The FDA Wants to Ban Berger Cookies, the World’s Most Delicious Dessert

The FDA may soon kill off the world’s most delicious
dessert—Baltimore’s own Berger Cookies. Please believe I make this
claim as one who is not otherwise overly enamored of sweets.

For those who haven’t had the pleasure, we’re talking fudge
slathered over a shortbread cookie to rapturous effect.

If you are one who feels another dessert has a better claim to
distinction, know that it doesn’t matter. Whatever you’re into will
be banned too if it contains artificial trans fats, which the FDA
may decide to outlaw as soon as January.

Berger Cookies, whose recipe has been only slightly modified
since the 1830s, are obviously not healthy. But they are one of
life’s little pleasures, and the law that criminalizes them is an
ass. A tremendous, giant donkey and/or posterior. Of evil.

Via
Capital News Service:

In the past two weeks, the Berger Cookie bakery has made two
attempts to produce the cookies without trans fat, said owner and
president Charles DeBaufre, Jr. The result was discouraging, he
said.

“We’ve tried it and trust me, it is nasty. It doesn’t taste
right,” DeBaufre said. “The texture’s not there. It’s an entirely
different product.”

Trans fats are essential to the taste and flavor of the cookie,
DeBaufre said. If the ban goes into effect, he said he would apply
for an exception. If the bakery is denied an exception, he said he
would continue to test out new recipes or “go out of business, one
of the two.”

As Baylen Linneken
noted earlier this month, the FDA claims a ban may prevent
between 3,000 and 7,000 deaths from heart disease each year. But
evidence for this proposition is equivocal at best. New York City
banned trans fats in 2006, and the heart disease mortality rate
fell. But, says Linneken, it fell faster in the rest of the
country—where trans fats are still freely available—over the same
period.

The FDA further claims the benefits of prohibiting trans fats
would dwarf the costs. But there is no way they could know that. As
they acknowledge (PDF),
their estimates do not include losses to consumers who find
themselves unable to obtain foods they once enjoyed.

This loss will be particularly acute for those who live near or
hail from Baltimore, where Berger Cookies are a revered commodity.
But the ban will also affect frozen pizzas, microwave popcorn,
donuts, and no doubt other local amuse-bouches. 
   

The nation already has an ample supply of actual, terrifying
public health crises like antibiotic-resistant
bacteria and critical
drug shortages. It would be nice if the agency that professes
to protect us from such perils would leave. The cookies. Alone.
People can decide what to eat for themselves.

The FDA is accepting
public comments through January 7th.

from Hit & Run http://reason.com/blog/2013/11/23/the-fda-wants-to-ban-berger-cookies-the
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The FDA Wants to Ban Berger Cookies, the World's Most Delicious Dessert

The FDA may soon kill off the world’s most delicious
dessert—Baltimore’s own Berger Cookies. Please believe I make this
claim as one who is not otherwise overly enamored of sweets.

For those who haven’t had the pleasure, we’re talking fudge
slathered over a shortbread cookie to rapturous effect.

If you are one who feels another dessert has a better claim to
distinction, know that it doesn’t matter. Whatever you’re into will
be banned too if it contains artificial trans fats, which the FDA
may decide to outlaw as soon as January.

Berger Cookies, whose recipe has been only slightly modified
since the 1830s, are obviously not healthy. But they are one of
life’s little pleasures, and the law that criminalizes them is an
ass. A tremendous, giant donkey and/or posterior. Of evil.

Via
Capital News Service:

In the past two weeks, the Berger Cookie bakery has made two
attempts to produce the cookies without trans fat, said owner and
president Charles DeBaufre, Jr. The result was discouraging, he
said.

“We’ve tried it and trust me, it is nasty. It doesn’t taste
right,” DeBaufre said. “The texture’s not there. It’s an entirely
different product.”

Trans fats are essential to the taste and flavor of the cookie,
DeBaufre said. If the ban goes into effect, he said he would apply
for an exception. If the bakery is denied an exception, he said he
would continue to test out new recipes or “go out of business, one
of the two.”

