iftttwall

“The reality is,”Kevin Warsh exclaims, “QE policy favors those with big balance sheets, those with risk appetites, and access to free money,” while real people “are still looking around and saying what is fed policy doing for me.” The problem, he explains, is a disconnect between what markets are discounting about the future and the Fed’s credibility with regard their apparently divergent forecasts for unemployment, growth, and interest rates. In a little under 90 seconds, Warsh explains the dilemma and sums up the Fed perfectly, “they’re just talking, rather than acting.”

“The challenge for [The Fed] in December is to convince the markets that both their economic forecasts are right – that is the economy will be growing at 3.5% in 2016, the unemployment rate will be in the fives – and yet, interest rates still at zero.

 

My view is one of those has to give.

 

If the economy is roaring as much as they say, markets will not believe that the Federal Reserve will keep the Fed Funds rate at zero in that environment. The alternative is the economy is stuck at around 2% growth in which case it is possible that rates and yields stay quite low.”

90 Quick seconds of uncomfortable enlightenment…

 

 

His later comments did not entirely suggest confidence in the short-term future…

“Financial markets tend to test new chairmen. They did it to Paul Volcker. They did it to Alan Greenspan,” Warsh said. “They challenged Ben Bernanke and his new team eight years ago.”

 

“I’ve got every bit of confidence that [Yellen] is going to realize that being chairman is frankly a very different set of responsibilities … where most of us get to sort of chatter from the cheap seats. She’s got to make the tough decisions.”

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Submitted by Lance Roberts of STA Wealth Management,

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Submitted by Lance Roberts of STA Wealth Management,

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/GPSbAhAVL8Y/story01.htm Tyler Durden

"I just don't see evidence that people believe we are launching into a great new era" of home price appreciation,"that's what we had in the early 2000s." Simply put, he chides Faber and Cramer, "people are not so excited about the future," in spite of record high stock prices (and surging home prices) as it seems the Fed's plan was foiled again. In a fascinating to-and-fro, they note "we don't want to go back to 2005," even though "it would lift the economy" since "we know how that story ends." The hedge funds and 'investors' proclaim themselves long-term investors, but Shiller notes "they are not, what they have learned there is short-run momentum in the housing market," and will bail at the first sign of that ebbing, "it's different now, we can't trust momentum."

Some uncomfortable truths from the Nobel winner…

"Real homebuyers are not as excited about the housing market as the price increases seem to suggest…"

 

"It's more of an 'unusual' demand from investors that's driving the market now…"

 

"…the market is driven more by psychology than affordability"

 

The rental market demand 'excuse' for growth and long-term gains is obsequious as Shiller asks rhetorically, "how can these guys not notice how fast prices have been going up and historically momentum is a much better play in housing than it has been in the stock market." He adds, "I'm pretty sure [an exit] is on their minds," but as he warns, "they are not going to say this, of course."

"It looks like we are a little bubbly in the stock market,… if it keeps going up like this, the expected retrun on the stock market will fall below the TIPS yield."

 

 

Former Fed official Kevin Warsh didn't help:

"Housing and housing assets are going to give you one signal," Warsh said in a "Squawk Box" interview. "[But] there is a broader cross section of data from the consumer, from the business, from trade and from exports. So this preoccupation with housing strikes me as really quite dangerous."

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mh_11-xQN9o/story01.htm Tyler Durden

"I just don't see evidence that people believe we are launching into a great new era" of home price appreciation,"that's what we had in the early 2000s." Simply put, he chides Faber and Cramer, "people are not so excited about the future," in spite of record high stock prices (and surging home prices) as it seems the Fed's plan was foiled again. In a fascinating to-and-fro, they note "we don't want to go back to 2005," even though "it would lift the economy" since "we know how that story ends." The hedge funds and 'investors' proclaim themselves long-term investors, but Shiller notes "they are not, what they have learned there is short-run momentum in the housing market," and will bail at the first sign of that ebbing, "it's different now, we can't trust momentum."

Some uncomfortable truths from the Nobel winner…

"Real homebuyers are not as excited about the housing market as the price increases seem to suggest…"

 

"It's more of an 'unusual' demand from investors that's driving the market now…"

 

"…the market is driven more by psychology than affordability"

 

The rental market demand 'excuse' for growth and long-term gains is obsequious as Shiller asks rhetorically, "how can these guys not notice how fast prices have been going up and historically momentum is a much better play in housing than it has been in the stock market." He adds, "I'm pretty sure [an exit] is on their minds," but as he warns, "they are not going to say this, of course."

"It looks like we are a little bubbly in the stock market,… if it keeps going up like this, the expected retrun on the stock market will fall below the TIPS yield."

 

 

Former Fed official Kevin Warsh didn't help:

"Housing and housing assets are going to give you one signal," Warsh said in a "Squawk Box" interview. "[But] there is a broader cross section of data from the consumer, from the business, from trade and from exports. So this preoccupation with housing strikes me as really quite dangerous."

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mh_11-xQN9o/story01.htm Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The front door is covered with official pronouncements of "the China Dream" and blustery demands of hegemony, but the back door is choked with members of the financial/political Elite fleeing China and taking their wealth with them.

The first thing to understand about China is there is always a front door and a back door to everything. The front door is what's presented to the outside world; the back door is for everything that doesn't fit the PR image created by the front door.

The front door presents positive "face," the back door is for everything that would "lose face," so it's hidden and never discussed, except in private, and only with trusted family or friends.

A friend who once worked for the Chinese government recently returned home after several years absence, and found that all her bosses had moved to the West: Australia, Canada, etc. These were typical officials: their base salary was low but they managed to buy multiple homes, support mistresses, have upscale autos, and so on.

