Tag: finance

Much has been said about Yellen’s Freudian slip involving the “6 month” considerable period language, which as we pointed out earlier, is said to have been the catalyst that sent stocks sharply lower just after 3 pm when it was uttered. However, in reality all this statement suggests is a rate hike some time in mid-2015, half a year after when QE is said to have ended, which if one listens to the market experts, is what is supposed to be priced in (of course, what the experts won’t tell you is that the market wants its cake and endless liquidity injections by the Fed too). However, one thing that was far more unexpected and certainly remained unexplained by Yellen, is the curious case of the Fed dots, or the estimations by the individual committee members, of where they see rates at the end of 2016. What was surprising here was the sharp upward jump from 1.75% as of December to 2.25% currently.What is even more inexplicable, is that the Fed hiked its rate forecast even as it lowered its GDP projections for the next two years. Why? Not even Janet Yellen could answer that.

Some further thoughts from SocGen on this latest example of just how clueless the Fed is when it comes to the signals it sends about the future.

Had it not been for the dots, market participants probably would have interpreted today’s FOMC statement and Fed Chair Yellen’s press conference as sufficiently dovish. Yet, seeing the FOMC median rate forecast for the end of 2016 rise from 1.75% to 2.25% singlehandedly rendered all else irrelevant. Are markets justified in placing so much faith in the dots? After all, they are pre-determined ahead of the meeting, reflect the views of both voting and non-voting members and are not subject to a vote. While we question the erratic movement of the dots that seems disconnected from the FOMC’s economic projections, the dots do matter. After all, they reflect an unbiased and current view of what current and future voters see as the appropriate rate setting.

 

The curious drift of the dots

 

The big shocker today was not that the Fed abandoned its 6.5% unemployment rate threshold, but that is moved the dots, and not by an insignificant amount. The FOMC’s median fed funds rate forecast for the end of 2016 increased from 1.75% to 2.25%, with the end-of-2015 target now at 1% (up from 0.75%). The curious aspect was that this revision looks out of synch with the Committee’s economic projections which did not change materially since December. To be precise, participants reduced their average GDP forecast by 0.1% (to 3.1%) for this year and by 0.05% (to 2.75%) for 2016, but revised down their unemployment rate trajectory by about 0.2%. These revisions were accompanied by similar movements in long-term growth and unemployment estimates, suggesting little change in the Fed’s assessment of projected slack. As a result, the Committee’s inflation forecasts were largely unchanged.

 

So why the sudden shift in the dots? Even Yellen herself couldn’t explain it, replying that she can’t speak for “why people write down what they do”. Instead, she tried to downplay the upward drift, saying that it was only modest and underscoring that the FOMC was still projecting a large undershoot relative to the prescribed fed funds rate. For clarification, the dots represent forecasts brought to the meeting by all participants, both voting and non-voting. They are effectively decided ahead of the meeting. As such, Yellen doesn’t have any control of the dots and they are not explicitly decided or coordinated by the Committee. In this context, today’s move looks genuinely unintentional.

 

Despite Yellen’s best efforts to downplay the dots, markets have taken them to heart and repriced 2016 fed funds futures by 25 basis points. Are they right to do so? Probably. While we question the erratic movement of the dots (see chart 1), they do reflect the latest view of all current and future voters about the appropriate level of the fed funds rate. More importantly, the drift was not caused by one or two outliers but rather by a lot of reshuffling in the middle (see chart 2). Therefore it seems to reflect a real change in the underlying view about the appopriate policy setting.

 

 

Forward guidance enters vague territory

 

In what was largely overshadowed by the dots, the FOMC did take a significant step in overhauling its forward guidance. As expected, the Committee abandoned all economic thresholds and replaced them with qualitative guidance. The timing of the liftoff in the fed funds rate will now depend on “measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments”. That’s as vague as it gets. The Committee does provide two additional pieces of information by (1) suggesting that rates will be at zero for “a considerable time after the asset purchase program ends”; and (2) promising that it will keep rates below levels viewed as normal even after employment and inflation are near mandate-consistent levels. In other words, the Fed still promises to undershoot on rates, or overshoot on the amount of stimulus for a long time to come and by a wide margin. This was the message that Yellen tried to push very strongly during the press conference, but convincing the markets may take more effort on her part.