As Baylen Linneken
noted earlier this month, the FDA claims a ban may prevent
between 3,000 and 7,000 deaths from heart disease each year. But
evidence for this proposition is equivocal at best. New York City
banned trans fats in 2006, and the heart disease mortality rate
fell. But, says Linneken, it fell faster in the rest of the
country—where trans fats are still freely available—over the same
period.

The FDA further claims the benefits of prohibiting trans fats
would dwarf the costs. But there is no way they could know that. As
they acknowledge (PDF),
their estimates do not include losses to consumers who find
themselves unable to obtain foods they once enjoyed.

This loss will be particularly acute for those who live near or
hail from Baltimore, where Berger Cookies are a revered commodity.
But the ban will also affect frozen pizzas, microwave popcorn,
donuts, and no doubt other local amuse-bouches. 
   

The nation already has an ample supply of actual, terrifying
public health crises like antibiotic-resistant
bacteria and critical
drug shortages. It would be nice if the agency that professes
to protect us from such perils would leave. The cookies. Alone.
People can decide what to eat for themselves.

The FDA is accepting
public comments through January 7th.

from Hit & Run http://reason.com/blog/2013/11/23/the-fda-wants-to-ban-berger-cookies-the
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Daisy Ad 2013: Nuclear Option Senate Remix

Click above for a 50-second trip down Memory Lane with
Sens. Reid, Clinton, and Obama talking about the “nuclear option”
back in 2005. A good time for all is guaranteed!

Back in 2005, the Republican majority in the Senate was
threatening to do away with procedural filibusters when it came to
judicial nominees and other appointments. The move would allow the
World’s Greatest Deliberative Body to proceed to up or down votes
on presidential picks in those categories with just 51 votes rather
than a two-thirds majority. Majority Bill Frist (R-Tenn.) and
future Minority Leader Mitch McConnell (R-Ky.) pooh-poohed that
this was any sort of big breach of tradition.

At the same time, folks such as Sens. Harry Reid (D-Nev.),
Hillary Clinton (D-N.Y.), and Barack Obama (D-Ill.) announced the
very end of constitutional rule if the “nuclear option” were indeed
triggered. The whole point of the rule, they said, was to protect
the right of the legislative minority to gum up the works in the
Senate. Simple majority votes to end debate before votes? That was
for the ruffians in the House. The Founding Fathers, in their
infinite wisdom, had made it so. Indeed,
as late as 2008, Harry Reid was still saying the nuclear option
was an abomination and swearing he would never use such a dastardly
tactic.

This week, of course, the
Senate Dems went ahead and pulled the switch on
the nuclear option, citing Republican obstructionism as the
reason that they had to go ahead and embrace exactly what they
denounced just a few years ago. The immediate case deals with the
important D.C. Circuit of Appeals, where Obama’s picks would change
the balance of the panel for years to come and have been twisting
in the wind as a result.  


They had to do it, don’t you see, say liberals, because the
Republican crackpots – Wacko Birds and Angry Birds alike! – just
wouldn’t allow “cloture” (the end of debate, needed before a proper
vote on a nominee) to happen. Conservatives respond that the only
reason the GOP was busting the president’s chops on nominees is
because
his choices were so radical. Now that the filibuster on
appointees is gone, they worry, Obama will fill the nation’s courts
and bureaucracies with bomb-throwers. The upside, say cons, is that
this means 2014 and 2016 will be all about Obama’s radicalism.

What do you think, Reason readers? Is Republican obstructionism
the problem here (The
Weekly Standard notes that 71 percent of Obama’s Circuit Court
nominees were confirmed in his first term, versus 67 percent of
George W. Bush’s in his first term). Or is it Obama’s radicalism
(the Wall Street Journal writes that of recent presidents, Obama is
the only one “whose average and median waiting time for circuit and
district court nominees from confirmation to nomination was more
than six months”)?

