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Submitted by Jeffrey Snider via Alhambra Investment Partners,

The stock market is still viewed as if it were a discounting mechanism, a system where information is processed and priced to deliver insight about the fundamental state of liquidity, markets, and the economy. That view has always been debatable, but never more so than the whole of this century so far. What were share prices suggesting, fundamentally, in March 2000? Or October 2007? Market efficiency proponents can only suggest that the “information” flowing into stock prices changed, as if there weren’t any warnings in the years leading up to those peaks.

You can make the same argument against stocks on the way up. In the US, starting just after QE3 and just before QE4, US stocks went on a rampage in anticipation of a full recovery drawn closer by the determined efforts of Ben Bernanke. It wasn’t the case that the recovery was then at hand; far from it, since throughout 2012 there were more hints of recession than anything else. Instead, stocks were predicting that QE would work even though they ignored that it was third and fourth iterations that apparently suggested it. This is a universal question about not just stocks but monetarism and the financialism that has taken hold of what used to be free markets (where discounting was most likely).

On September 25, 2013, Japan’s Prime Minister Shinzo Abe delivered a speech to the floor of the NYSE. He began by citing the Hollywood movie Wall Street, inducing several cringe-worthy passages that were intended to show how Japan had just faded over time.

In the original film in 1987, the words “Nikkei Index” appear. Japanese businessmen also take the screen and the film reminds us of the era in which the Japanese economy was regarded as a juggernaut.

However, in the 2010 sequel, the investors that appear are Chinese and it is not Wall Street but London where Gordon [Gekko] amasses his wealth. Japan is conspicuous only in its absence.

The only real significance of Abe’s statement is the reference to a shift into London (eurodollars) but that is another story. Abe’s point was to emphasize the introduction of QQE (and the other two “arrows”) having been effected only months before. He was on his own version of a Wall Street road show to get the world’s “markets” to buy in to his vision.

It is certainly true that after the bursting of its bubble, from the 1990’s Japan was mired in almost 20 years of deflation and the economy was sluggish. But today, I have come to tell you that Japan will once again be a country where there is money to be made, and that just as Gordon Gekko made a comeback in the financial world after 23 years of absence, so too can we now say that “Japan is back.”

He told Wall Street traders that, “the Japanese economy that surrounds us in exceptionally good” and that they should “buy my Abenomics.” He gave them no real reason to except that faith; it isn’t as if QQE was Japan’s first run at the program, indeed it was the nation’s eleventh (if not twenty-second or third version) dating all the way back to 2001. The size, scale, and persistence were supposed to be the true differences – this time they meant it.

Stock traders, of course, had by that time already bought the premise starting the prior November when the yen first shifted on Abe’s electoral victory. It was the same pattern as we saw of QE3 in the US, that stocks were “discounting” a recovery that would follow from the inarguable success of QE writ large(r). By the time Abe spoke on Wall Street about Wall Street, the Nikkei 225 had already almost doubled – jumping from around 8,700 in late November 2012 to about 14,760 in September 2013. Japanese stocks kept going even though the Japanese economy would soon fall apart. The Nikkei 225 would peak last summer, importantly just before the August global liquidations, at nearly 21,000.

During that entire time, the Japanese economy fell into recession, recession again, and now with economists left to argue whether this first quarter in 2016 will mark the third re-recession just under QQE. As I have tried to chronicle this whole time, Japanese households have been utterly devastated by QQE’s effects primarily via the yen and its disruptions and impoverishment.

Now, at this very late date two and a half years after Abe’s financial advice to “buy Abenomics”, only now is Wall Street selling.

Starting in the first days of 2016, foreign traders have been pulling out of Tokyo’s stock market for 13 straight weeks, the longest stretch since 1998. Overseas investors dumped $46 billion of shares as economic reports deteriorated, stimulus from the Bank of Japan backfired and the yen’s surge pressured exporters. The benchmark Topix index is down 17 percent in 2016, the world’s steepest declines behind Italy…

“Japan has been disappointing,” said Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors Ltd., which oversees about $115 billion. He’s a long-time fan of Tokyo equities who says he’s now looking for opportunities to sell. “A lot of people are starting to doubt Abenomics.”