 

Erratic dot movements + vague guidance = more rate volatility

 

One of the outcomes of today’s shift to qualitative guidance will be increased volatility in rate expectations between FOMC meetings. Market participants clearly base their expectations for the fed funds target on the dots, and forward guidance is supposed to tell them how the dots will change in response to the data. Unfortunately, the new language provides very little information in that regard. And, the erratic and unexplained movement of the dots themselves does not help either. The next set of projections will be published in June, and until then, we are all flying with limited visibility.

In retrospect, perhaps it is a good thing the Fed no longer is providing forward guidance – if anything, it likely would have both bonds and stocks soaring to all time highs at the same time, on two completely contradictory yet parallel indicators about the future state of the economy, in what is becoming a glaring example of just how horrible the Fed is at not only predicting the future, but telegraphing how it plans to get there.

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Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Rather than deal forthrightly with the reality that unrealistic promises made to their employees cannot be honored, local government has pursued a strategy of legalizing looting.

The gradual erosion of civil liberties, legal rights and government ethics are connected: our rights don't just vanish into thin air, they are expropriated by government: Federal, state and local. Though much is written about the loss of civil liberties at the Federal level, many of the most blatantly illegal power grabs are occurring in local government.

This expropriation is under the radar of the average citizen because the process slowly chips away the fundamentals of legality and justice: bit by bit, due process and the rights of the individual have been eroded by state and local governments until the fundamental Constitutional protections simply cease to exist.

When local government looting is legalized, the entire system is illegal. Here are three recent examples of blatantly illegal looting by local governments.

First up: privatizing the collection of traffic fines and probation to create a modernized debtor's prison. We turn to The Nation for the story:

The Town That Turned Poverty Into a Prison Sentence Most states shut down their debtors’ prisons more than 100 years ago; in 2005, Harpersville, Alabama, opened one back up.
 

What happened to Ford in the small town of Harpersville was tangled and unconstitutional– but hardly unique. Similar tales have been playing out in more than 1,000 courts across the country, from Georgia to Idaho. In the face of strained budgets and cuts to public services, state and local governments have been stepping up their efforts to ensure that the criminal justice system pays for itself. They have increased fines and court costs, intensified law enforcement efforts, and passed so-called “pay-to-stay” laws that charge offenders daily jail fees. They have also begun contracting with “offender-funded” probation companies like JCS, which offer a particularly attractive solution—collection, at no cost to the court.

Harpersville’s experiment with private probation began nearly ten years ago. In Alabama, people know Harpersville best as a speed trap, the stretch of country highway where the speed limit changes six times in roughly as many miles. Indeed, traffic is by far the biggest business in the town of 1,600, where there is little more than Big Man’s BBQ, the Sudden Impact Collision Center and a dollar store.

In 2005, the court’s revenue was nearly three times the amount that the town received from a sales tax, Harpersville’s second-largest source of income. Fines had become key to Harpersville’s development, but it proved difficult to chase down those who did not pay. So, that year, Harpersville decided to follow in the footsteps of other Alabama cities and hire JCS to help collect.

It was a system of extraction and coercion so flagrant that Alabama Circuit Court Judge Hub Harrington likened it to a modern-day “debtors’ prison.”

Her fines for the three charges added up to $2,922, court papers show. Ward sentenced her–and others who said they couldn’t pay their full fines that day– to probation. Once a means of allowing convicted offenders to stay out of jail on the condition of good behavior, probation had now become a court-sanctioned tool for debt collection.
Burdette reported to the JCS office in nearby Childersburg, where she paid her probation officer $100. Of that, $45 went toward her fine, $10 toward a one-time “start-up fee,” and the last $45 went to JCS as a monthly fee for service.

Next up: illegal search and seizure under the pretext of traffic violations. As if "driving while black" isn't bad enough, now "driving with cash" is pretext enough to be stripped of your rights and your property stolen by local government:

Lawsuits over cash seizures settled in Nevada

Tan Nguyen of Newport, Calif., and Michael Lee of Denver said in lawsuits filed in U.S. District Court in Reno they were stopped last year on U.S. Interstate 80 near Winnemucca about 165 miles east of Reno under the pretext of speeding. They said they were subjected to illegal searches and told they wouldn't be released with their vehicles unless they forfeited their cash.