In a word, ill-gotten wealth. There are tens of thousands of these beneficiaries of China's boom in credit and corruption, and they have all either fled (with their ill-gotten wealth) to the West or "safe-haven" East (Singapore, for example). Those who haven't fled yet have passports to a safe haven, and cash and homes overseas awaiting their arrival.

It is common knowledge that the offspring of top officials all have passports and homes awaiting them in the West.

That every one of your political bosses has left China is an astounding revelation into the mindset of those who have benefited most from China's boom: they obviously fear that some upheaval could strip away their ill-gotten wealth, otherwise, why not simply move to some wealthy enclave in China?

The front door is covered with official pronouncements of the China Dream and blustery demands of hegemony, but the back door is choked with members of the financial/political Elite fleeing China and taking their wealth with them. All of this is well-known, yet it is spoken of in hushed tones, lest China lose face from this wholesale exodus of those who stripmined the nation with credit and corruption.

If the Elites had any faith in China's future, and in the security of their wealth, why would they be fleeing China in perhaps the greatest peacetime exodus of wealth the world has ever seen? Estimates of the money flowing out of China are merely guesses, of course, but the numbers run into the tens or even hundreds of billions of dollars.

Those in the political/financial Elites have the best information about conditions in China. What speaks louder, actions, or empty words? Actions, without a doubt. It's difficult to see how China can be as stable as advertised when its monied Elites all have back doors out of the country and homes awaiting them in the West. The most fearful (or guilty) aren't waiting around to risk the future in China; they're already long gone. What does that say about the front door pronouncements of hegemony and dreams? The inconvenient truth is the Chinese Dream is to live in Palo Alto:

Why Chinese People Buy So Many Homes in Palo Alto (The Atlantic)

Chinese Dream: To Become the Father of an American, by Jia Jia "When Bill Clinton visited China in 1998, a female student named Ma Nan at Peking University stood up and denounced the appalling human rights condition in the US. She was supposed to file a question, but she sounded more like she was delivering a lecture. Later on, she married an American man, gave birth to a son, became the mother of an American, and departed China for good."

Young, Gifted, and Chinese "Facing the future of housing, marriage, and job, why do our hearts beat not with expectations but fear?"

Fitch says China credit bubble unprecedented in modern world history

China in Revolution and War "Several serious problems in China could trigger a major crisis, potentially igniting either a domestic revolution or foreign war."

How will a slowing China cope with rapidly aging buildings?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/nGN2arQ6njI/story01.htm Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The front door is covered with official pronouncements of "the China Dream" and blustery demands of hegemony, but the back door is choked with members of the financial/political Elite fleeing China and taking their wealth with them.

The first thing to understand about China is there is always a front door and a back door to everything. The front door is what's presented to the outside world; the back door is for everything that doesn't fit the PR image created by the front door.

The front door presents positive "face," the back door is for everything that would "lose face," so it's hidden and never discussed, except in private, and only with trusted family or friends.

A friend who once worked for the Chinese government recently returned home after several years absence, and found that all her bosses had moved to the West: Australia, Canada, etc. These were typical officials: their base salary was low but they managed to buy multiple homes, support mistresses, have upscale autos, and so on.

In a word, ill-gotten wealth. There are tens of thousands of these beneficiaries of China's boom in credit and corruption, and they have all either fled (with their ill-gotten wealth) to the West or "safe-haven" East (Singapore, for example). Those who haven't fled yet have passports to a safe haven, and cash and homes overseas awaiting their arrival.

It is common knowledge that the offspring of top officials all have passports and homes awaiting them in the West.

That every one of your political bosses has left China is an astounding revelation into the mindset of those who have benefited most from China's boom: they obviously fear that some upheaval could strip away their ill-gotten wealth, otherwise, why not simply move to some wealthy enclave in China?

The front door is covered with official pronouncements of the China Dream and blustery demands of hegemony, but the back door is choked with members of the financial/political Elite fleeing China and taking their wealth with them. All of this is well-known, yet it is spoken of in hushed tones, lest China lose face from this wholesale exodus of those who stripmined the nation with credit and corruption.

If the Elites had any faith in China's future, and in the security of their wealth, why would they be fleeing China in perhaps the greatest peacetime exodus of wealth the world has ever seen? Estimates of the money flowing out of China are merely guesses, of course, but the numbers run into the tens or even hundreds of billions of dollars.

Those in the political/financial Elites have the best information about conditions in China. What speaks louder, actions, or empty words? Actions, without a doubt. It's difficult to see how China can be as stable as advertised when its monied Elites all have back doors out of the country and homes awaiting them in the West. The most fearful (or guilty) aren't waiting around to risk the future in China; they're already long gone. What does that say about the front door pronouncements of hegemony and dreams? The inconvenient truth is the Chinese Dream is to live in Palo Alto:

Why Chinese People Buy So Many Homes in Palo Alto (The Atlantic)

Chinese Dream: To Become the Father of an American, by Jia Jia "When Bill Clinton visited China in 1998, a female student named Ma Nan at Peking University stood up and denounced the appalling human rights condition in the US. She was supposed to file a question, but she sounded more like she was delivering a lecture. Later on, she married an American man, gave birth to a son, became the mother of an American, and departed China for good."

Young, Gifted, and Chinese "Facing the future of housing, marriage, and job, why do our hearts beat not with expectations but fear?"

Fitch says China credit bubble unprecedented in modern world history

China in Revolution and War "Several serious problems in China could trigger a major crisis, potentially igniting either a domestic revolution or foreign war."

How will a slowing China cope with rapidly aging buildings?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/nGN2arQ6njI/story01.htm Tyler Durden