The only question is, “what took so long?” There were doubts about Abenomics from the very start and then a distinct lack of indicative progress throughout its entire run. What that suggests is that traders were trading Japan only for the self-fulfilling prophecy of central bank programs – “investors” weren’t buying QQE or Abenomics as they were intended but rather what they assumed other “investors” would do for the same reason. That left stock prices discounting not fundamental properties but cumulative views on central banking. Again, the reversal dating back to last August’s liquidations is very telling in that regard.

Since then, central bankers and economists everywhere have remained steadfast as if nothing has changed; the future economy remains as bright as ever in their vision, with any problem just a temporary detour on the road to eventual fulfillment. The shift in markets, however, was accompanied by an equally shattering one in the global economy, creating an even larger mismatch between promises and delivery; with central bankers increasingly stranded upon a dream that hardly anyone can recognize now as realistic. It is, as noted this morning about Italy, a global awakening. The monetarist dream is not yet quite dead, but it is being called out for still suggesting an increasingly unbelievable future path.

Gordon Gekko might have been the perfect analog for Abenomics since he perpetrated in the movie various “pump and dump” schemes. How has Abenomics, or any of the QE’s for that matter, been any different?

I wrote back in September 2014, exactly one year after Abe spoke at the NYSE, about “being wrong.” At that time it was in the context of viewing markets through a fundamental prism when everyone was so sure that the fun was just getting started.

Reflections upon the past few years bring out valid criticisms about “being wrong.” I have made no secret that I favor the bearish interpretation of eventually the stock market, but immediately the economy. The erosion and attrition I describe does not look like anything seen before, except the months and years immediately preceding the Great Recession. But that inevitably brings back the rejoinder that there is no such immediate danger right now, as bad as the economy may be there is nothing financially equivalent to the conditions that existed prior to August 9, 2007; with the further inference that a floor exists, economically speaking, today where a trap-door was present then.

The point is evaluating risk and actually discounting relevant information no matter how inconvenient and contradictory (and lonely, in the respect of swimming against the raging tide):

But 2008 was 2008, and 2014 is a different circumstance. Or is it? We see the same types of cracks appear and widen, dysfunction continues on a global scale and the economy even here never lives up to those promises. So even evaluating on the individual circumstances here leads to the same framework – identifying the possibility that the economy may not be providing the support markets are expecting. Further, the potential trajectory of that may be such that “next year” never actually comes, and at some point “markets” become too aware…

Risk is defined as keeping those positive returns for more than just numbers on a long ago discarded custodial statement. You can generate all the positive return you want on the upside, but you better have a solid handle on risk of a downside that buries the returns wherever and whenever it may show up. An economy that never lives up to the hype set against rapidly rising prices is simply a highly increased probability of that.

In other words, it is and always has been “bubble.” That meant seeing through all the distortions and finding the true economic and financial identity; looking at 2014’s 5% GDP for what it was (actually transitory) rather than what everyone wanted it to be (the finish line) because systemic function (“rising dollar”) mattered(s) far more than “the narrative.” It’s an honest examination of what is really an ongoing and seemingly unstoppable slowdown, because 2% GDP (which is what 2014 amounted to after all the hype) is not now just as it has never been associated with “overheating.” It is not accepting excuses for what were supposed to be “inarguable” monetary successes; it was realizing that there are only excuses.

The difference between the US stuck at 2% (to this point) and Japan in perpetual shallow recession is only the US bond market – and that is in danger of being removed as a distinction artificially in our “favor.” The monetary results of the QE’s have been almost exactly identical, and that includes widespread impoverishment. That is the legacy of monetarism as it presents negative economic factors of redistribution combined with global monetary decay; i.e., the slowdown that will not stop slowing down. It is several years too late, but even stocks are starting to see it at least as a serious risk. In the end, that might be the biggest significance of last August; that it finally represented clear and unequivocal evidence that there is really is and has been nothing to QE.

The world looks vastly different on this side of that divide, but the truth is that it has been that way all along.

The global economy did not change last year but it finally sowed enough doubt that views on QE, as a representation of true central bank power and influence, did.

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As one veteran trader told us, this massive short-squeeze came "out of nowhere," seemingly driven by oil-headline-induced algo momentum ignition. Goldman's "Most Shorted" stocks are up a stunning 6% in the last 2 days – the biggest 2-day surge since Oct 2015 as Credit Suisse noted earlier there is a "lot of pain being felt out there on the short side."