This seems like as good a time as any to remind you all of the

long-term trend to voters identifying as
“independents” and that display such as this are surely
one of the reasons why people are looking for a real alternative to
the played-out politics of Team Red and Team Blue.

from Hit & Run http://reason.com/blog/2013/11/23/daisy-ad-2013-nuclear-option-senate-remi
via IFTTT

Baylen Linnekin on Proposed New FDA Food Rules

FDAEarlier
this week Keep Food Legal, the nonprofit Baylen Linnekin leads,
submitted formal comments to the FDA in opposition to two proposed
food safety rules the agency is currently considering. The comment
period closed yesterday. The proposed rules, mandated thanks to
passage of the Food Safety Modernization Act in 2011, would
increase the regulatory burden faced by fruit and vegetable farmers
and other food handlers, packers, and sellers and require many to
adopt procedural standards the FDA claims would prevent a small
percentage of foodborne illness. Linnekin rounds up some of the
negative reactions left by others who will be affected by the new
rules.

View this article.

from Hit & Run http://reason.com/blog/2013/11/23/baylen-linnekin-on-proposed-new-fda-food
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Diverging Dollar Performance Set to Continue

The market seemed to get confused last week between the noise and the signal and this confusion gave the dollar a bit of a reprieve.  However, by the end of the week, the market seemed to be back on message.  

 

Specifically, market sentiment swung from what was perceived as dovish comments at Yellen’s confirmation hearing to Fed can taper in December after reading the FOMC minutes.  Similarly, speculation of a negative deposit rate in Europe triggered a quick decline in the euro.   Surveys suggest that the perceived odds of Fed tapering this year are still low and Draghi and other ECB officials played down the likelihood of a negative deposit rate (though did not take it off the table entirely). 

 

The divergent performance of the US dollar makes it difficult to talk about in general.  The Dollar Index itself is really mostly Europe, which accounts for almost 80% of its basket.  Against the European currencies, the US dollar looks heavy.   The Dollar Index can work lower.  

 

Since the ECB’s rate cut on Nov 7 and the stronger than expected US employment , the Dollar Index has been flirting with the 100-day moving average.  After repeated attempts in vain to close above it, the Dollar Index may have to work lower first.   A break of the 80.40 area could signal a move toward 79.50 before better support is found.  

 

On the other hand, the US dollar’s outlook against the yen, Canadian dollar and Antipodean currencies appears more constructive.   These were the worst performing major currencies over the past week, with the former two losing about 1% and the latter two losing about 2.2%.  

 

From a technical perspective, this divergence is set to continue.  The euro-yen and sterling yen crosses capture the theme.  Both are trading at multi-year highs, even though the dollar remains a few percentage points below the high it set against the yen in May. 

 

The euro traded down to almost the support near GBP0.8300, but sterling is at 3-year highs against the Australian dollar, while the euro is well below the peak it made in late Aug, just above AUD1.50  Sterling poked through CAD1.71 for the first time since early 2010, and although it pulled back, may not be done.   

 

Technically, the euro and sterling have scope for additional near-term gains without encountering strong resistance.  For the euro the $1.3600-50 area stands in the way of the 2-year high set last month near $1.3830.  Sterling faces the double top set in early- and late-October near $1.6260.  A convincing break could spur a move to $1.6400.   For the euro, a break of $1.3400 would call this constructive view into question.  A similar level for sterling is near $1.6050.  

 

The US dollar finished the week above JPY100 for four consecutive sessions.  In the last two sessions it closed above JPY101.  It is at the highest level since July.  Although we are sympathetic to the divergence of monetary policy trajectories, we not that the US 10-year premium over Japan has not risen above the Sept high near 222 bp.    Moreover, the euro gains against the yen may also not have been driven by interest rates.  Over the past month, for example, the German premium on 2-year as well as 10-year money actually eased compared to Japan. 

 

The immediate target for the dollar is near JPY101.60 and then the May high set at almost JPY103.75.  We remain attentive to 1) the inverse relationship between the yen and Nikkei and 2) the risk that Japanese investors take profits on equities ahead of the doubling of the capital gains tax (to 20% on Jan 1).  The Nikkei made new six-month highs at the end of last week, but had a weak close before the weekend.   While technical indicators are constructive, a wave of profit-taking could buoy the yen.   

 

The US dollar is near the upper end of its five-month range against the Canadian dollar.  The Bank of Canada has moved away from the forward guidance that suggested it would need to remove some liquidity (i.e. raise rates) next year and the soft inflation figures (headline CPI was 0.7% in October) may keep it on the defensive.  The year’s high set in early July just above CAD1.06 is the next immediate target for the greenback, though it probably requires a break of the Q4 2011 high near CAD1.0660 to signal a break out.  

