Aside from the S&P 500 of course, which made billionaires out of millionaires (even if it failed to make billionaires into trillionaires this time around – we will have to wait for QE4 or QE5 for that), some may wonder: who was the biggest beneficiary of QE3? It certainly wasn’t the US middle class, which has seen its real wages decline in 6 of the past 7 months, and its disposable income is back at levels not seen since the mid-1990s. No, the biggest winner of QE3 is the same entity that we noted benefited the most from QE over the past 6 years, and which even the WSJ realized was the primary beneficiary of the trillions in cash created out of thin air by the Fed, when in late September Hilsenrath wrote “Fed Rate Policies Aid Foreign Banks“… something we first said back in 2011 with “Exclusive: The Fed’s $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went.”
So when it comes to the Fed’s QE3 generosity to foreign banks, what was the real number?
Here is the answer.
The first chart below shows that since starting in December 2012, when QE3 was formally launched, and continuing through today, the Fed injected some $1.3 trillion reserves with banks, which has manifested as extra cash held by various banks operating in the US, both domestic, but most importantly, foreign.
So how does this increase in bank cash assets look like when broken down by banking group? The answer is shown below:
And the bottom line:
Small domestic banks, such as your mom and pop regional bank which is anything but Too Big To Fail: change in cash: zero.
Large domestic banks, think JPM’s CIO group, i.e., its London Whale division which used precisely this “excess” Fed cash to try to corner the IG market and blow up in the process: call it just under $600 billion in cash as a result of QE3.
And the winner, with over $700 billion in extra cash added thanks to QE3, is: foreign (mostly insolvent European) banks,
So yes, European banks: feel free to send your thank you cards to the Fed: without its $1.3 trillion cash injection who knows how many of you would have passed the ECB’s “no deflation to model” most recent Stress Test.
A word of warning: let’s all hope that now, with some $1.5 trillion in Fed cash on foreign bank balance sheet, or just about half of all QE liquidity injections since the start of QE1, European banks are finally solvent. Or else, deflation, inflation, or whatever, the Fed will be storming right back in to bail out Europe’s insolvent banks the US middle class all over again.
The spread between 30Y Treasury yields and 10Y yields tumbled 4-5bps today post-FOMC back to its flattest in 4 weeks as hawkish sentiment sparked bond-selling out to 10Y and buying at the long-end. The reason this is notable is that yesterday, as Nanex details, there were two "monster" sized trades in 10Y and 30Y Treasury Futures putting on a significant steepening bet.
Overall market reaction so far…
Curve flattening post FOMC…
This is interesting though…
Meaning the following trade is hurting… (via Nanex)
Record Treasury Futures Trades
Monster buy in the 10-Year and sale in the 30-Year a day before FOMC
On October 28, 2014, there were two monster sized trades in Treasury Futures, a 26000+ contract trade (sale) in the 30-Year T-Bond (ZB) at 12:08:23 and a 29000+ contract trade (buy) in the 10-Year T-Notes (ZN) at 12:17:42. We know the 10-Year trade set a record for most contracts traded in 1 second for that contract since at least 2005 (the 30-Year may have as well, but we haven't completed a thorough check of the data).
What made this event even more interesting, was that an equivalent huge order in the opposite direction first appeared 3 minutes before the trade in the 30-Year and exactly 2 minutes before the trade in the 10-Year. That is, buy orders totaling about 27000 contracts started appearing in 9000 contract lots at 12:05:21 in the 30-Year – which were executed against by a large 26000+ contract sell order just over 3 minutes later, at 12:08:23. In the 10-Year, sell orders in lots of 9500 contracts started appearing at 12:15:42 and were executed against exactly 2 minutes later at 12:17:42. The two charts below show this sequence of events.
1. Depth of book for the 30-Year (ZB, left) and the 10-Year (ZN, right). (how to read these charts). The white vertical lines in the middle of the top section are trades. There are 10 levels of bids and 10 levels of offers – each color coded by how many contracts are available to instantly buy or sell. The red indicates the highest relative to other levels. Most of the levels are deep blue because they are practically empty, relatively speaking, when compared to those huge orders in the top few levels.
2. Chart of the most contracts offered for sale in the top 3 depth of book levels for every second since 2008 in the 10-Year Treasury Contract (ZN). Each day is drawn as one line from left (starting at midnight or 0:00) to right (and ending at midnight 24:00). Days are color coded by age – with red being the most recent and violet the oldest – with the exception of October 28, 2014 which is a thick purple line for contrast. Since at least 2008, there has never been as many contracts for sale in the top 3 levels of CME's depth of book for the 10-Year Treasury Contract.