The lawsuits claimed the cash seizures were part of a pattern of stopping drivers for speeding as a pretext for drug busts in violation of the Constitution.

Nguyen was given a written warning for speeding but wasn't cited. As a condition of release, he signed a "property for safekeeping receipt," which indicated the money was abandoned or seized and not returnable. But the lawsuit says he did so only because Dove threatened to seize his vehicle unless he "got in his car and drove off and forgot this ever happened."

"He wasn't charged with anything. He had no drugs in his car. The pretext for stopping him was he was doing 78 in a 75," John Ohlson told KRNV-TV. "It's like Jesse James or Black Bart," he told AP in an interview last week.

The district attorney's statement said both men were stopped legally and that "every asset that was seized pursuant to those stops was lawfully seized."

Exhibit # 3: guilty until proven innocent: State of California seizes cash from "suspected" tax evaders with no evidence, no court action, no recourse. I have documented in detail how the jackboot of the State of California has pressed on the necks of thousands of law-abiding citizens whose only crime was moving out of California.

The State of California presumes anyone moving out of the state who still has a source of income in California–for example, a few dollars of interest earned on a bank account–owes California income tax on all their presumed income, even if they have filed income tax returns in another state.

If this isn't the acme of illegal seizure and denial of basic rights, i.e. presumed innocent until proven guilty, then what is?

Here is one reader's account of how this legal looting works: I wrote about this inWelcome to the United States of Orwell: Law-Abiding Taxpayers Are Treated as Criminals While the Real Criminals Go Free (March 27, 2012).

I received a letter last year that we owed the state of California's Franchise Tax Board $90,000 for taxes in the year 2008.We replied to the Franchise Tax board in a similar manner as RT stating that:

— Did not reside in California in 2008
— Did not file a State income tax return in California in 2008
— Did not have any outstanding tax issues with California in 2008
— Did no business in California in 2008
— Owned no property in California in 2008

 

The CA Franchise Tax board responded by putting a lien on us in the state – fortunately, our banks and assets have no business in CA or I am certain our accounts would have been robbed as well.

 

After a great deal of uncertainty and angst, I found an accountant in CA who advised us that we needed to file a complete CA tax return for 2008 even though we did not owe any tax. We filed the return and received a response that we owed the state $625 to cover the State's collection fees. We paid the fee and within two weeks received a "refund" check for the $625.

On reflection, we felt as if we had been "held up" by some powerful gangsters and if it had not been for an honest tax accountant we would have suffered much financial damage.

In other words, honest taxpayers are reduced to begging the predatory state of California to return their own money. Meanwhile, the bagmen for the local government thieves, Wells Fargo and Bank of America, among others, get to keep the $100 fee they charged the taxpayer for stealing their money. If this isn't Orwellian, then what do you call it? "Legal"? If this is legal, legality has lost all meaning.

For more on the blatantly illegal seizures of cash from people who aren't even residents of California and who filed income tax returns in another state, please read:

Welcome to the Predatory State of California–Even If You Don't Live There (March 20, 2012)

The Predatory State of California, Part 2 (March 21, 2012)

Just as pernicious as outright looting is the growing dependence of local government on fines and related rip-offs. Correspondent Joel M. recently submitted this article which features New York City officials whining that the recent snow storm deprived them of sorely needed revenues from parking fines.
Costs Have Piled Up Along With the Snow of a Difficult Winter (NYT.com)

"If the winter was costly for individuals, it was even more so for municipalities. The snow triggered repeated suspensions of New York City’s alternate-side-of-the-street parking rules, delighting car owners but costing the city an average of $270,000 a day in potential fines, officials said. That added up to $4.3 million during a three-week stretch in February alone, money that would have gone to help pay for city services, including the fire and police forces, city officials said."

Everyone who believes local government is "here to fill potholes and help disadvantaged people" needs to wake up and ask what kind of government we have when due process has been replaced with "legal" looting. Is local government focused on serving citizens or on funding public employee pensions and healthcare benefits?

The erosion of ethics of those in government service is as pernicious as the rise of legal looting. Let's be honest, shall we? Those in local government tasked with collecting all these forms of legal looting are "just doing my job," but how many protest the process? How many public employee unions are outraged by the legal looting that fills the coffers of their pension funds?

