Tag: news

The slump in the upper tiers of the Manhattan real-estate market is already having a knock-on impact in some of the toniest tri-state area real-estate markets – most notably that of Greenwich, Conn., known for being a leafy suburban haven for hedge fund titans and other MOTUs.

To be sure, sales of luxury homes in Greenwich have been falling for a while now, prompting many sellers to pull their homes from the market in the hopes that conditions might improve. But in a sign that wealthy New Yorkers looking to trade their two-bedroom UES apartments for a sprawling Fairfield County estate are being forced to scale back their budgets after their apartments didn’t fetch as high a price as they had hoped, Bloomberg reported that the median home-sale price in Greenwich fell 17% during the last three months of 2018 to $1.5 million. Overall purchases continued to slip, falling 2.2% during the quarter.

Real estate brokers told BBG that the weakness in the NYC market was largely to blame.

“The weakness in New York City has definitely played a role in some of the weakness that we’ve felt here,” said David Haffenreffer, brokerage manager of Houlihan Lawrence’s Greenwich office. Sellers who got less than they wanted for their city apartments “are in turn then dialing down their budgets when they get here to look at homes. Or, it’s just flat-out delaying their ability to buy here.”

And just as New York led Greenwich on the way down, sellers in Greenwich will be looking to New York City to determine when the market equilibrium has shifted back into the seller’s favor.

“As New York City finds its footing, so too will our markets,” Haffenreffer said. “We’re just waiting for those indications.”

And sellers in the high-end of the market have already largely pulled their inventory off the market, as weakness first surfaced in the market for homes selling for $10 million or more (a trend that some brokers blamed on a shift in tastes away from estates and toward more centrally located homes closer to down town and public transit like the train station).

In a town known for its $10 million-plus estates, most purchases in all of 2018 were for less than $2 million, according to a report by Houlihan Lawrence. There were 335 single-family deals in that price tier, up 4 percent from 2017.

Condos continued to be an appealing option for buyers looking to keep city-style living and amenities even after moving to the tony suburb. Purchases jumped 23 percent in the fourth quarter from a year earlier to 48 deals, Miller Samuel and Douglas Elliman said. The median price was $746,250, down 3.1 percent.

Lately, weakness that was initially confined to hot urban markets has been seeping into the broader US housing market, as data showed sales slumped by double-digits during Q4, one of the worst quarterly showings since the housing recovery began.

via RSS http://bit.ly/2R0aaz4 Tyler Durden

Reviving an age-old debate whether the insolvent, bailed-out zombies GSEs, Fannie and Freddie will emerge from conservatorship, the shares of Fannie Mae and Freddie Mac soared Friday amid reports that the Trump Administration is working on proposal that would likely recommend that the mortgage-finance giants be released from government control as part of a broader plan for U.S. housing finance.

According to Bloomberg, Joseph Otting, acting director of the Federal Housing Finance Agency, commented on the administration’s plans at an internal gathering to introduce himself to staff and “establish open lines of communication,” an FHFA spokesperson said in a statement.

The statement by Otting, who is serving as interim FHFA director in addition to heading the Office of the Comptroller of the Currency, corroborates earlier reports that the administration is working on a plan. Still, the FHFA spokesperson didn’t offer details on what might be included in any proposal, such as whether Treasury would call for releasing the companies without Congress passing legislation.

As a result, shares of Fannie rose more than 31% to $2.36 and Freddie surged nearly 25% to $2.26 just after noon. The jump was the biggest since November 30, 2016, when then-Treasury Secretary nominee Steven Mnuchin first said getting the companies out of the government’s grip was a priority.

The report will be welcome news to both casual retail investors and activist hedge fund involved with the two companies, which have been under U.S. control since the 2008 financial crisis, as a result of optimism that President Donald Trump’s appointees at the Treasury Department and FHFA will allow them to reap a windfall by ending the conservatorship.