3. Chart showing the most contracts traded in any one second for the 10-Year Treasury Contract (ZN) since 2005.
A new Harvard poll
of likely voters between the ages of 18 and 29) drives home what
The Reason-Rupe Poll of millennials found this summer: The kids are
politically up for grabs.
The
national survey of 2,000 millennials found that among likely
voters, 51 percent wanted a GOP takeover of the Senate while 47
percent preferred the Dems to keep the reins. In 2010, the
respective numbers were 43 percent and 55 percent.
Reason’s poll of millennials was titled “The
Politically Unclaimed Generation” precisely because younger
voters appeared to be far less partisan than older Americans (this,
despite President Obama overwhelmingly winning the youth vote in
2008 and 2012). Of course they are, for at least two
reasons. First, they’re still working out their relationships
toward politics, where they came from, and the like. As Emily Ekins
and I discussed in our October cover story in Reason, it’s
a given among political scientists and sociologists that the decade
or your twenties is a time when you search around for your
identity.
Second, Obama and the Democrats have generally been awful to
younger Americans. Obama has presided over a terrible economy and
can no longer simply blame it all on Bush; in 2012, despite pulling
5 million more votes from the 18-29 group,
he actually lost to Mitt Romney among 18, 19, and 20 year olds.
And when you move past economic issues (as big as they are), Obama
and the Dems have been truly rotten on issues they care a lot
about. Obama and a number of high-profile Dems such as Hillary
Clinton are objectively pro-NSA surveillance, massive drone
attacks, and new and better wars. They’ve dragged their feet on gay
marriage, typically having conversion experiences in the thick of
electoral battlefields that only inspire cynicism. Despite other
recent “evolutions” on issues such as pot legalization and
immigration, he’s got a terrible record on both those things,
raiding medical marijuana joints in California at a quicker pace
than George W. Bush and deporting more illegals than Dubya did
too.
What’s even more interesting—and from a libertarian POV, even
more inspiring—in the Harvard poll is that millennials show genuine
signs of bypassing politics and diving right into life itself.
These kids don’t want to waste their time on political campaigns.
They want direct action:
That’s good stuff, I think, and again it correlates with
what Reason-Rupe found: Millennials are wary of politics but very
interested in real life—63
percent told us that regulators favor special interests but 55
percent wanted to start their own businesses someday. Of course
they are skeptical: Their entire lives have been lived in the
relentless clusterfuck of the 21st century, where the right-wing,
conservative failures of George W. Bush and the Republicans has
been supplanted by the left-wing, liberal failures of Barack Obama
and the Democrats.
As
Ekins and I wrote, millennials are different from older
generations when it comes to ideology.
…it would be a major mistake to think that millennials are the
second coming of Murray Rothbard-style anarchism or even
Reaganesque disdain for government solutions. While millennials
clearly prefer free markets to state-managed ones, they are split
on whether free markets are better at promoting economic mobility
(37 percent) than are government programs (36 percent). Seven in 10
support government guarantees for housing, health care, education,
and income for the truly needy. Yet almost as many—65 percent—think
overall government spending should be reduced, and 58 percent favor
cutting taxes.
From the point of view of older Americans and the political
identities they inhabit, such seeming contradictions—government
should guarantee income but cut spending?—come across as the folly
of youth, an inability to hash out a coherent, systematic ideology.
That sort of response will doubtless allow Republicans, Democrats,
conservatives, liberals, libertarians, and progressives to keep
selling what they’ve been selling for decades with minimal
changes.
OK, millennials are willing to listen to new ways of thinking
about politics and life more generally. The next step for
libertarians (and conservatives, and liberals, etc.) is to explain
exactly why and how their ideas and policies are more likely to
create a world that is fun, interesting, innovative, fair, and
workable.
In a recent
column, I noted the lack of evidence that people try to
get kids high on Halloween by passing off cannabis candy as
ordinary treats. The Denver Police Department’s inability to cite a
single actual example of such a prank in Colorado or anywhere else
has not stopped it from warning parents about the possibility, over
and over again. With Halloween approaching, the department has been
hyping this mythical menace on its Facebook page, building
on the alarm generated by the podcast and
video it produced on the subject. Recently the Pueblo Police
Department
joined the fear mongering.