The face-ripping surge has sent "Most Shorted" stocks back into the green for the year…

However, 5 of the last 6 times that shorts have been squeezed this much this fast, stocks have stalled dramatically.

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It seems billion dollar baby of Silcon Valley, Elizabeth Holmes, is facing yet another unicorn-slaying moment as the fairy-take ending for Stanford drop-out looks increasingly distant after WSJ reports regulators are seeking ban the so-called "billionaire" from the blood-tsting business for two years after U.S. health inspectors have found serious deficiencies at Theranos Inc.’s laboratory in Northern California.

As The Wall Street Journal reports,

In a letter dated March 18, the Centers for Medicare and Medicaid Services said it plans to revoke the California lab’s federal license and prohibit its owners, including Ms. Holmes and Theranos’s president, Sunny Balwani, from owning or running any other lab for at least two years. That would include the company’s only other lab, located in Arizona.

 

The two labs generate most of Theranos’s revenue and are at the core of its strategy to revolutionize the blood-testing industry with new technology, user-friendliness and quick results.

 

The letter hasn’t been released to the public, but a copy was reviewed by The Wall Street Journal.

None of this should be a huge surprise, after Aswath Damodaran chastened just a few months ago, looking back at the build up and the let down on the Theranos story, the recurring question that comes up is how the smart people that funded, promoted and wrote about this company never stopped and looked beyond the claim of “30 tests from one drop of blood” that seemed to be the mantra for the company. While we may never know the answer to the question, Aswath Damodaran offers three possible reasons that should operate as red flags on future young company narratives…

1. The Runaway Story: If Aaron Sorkin were writing a movie about a young start up, it would be almost impossible for him to come up with one as gripping as the Theranos story: a nineteen-year old woman (that already makes it different from the typical start up founder), drops out of Stanford (the new Harvard) and disrupts a business that makes us go through a health ritual that we all dislike. Who amongst us has not sat for hours at a lab for a blood test, subjected ourselves to multiple syringe shots as the technician draw large vials of blood, waited for days to get the test back and then blanched at the bill for $1,500 for the tests? To add to its allure, the story had a missionary component to it, of a product that would change health care around the world by bringing cheap and speedy blood testing to the vast multitudes that cannot afford the status quo.

 

The mix of exuberance, passion and missionary zeal that animated the company comes through in this interview that Ms. Holmes gave Wired magazine before the dam broke a few weeks ago. As you read the interview, you can perhaps see why there was so little questioning and skepticism along the way. With a story this good and a heroine this likeable, would you want to be the Grinch raising mundane questions about whether the product actually works?

 

2. The Black Turtleneck: I must confess that the one aspect of this story that has always bothered me (and I am probably being petty) is the black turtleneck that has become Ms. Holmes’s uniform. She has boasted of having dozens of black turtlenecks in her closet and while there is mention that her original model for the outfit was Sharon Stone, and that Ms. Holmes does this because it saves her time, she has never tamped down the predictable comparisons that people made to Steve Jobs.

 

 

If a central ingredient of a credible narrative is authenticity, and I think it is, trying to dress like someone else (Steve Jobs, Warren Buffett or the Dalai Lama) undercuts that quality.

 

3. Governance matters (even at private businesses): I have always been surprised by the absence of attention paid to corporate governance at young, start ups and private businesses, but I have attributed that to two factors. One is that these businesses are often run by their founders, who have their wealth (both financial and human capital) vested in these businesses, and are therefore as less likely to act like “managers” do in publicly traded companies where there is separation of ownership and management. The other is that the venture capitalists who invest in these firms often have a much more direct role to play in how they are run, and thus should be able to protect themselves. Theranos illustrates the limitations of these built in governance mechanisms, with a board of directors in August 2015 had twelve members:

 

 

 

I apologize if I am hurting anyone’s feelings, but my first reaction as I was reading through the list was “Really? He is still alive?”, followed by the suspicion that Theranos was in the process of developing a biological weapon of some sort. This is a board that may have made sense (twenty years ago) for a defense contractor, but not for a company whose primary task is working through the FDA approval process and getting customers in the health care business. (Theranos does some work for the US Military, though like almost everything else about the company, the work is so secret that no one seems to know what it involves.)

 

The only two outside members that may have had the remotest link to the health care business were Bill Frist, a doctor and lead stockholder in Hospital Corporation of America, and William Foege, worthy for honor because of his role in eradicating small pox. My cynical reaction is that if you were Ms. Holmes and wanted to create a board of directors that had little idea what you were doing as a business and had no interest in asking, you could not have done much better than this group of septuagenarians. 

