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Submitted by Jim Quinn via The Burning Platform blog,

The talking heads will be rolled out on CNBC to assure the masses that all is well. The economy is strong. Corporate profits are awesome. The stock market will go higher. Op-eds will be written by Wall Street CEOs telling you it’s the best time to invest. Federal Reserve presidents will give speeches saying there are clear skies ahead. Obama will hold a press conference to tell you how many jobs he’s added and how low the budget deficit has gone.

We couldn’t possibly be entering phase two of our Greater Depression after a temporary lull provided by the $8 trillion pumped into the veins of Wall Street by the Fed and Obama. Could we?

1927-1933 Chart of Pompous Prognosticators
Colin J. Seymour
 

 

Chart locations are an approximate indication only

1. “We will not have any more crashes in our time.”
– John Maynard Keynes in 1927

2. “I cannot help but raise a dissenting voice to statements that we are living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future.”
– E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928

“There will be no interruption of our permanent prosperity.”
– Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

3. “No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment…and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding.”
– Calvin Coolidge December 4, 1928

4. “There may be a recession in stock prices, but not anything in the nature of a crash.”
– Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929

5. “Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”
– Irving Fisher, Ph.D. in economics, Oct. 17, 1929

“This crash is not going to have much effect on business.”
– Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

“There will be no repetition of the break of yesterday… I have no fear of another comparable decline.”
– Arthur W. Loasby (President of the Equitable Trust Company), quoted in NYT, Friday, October 25, 1929

“We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices.”
– Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929

6. “This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan… that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years.”
– R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929

“Buying of sound, seasoned issues now will not be regretted”
– E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929

“Some pretty intelligent people are now buying stocks… Unless we are to have a panic — which no one seriously believes, stocks have hit bottom.”
– R. W. McNeal, financial analyst in October 1929

7. “The decline is in paper values, not in tangible goods and services…America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin.”
– Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929

“Hysteria has now disappeared from Wall Street.”
– The Times of London, November 2, 1929

“The Wall Street crash doesn’t mean that there will be any general or serious business depression… For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game… Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.”
– Business Week, November 2, 1929

“…despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation…”
– Harvard Economic Society (HES), November 2, 1929

8. “… a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.”
– HES, November 10, 1929

“The end of the decline of the Stock Market will probably not be long, only a few more days at most.”
– Irving Fisher, Professor of Economics at Yale University, November 14, 1929

“In most of the cities and towns of this country, this Wall Street panic will have no effect.”
– Paul Block (President of the Block newspaper chain), editorial, November 15, 1929

“Financial storm definitely passed.”
– Bernard Baruch, cablegram to Winston Churchill, November 15, 1929

9. “I see nothing in the present situation that is either menacing or warrants pessimism… I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.”
– Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

“I am convinced that through these measures we have reestablished confidence.”
– Herbert Hoover, December 1929

“[1930 will be] a splendid employment year.”
– U.S. Dept. of Labor, New Year’s Forecast, December 1929

10. “For the immediate future, at least, the outlook (stocks) is bright.”
– Irving Fisher, Ph.D. in Economics, in early 1930

11. “…there are indications that the severest phase of the recession is over…”
– Harvard Economic Society (HES) Jan 18, 1930

12. “There is nothing in the situation to be disturbed about.”
– Secretary of the Treasury Andrew Mellon, Feb 1930

13. “The spring of 1930 marks the end of a period of grave concern… American business is steadily coming back to a normal level of prosperity.”
– Julius Barnes, head of Hoover’s National Business Survey Conference, Mar 16, 1930

“… the outlook continues favorable…”
– HES Mar 29, 1930

14. “… the outlook is favorable…”
– HES Apr 19, 1930

15. “While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”
– Herbert Hoover, President of the United States, May 1, 1930

“…by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent…”
– HES May 17, 1930

“Gentleman, you have come sixty days too late. The depression is over.”
– Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