Any potential release from conservatorship of the two bailed out mortgage giants would come at a time when many investors are convinced the US is headed into a recession, which the cynics would say likely means that Fannie and Freddie would be “unbailed out” just in time for them them be rescued by taxpayers all over again when the next financial crisis strikes some time over the next 12-24 months.

via RSS http://bit.ly/2szqflN Tyler Durden

Earlier this week we reported that, according to Nomura’s calculations, CTAs were about to cover their recent S&P short positions and turn increasingly longer the higher the market rose. And sure enough, the US stock market has only risen higher, with the latest two upside catalysts being the positive WSJ headline related to US-China trade talks on Thursday and today’s Bloomberg report that China would seek to reduce its trade surplus with the US.

As a result, Nomura’s Masanari Takada writes, the bank’s quant models suggest CTAs continued short-covering on major stock index futures like the S&P500 or Russell 2000 and adds, somewhat redundantly, that “US equity markets seem to have enjoyed such mechanical purchasing pressure by algo investors.”

Additionally, there has been some modest improvement in recent economic data (at least that which is released) and the US economic surprise index (which is missing a lot of recent components) which Nomura views as one of the most important indicators in gauging the sustainability of the current market rally, improved to -3 yesterday (although it tipped back down to -6.90 after today’s big miss in the UMich Sentiment) which more importantly was followed by a gradual increase in overall exposure to US equity markets by hedge funds.

Indeed, this stacked waterfall effect of investors following other bullish investors into risk assets, which some call simply FOMO, is what Nomura defines as the “histeresis effect” on hedge fund behavior, and is as follows:

1. Trend-followers’ systemic buying pushes US stocks up
2. Other hedge fund start to buy the market, chasing CTAs buying programs
3. As buying pressure gets “overheated”, upward momentum of the market becomes unstable
4. US market sharply drops as such crowded long become rapidly liquidated.

This is shown schematically in the chart below:

And yet with stocks surging to new one-month highs, as the brief Christmas Eve S&P500 bear market has been cut in more than half, what Nomura is carefully monitoring at this moment is whether its gauge of US equity market sentiment is leveling off slightly after having rapidly improved over the past few days.

What is surprising, according to the Japanese bank, is that a recovery in sentiment into positive territory (i.e., risk-seeking phase) “appears so close yet so far away.” Specifically, unlike CTAs and other systematic funds, many US equity investors – especially macro hedge funds and risk parity funds – remain hesitant to impatiently begin following an equity market rally that is not sufficiently justified in the context of fundamentals.

Going back to the “histeresis example”, Takada  notes that we experienced a similar situation in which algo investors, mainly in trend-following programs, led the significant upturn of the market last January, March and September. What happened next is that other investors – including major hedge funds – rushed to jump in the stock market uptrend, such “crowded” buying pressures caused an over-heating of momentum and overall market positioning became very unstable with outsized reactions to insignificant headlines and small volatility shocks before subsequently experiencing sharp drops.

So going back to the question we asked in the headline, why do investors – or rather human investors – refuse to buy into this rally, the reason according to Nomura is that most investors – except algo players – now seem to be wary of the future “pitfalls” of such a machine-led stock rebound because of past experiences, are maintaining a conservative approach at present.

What this means, somewhat ironically, is that while everyone was blaming the algos for the December meltdown, even though nobody has “accused” the algos of creating the ongoing meltup, investors and traders know very well that the move higher is not organic, but is purely the result of systematic, algo and various other quant traders forcibly buying as a result of key technical market levels being hit. Unfortunately for the few humans left trading stocks, this is not a buying signal, which likely means that just like in January of 2018 when retail investors finally capitulation and rushed into stocks just ahead of the February 2018 correction, so this time too it is likely that the algos will keep buying until everyone else jumps into the pool… at which point the market will once again take the elevator down.

via RSS http://bit.ly/2TWYQpm Tyler Durden

After surging 200k b/d in the last week to a new record for US crude production, Baker Hughes reports that the US oil rig count has plunged by 21 in the last week – the biggest drop since Feb 2016.