 

The Australian and New Zealand dollars appear to have carved out a topping pattern that looks like a complicated head and shoulders pattern.  The objective of the Australian dollar’s head and shoulders pattern is around $0.8800, which is just below the August low of $0.8850.  Resistance is seen near $0.9280.  The New Zealand dollar closed well below the $0.8200 neckline on a weekly basis.  The measuring objective is around $0.7950.  On a break of $0.8130, the next target is about $0.8030. 

 

The US dollar peaked against the Mexican peso on Thursday near MXN13.15.  It settled on Friday on the session lows near MXN12.97.  The bottom of the recent range is a little more than another percentage point lower at MXN12.80.  Real sector data has softened, but the bullish case for the peso is 1) anticipation of structural reforms and especially the measure to open up the oil and telecom sectors and 2) the clearing of the previous overhang of positions.  

 

Observations from the speculative positioning in the CME currency futures:  

 

1.  The latest CFTC reporting period, for the week ending Nov 19, position adjustment by speculators in the currency futures were generally minor.  The main exception is the rise in the gross short yen position by almost 16k contracts.  This market segment was anticipating the break out that took place two sessions after the reporting period ended.  At 131k contracts, the gross short yen position was the largest since late March.  It has risen from 80k contracts in late October.

 

2.  The second largest position adjustment was in the rise in the gross long sterling contracts.  Here too the speculators were rewarded.  Sterling finished the week above $1.6200, the best level in a month.  The gross short sterling positions remain substantial and the net position is still slightly short.  It probably swung to the long side during the current period.

 

3.  The speculative market appeared to get wrong-footed with the euro.  They have been dramatically cutting back on gross long euro position.  Since late October, the gross long position has been slashed by around 55k contracts, driving the net position below 9k contracts from 72k.   The euro finished last week with its highest close of the month (thus far).  The gross long euro position remains considerable larger than in any other currency futures, with sterling’s nearly 54k contracts a distant second.

 

4.  There has been a bit of a tug-of-war in the peso.  The gross short position has doubled since mid-October to 31k, the highest in two months.   The gross long peso position has nearly doubled to almost 41k contracts.  The bulls may have been happy as the dollar slipped to new 3-week lows at the start of the week nearing MXN12.85.  Two days after the reporting period ended, the dollar has rallied back to MXN13.15. The dollar reversed lower on Thursday (Nov 21) and there was good follow through on Friday, where the greenback settled on its lows just below MXN12.97.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/o6e4DE5G0i8/story01.htm Marc To Market

Diverging Dollar Performance Set to Continue

The market seemed to get confused last week between the noise and the signal and this confusion gave the dollar a bit of a reprieve.  However, by the end of the week, the market seemed to be back on message.  

 

Specifically, market sentiment swung from what was perceived as dovish comments at Yellen’s confirmation hearing to Fed can taper in December after reading the FOMC minutes.  Similarly, speculation of a negative deposit rate in Europe triggered a quick decline in the euro.   Surveys suggest that the perceived odds of Fed tapering this year are still low and Draghi and other ECB officials played down the likelihood of a negative deposit rate (though did not take it off the table entirely). 

 

The divergent performance of the US dollar makes it difficult to talk about in general.  The Dollar Index itself is really mostly Europe, which accounts for almost 80% of its basket.  Against the European currencies, the US dollar looks heavy.   The Dollar Index can work lower.  

 

Since the ECB’s rate cut on Nov 7 and the stronger than expected US employment , the Dollar Index has been flirting with the 100-day moving average.  After repeated attempts in vain to close above it, the Dollar Index may have to work lower first.   A break of the 80.40 area could signal a move toward 79.50 before better support is found.  

 

On the other hand, the US dollar’s outlook against the yen, Canadian dollar and Antipodean currencies appears more constructive.   These were the worst performing major currencies over the past week, with the former two losing about 1% and the latter two losing about 2.2%.  

 

From a technical perspective, this divergence is set to continue.  The euro-yen and sterling yen crosses capture the theme.  Both are trading at multi-year highs, even though the dollar remains a few percentage points below the high it set against the yen in May. 