Police in both cities urge parents to be on the alert for candy
that looks unfamilar or seems to have been tampered with. But such
precautions hardly seem adequate in dealing with a determined
cannabis concealer, who could always rewrap marijuana-infused
treats in familiar packaging or dose conventional candy with
store-bought tincture. For parents who worry about such
trickery, CB
Scientific has a solution: a kit that you can use to
quickly test
Halloween treats for cannabis.
The Denver-based company, which should be paying a
commission to the cops in Denver and Pueblo, sells
the kits for $15 each. But each kit can be used to test only three
samples, so the cost of screening every tiny chocolate bar,
jawbreaker, and jelly bean can quickly add up. It would be
considerably cheaper just to throw out the entire haul and buy your
kid replacement candy, although you can never be completely sure
that no one has tampered with the stuff at the store either. As far
as we know, it has never happened. But it’s possible!
The petition…asks the administration to “Declare an
executive order for all executive departments and agencies to be
closed 12/26/2014, for a four-day weekend.”
While the rest of us poor sods will be at work nursing our
eggnog hangovers, the feds are hoping for a longer holiday to help
them recover from a taxing year of
reading our emails and
taking our money. From
the petition:
Federal Employees have dealt with pay freezes and furloughs over
the past few years. Giving federal employees an extra holiday on
Dec. 26th, 2014 would be a good gesture to improve morale of the
federal workforce.
As of writing, the petition is still 60,000 signatures shy of
the 100,000 threshold required for the White House to respond. The
petitioners will probably get what they wish for, however, even if
the minimum isn’t reached in the next few weeks. Like George W.
Bush, Obama has a history of giving feds time off during the
holiday season.
Obama also
granted a petition in 2012 asking for a government Christmas
Eve holiday. And that’s just one of 150-odd petitions the White
House has responded to on a range of topics that deeply affect the
future of our polity, such as whether to institute the
metric system, how to address
pet homelessness, and whether to build a
Death Star.
But the administration has been reticent when it comes to
petitions that, you know, address issues that matter. Like the
one demanding
a pardon for Edward Snowden, to which the White House has yet
to respond more than a year after it reached 100,000 signatures.
GMO labeling
might be bunk, but a
popular petition on the subject from 2012 also continues to
gather cyberdust waiting for an administration response.
Among the masterpieces of the Italian Renaissance, Leonardo da Vinci’s “La Scapigliata” stands out distinctly from the rest.
The unfinished painting is of a common woman with disheveled hair. It’s remarkable particularly for depicting not the exceptional, but the real.
Part of da Vinci’s genius was the way he was able to capture life—genuine, unaffected reality, often intense detail. His notebooks reflect the same.
Leonardo, in fact, passed on to posterity great details of his finances. We know, for example, that around the time he painted La Scapigliata in the early 1500s, the great master was living in Milan and earning a salary directly from the king.
Leonardo’s journals state that in a ten-month period, he was paid a total of 240 scudi and 200 florins from the king.
The Italian gold scodo at the time was 3.42 grams of gold, and the florin was 3.54 grams. As of today’s gold price, that adds up to an annualized salary of $72,153.24.
Bear in mind, this was Leonardo’s ‘take home pay’ as there was no income tax, meaning his gross salary in today’s world would be just over $100,000 to account for income tax and FICA.
If we were to extend this analogy even further, given that Leonardo was on the government payroll back then as an artist/engineer, we can look up the US government employee pay scale today.
Da Vinci was an accomplished professional to say the least. His age, experience, and job title in the early 1500s would make him the equivalent of a GS-13 rank today (based on current US government pay scale).
And today’s salary for a GS-13 government worker? You guessed it. Right around $100,000.
It’s incredible how effective precious metals are as a long-term store of value. Even going back over 500 years, we can match up Leonardo da Vinci’s salary as being similar to what he might receive today.
Imagine for a moment that time travel were possible, and Leonardo could transport himself to today’s time—he would still be able to spend those coins. Or at least trade them for currency at the same purchasing power.
Now that is a store of a value. This is the real stuff.
Could you imagine the same if you were transported 500 years into the future? Imagine taking your pieces of paper to people of the future and trying to trade for goods and services.
Our paper today would mean nothing to them.
Today’s currency relies on everyone in the system having confidence in it. Or at least being fooled into having it.
But confidence in fiat money is ebbing away with each passing day.
If you want your money to be worth anything at all for your kids and even for yourself later in life, you’ll want to own real assets—productive businesses, land, and yes, precious metals.