For context, government employees constitute about 15% of the employed workforce in the U.S.: 22 million out of 142 million. Unlike the other 85%, their employer can legalize looting on their behalf.

Local government spending has soared for decades.

So has local government debt.

Promises were made to local government employees by craven, bought-and-paid-for politicos that cannot possibly be honored in a stagnating economy with widening wealth inequality. But rather than deal forthrightly with that reality, local government has pursued a strategy of legalizing looting.

From the point of view of the hapless tax donkeys and debt-serfs being looted, this strategy boils down to a stark threat: Pay Our Pensions Or We'll Throw You in Jail.

Here's the deal: government is supposed to serve the people, not the insiders. Please read the above news stories; can anyone claim that legalized looting is OK because the "ends" (public services) justify the "means" (legalized looting)? How many public employees care about where the money that funds their paycheck, pension and healthcare benefits comes from?

Maybe public employees should start caring about where the money is coming from, because taxation approved by elected officials or direct voter approval is one thing, and legalized looting is another. If you don't care that your pay/pension/benefits may be partly funded by legalized looting, perhaps you should start caring.

Remember that we (the general public) can't pull you over and "legally" steal your cash, nor can we order Wells Fargo to go into your bank account and "legally" steal your money without court review, evidence of wrongdoing or recourse. We can't award private collection agencies the powers reserved for representative government and rig the probation system into a cash cow that benefits us.

Please don't trot out the "good German" excuse: I only take orders. You're the ones who are pulling the levers of the legalized looting machine; us tax donkeys and debt-serfs are on the receiving end. Given that special interests own the state legislatures, the tax donkeys and debt-serfs have only three choices: opt out, move out or stop paying, and fill your modern debtors' prisons to the brim.

via Zero Hedge http://ift.tt/1hDev3A Tyler Durden

With the story of the day undoubtedly Yellen’s first (bungled) press conference, it was easy to forget that the second coming of the Cold War is raging in the Ukraine. For those curious what they may have missed, here is a summary of the major events that took place in the troubled country this afternoon. Highlights from AP, Reuters, WSJ, Bloomberg, RIA and Interfax.

Obama rules out ‘military excursion’ in Ukraine

President Barack Obama ruled out U.S. military involvement in Ukraine on Wednesday, emphasizing diplomacy in the U.S. standoff with Russia over Crimea.

 

“We are not going to be getting into a military excursion in Ukraine,” Obama told KNSD, San Diego’s NBC affiliate, in an interview. “There is a better path, but I think even the Ukrainians would acknowledge that for us to engage Russia militarily would not be appropriate and would not be good for Ukraine either,” Obama said.

Ukraine to hold military exercises with US, UK

Russian forces seized military installations across the disputed Crimean Peninsula on Wednesday, prompting Ukraine’s security chief to announce that his country will hold joint military exercises with the United States and Britain.

 

U.S. Vice President Joe Biden was in Lithuania, trying to reassure nations along Russia’s borders who were terrified by the sight of an expansion-minded Moscow.

 

“We’re in this with you, together,” Biden said.

Ukraine Readies Plan to Evacuate Troops From Crimea

Ukraine’s government is preparing to evacuate its remaining military personnel and their families from the breakaway region of Crimea now that Russia has moved to annex the territory.

 

Andriy Parubiy, the secretary of Ukraine’s National Security and Defense Council, didn’t provide details on the mechanisms or timing of the plan, however.

 

“We’re working on a plan to quickly and effectively move not only the military personnel, but first of all their family members, to continental Ukraine,” Mr. Parubiy told a media briefing in Kiev. He added that 25,000 places had been reserved for such transfers altogether.

 

A Ukrainian Defense Ministry spokesman in Crimea, however, said Wednesday evening that he had received no word yet of any order to evacuate.

 

Early in the day, pro-Russian forces in Crimea had stormed Ukraine’s naval headquarters and allegedly detained the base’s commander, sparking an ultimatum from Ukraine’s acting president that the country would take “appropriate measures” if he and others weren’t released.

… The ultimatum deadline has come and gone, and so far nobody has been released to the best of our knowledge.