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Submitted by Wim de Vriend via OilPrice.com,

The LNG Glut and the Golden Age of Gas, Part 1

‘Where are all the LNG postponements?’ was the puzzled, plaintive warning heard from Oil & Gas experts Wood Mackenzie last September. Besides the new Australian and American terminals preparing to ship out well over 100 Mtpa (Million tones per annum), of LNG, a second wave that size was making its way through the permitting process.

If there weren’t any postponements soon, the consultants warned, ‘. . . the market could see an additional 100 Mtpa of LNG sanctioned in the next six to 18 months, expanding the likelihood of an oversupply of LNG in Asia to 2025.’

It may not have been the first warning about the developing LNG glut, but its tone was the most disturbing, like a fire alarm. So far that year’s only postponement in the U.S. had been BG Group’s Lake Charles terminal in Louisiana.

But I wondered if in asking its question about postponements, Wood Mackenzie wasn’t being overoptimistic again, as all oil and gas experts seem to have been. WoodMac’s question implied that a second wave of over 100 Mtpa would prolong the developing oversupply by several years, but could still lead to a market balance by 2025. Hence they assumed that the global LNG market, which has never traded more than about 240 Mtpa, could absorb new production of over 200 Mtpa in ten years.

Perhaps time will prove them right. I just didn’t think it likely, one reason being that the world’s oil and gas experts had already proved their fallibility. So I started writing this series of articles, in which rather than making firm predictions I explored the probabilities of future market scenarios in light of past and present trends. Those probabilities led me to the following conclusions:

• It seems quite possible that today’s early entrants on the global LNG market, such as Cheniere, will do fairly well, thanks to a solid portfolio of long-term contracts, and despite huge construction debts, low spot prices overseas, and in time the risk of rising domestic gas prices. But prospects are not favorable for more U.S. entries into the global LNG market than those now under construction.
• The common expectation that the global LNG market can absorb the first 100 Mtpa of new production by 2020 requires a boost in demand too steep to be plausible. It seems more likely that the market won’t balance before 2025, or even later. This is due to the static level of global shipments in recent years, LNG’s continuing cost disadvantage vis-à-vis other fuels, and the poor outlook for vigorous economic growth worldwide.
• At this time the addition to LNG liquefaction capacity of the greenfield projects proposed for the west coast of North America seems highly imprudent, given that prices in Asia have crashed and because of those proposals’ difficulties in obtaining quality long-term liquefaction or sales contracts.
• The worldwide rush to build liquefaction capacity has the characteristics of speculative bubbles and gold rushes of past centuries. In the case of the developing LNG glut, the blame must probably be shared by overambitious promoters and prestigious but imprudent energy experts.

One example of shared responsibility between promoters and experts could be the bar graph below, titled ‘Steady LNG Demand Growth Projected’, which was part of a presentation by Cheniere of July 2015. That was well before Charif Souki’s ouster as CEO in December, and obviously designed to create enthusiasm for Souki’s ambitious plans – which Cheniere’s new board has trimmed since.

According to Cheniere, the source of the graph was WoodMac. It shows actual annual LNG trade from 2000 through 2015 (except that the 2015 shipments were an estimate made in mid-year). Those years are followed by a projected LNG boom that’s supposed to start now, in 2016. I have drawn three red horizontal lines on the graph. The bottom red line marks actual LNG trade in 2015. The other two mark WoodMac’s trade predictions for 2020 and 2025. For clarity, I marked with numbers two recent years that are especially important, 2011 and 2015.

(Click to enlarge)

The bar graph shows that after rising at a fairly steady pace, the global LNG market saw sharp increases in 2010 and in 2011, when it reached 242 Mtpa. The Mtpa totals for the five years 2011 – 2015 are listed below:

Because during those five years, annual LNG trade moved within a narrow range between 237 and 242 Mtpa, I will call them ‘the 5 flat years’. As we shall see, in projections by gas experts those flat years were unforeseen.