Is this the turn for the Permian? Perhaps, but, as OilPrice.com’s Nick Cuningham notes, while low oil prices are beginning to slow the growth of U.S. shale, in the years ahead oil and gas drilling could be curtailed by a different problem: a shortage of water.

Water is a crucial ingredient in the fracking process, and drillers use copious volumes of it. The problem for the U.S. oil industry is that so much of the output growth expected over the next half-decade or so depends very heavily on the Permian basin, where water is increasingly scarce.

Water already accounts for about 15 percent of the cost of a shale well, according to analysts at Morgan Stanley. “In the Permian, total spending on water is expected to double over the next 5 years, to $22B, with E&Ps on avg using 50 barrels (bbls) of water for each lateral foot completed,” the investment bank wrote in a new report. “Assuming 10k lateral feet per well, this implies that the ~5,500 existing Permian well permits will require ~2.75 billion bbls of water to complete.”

That’s a lot of water in an area that doesn’t have a lot of it. “Given the sizeable water need, we believe drought and water scarcity present long-term risks to shale economics, particularly in the Permian, a core area of growth in a drought-prone region,” Morgan Stanley warned.

It’s worth pausing and noting that the warning is not coming from an environmental group, or even a local community organization opposed to a drilling presence. It’s coming from a major Wall Street investment bank, which says that drilling economics in the world’s hottest shale basin could be upended because of water scarcity.

It’s a rather ironic development. Greenhouse gas emissions from oil and gas drilling are fueling climate change, which in turn could make the most desirable oil and gas play increasingly costly due to growing water problems.

Morgan Stanley goes on to provide further detail into the scale of the problem. Morgan Stanley overlaid water scarcity data from the World Resources Institute with Permian well locations, finding that “53% of Permian wells being drilled today are located in areas with high water risk,” the investment bank concluded. “While operators are comfortable with water availability at the moment, there are precedents (most recently in 2011/2012 in Oklahoma) where severe drought conditions materially affected completion performance.”

There is also another separate water problem facing shale drillers. “Produced water” – water that comes out of a well when drilled – must be handled somehow. The volume of produced water that comes out of a shale well can exceed that of oil by a ratio of 10 to 1. The ratio also increases over time as the oil from individual wells begins to deplete, so the cost-per-barrel for water disposal also rises.

Water can be injected underground into disposal wells, which carries environmental and seismic risk. Or it is trucked away for recycling or some other form of disposal, often done by third parties, at huge expense. Last year, Wood Mackenzie said that the rising cost of water disposal alone would increase the breakeven price in the Permian by between $3 and $6 per barrel, potentially shaving off future Permian oil production by around 400,000 bpd by 2025.

Morgan Stanley notes that shale drillers are increasingly recycling the water they use to drill wells, injecting it back underground to be used again in the next well. That saves on water use, of course, but it also cuts down on the cost of water disposal. The investment bank says simply recycling water could save around $1 per barrel.

“Water risks to date have largely been described as a cost issue, but as projects continue to build scale, the risks become more serious,” Ryan Duman, principal analyst with Wood Mackenzie’s Lower 48 upstream team, said in a June 2018 statement accompanying the report. “They could impact the ability to actually carry out operations. Investors and project partners should challenge operators on how water is being managed.”

To sum up, costs could rise because the amount of oil coming from legacy wells is increasing as drilling proliferates; water scarcity is getting worse, which could increase the cost of water needed to drill a well; and as the Permian frenzy ages, drillers are pushed into less desirable locations on the periphery, where well economics may be worse to begin with.

via RSS http://bit.ly/2Dkf0Uw Tyler Durden

Authored by James Howard Kunstler via Kunstler.com,

Battle Royale

The effrontery of Ms. Pelosi, Speaker of the House, in cancelling Mr. Trump’s State of the Union address in the chamber she controls is perhaps the worst insult to institutional protocol since the spring day in 1856 when Congressman Preston Brooks (D-SC) skulked into the senate chamber and smashed Senator Charles Sumner (R-Mass) about the head within an inch of his life with a gold-headed walking stick. Brooks’s attack was launched after Sen. Sumner gave his “Bleeding Kansas” speech, arguing that the territory be let into the union as a “free” state, and denouncing “the harlot slavery,” whom he imputed was Rep. Brooks’s dearest consort.