16. “… irregular and conflicting movements of business should soon give way to a sustained recovery…”
– HES June 28, 1930

17. “… the present depression has about spent its force…”
– HES, Aug 30, 1930

18. “We are now near the end of the declining phase of the depression.”
– HES Nov 15, 1930

19. “Stabilization at [present] levels is clearly possible.”
– HES Oct 31, 1931

20. “All safe deposit boxes in banks or financial institutions have been sealed… and may only be opened in the presence of an agent of the I.R.S.”
– President F.D. Roosevelt, 1933

via Zero Hedge http://ift.tt/1uchTYi Tyler Durden

With numerous counties and states having declared "States of Disaster" or "States of Emergency", the looming civil rights destruction of martial law domestically draws ever closer.

However, President Obama has decided that, by Executive order:

• *OBAMA ISSUES EXECUTIVE ORDER FOR ARMED FORCES IN WEST AFRICA

• *OBAMA TO ACTIVATE INDIVIDUAL READY RESERVE FOR EBOLA

What is The Individual Ready Reserve? (via Wikipedia)

The Individual Ready Reserve (IRR)is a category of the Ready Reserve of the Reserve Component of the Armed Forces of the United States composed of former active duty or reserve military personnel and is authorized under 10 U.S.C. ch. 1005.

 

 

For soldiers in the National Guard of the United States, its counterpart is the Inactive National Guard (ING). As of 22 June 2004, the IRR had approximately 112,000 members (does not include all service IRR populations) composed of enlisted personnel and officers, with more than 200 Military Occupational Specialties are represented, including combat arms, combat support, and combat service support.

*  *  *

#BREAKING Obama issues executive order calling up reserve troops to combat Ebola in Africa http://t.co/rjVUTCF9Kq

— USA TODAY (@USATODAY) October 16, 2014

WASHINGTON (AP) – Obama authorizes call-up of National Guard, reserves if needed to address Ebola.

— Charlie Kaye (@CharlieKayeCBS) October 16, 2014

In other words, we are sending Vets and reservists to Africa… where they are expected to do what? Shoot at viruses?

*  *  *

BUT they will come into contact with Ebola:

Via Bloomberg Transcript,

 

 

KIRBY: Afternoon, everybody. I'm proud to welcome into the briefing room General David Rodriguez, commander of Africa Command. He's here to give you an update on U.S. contributions to the effort against Ebola — U.S. military contributions to the effort against Ebola in West Africa. And with that, sir, I'll turn it over to you.

 

QUESTION: Just a clarification on that, please. Will they be in contact with individuals or just specimens?

 

GENERAL DAVID M. RODRIGUEZ (USA), COMMANDER, U.S. AFRICA COMMAND: They come in contact with the individuals and they do that. And they're — like I said, it's a — it's a very, very high standard that these people have operated in all their lives, and this is their primary skill. This is not a — you know, just medical guys trained to do this. This is what they do for a living.

*  *  *

As USA Today reports,

President Obama has issued an executive order calling up ready reserve troops to combat the Ebola crisis in Africa.

 

Obama notified Congress of his order Thursday. It reads: "I hereby determine that it is necessary to augment the active Armed Forces of the United States for the effective conduct of Operation United Assistance, which is providing support to civilian-led humanitarian assistance and consequence management support related to the Ebola virus disease outbreak in West Africa."

 

The Pentagon said it had no immediate plans to send reservists to Africa, saying that the order simply allows the military to begin utilizing reserve/guard forces in our overall response in Northern Africa.

 

It "doesn't mean that we are deploying these forces, but it gives us the option to do so if we need to," said Air FOrcer Lt. Col. Thomas Crosson, a Pentagon spokesman.

 

The White House said it didn't know exactly how many reserve troops would eventually be required.

*  *  *

via Zero Hedge http://ift.tt/1wNt7VH Tyler Durden

Is It Fair to compare this sell off to the Great Recession of 2008 and 2009?