While I would welcome contrary facts from people in the LNG business, I was able to find only limited evidence that supply shortages contributed to causing the 5 flat years, except perhaps in 2012:

The 2012 decrease in LNG trade was largely driven by supply?side issues in Southeast Asia (Indonesia and Malaysia) and domestic and political challenges in Egypt, Libya, and Yemen (e.g., the Libyan Marsa el Braga facility has made no deliveries since the 2011 civil war, and is assumed to be decommissioned). Increased production in Qatar and Nigeria partially offset these losses.

That Qatar was capable of making up for some of 2012’s lost capacity seems to be supported by the graph below, which shows that Qatar had added about 25 Mtpa of capacity during the three preceding years. (Qatar is the light blue in the bars below; the chart’s numbers are in m³; 1 m³ = .405 tons.)

(Click to enlarge)

This 2015 graph by the IEA (International Energy Agency) also shows that 2012 saw the smallest addition to LNG export capacity since 2005, the Pluto terminal in Australia, which started operating at only part of its 4.3 Mtpa capacity. But 2013 added twice as much supply and 2014 doubled that again, as did 2015. Even more is expected to hit the market by 2020, mainly from Australia (dark blue) and from the U.S. (green). As an apparently unexpected result, LNG has already become a buyer’s market, with Asian interest in signing long-term contracts greatly reduced. That the effects of 2012’s limited supply did not last long is also demonstrated by the steep slide of Asian spot prices that started in early 2014. In recent months they have slid even lower.

During the 5 flat years the first bar graph showed a steep increase in Asia-Pacific trade (the light blue bottom part), while European trade (dark blue) shrank, making up the difference. It’s widely known that the rising Asia-Pacific trend was mostly driven by a demand boost in Japan, the world’s largest LNG consumer, due to the government-ordered closing for safety inspections of some four dozen nuclear power plants after the 2011 Fukushima meltdown. That calamity boosted imports of coal, oil and LNG to make up the lost generating capacity. It caused spot LNG prices in Japan, already higher than contract prices, to rise steeply, so that 2012 and 2013 saw some European LNG importers diverting or re-exporting contracted cargoes to Japan. Even with high LNG carrier rates they could make money on those trades, and unlike Japan, South Korea and Taiwan, Europe had pipeline gas available, along with cheap coal for its power plants.

While that same bar graph shows actual LNG trade of about 240 Mtpa during all the flat years 2011-2015, it does not show that WoodMac had predicted trade of 250 Mtpa by 2015. As confirmed by the red lines I drew on the nearby line graph, WoodMac had also predicted about 360 Mtpa for 2020, and 440 Mtpa by 2025. In other words, WoodMac considered it reasonable to expect a capacity increase of about 100 Mtpa to be absorbed by the market by 2020, and for that performance to repeat by 2025.

(Click to enlarge)

In 2012 Ernst & Young published even more upbeat projections for the global LNG trade, for which it had combined ‘data from multiple sources’. Those projections are shown in the bar graph below, again with red lines added to clarify them. Notice Ernst & Young’s black lines at the top, identifying as ‘Actual’ the years through 2011, and as ‘Projected’ those starting with 2012. Citing the IEA (International Energy Agency), they said:

(Click to enlarge)

Global LNG demand by 2030 could . . . be almost double that of the estimated 2012 level of about 250 million metric tonnes. Japan, South Korea and Taiwan (collectively, JKT) have been and are expected to remain the backbone of the global LNG market, while China and India are expected to be the biggest sources of additional LNG demand.

Like WoodMac’s estimate for 2015, E&Y’s estimated 2012 trade of 250 Mtpa turned out to be wrong. This is not serious by itself, but it was part of a projected growth trend that never materialized, which predicted global LNG trade of about 310 Mtpa by 2015, some 70 Mtpa or 29% more than the actual number. The table below compares the two projections, WoodMac’s and E&Y’s:

These numbers make plain that both consultants predicted that new demand could absorb over 200 Mtpa of new production by 2025, though E&Y’s predictions were more front-loaded than WoodMac’s. All this raises a couple of questions that are important for anyone trying to make predictions beyond 2015.

One question to ask is: what would have happened to the global LNG trade without the Japanese catastrophe? Would it have continued to rise, or would it have stagnated as it did, or declined?

The possible answers are a mixed bag. On the one hand, the passing supply restrictions of 2012 might still have had a temporary effect on growth. On the other, if in the absence of the earthquake Japanese demand had been flat or mildly rising, then shipments to Europe would have had to increase in order for global trade to keep growing at the same pace.