Many of us — except perhaps students immersed in intersectional gender studies — know how that worked out: a little dust-up in the meadows and cornfields known as the Civil War. We’re about at that level of animosity today in the two federal houses of legislature, though it is very hard to imagine how Civil War Two might play out on the ground. Perhaps opposing mobs (not even armies) meet in the Walmart parking lots of Pennsylvania and go at it demolition derby style, with monster trucks bashing their enemies’ Teslas and Beemers. Throw in clown suits instead of blue and gray uniforms and we’ll really capture the spirit of the age.

Not to be outdone, days after the SOTU cancellation, the Golden Golem of Greatness cancelled a Democratic Party grandstanding junket to the Middle East, led by Ms. Pelosi. A US Air Force bus has just departed for Andrews Air Force Base, where an Air Force jet waited for the junketeers. But then, with impeccable timing, Mr. Trump cancelled the junket — denying the use of military aircraft as Commander-in-Chief — and forcing the bus back to town with its load of elected dignitaries and their luggage — making the reasonable suggestion that they fly a commercial airline instead.

The peevish media played the story as though Mr. Trump had acted like a vindictive child. In fact, he continues to play a familiar role that the adolescent Left just can’t abide: Daddy’s in da House. Nothing is more hateful to the Left these days as a large-ish white man telling them what to do. I don’t think Mr. Trump really relishes that role, especially when he has to bring the hammer down on the kids, but considering all the things he’s not good at, playing Daddy is perhaps a big exception. He is, after all, the father of at least five children, and there must have been opportunities a’plenty to straighten their asses out during those horrible teen years — especially in New York City of the 1990s, on fire with cocaine, AIDS, and nightclubbing gangstas with guns.

Interestingly, the quarrel du jour, is over boundaries — rather specifically the boundary between the USA and Mexico. The Left is against it. In fact, the Left’s mouthpiece, The New York Times ran an op-ed this week headlined: There’s Nothing Wrong With Open Borders. Well, you might ask, did they really mean it? Or was The Times just flopping the idea on the table like so much meat, to inflame the raging Beast of the Right?

Of course, the elected official cohort of the Left doesn’t believe it, but they are pretending to believe it as strenuously as possible just to oppose the wicked white Golem in the wickedly white White House, and, alas for them, they now own that stupid position. The fabled wall is a symbol, we all know that, but it is at least an apt one for a firm boundary. And it is a boundary worth fighting over, just to establish for an hysterical mob that the world is not one big intersectional mishmash of sentimental fantasy where anything goes and nothing matters.

Ms. Pelosi and her Democratic Party House majority have been sent to their room now, awaiting a fateful conference with Daddy. A majority of the public actually does believe that the boundary-in-question with Mexico ought to be recognized in the way that normal nations recognize normal national boundaries: namely, that they are barriers to entry, and that rational procedures must be followed to go from one side to the other. Ms. Pelosi’s next step will probably be something like a few weeks of anorexia, or some other sort of self-destructive adolescent rebellion. Let’s hope she doesn’t try to burn the house down in her boundless rage.

For more clarity and illumination on the deeper psychological angles of this impasse, please read this excellent guest essay by Jasun Horsley which I have posted on this website’s landing page: What is Liminality?

via RSS http://bit.ly/2QUTY2h Tyler Durden

With stocks set for their 4th weekly gain in a row – despite tumbling earnings expectations and macro data…

Questions remain as to what (or who) is behind this extreme rebound…

But, as former fund manager and FX trader Richard Breslow notes, a number of those plunge-protecting central banks are set to meet over the next couple of weeks leading up to the FOMC. None of them are expected to do anything with rates. Still, how they portray their dovish holds will be interesting. I hope they don’t try to sound more upbeat than is warranted (Fed) simply because the stock markets have bounced. Or to appease the hawks (ECB). That really would make it too easy for equity traders.

via Bloomberg,

It’s January and, say what they will, not all meetings are live. Nor should they be, absent a crisis. Nevertheless, asset prices look a lot different than a couple of weeks ago when possible rate cuts took their place on the dais. In the aftermath, there have been some wonderfully tradable opportunities.