 

The euro traded down to almost the support near GBP0.8300, but sterling is at 3-year highs against the Australian dollar, while the euro is well below the peak it made in late Aug, just above AUD1.50  Sterling poked through CAD1.71 for the first time since early 2010, and although it pulled back, may not be done.   

 

Technically, the euro and sterling have scope for additional near-term gains without encountering strong resistance.  For the euro the $1.3600-50 area stands in the way of the 2-year high set last month near $1.3830.  Sterling faces the double top set in early- and late-October near $1.6260.  A convincing break could spur a move to $1.6400.   For the euro, a break of $1.3400 would call this constructive view into question.  A similar level for sterling is near $1.6050.  

 

The US dollar finished the week above JPY100 for four consecutive sessions.  In the last two sessions it closed above JPY101.  It is at the highest level since July.  Although we are sympathetic to the divergence of monetary policy trajectories, we not that the US 10-year premium over Japan has not risen above the Sept high near 222 bp.    Moreover, the euro gains against the yen may also not have been driven by interest rates.  Over the past month, for example, the German premium on 2-year as well as 10-year money actually eased compared to Japan. 

 

The immediate target for the dollar is near JPY101.60 and then the May high set at almost JPY103.75.  We remain attentive to 1) the inverse relationship between the yen and Nikkei and 2) the risk that Japanese investors take profits on equities ahead of the doubling of the capital gains tax (to 20% on Jan 1).  The Nikkei made new six-month highs at the end of last week, but had a weak close before the weekend.   While technical indicators are constructive, a wave of profit-taking could buoy the yen.   

 

The US dollar is near the upper end of its five-month range against the Canadian dollar.  The Bank of Canada has moved away from the forward guidance that suggested it would need to remove some liquidity (i.e. raise rates) next year and the soft inflation figures (headline CPI was 0.7% in October) may keep it on the defensive.  The year’s high set in early July just above CAD1.06 is the next immediate target for the greenback, though it probably requires a break of the Q4 2011 high near CAD1.0660 to signal a break out.  

 

The Australian and New Zealand dollars appear to have carved out a topping pattern that looks like a complicated head and shoulders pattern.  The objective of the Australian dollar’s head and shoulders pattern is around $0.8800, which is just below the August low of $0.8850.  Resistance is seen near $0.9280.  The New Zealand dollar closed well below the $0.8200 neckline on a weekly basis.  The measuring objective is around $0.7950.  On a break of $0.8130, the next target is about $0.8030. 

 

The US dollar peaked against the Mexican peso on Thursday near MXN13.15.  It settled on Friday on the session lows near MXN12.97.  The bottom of the recent range is a little more than another percentage point lower at MXN12.80.  Real sector data has softened, but the bullish case for the peso is 1) anticipation of structural reforms and especially the measure to open up the oil and telecom sectors and 2) the clearing of the previous overhang of positions.  

 

Observations from the speculative positioning in the CME currency futures:  

 

1.  The latest CFTC reporting period, for the week ending Nov 19, position adjustment by speculators in the currency futures were generally minor.  The main exception is the rise in the gross short yen position by almost 16k contracts.  This market segment was anticipating the break out that took place two sessions after the reporting period ended.  At 131k contracts, the gross short yen position was the largest since late March.  It has risen from 80k contracts in late October.

 

2.  The second largest position adjustment was in the rise in the gross long sterling contracts.  Here too the speculators were rewarded.  Sterling finished the week above $1.6200, the best level in a month.  The gross short sterling positions remain substantial and the net position is still slightly short.  It probably swung to the long side during the current period.

 

3.  The speculative market appeared to get wrong-footed with the euro.  They have been dramatically cutting back on gross long euro position.  Since late October, the gross long position has been slashed by around 55k contracts, driving the net position below 9k contracts from 72k.   The euro finished last week with its highest close of the month (thus far).  The gross long euro position remains considerable larger than in any other currency futures, with sterling’s nearly 54k contracts a distant second.