Sort of, Kind of, and not really.    No Baby, No bathwater, not yet.    

Let’s check the tape.  SP500 at the peak of the “unrest” in the crisis was at 666.79, March 2009. Dollar index (DXY) during the same week was 89.522.  

Conversely, March 2008 DXY was at 70.698.  SP500 was 1325.61 during the same time period.  The high for the SPX before the crisis was 1578.11. From the high to the low of the crisis the SPX index fell 57.74%. (1578.11-666.79/1578.11)

Crisis SPX volatility

 

The DXY increased 26.63%.  (89.522-70.698/70.698)

DXY crisis volatility

Let look at the current situation, numerically.  High of the SPX before this sell-off was 2019.26.  Let’s suppose we close near the 1850 levels.  From this recent high to current levels, we have a sell-off of 8.38%. Apples to Apples, we have about 1/6 of the move from 2008. 

Recent SPX volatility

Recent DXY volatility

Let’s bring the dollar back into the picture.  We can infer that the DXY was at 78.906 (May 8, 2014) October 3, 2014 the DXY hit a high of 86.732. The increase in the DXY was 9.91%.  The recent increase is 37.21% of the move during the crisis of 2008.

Equating the DXY increase with the SP500 decrease (26.63/57.74) we get a factor of .4612. Equating the current situation (9.91/8.38) we get a factor of 1.1826.  In order this market to react in a similar way as in  2008/2009 we would need the SPX to move 21.49% lower from the high of 2019.26.  This would mean the SPX would need close at 1585.32 to make the equation work. And yes, this would put the index in a bear market.  

Economically and philosophically speaking, the two situations are difficult to equate.  The Great Recession, The Crisis of 2008, The 2008 Depression, whatever you want to call it, the impedance for the event was on several fronts. Over bloated lending mechanisms,  consumer mortgage based debt, Asset Bases Securities (ABS) euphoria, popularity of Collateralized Debt Obligations (CDO), rampant involvement in Credit Default Swaps (CDS) by institutional and Hedge Funds.  At the peak of this euphoric period, the notional value of ABS, CDS, CDO held by investors was 14-16 times global GDP. To complicate matters, the internals of CDO’s held highly suspect securities and reaped the benefit of high ratings from trusted analysts. These CDOs found their way into balance sheets of banks, funds, and government entities. 

The crisis was not only a perfect storm of complication and insolence but involved multiple industries and worked perfectly into the disruptive nature of events. Since then we witnessed a deleveraging by investors across the globe. The perception of risk and ratings on securities has changed. BASEL III has now entered the picture and financial institutions have revamped their Tier 1 ratios to comply with the new regulations.  As a side comment, perhaps this is why we have a bid in the 10 year US notes.  But that is a topic for our next article.

Let’s return back to the present.  Do we have a market addicted to QE? Yes.  Commodities, Energy, and Raw Materials have dropped significantly in recent weeks.  What is this reason behind this drop?  Potential recession in Europe, Chinese economic slowdown, OPEC countries jockeying for position to gain market share? Are these inter-industry, potentially disruptive events? Not sure, yet.

Putting things into perspective: Here is a slight philosophical and macroeconomic opinion on developed G8 category economies.  No matter where the leading economic are pointing to, a developed economy has a set amount of implicit activity to sustain some level of growth.  Short of a cataclysmic or debilitating event; i.e. a full pandemic EBOLA outbreak that has infiltrated a New York, London, Paris, etc; economic activity will churn to some degree to sustain some semblance of an isolated GDP. 

Let’s recap: We do not have a banking crisis on our hands.  We do not have a systemic financial crisis.  We do have a softening of global macro-economic growth. Certainly, the recent memory of the crisis conjures up unpleasant and extremely volatile conditions.

A check of oil: Although we did not provide analysis of oil in this article, suffice it to say that oil’s low during the crisis of 2008/2009 was $33.2.  The high was $147.27.  This current oil swoon took us from $107.21 to current levels of $81.66.  Certainly, this has been a tighter range of momentum.