Oddly enough, the meeting with the greatest potential to be a market event is the ECB. Will they change their balance of risks assessment without new staff projections? Either way, traders may jump to bigger conclusions than are warranted. Also, given the latest love affair with emerging markets, just how dovish the Malaysian and South Korean decisions read will matter. And while there isn’t a PBOC meeting, there are enough A-list numbers to set the tone.

I realize the topic of the hour is the equity pop and whether the much anticipated breakouts are real or will end up being false. As far as U.S. stocks are concerned, surmounting the well-advertised resistance levels on a report about tariff relief that was quickly denied doesn’t negate the price action but does call into question the move’s credibility. Unless you believe, quite reasonably, that the way the market was trading, it was meant to happen anyway.

Ideally, if this is going to continue, we would test lower at some point and hold. That’s how great-looking charts get created. These markets, however, have a habit of trying to take off without solidifying a base, forcing traders to chase their benchmarks. And then they correct. Try not to get too focused on the S&P 500. Unless you are already involved in this jaw-dropping move. Other global indexes are trading well, just not quite to the same extent. Look there for confirmation one way or the other. They are mostly all close so you probably won’t have long to wait.

Of equal importance in the grand scheme of things are 10-year Treasury yields which do look like they have formed a base from which to take a look at what’s above. Where they are, near 2.77%, is the first significant challenge, and a new high for the year. If they gain momentum from here, a lot of extant forecasts will have to be reconsidered. U.K. gilt yields look like they caught a lot of people short as they too have been marching methodically higher. Today’s high at 1.38% matters and looks like it was a bridge too far.

In a world where we are told there is no inflation, the Bloomberg Commodity Index has been trading like a champ. In classic January fashion it made the YTD low on the first trading day and hasn’t looked back. A nice 6% move with no pain and a lot of gain. Both WTI and copper have done the easy work and now it becomes really interesting. What happens from right here will do a lot to influence narratives about the global economy.

Three weeks into the year and the trading landscape has been evolving quickly. Mostly, it’s fair to say, toward the optimistic. Or maybe the bears are just all twisted around with badly located positions. Forget narratives and intuition. The flows have been telling you everything you need to have known. Or at least the Fed has.

via RSS http://bit.ly/2FDGJlt Tyler Durden

Authored by Tsvetana Paraskova via Oilprice.com,

U.S. natural gas prices continue their rollercoaster ride at the height of the heating season, after extreme volatility gripped the market in the fall amid more-than-a-decade low natural gas inventories ahead of the winter.

Analysts believe that volatility in the natural gas market will continue to be high through the winter, as inventories below the five-year average and seasonal storage draws make natural gas prices highly vulnerable to changes in the short-term weather models and forecasts.

The front-month natural gas futures contract for delivery at the Henry Hub surged by 14 percent at the start of this week, from $2.945 per million British thermal unit (MMBtu) on Friday to $3.289 per MMBtu on Monday.

After a relative lull and lower prices over the previous five-six weeks, due to milder winter weather, prices shot up early this week on weather forecasts for a cold snap across the United States. As of January 16, the National Weather Service expected below-average temperatures over the next six to ten days for most of the United States, with very high probability of below-average temperatures in the Midwest.

The Monday move was the sharpest price increase since the surge in the middle of November last year, when natural gas prices jumped to $4.80 per MMBtu. Storage at a 15-year low, an unusually cold fall, production freeze-offs, and high exports from Corpus Christi combined to create a perfect storm that sent U.S. natural gas prices to their highest level since the polar vortex of 2014.

Natural gas storage levels have been below the five-year average since late 2017, but in the summer of 2018, they also slipped to below the 5-year maximum-minimum range, EIA data shows.