 

4.  There has been a bit of a tug-of-war in the peso.  The gross short position has doubled since mid-October to 31k, the highest in two months.   The gross long peso position has nearly doubled to almost 41k contracts.  The bulls may have been happy as the dollar slipped to new 3-week lows at the start of the week nearing MXN12.85.  Two days after the reporting period ended, the dollar has rallied back to MXN13.15. The dollar reversed lower on Thursday (Nov 21) and there was good follow through on Friday, where the greenback settled on its lows just below MXN12.97.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mOw-Pllz53U/story01.htm Marc To Market

Sandy Creek moves on; Landmark, OLM elminated

Three local teams competed Friday night in the GHSA state football playoffs, but only one will live to fight another day this season.

*

Sandy Creek 55, Chestatee 7: The Patriots steamrolled into the AAAA state quarterfinals with another offensive explosion, this time against the War Eagles from Hall County.

It was the seventh time in 12 games this season Sandy Creek has scored 54 or more points in a game, and the sixth time the team has allowed seven points or fewer.

read more

via The Citizen http://www.thecitizen.com/articles/11-22-2013/sandy-creek-moves-landmark-olm-elminated

5 Things To Ponder This Weekend

Submitted by Lance Roberts of STA Wealth Management,

It is hard to believe that the end of the year is fast approaching.  This weekend's list of things to ponder covers a range of issues that caught my attention as I prepare to write my annual outlook for 2014.  Will the economy continue to grow, are stocks under owned, what about Fed, rising credit risk and the question of "when or if to taper?"  These are all important questions that all investors must answer as the new year rapidly approaches.

1) Only 20% of Economic Expansions Have Lasted Longer via Zero Hedge

With the duration of the current bull market now the 4th longest in history, we thought it worth noting just how unusual this business cycle has been. As the following chart shows, the current 'expansion' has lasted longer than 80% of all the 33 previous NBER expansionary periods. Of course, given projections from Wall Street to the Fed, there will never be another recession (by decree) ever again…

Exp 2013 11 21

 

2) Howard Marks: Stocks Are Under Owned via Advisor Perspectives


In last week's "Things To Ponder" I shared various viewpoints discussing the potential market bubble.  This week I also discussed why, due to the Fed's ongoing monetary interventions, that stocks could conceivably rally another 30% from current levels.  

Robert Huebscher has an excellent interview with Howard Marks covering a wide range of topics that are worth an entire read.  Importantly, Howard discusses his views on why stocks could rise from current levels.

"I wrote a memo February or March called the Outlook for Equities and I enumerated the pros and cons. I found roughly six pros and eight cons. The trouble is that you cannot put them on a scale and figure out how to weight them. You have to decide which factors you consider more important. Just like so many other things in this interview we have been talking about, the confidence in equities had swung to the negative. In 2000, everybody would have said equities would give you 11%; they would have been unanimous in that. Now everybody says 6% or 7%.

 

What changed? The only thing that changed is that the companies doubled their earnings and the P/E ratio went in half.

 

To put it simply, I still think equities are under-owned institutionally and under-loved, and I like to buy assets like that.

 

Obviously it is a little less true today, but money has to go someplace. Where is it going to go? I don’t think it is going to go into bonds. You can only put so much into real estate, private equity, or hedge funds. If you put it in hedge funds, they will buy stocks anyway. So it bodes well for the stock market.

 

But, now the stock market is back to fully or fairly priced, at a P/E ratio of 16 or 17. They are not giving them away.  But, I keep going back to what would you rather buy? I am not shilling for stocks because we are not in the equity business.   But with bonds at these artificially low interest rates, stocks are less bad. Note that I did not say 'good.'"

 

3) Corporate Credit Markets Back To Frothy Levels via Sober Look

One of the major side effects of the ongoing interventions by the Federal Reserve has been a rise in complacency with regard to investment risk.  That complacency, combined with the artificial suppression of interest rates to historically low levels, has led to a "chase for yield" in potentially some of the most dangerous places like the "high yield" (a much more marketable term than "junk") credit market.   Walter Kurtz noted:

"All of a sudden we find ourselves back in the frothy corporate credit environment that existed before the Fed struck a more hawkish tone in May (see discussion)."

HY-and-IG-Spread1

 

"Perhaps some of the more publicized signs of corporate credit markets overheating have been the loosened underwriting standards in the syndicated loan market. The so-called 'cov-lite' loans often limit the lenders’ ability to take corrective action with the borrower when a company takes a turn for the worse. And the number of such deals has reached new highs.