But European demand turned out to be not very robust, due to a combination of factors including mild winters, imported pipeline gas from Russia, and a lot of cheap coal used instead of gas for power generation. And finally, for its projected global growth E&Y in particular counted on robust demand growth in ‘other Asia’, the light grey part of the annual bars in its graph. ‘Other Asia’ would be mostly China and India. But as we shall see, such high hopes among LNG exporters may be disappointed.

The other question we should ask is why, in view of the 5 flat years, we should believe that the present year, 2016, will see the start of another growth spurt in LNG shipments, and a steep one at that, to make up for the recent pause; for this is clearly what the first bar graph, from Cheniere/WoodMac, showed.

It seems counterintuitive, like shifting a manual transmission directly into third gear while standing still. I do realize that can be done while your car is parked on a steep hill facing down, but that’s a unique situation. In this case the current low LNG prices may give a hill-effect, stimulating demand, but as we will see there are other market conditions that may work against that, too.

More about what we should believe in part 2.

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Perhaps its a remnant from 2014 and 2015, but the first thing we noticed when skimming through the April Fed Beige Book is that “weather” continues to play an impact on the US economy: after declining from 26 mentions of the word “weather” in the January beige book, down to 17 in March, April saw a fractional pick up, with 18 cases of the word appearing in the just released Fed report. 

Also notably, after three mentions of “stock market”in the March beige book, the April one did not resort to blaming the market for anything even once. Most curious, however, was that after the Fed admitted it is only focusing on “global” conditions in its latest statement, and with 11 mentions in the March edition, in April the Fed used “global” just twice.

We find this a very odd lack of mentions for the one key factor that the Fed supposedly is most focused on. So what did the Beige book focus on instead? Here are the key highlights:

• Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand in late February and March, though the pace of growth varied across Districts.
• Most Districts said that economic growth was in the modest to moderate range and that contacts expected growth would remain in that range going forward.
• Consumer spending increased modestly in most Districts and reports on tourism were mostly positive.
• Labor market conditions continued to strengthen and business spending generally expanded across most Districts.
• Demand for nonfinancial services grew moderately overall. Manufacturing activity increased in most Districts.
• Construction and real estate activity also expanded.
• Credit conditions improved, on net, in most Districts.
• Low prices weighed on energy and mining output as well as prospects for agricultural producers. Overall, prices increased modestly across the majority of Districts, and input cost pressures continued to ease

A glowing picture of a healthy economy some would say. So why is the Fed not hiking?

And then there was the Fed’s take on wage growth, arguably the most important domestic economic “data” from the data-dependent Fed. This is what it said in January:

Overall, wage pressures remained relatively subdued, as evidenced by reports from Philadelphia, Atlanta, Chicago, and Kansas City. Just two Districts–New York and San Francisco–indicated some acceleration in upward wage pressures.

Wages improved in March:

Wages generally increased, as most Districts experienced slight to strong wage growth. However, the Kansas City, Richmond and Atlanta Districts reported flat wage growth. St. Louis noted strong wage growth as fifty-six percent of contacts, the highest in two years, reported that wages were above year-ago levels. Cleveland, Richmond, Atlanta, Chicago, St Louis, Minneapolis, and San Francisco reported positive wage growth among high-skilled workers, especially for occupations in the technology, high-skilled manufacturing, aerospace and defense, financial services, and professional technical sectors.

Fast forward to April where we now read that wages increased in all districts except Atlanta.

Wages increased in all but one District (Atlanta), and several Districts reported signs of a pickup in wage growth over the last survey period. New York, St. Louis, Minneapolis, and San Francisco reported moderate wage growth, while wage pressures were characterized as mild in Chicago, mostly contained in Kansas City, and stable in Atlanta. The strongest wage pressures were for occupations where labor shortages are pressing and turnover is elevated. Contacts in the Boston, Cleveland, and St. Louis Districts cited sizeable wage increases for workers in fields such as information technology services and skilled construction and manufacturing trades. In addition, some firms in Philadelphia indicated that they had raised their starting wages in order to attract higher quality workers, and Chicago noted an increase in the number of contacts who raised wages for low-skilled entry-level workers.

The summary: modest to moderate growth, increasing consumer spending, stronger labor market conditions, improving labor market conditions, and most importantly, rising wages almost across the board. And virtually no mention of “global” conditions (and certainly no mention of China). So what excuse will the Fed use not to hike in April again?

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