As Leonardo’s story shows, these asset classes have been proven to maintain their value over the centuries.
from SOVEREIGN MAN http://www.sovereignman.com/trends/historical-figures-salaries-in-gold-leonardo-da-vinci-15485/
via IFTTT
In an attempt to exploit these fears for political gain this
midterm election season, candidates and independent groups have run
ads in Nebraska, Kansas, Alaska, and Colorado attacking opponents
for being “soft on crime”.
Some of these ads are so heinous, they’ve drawn comparison to
the infamous Willie Horton spot that aired in 1988. That ad went
down in the annals for making people believe Democratic
presidential candidate Michael Dukakis was to blame for the rape
committed by a scary black prisoner who was on weekend
furlough.
Here are some of the worst Willie Horton–style ad campaigns
running this year:
Nebraska
The ad that most closely resembles the Willie Horton spot comes
from Nebraska. Paid for by the National Republican Congressional
Committee, it tries to link Democratic state senator Brad Ashford
to the murders committed by Nikko Jenkins, a man who was released
from prison early . The ad has been viewed over 162,000 times on
YouTube.
Like the fear mongering Willie Horton ad, this ad plays up
racial stereotypes with menacing footage of Nikko Jenkins, a black
man heavily covered in facial tattoos, yelling at the camera while
in his prison uniform. As this footage plays, a female narrator
states Jenkins was released from prison after serving only half of
his sentence because of the state’s “good time” law, which Ashford
supported and still defends.
Indeed, Nebraska’s good time law, which was expanded in 1992 to
allow prisoners to earn automatic credits toward reductions in
their sentences, is why Jenkins was released after 10 and a half
years. He had received a maximum 21-year sentence for two
carjackings committed as a teenager and two assaults committed
while behind bars.
But it’s still not right to take away all offenders’ ability to
earn credit for good behavior just because there’s a chance one of
them might commit a crime in the future. The implication that
Ashford, who didn’t even vote on the law, is somehow responsible
for Jenkins’ murders is ridiculous at best.
If that’s not bad enough, there’s more. Yesterday, the NRCC
released a second ad attacking Ashford for being soft on crime. The
narrator once again links his support of the state’s good time law
to Nikko Jenkins’ murders—and adds that he also supported removing
sex offenders from the state registry.
According to the Omaha World-Herald, that claim refers
to amendments Ashford offered that would allow the state to
differentiate between high-risk offenders, like those convicted of
child molestation, and low-risk offenders, like those convicted of
public urination. As far as the NRCC is concerned, this means he
wants to prevent families from knowing if sexual predators are in
their neighborhoods.
Kansas
This ad comes from the current Republican governor of Kansas,
Sam Brownback. It starts by showing two scary black men, the Carr
brothers, who went on a “killing spree” and were subsequently
sentenced to death row. The Kansas Supreme Court later
overturned those sentences because of legal errors made during
the sentencing phase of trial.
However, the narrator states that “liberal judges” changed the
Carr brothers’ death sentences and that Brownback’s Democratic
opponent, Paul Davis, “supported these judges.” The ad goes on to
accuse Davis of being a “liberal defense lawyer” who will appoint
“liberal judges” to the Kansas Supreme Court who will let
murderers, like the Carr brothers, “off the hook.”
The thing is, the Carr brothers weren’t let out of prison, as
the ad suggests—their convictions stand. The likelihood that
they’ll be released before they die is roughly 0 percent. And even
if their death sentences had been upheld, they likely wouldn’t have
been executed, as
Kansas hasn’t performed an execution since 1965.
But who cares about all of that when there’s fear to manufacture
and exploit?
Alaska
Alaska Senator Mark Begich, a Democrat, initially ran an ad
attacking his Republican challenger, Dan Sullivan, on his crime
record, but pulled it after it received massive backlash.
The ad, which can still be viewed on Politico, suggested that as
the state’s attorney general, Sullivan was responsible for the
early release of a convicted sex offender who later murdered a
couple and sexually assaulted their 2-year-old granddaughter. It
features a retired police sergeant parking in front of the location
where the brutal crimes took place and even lists the address.
But Jerry Active, the man accused of committing these crimes,
hasn’t been convicted yet. In fact, the trial hasn’t even begun.
The victim’s family attorney contacted Begich’s campaign and
asked him to take down his ad, partly out of fear it could
poison the jury pool.
Moreover, Sullivan had nothing to do with Active’s release. He
was let out of prison in 2009 after serving four years of a plea
deal that, according
to Politico, happened “because of a clerical error that took
place before Sullivan became attorney general.”
The controversial ad received a “pants on fire” rating from
Politifact.com.