 

Just as in the past, eventually someone will be suing the banks for selling these products. We will hear institutional investors testifying in court on how they were mislead by unscrupulous bankers about the 'hidden' risks. And some shareholders will be complaining about the amount of leverage the lenders put on the company. Everyone will all of a sudden develop amnesia about how these assets ended up in their portfolios in the first place. And those with capital and the ability to work out distressed situations will make a fortune.

 

For now, however, investors don’t seem to care – as long as it’s rated corporate credit it&r
squo;s got to be good. It’s not 2006 quite yet, but we are certainly moving in that direction."

 

4) The Fed Is Desperate To Taper via Tim Duy

I wrote this past week that I remain convinced that the Federal Reserve likely will not be able to taper any time soon due to a weakening economic environment.  That problem will likely be exacerbated next year by the impact of the Affordable Care Act.  As I stated:

"While there is much talk about the Federal Reserve potentially 'tapering' their purchases as early as 2014, the rising wave of deflationary pressures, both domestic and abroad, will likely keep the Federal Reserve engaged longer than currently believed."

QE-CPI-112113

Tim Duy laid out a similar case with a twist which is that the Fed may be forced to "taper" despite the data.

"Interestingly, one of the costs of quantitative easing seems to be the inability to exit quantitative easing.  This was revealed in today's bond market sell-off after the minutes were released.  Despite the Fed's repeated efforts to use forward guidance to hold down rates, despite repeated reassurances that tapering is not tightening, Treasury yields gain almost 10 basis points at the 10 year horizon on even a whisper of tapering – and this after Bernanke's dovish speech and Vice Chair Janet Yellen's (perceived) dovish Senate hearing last week.  Fine tuning policy with a tool of uncertain force is something of a challenge.  Sufficient faith in an alternative tool would help clear the way for tapering despite this uncertainty, but after reading these minutes, I am somewhat concerned such faith is lacking.

 

Bottom Line:  Clear evidence of the space we have been in for months.  The Fed wants to taper, and is becoming increasingly nervous they will need to pull the trigger on that option before the data allows.  That means that tapering is not data dependent.  That means the policy deck is stacked with at least one wild card.  And that sounds like a recipe for the kind of volatility the Fed is looking to avoid."

If Tim is correct, then this could be extremely disruptive to the financial markets.

5) Fed Efforts To Boost Growth Dangerous But Necessary via Wall Street Journal

Interesting discussion by Stanley Fischer, former governor of the Bank of Israel and Glenn Hubbard, chairman of the Council of Economic Advisors under Bush, discussing that the Federal Reserve's policy responses to the financial crisis were correct at the time.  However, their early actions may have become a dangerous addiction.

But Mr. Hubbard is unsure if the current bond-buying program is having much positive effect on the economy, saying it does create the risk of asset bubbles.

 

He lays the blame on the government rather than Fed policy makers.

 

'The problem is not the Federal Reserve, the problem has been the government,' said Mr. Hubbard, the dean of the Columbia Business School. Rather than buying $85 billion a month in securities, the more appropriate policy response would have been a big government investment in infrastructure and other needs, he said.

 

Congress, which would need to approve that type of investment, has instead moved to curtail government spending in the past year.

 

Stanley Fischer, former governor of the Bank of Israel, agrees that the Fed's early action helped avoid an even deeper crisis. He added that the Fed can successfully unwind its stimulus programs.

 

'Everyone knows now about asset prices and presumably they'll take that into account and moderate policy accordingly,' he said. The Fed's actions were 'dangerous, but necessary.'"

Just For Fun – Stupid Things That Finance People Say via Morgan Housel/Motley Fool

Morgan Housel recently wrote a fantastic list of things that are consistently thrown out on the financial media that, upon reflection, is quite foolish.  The whole list is worth reading but here a couple that I thought should have been included:

"[Portfolio Manager On TV] It's Time To Buy"

Sure it is.  Of course, they told you the same thing in 2001, 2002 and 2008.

 

"We Have A Buy Rating On That Stock"

Of course, you do.  You also have a buy rating on every other stock that you underwrite for a fee.