Russia will respond in kind to U.S. sanctions – deputy foreign minister

Moscow will respond in kind to U.S. sanctions imposed on Russian officials over the Crimea dispute and is considering other steps if Washington escalates tensions, Deputy Foreign Minister Sergei Ryabkov said on Wednesday.

 

On Monday, the United States and the EU announced sanctions on a handful of officials from Russia and Ukraine accused of involvement in Moscow’s seizure of Ukraine’s Crimea region, most of whose 2 million residents are ethnic Russians.

 

Washington has threatened further sanctions while Russian lawmakers raced to ratify a treaty making Crimea part of Russia by the end of the week.

 

“We are looking at a broad range of responsive measures. They can be identical measures regarding certain lists of American officials – not necessarily representatives of the administration … who have influenced American policies,” Ryabkov was quoted as saying by Interfax.

 

“There is also the possibility of passing asymmetrical measures, that means steps which, let’s say … won’t go unnoticed in Washington,” he said.

Russia Sounds Alarm on Economy as West Starts With Sanctions

Russia’s economy is showing signs of a crisis, the government in Moscow said as the U.S. and the European Union announced sanctions over its plan to annex the Crimea region from Ukraine.

 

“The situation in the economy bears clear signs of a crisis,” Deputy Economy Minister Sergei Belyakov said in Moscow yesterday. The cabinet needs to refrain from raising the fiscal burden on companies, which would be the “wrong approach,” he said. “Taking money from companies and asking them afterward to modernize production is illogical and strange.”

 

Even before the standoff with the West, the worst since the Cold War, Russia’s economy was facing the weakest growth since a 2009 recession as consumer demand failed to make up for sagging investment. President Vladimir Putin signed a treaty today on Crimea joining Russia, signaling his defiance of Western sanctions. Russia won’t seek to further split Ukraine, he said in the Kremlin.

 

The Ukrainian crisis is putting a strain on Russia’s $2 trillion economy, which expanded 1.3 percent in 2013 after 3.4 percent the previous year. Last year’s

growth was “insufficient” and the current outlook and government forecasts “can’t satisfy us,” Putin said March 12.

Russia to cover Crimea’s $1.5 billion budget deficit with state funds

Russia will cover Crimea’s estimated 55 billion rouble ($1.53 billion) budget deficit with funds from the federal budget, Russian Finance Minister Anton Siluanov said on Channel 1 state television on Tuesday.

 

“The volume of the (budget) deficit of Crimea and Sevastopol is about 55 billion roubles,” Siluanov said in an interview televised by Channel 1.

 

“The whole sum will definitely be covered with federal budget.”

Switzerland Halts Trade Talks With Russia, Former Soviet Republics

Switzerland has frozen negotiations on a free trade deal with Russia, the head of the country’s economic affairs department said Wednesday, a decision he linked to Moscow’s annexation of part of Ukraine’s Crimea region.

 

In an interview with Swiss broadcaster SRF Radio, Johann Schneider-Ammann said the talks with Russia, as well as the former Soviet republics of Belarus and Kazakhstan, had been halted. Mr. Schneider-Ammann, who is a member of Switzerland’s seven-person cabinet, blamed the increasing crisis in Ukraine and the annexation of Crimea after a Sunday referendum for the halt.

 

“In this uncertain situation we cannot pretend as if nothing has happened,” Mr. Schneider-Ammann said in the interview. He called the freeze the “first formal sign” of Switzerland’s concern over the situation in Ukraine, saying the Alpine country wanted a trade deal with Russia “but not at any price.”

 

The halt of the talks also applies to Switzerland’s partners in the European Free Trade Association, which includes Norway, Iceland and Liechtenstein, which were also due to take part in the next round of negotiations in April, a spokesman for the Swiss Economics Dept. said.

Germany says Rheinmetall can’t deliver combat simulator to Russia

The German government said on Wednesday that defence contractor Rheinmetall’s plan to deliver combat simulation kit to Russia was unacceptable in light of the diplomatic showdown with Moscow over its military occupation of Crimea.

 

The economy ministry, asked by Reuters about Rheinmetall’s intention to honour contractual obligations to deliver about 100 million euros ($139 million) worth of technology to a Russian combat training centre, said it was in contact with the firm.