The dovetail risk: EBOLA.  This is the only non-quantified aspect of most trader’s models and algos.  This would be a very difficult scenario to quantify with respect to markets, domestic and global economies.  Since we live in an interconnected world, the fact that EBOLA has reached industrialized countries should not be a huge surprise.   The objective is to quantify the potential disruptive nature of EBOLA on society and the functionality of economies. Could this be the proverbial Black Swan? Maybe.  From a social and humanitarian perspective, this is the last thing we need.  This is the possible inter-industry, inter-global economic disruptive event. 

If we continue to receive news that EU countries are at the ready for possible QE-like actions and “dovish” sentiment from the US FED, we will most likely avoid a major relapse of the macro markets.  The proverbial “bid” in the market.  

We will certainly continue with the volatility but instinct and a bit of history dictates that rational thought should supersede “fear”, just don’t forget about EBOLA. 

via Zero Hedge http://ift.tt/1yI4tKL Pivotfarm

An ugly dump in stocks early on sent all the major indices to yesterday's lows (and bond yields to yesterday's lows) but for a smorgasbord of reasons (pick from: Bullard "QE4", jobless claims, industrial production, oil rising, lack of Ebola panic, oh and POMO) stock performed the ubiquitous bounce and extended gains quite handsomely before fading back in the afternoon. Volume was considerably lower than yesterday but solid (driven mostly by the dump). All major asset classes ticked together all day with USDJPY, Treasury yields, stocks, and oil all rising with one another. The USD was flat (despite some intraday kneejerks) as were gold and silver. Copper slid lower as oil jerked dramatically higher intraday before falling back (holding above $82). VIX fell modestly to around 25.5. Once again early manic-selling led to late buying panic (but the volume buying was dramatically lower). The Dow closed red for the 6th day in a row – longest losing streak since Aug 2013.

 

Russell & Trannies were the best performers on the day as the major indices all closed around unchanged despite the best effortsof JPY…

 

The weakness in stocks (during the European session) is evident from futures…

 

Ramp volume (which lifted S&P Futs back to VWAP) was weak relative to selling volume

 

Sectors saw the worst first today as Energy rebounded…

 

Everything was nicely coupled today…

 

A very big swing in HY CDX today (looks like hedges being unwound and managers reducing risk into the rally)

 

VIX decoupled again at the close (same as the last 2 days)…

 

The USD kneejerked higher and back down around EU and US data to close very marginally higher (-0.9% on the week)

 

Treasury yields rose 3-4bps on the day – across the curve

 

Oil surged (but faded back), gold and silver flat, copper lower…

 

Charts: Bloomberg

Bonus Chart: GOOG….

via Zero Hedge http://ift.tt/1yI2ea2 Tyler Durden

Via ConvergEx’s Nick Colas,

When will the Fed… Raise rates? Stop buying bonds? End quantitative easing? Common questions, those, from Wall Street to Main Street. And – apparently – the online world as well, because they also reflect (literally) what Google autofills when individuals pose inquiries about future monetary policy action in the famously simple Google search box.

Since Google’s autofill algorithm constantly updates commonly entered completions for the most typically searched phrases, it provides telling insight into what Americans are thinking and asking about the Fed. And because Fed related inputs are broader than the more geographically sensitive such as “Movie theater in…” or “Shopping mall in…”, completions offered by the search engine are based on larger populations. Don’t worry – we checked. Here are some of the top autofills that followed our unfinished queries:

“The Fed Will…” Three out of the top four autofills reads “Never taper”, “Not taper”, and “Never stop QE”. The Fed is on track to close out its bond buying program this month, but after almost six years with three shades of QE, it seems the public is reluctant to believe it.

 

“The Fed is…” Second on the list shows Americans classifying our central bank as “behind the curve”. Autofills may highlight the perception of the Fed as dovish, but not rightly so for those typing the phrase into Google’s search box. In fact, an input of “I want the Fed to” elicits “decrease money supply”.