According to Bluegold Research, the natural gas market has dug itself into a hole during the past injection season—April to September—when it “allowed huge storage deficits to run unchecked during the summer,” allowing the coal-to-gas switching to be at exceptionally high levels in the summer of 2018. The coal-to-gas switching during the whole 2018 injection season rose by 35 percent compared to the five-year average, which left natural gas stocks uncomfortably low at the start of the winter season and primed prices for volatile trading during the winter.

So instead of gradual increases during the winter season, natural gas prices now react with extremes to every bullish change in weather forecasts, Bluegold Research reckons.

“[B]ullish changes in the weather models are resulting in an extremely exaggerated bullish change in natural gas prices. Prompt-month contract price reaches unjustifiably high levels and can then correct violently even if weather turns only slightly bearish. In other words, prompt month contracts (February contract and, to a lesser degree, March contract) are very speculative and very risky to trade right now,” the analysts said.

Front-month contracts are expected to remain extremely volatile, according to Bluegold Research.

Looking ahead, analysts are not ruling out a return to $4 per MMBtu, if the currently predicted cold snap in the U.S. persists for more than two weeks.

“You would need to really sustain this cold through at least a third or half of February in order to get $4, even though we’ve made great progress in the five-year storage deficit over the last month,” Jacob Meisel, chief weather analyst at Bespoke Weather Services, told CNBC. “I still wouldn’t rule out $4 if the cold lasts long enough.” 

Barclays currently expects Henry Hub prices to average $3.51 per mmBtu in Q1 and $2.92 per mmBtu for the whole of 2019.

According to the EIA estimates in the January Short-Term Energy Outlook (STEO), Henry Hub spot prices averaged $3.15 per MMBtu in 2018, up 16 cents/MMBtu from the average for 2017. EIA expects Henry Hub spot prices to average $2.89/MMBtu this year and $2.92/MMBtu next year.

“Forecast prices are lower than 2018 levels as expected production growth keeps pace with demand and export growth and inventories build faster than the five-year average,” the EIA said in the STEO earlier this week.

via RSS http://bit.ly/2DlIzF1 Tyler Durden

Authored by Jeffrey Snider via Alhambra Investment Partners,

Yesterday was supposed to see the release of the Census Bureau’s retail trade report, a key data set pertaining to the (alarming) state of American consumers, therefore workers by extension (income). With the federal government in partial shutdown, those numbers will be delayed until further notice. In their place we had to manage with something like the Federal Reserves’ Beige Book.

It may not be close to the same caliber as retail sales but it can be interesting in an important sort of way nonetheless. It really doesn’t give us much by way of information about the economy, the Beige Book instead tells us what our central bankers think of it. I wrote about it almost two years ago:

Fed officials today still refer to the Beige Book quite often in their discussions, though from a truly objective point of view it isn’t at all clear why they should. It is notorious for getting things wrong, and often very wrong. Perhaps that is because any anecdotal report filtered through the bureaucratic apparatus in any official setting will become by nature an echo chamber. The various Fed presidents will do what is perfectly corrosive, which means they will select stories or conversations they have had that best reflect their own beliefs and biases. If the Fed presidents are all wrong, as they have been, the Beige Book will necessarily follow, not lead.

Tracking what Fed Presidents get wrong is itself a measure for measuring expectations. The cover of the volume should be changed from Beige to mirrored glass.

For example, US policymakers have been talking about a labor shortage for years. The reason is quite simple; the unemployment rate is the only metric that is consistent with a healthy economy and therefore the successful conclusion of so much monetary “accommodation.”

An economy that is doing so well businesses are having trouble finding workers would really put an enormously positive exclamation on what had been a very tough decade for everyone.

Just before the first “rate hike” took place in December 2015, the October 2015 Beige Book, the last one before the hike, mentioned the term “labor shortage” (or a close variation) eight times. The implication was clear; in the Beige Book way FOMC officials were thinking inflationary consequences just as they kicked off the appropriate policy “exit.”