 

“The German government considers the export of the combat simulation centre to Russia unacceptable in the current circumstances,” the ministry said in a statement to Reuters.

 

“The government is in contact with the company. At the moment no such export is foreseen,” said the ministry.

 

Rheinmetall had said earlier on Wednesday that it intended to complete the delivery of the equipment, which was ordered about two years ago. The company said it had no further orders outstanding from Russia or Ukraine.

Russia poised to react to Kiev’s new visa regime

Moscow will decide whether to introduce visas for Ukrainians visiting Russia after it is officially informed of Kiev’s new visa regime for Russians, Russian state news agency RIA reported a source at Russia’s Foreign Ministry as saying on Wednesday.

 

Ukrainian security chief Andriy Parubiy said earlier in the day that Ukraine’s Foreign Ministry had been given instructions to introduce visas for Russians visiting Ukraine, as tensions rise between the two neighbours

European leaders seek ways to curb dependence on Russian gas

European leaders will seek ways to cut their multi-billion-dollar dependence on Russian gas at talks in Brussels on Thursday and Friday, while stopping short of severing energy ties with Moscow for now.

 

Russia’s seizure of Ukraine’s Crimea region has revived doubts about whether the European Union should continue to rely on Russia for nearly a third of its gas, providing Gazprom with an average of $5 billion per month in revenue. Some 40 percent of that gas is shipped via Ukraine.

 

EU powerhouse Germany is among those with particularly close energy links to Russia and has echoed comments from Gazprom, Russia’s top natural gas producer, that Russia has been a reliable supplier for decades.

 

EU officials said the current Ukraine crisis, however, had convinced many in Europe that Russia was no longer reliable and the political will to end its supply dominance had never been greater. “Everyone recognises a major change of pace is needed on the part of the European Union,” one EU official said on condition of anonymity.

 

“At the back of people’s minds, there will always be the doubt that if the relationship goes sour, Russia has that weapon and it’s not something it should have,” another official said, referring to Russia’s option of severing supplies.

As alternatives to imported gas, the Brussels talks will debate the EU’s “indigenous supplies”, which include renewable energy and shale gas.

Russia shares “fears” about Ukraine humanitarian situation with UNHCR

Russia has “shared [its] fears” about the humanitarian situation in Ukraine with the UN High Commissioner for Refugees, the head of the Russian Federal Migration Service said on Wednesday.

 

“I won’t keep it secret that we have shared our fears with the Office of the United Nations High Commissioner for Refugees. Our fears were understood to a certain extent, and a certain form of interaction with that organization has begun,” Konstantin Romodanovsky told reporters in Moscow.

 

“I think that by combined efforts we will minimize the problems that the unstable situation in Ukraine may cause us,” he said.

And that’s a wrap.

via Zero Hedge http://ift.tt/1j8a6qB Tyler Durden

"If we look only at the stock market, then we're in denial," warns Ron Paul in this brief 'uncomfortable-for-the-anchor' CNBC interview, adding that "it's an illusion." While the stock market has performed well, Paul explains that the economy-at-large continues to struggle noting that it's due to the Fed: "I don't think any one individual knows how to plan the economy by manipulating interest rates' [they] are so important that if you give this power to one small group – there will be distortion." That's why socialism fails, slams the Fed critic, "it's the invisible hand that we lack, not the wisdom of a few people. Few people can't be wise enough to dictate the market," and the Fed's history shows their track "record is pretty bad."

"So sometimes you have housing bubbles and sometimes you have housing busts, then you have housing bubbles and bond bubbles that's all [the] result of the manipulation of interest rates, which is my real objection to it."

 

"So one half of our economy is socialized, because it's the control of the money supply, the control of the interest rates,"

 

"We don't believe they're capable of doing it and I think history shows that the record is pretty bad."

 

"The economy on the surface looks good, but if you look at hardcore unemployment and standard of living of the middle class, there's still a lot of problems out there… So if we look only at the stock market, then we're in denial."

