who knows a story about that.”
This appears to be confirmed by a 2007 letter sent to federal prosecutors by Epstein’s then-attorneys Alan Dershowitz and Gerald Lefcourt, which reads: “Mr. Epstein was part of the original group that conceived the Clinton Global Initiative, which is described as a project ‘bringing together a community of global leaders to devise and implement innovative solutions to some of the world’s most pressing challenges.”
Watch:
via ZeroHedge News https://ift.tt/2XFVjSU Tyler Durden
According to wiki, verschlimmbessern is to make something worse in an honest but failed attempt to make it better.
Other working titles for today’s T-Report included
So Much Communication, So Little Information
The Over-Engineered and Micro-Managed Market
The Catch-22 of Fed Policy
Why do Today what you Can do Next Meeting?
I’ll Gladly Cut Next Meeting for a Market Move Today
The titles all convey the same sentiment – that the Fed has gone overboard in terms of trying to manage expectations and is distorting markets and creating confusion.
If You Are Going to Buy Insurance, Why Not Buy it Now?
If the Fed’s rate cut is supposed to be an “insurance cut”, why not do that back in June?
What was the thought process? Yeah, I live in a flood plain, yeah, it’s the rainy season, yeah, the river is running high, but I was kind of hoping to lie on the couch and watch the game. Maybe I’ll buy that flood insurance next month?
If we ‘needed’ an insurance cut, why didn’t we get it? Because it wasn’t needed? But if it wasn’t needed in June, why after some good data, is it needed in July?
After a Decade of Failing on Inflation, Let’s Wait 1 Month and then Panic
Let’s ignore for a moment that many people question how relevant the common inflation measures are to today’s economy.
Let’s ignore for a moment the fact that the Fed’s favorite measure of inflation barely beats the alleged 2% target. The PCE didn’t even average 2% during the 8 years before the financial crisis, let after the financial crisis.
Let’s ignore for a moment how we came up with 2% as being some optimal level of inflation.
Let’s ignore for a moment the chart Academy sent around yesterday, highlighting that for all the academic/wonkish discussions on inflation expectations, they are pretty much just correlated to the price of oil.
But let’s not ignore the reality that if you are “committed” to inflation, then why wait a few more weeks? Is inflation going to miraculously appear out of nowhere? I understand about waiting to start a diet next week or next month, because there is always an excuse, but fighting the ‘dreaded’ deflation monster seems like something you should start today if you really believe it.
So, does the Fed desperately want inflation or was that just a good talking point to help markets along?
Everyone is Data Dependent Until the Data Doesn’t Support the Narrative
Since the last Fed meeting, the data has improved slightly. The Citi economic surprise index, while still negative has ticked higher.
Trade tensions between the U.S. and China have subsided recently.
The ECB is in the midst of a dramatic makeover that could mix politics and monetary policy in a potentially positive way to step up growth.
If the data wasn’t bad enough to cut rates last month, why is it bad enough now?
Schadenfreude
This word has nothing to do with today’s T-Report, but it is my favorite word in the English language. Seriously, how can you not love a word that means “glee at another’s misfortune”? Verschlimmbessern pales in comparison (and yes, I have issues ).
Do You Do What the President Tells You?
Personally, I’m about 50/50 on responding well to being told to do something. My caddy tells me to slow down my practice swing. You know the next practice swing is going to be my fastest of the round.
So how does the Fed, and Powell in particular, respond to the pressure from the administration to cut rates? Do you do it? Do you fight it? Are you mature enough to not be tempted to go against the constant unwanted ‘advice’?
Has the situation changed enough that you can back off the dovish rhetoric and prove you are ‘independent’? I think the Fed will restrain themselves on this front, though it must take a lot of effort for such successful people not to want to push back on so much unwanted interference.
Do You Risk Disappointing the Market?
No.
What to Expect?
The Fed to double down on their concerns about a lack of inflation.
If the Fed wants to cut, mostly to appease markets, they will lean heavily on the inflation excuse.
Expect Powell to try and be as dovish as possible and fixate on inflation, or the lack thereof in the coming days.
It isn’t logical that they didn’t cut in June, but seem likely to cut in July, but it didn’t seem logical to ignore balance sheet reduction while hiking last year, so let’s not let logic stand in the way of trying to figure out what the Fed will do next.
via ZeroHedge News https://ift.tt/2YJGL0H Tyler Durden