 

“Interest rates will…” This phrase conjured mixed responses of “rise” and “go up”, and “fall in 2014” and “never rise”. The third wager is highly unlikely based on fed funds futures, which signal a rise in mid-2015; the question isn’t a matter of direction, but when the grind higher begins.

 

“Low interest rates are…” “Here to stay” autofilled first, yet “bad for the economy” and “bad” trail behind. Even still, “economic growth” and “economic recovery” appear next to “low interest rates help”. Near-zero rates may have helped stimulate the economy during the early years of the sluggish recovery, but Americans also understand that maintaining these low levels for too long could act as an impediment. “Higher interest rates will help” produce “economy” and “the economy”.

 

“The economy is…” Besides the doomsayers autofill of “going to implode”, “getting better” and “improving” appear. On the labor market front, “Jobs are…” produce “not enough”, “hiring”, and “hard to find”. An entry of “Wages have” paints the gloomy picture of wage inflation: “not kept up with inflation”, “not increased”, “not stagnated”, “remained stagnant”, and “stagnated”. These tensions underscore the Fed’s patience when it comes to normalizing rates.

Just as Google autofills offers a unique view on how Americans negotiate monetary policy, the Beige Book captures the economic sentiment of each regional Fed District. This information proves particularly useful in gauging the Fed’s decisions since it colors each district’s respective Fed President. Given his or her spot on the Federal Open Market Committee, we provide customary analysis of the report after it is released eight times a year. Please continue reading for our takeaways of the Federal Reserve’s “Current Economic Conditions”.

Although the Fed continued to describe economic growth as “modest” and “moderate”, the pace of growth remained largely unchanged across districts. With that said, many districts experienced “slight” to “moderate” growth in consumer spending, cited strong tourism activity, and noted retailers’ positive outlook for the balance of the year. Nonfinancial services, transportation services, and manufacturing activity also fared better in most districts. Additionally, commercial construction, real estate activity, and banking conditions—particularly commercial loan volumes—improved across most regions.

 

These steady trends carry over into the two components we watch most closely—inflation and the labor market—which also showed slight improvement or little change. According to the Fed, the state of employment generally stayed the same from the prior Beige Book. Finding skilled workers continued to prove most challenging for many districts, but once again helped the other half of the Fed’s “Dual Mandate”, at least in terms of increased wage pressure for some industries and professions. However, price levels were mostly reported as “unchanged” or “up slightly”.

 

Given the cautious tenor of the Federal Open Market Committee minutes from last week, central bank monetary policy will likely echo this report in remaining mostly unchanged. Despite the strength of the most recent jobs report, FOMC minutes showed the Fed’s concern about the impact of slow global growth on the U.S. economic recovery. This worry has riled financial markets for over the past week, and recent U.S. economic data, such as today’s weak retail sales number and negative reading for producer prices, will encourage the Fed to stay patient with respect to raising near-term interest rates.

Beige Book Summary: Overall national economic activity continued to expand in September and October, according to the Federal Reserve’s most recent Beige Book released today. Six of the twelve Federal Reserve Districts experienced “moderate” economic growth during the reporting period, while five Districts noted “modest” expansion and Boston’s economic conditions were described as “mixed”. In terms of labor market conditions, growth in employment, wages, and prices remained mostly unchanged. Employers continued to struggle finding skilled workers, which put some upward pressure on wages in certain industries and professions. What does this mean for monetary policy going forward?

While Beige Book findings suggest the U.S. economy continues to improve, this report clearly does not portend a rise in short-term rates over the near future. Given widespread global growth concerns, a large contributor to today’s market sell-off, the Fed will likely wait to see how the slowdown in Europe and China impact the U.S. economic recovery, as touched upon in the latest FOMC minutes.

via Zero Hedge http://ift.tt/1uc90xR Tyler Durden