 

Furthermore, Ron Paul went to note that "low interest rates are not a panacea – though they won't admit this," adding that the reason for a lack of recovery and hiring is all aboyt "confidence" and that can't be manufactured by stock markets… "we are bankrupt and have been encouraged to take on more debt" – simply put, he adds "the financial system is deeply flawed"…

 

 

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via Zero Hedge http://ift.tt/1nEH7Ru williambanzai7

Much has been said about Yellen’s less than stellar first press conference so we will let her own words do most of the talking. First, from the transcript of her prepared remarks and the following Q&A, here are some highlights.

First, the word count:

• Market(s): 35
• Economy: 25
• Weather: 7
• Inflation: 58
• Deflation: 1

The word cloud:

Goldman’s take of the press conference (as opposed to the statement which we summarized earlier):

BOTTOM LINE: Chair Yellen’s first post-meeting press conference came across as slightly more hawkish than expected.

 

MAIN POINTS:

 

1. When asked how to interpret the new guidance that the fed funds rate would remain in the current 0 to 25 basis point range for a “considerable time after the asset purchase program ends,” Chair Yellen stated that “the language in the statement … probably means something on the order of six months.” Assuming tapering continues at a pace of $10bn per meeting, this suggests rate hikes could begin as early as mid-2015.

 

2. Asked how to explain the hawkish shift in the “dots,” Yellen stated that “the labor market more broadly I think has improved a little more than we might have expected,” but went on to say that “I think that one should not look to the dot plot so to speak as the primary way in which the committee wants to or is speaking about policy to the public at large.”

 

3. Explaining the statement that the fed funds rate may remain at a below-normal level even as employment and inflation approach “mandate-consistent levels,” Yellen mainly appealed to persistent headwinds from the financial crisis, and did not explicitly mention optimal control considerations as she has in the past.

 

4. Regarding distortions from the weather, she stated that “it’s an important factor. It’s not the only factor,” in explaining the weaker data. She showed a refreshing amount of candor by noting that “we probably overdid the optimism in January, so in some sense our views have moved around here a little bit.”

 

5. Asked about wage inflation, she said that 3-4% annual gains in wages would be more normal, in her view, consistent with the average rate of wage increase seen in the last business cycle expansion. She described current wage inflation as “running at 2%.”

 

6. She was somewhat dismissive of recent arguments that the short-term unemployment rate is a more important measure of slack for wage and price inflation than the headline unemployment rate. Specifically, she said that “I think it would be tremendously premature to adopt any notion that says that that is an accurate read, on either how inflation is determined or what constitutes slack in the labor market.”

And while the punchline was already noted, namely the “6 month” statement:

So, the language that we use in this statement is considerable, period. So, I — I, you know, this is the kind of term it’s hard to define, but, you know, it probably means something on the order of around six months or that type of thing. But, you know, it depends — what the statement is saying is it depends what conditions are like.

… which incidentally said nothing that the statement didn’t already note, namley that if the tapering ends in the fall the first hike would be in mid-2015, or precisely as the “dots” suggested it would, she did have several other notable observations, some of which are highlighted below.

And the full transcript (pdf)

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Submitted by Mike Krieger of Liberty Blitzkrieg blog,

It’s been a couple months since I last updated readers on the epic disaster that is Obamacare. In case you need a refresher, here is the last article I published on the law: Computer Security Expert Claims he Hacked the ObamaCare Website in 4 Minutes.

Moving along, we now have some details on the average premium increase for non-Obamacare health plans following the implementation of the law, and the results are not pretty. According to a cost report from eHealthInsurance, premiums have increased by between 39%-56%.

More from The Washington Examiner:

Americans buying health insurance outside the new Obamacare exchanges are being forced to swallow premiums up to 56 percent higher than before the health law took effect because insurers have jumped the cost to cover all the added features of the new Affordable Care Act.

 

According to a cost report from eHealthInsurance, a nationwide online private insurance exchange, families are paying an average of $663 a month and singles $274 a month, far more than before Obamacare kicked in. What’s more, to save money, most buyers are choosing the lowest level of coverage, the so-called “bronze” plans.

 

In California, for example, some families are paying a high of $2,604 a month and in New York, $1,845.

 

His firm’s price index also gives an average age for singles buying plans, and the results are worrying for insurers and the Obama administration. That’s because the average age is 36, older than the administration had hoped for.

The demographic issue is a huge ticking time bomb, something I previously highlighted in my piece: Humana Warns of “‘Adverse ObamaCare Enrollment Mix.”