 

"Operating and Pro-forma Earnings"

When you can't report GAAP earnings because you will miss estimates – fudge it with accounting gimmicks.

 

"Stocks Are Cheap Based On Forward Estimates"

True, of course forward estimates are achieved just about as often as "unicorn sightings"

Well you get the idea and Morgan's list is well worth a read. 

Have a great weekend.

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/blJsSbQJ7Lc/story01.htm Tyler Durden

“We Will Soon Learn How Strong The QE Trap Has Become”

Submitted by Derrick Wulf via NoEasyTrade blog,

Reading between the lines of recent Fed communications, it’s becoming increasingly clear to me that the Fed wants to exit its quantitative easing policies as soon as possible. Though they’re loath to admit it, the architects of quantitative easing now recognize that their efforts are achieving diminishing marginal returns while at the same time building up massive imbalances, distortions, and speculative excesses in the capital markets. Moreover, they’re realizing that the eventual exit costs are also likely much higher than they had previously thought, and continue to rise with each new asset purchase. Never was this more clear than when the Fed first hinted at tapering its large scale asset purchases over the summer: equity prices fell, interest rates rose, volatility increased, and huge sums of hot money were repatriated from various emerging markets, causing significant disruptions to local overseas economies and currencies in the process.

The market’s strong reaction to the mere hint of a taper also threw cold water on the widely held belief among Fed officials that the primary impact of their asset purchases comes through the accumulated “stock” of their holdings rather than the ongoing “flow” of purchases. This sudden and unexpected realization among policymakers has forced a complete rethink of their strategy. Indeed, one of the most basic premises of their monetary policy assumptions has been shown to be false. Markets are, in fact, forward looking.

Fearing the economic impact of an unwanted tightening of financial conditions, the Fed quickly stepped back from the tapering abyss in September. Since then, FOMC officials, along with their staff researchers and economists, have been working diligently on devising a new strategy, floating numerous trial balloons along the way. Their primary objective is to allow for a taper and ultimate exit from QE while somehow minimizing the flow impacts of such a shift in policy. There has been a renewed focus on the Fed’s other policy tools – namely the overnight lending rates and forward guidance – as a means to that end. There have been active discussions about lowering unemployment thresholds, increasing inflation tolerances through “optimal control,” and cutting interest on excess reserves to help guide market expectations towards a lower future path of interest rates.

It is my belief that one or more of these options is likely to be adopted alongside a modest tapering of asset purchases, perhaps even as early as December. While central bank officials don’t want to disrupt the fragile economic recovery through a premature tightening of monetary policy, they are also well aware that the longer they wait, the more difficult it will become later on. In a word, they’re starting to feel trapped. They want to wriggle themselves free of this as soon as conditions will possibly allow.

I expect to see more public comments and newspaper articles indicating as much in the coming days and weeks. Economic data – namely the November employment report – will clearly play a very important role in shaping expectations as well, but barring a material deterioration in the employment and growth outlook, I expect a tapering announcement, coupled perhaps with an IOER cut or more aggressive forward guidance, to come sooner rather than later.

Implications for the markets, which may not yet be fully prepared for this outcome, are likely to be significant. In short, I would expect yield curves to steepen, the dollar to strengthen, equities to fall, credit spreads to widen, commodities to weaken (the metals in particular), and volatility to rise. How the Fed will then respond to these developments will be very telling indeed. Their hand will be forced, and we may all soon learn how strong the QE trap has become.

My preferred strategy until then is to buy inexpensive volatility, either directly or indirectly through longer-dated options, and to continue to trade the Euro and Yen from the short side.

I also like maintaining a core curve steepener, preferably in 5s / 30s (or long FVZ against a duration-neutral USZ short), and establishing some equity shorts near trend resistance around 1810 in ESZ (see yesterday’s note for charts). On the curve, with 5s / 30s now having cleared resistance at 240, I expect to see 300 tested again before much longer, with new wides to follow.

5s30s112213

 

The first two major episodes of the current multi-year steepening trend – the crisis and the response – both widened the 5s / 30s curve by 200 basis points. If the third episode, the exit, follows a similar trajectory, we could see eventually see 5s / 30s hit 390.

 

 


    



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