But late 2015 was rife with all sorts of market prices and movements going the other way – renewed deflation rather than wage-driven inflation. The implication was clear; in the Mirror Book way FOMC officials were hoping and praying for inflationary pressures, writing them into their book instead of conducting more rational analysis.

Guess which interpretation ended up being more accurate?

As the PCE Deflator plummeted and the Fed’s models recognized it, toward the end of 2015 the number of times each successive Beige Book volume mentioned “labor shortage” plummeted, too. By March 2016, that one cited the term just a single time. The labor shortage if it was real didn’t matter; more likely, it was the collectively biased imagination of Economists attempting to convince each other there was a real basis to it.

Their bitter disappointment in early 2016 was nothing compared to the global economy’s. We are still sorting out the consequences. These have included officials having learned nothing from the last downturn, instead becoming even more determined to just repeat the futile exercise – becoming full-blown hysteria by the end of 2017.

The Beige Book fiasco would peak in September 2018. Jay Powell and his gang received the best news, they thought, earlier that month when the BLS payroll reports suggested a mild pickup in wage gains – but since they were couched, technically accurate, as the best in a decade emotions ran wild.

September’s version of the Mirror Book mentioned “labor shortage” fourteen times! Surely, the unemployment view of the economy was right this time.

This followed from substantial upgrades to the modeled central tendencies for inflation; which only raises the question as to what the basis for either the models or the anecdotes might truly be.

You can probably guess what happened next. In October, markets turned ugly, kept going in November, and then really hammered everything in December. Again, deflation.

The FOMC models trimmed the inflation forecasts even this late in the year and the final Beige Book for 2018 cited “labor shortage” fewer than half the number of times as in September.

The current volume for January 2019, the one released today, is only one better than December, hardly the vote of confidence in inflation pressures. This anecdotal development might be fairly classified as “muted.”

Minneapolis’ branch of the Fed helpfully includes some insight into one part of the problem. First, the shortage:

In a separate, external survey of Minnesota builders, almost two-thirds said the lack of available labor has forced them to turn down business.

Then, the contradiction:

Wage pressures rose moderately…Staffing firm contacts noted continued reluctance among some clients to raise wages enough to change hiring difficulties. ‘Clients are not changing with the labor market, so wages are not going up as much as they should,’ said a contact in Minneapolis-St. Paul. A central Minnesota contact said that ‘skilled trades are hard to find and wages are not increasing (enough) to bring in good candidates that have the necessary skills and background.’

Minnesota businesses are so desperate to find enough workers they refuse to pay the market-clearing wage to obtain them? If you are confused, like Jay Powell, don’t be. The unemployment rate isn’t an accurate measure of the economy.

Even if there was a labor shortage, businesses that can’t afford to pay for workers to clear it up indicate collectively the economy really isn’t doing all that well to begin with. In an actually booming economy, a labor shortage would never happen – wages would easily adjust to clear the market. Business and the profit outlook would be genuinely positive, so any firm would more easily balance higher input costs to book growing opportunities.

If they don’t, the outlook is not genuinely positive so how can the economy be booming?

Beyond that, the idea of a labor shortage is simply being hyped because of the unemployment rate combined with the desperation of policymakers using it (along with the media that supports the technocratic ideal they embody). Thus, the skyrocket in mentions not wages, then the plummet in the former as the economy suddenly, unexpectedly turns “uncertain” after September.

It is therefore interesting that the Mirror Book shows us again just how much officials lack for confidence in their view. But we already knew that. If they really believed the economy was strong, why the “rate hikes” every other meeting? Greenspan raised the federal funds regime at 17 successive opportunities.

The ebbs and flows of “labor shortage” citations are Federal Reserve officials becoming desperate trying to talk themselves into what they only hope could be the real case, and then disappointed when it turns out, again, it isn’t. Full circle, we are back toward “isn’t.”

It may be a lagging indication, but it’s still an indication and one actually more consistent with the curves.

via RSS http://bit.ly/2FMO4xY Tyler Durden