Sleazy, yes. Facutally inaccurate, potentially harmful to
Active’s trial and traumatizing to the victims’ family? Who cares.
An election is at stake!
Colorado
The Republican Governors Association is spending $2 million to
air an attack ad against current Democratic governor John
Hickenlooper. The ad suggests he is considering granting Nathan
Dunlap, a prisoner sentenced to death for the 1993 murder of three
people at a Chuck E. Cheese, “full clemency,” allowing him to walk
free.
Republican candidate for governor Bob Beauprez is running a
similar ad suggesting Hickenlooper let a prisoner out who
threatened to “kill as many people” as he could.
The ad ends with text that reads, “With John Hickenlooper as
Governor, is your family safe?”
Terrifying, indeed.
Besides being inflammatory, inaccurate, and/or misleading, all
these ads have the potential to do some real harm. A recent study published by the
American Constitution Society and two Emory Law School professors
found that airing a lot of state supreme court election ads makes
justices less likely to rule in favor of criminal defendants.
It’s one thing to run ads criticizing a candidate’s record on
crime, but using scary images of heinous criminals and attempting
to link your opponent to the crimes they committed crosses a line.
It’s irresponsible, and it reinforces the misconception that crime
is going up and politicians need to “do something” about it. Good
policy rarely comes from hysteria.
Can an army of bloodthirsty theocrats survive a
brutal ribbing? Well…yes. And a new supply of
Chinese ground-to-air missiles gained courtesy of Qatar isn’t
exactly going to make ISIS hemhorrage too terribly under assault
from even the most rapier-like wit. But political comedian Dean
Obeidallah
points out at The Daily Beast that the terrorist
group/fundamentalist state has become a popular target of
entertainers across the Middle East. Says he, “they mock ISIS on
everything from being hypocrites when it comes to Islam to being
bumbling idiots to simply smelling like crap.”
He writes that one of the funnier videos he’s seen translated
into English is a Palestinian-produced take (embedded below) on an
ISIS checkpoint manned by the Three Stooges of homicidal
fanaticism. Belly-tickling-wise, it’s probably better than some of
the material that Saturday Night Live has inflicted on its
audience. It ends with an off-tune dig to the effect that ISIS is
more interested in terrorizing Arabs than in tormenting
Israelis.
Which, again, is better than some of the material that Saturday
Night Live has inflicted on its audience.
Whatever their quality, the comedic attacks, Obeidallah
emphasizes, are a means for people across the region to defy ISIS.
For comics in Syria and Iraq, that defiance potentially risks
serious consequences, since entertainers face death for poking fun
at the group.
Fed comes in with a bit of a Hawkish tilt as it rids of key policy line around labor market and keeps “considerable time.” The buying program has ended. Hawks Fisher and Plosser voted for the action, while Kocherlakota voted against it, which is a flip from recent votes.
“The dove dissenting says it all,” trader quips.
And Brean Capital’s Peter Tchir adds:
Hawkish statement:
1) QE gone.
2) The hawks were on board, and a dove took the time to dissent – in our Fed “U” shape pattern, we think the shift to hawkish overall Fed has commenced and the pure hawks are appeased and winning and the pure doves, losing.
3) Job highlighted and as Yellen said back at Jackson Hole – structural unemployment is higher than she thought, so less slack, and as San Fran Fed said recently, when a period occurs where wages were sticky, once they finally start to rise, it happens very quickly
Is March back on the table? If they are only fighting inflation now, they have less ability to enact more dovish policy.
I think this should be a “risk off” trade.
Initial reaction might be “risk on” as they are touting the economy and growth and talk about a great GDP print tomorrow, but
Growth going forward is frought with risk, especially with a less helpful Fed, which will support the long end of treasuries – not the front end.
The market started its big reversal on Bullard’s comments and I find it hard to believe that having his comments not be reflected at all in the statement means we have to head back lower.
HY has been a bit heavy past few days, and since we never saw a true “clearing level” we should see that.
The Fed’s implicit tightening and simplification of monetary policy was not apparent merely in the message conveyed by the FOMC moments ago: it was also clearly visible in the grammar of the statement itself, and specifically in the word count. Because after hitting a record 895 words last month, the October statement tumbled in complexity and its message to just 707 words: this is also the fewest words the Fed used to explain its actions in over a year, or since July of 2013.
To those who lament the Fed’s inability to explain what it will do, fear not: we are quite confident that within a year, we will see the first 1000+ word FOMC statement as the Fed finds itself in the same place it was after QE1… and QE2… and Operating Twist… and so on.
In a recent 