Moving along, while we are well aware of the financial disaster Obamacare represents for those not participating, what about those who are in (or at least think they are in) the program?

Let’s look at the story of one Las Vegas man who paid his Obamacare premiums since November yet remains uncovered and now has a $407,000 hospital bill nobody is covering.

From the Review Journal:

The hospital bills are hitting Larry Basich’s mailbox.

 

That would be OK if Basich had health insurance. But he doesn’t.

 

Thing is, he should be covered. Basich, 62, bought a plan through the state’s Nevada Health Link insurance exchange in the fall. He’s been paying monthly premiums since November.

 

Yet the Las Vegan is stranded in a no-man’s-land where no carrier claims him, and his tab is mounting: Basich owes $407,000 for care received in January and February, when his policy was supposed to be in effect. Instead, he’s covered only for March and beyond.

 

Basich has begged for weeks for help from the exchange and its contractor, Xerox. But Basich’s insurance broker said Xerox seems more interested in lawyering up and covering its hide than in working out Basich’s problems. Nor is Basich the only client facing plan-selection errors through the exchange, she added.

 

Weeks ticked by, but Basich received nothing to confirm he had insurance. Nevada Health Link kept telling him he was enrolled, but UnitedHealthcare said he wasn’t in their system.

 

Basich’s predicament went critical on Dec. 31, when he had a heart attack. His treatment, which included a triple bypass on Jan. 3, resulted in $407,000 in medical bills in January and February that no insurer is covering.

 

Though Basich’s problem is exceptional for its dollar value, his situation is not unusual, Burch said. She estimates that of nearly 200 Branch Benefits Consultants client sign ups via Nevada Health Link, only 5 percent have gone through problem-free. More than 20 customers have the same plan-selection issue as Basich. One gave up trying to fix it and is sticking with the plan the exchange put her in.

Serfs up suckers!

via Zero Hedge http://ift.tt/1j4N6wU Tyler Durden

Concerns about Fed "over-optimism" admissions and shortening the time from taper to rate-hike sparked a major algo-surging risk-off dump in US equities… but that 1% dip was bought with hands and feet as reassuring figures emerged on screens to pat traders heads gently. Stocks bounced but then faded into the close as Yellen's first press conference saw the worst market performance since Bernanke's May Taper hint. Bonds had a bad day… massive bear-flattening occurred on the release with 5s30s -12bps (5Y +16.5bps, 30Y +4.5bps) to 19-month lows. The USD was smashed 0.75% higher – its biggest gain in 7-months. Gold (and silver) dropped (down 4% on the week) as copper short-squeezed up to key resistance after early significant weakness.

 

The S&P 500 tracked AUDJPY through all the excitement…

 

The reaction in stocks is full of confusion – initial weakness which recovered quickly, then a plunge on over-confidence and rat-hike-period comments… which were then bid…

 

With financials outperforming in the sell-off (but yield curves flattened dramatically!!?)

 

Treasury yields soared (led by the short-end)

 

As the Treasury curve flattened dramatically… the biggest single-day flattening since Sept 2011

.

 

USD Index screamed 0.75% higher…

 

Gold and silver slipped as copper ripped

 

In summary – Bonds Dumped And Dollar Pumped As Stocks Stumble On Yellen Mumble

 

Charts: Bloomberg

Bonus Chart: Copper WTF Chart of the day…

via Zero Hedge http://ift.tt/1d0W6k1 Tyler Durden

From Jan Hatzius, who needs to coach Yellen much better next time around. Incidentally, this is Goldman’s take on the statement and not on Yellen’s disastrous press conference. 

From Goldman Sachs

BOTTOM LINE: The March Summary of Economic Projections (SEP) indicated a more hawkish path of the policy rate than that seen in the December SEP. The statement included a move toward qualitative guidance, but was roughly neutral on net in our view.

MAIN POINTS:

1. The median participant’s forecast for the funds rate (the “dots”) remained at 0.13% at end-2014, but rose 25bp to 1.0% at end-2015 and rose 50bp to 2.25% at end-2016. The median projection for the longer-run rate remained 4.0%. Only two participants expected that the first hike would come in 2016, down from three in December.

2. The Committee adopted qualitative forward guidance by stating that it currently anticipates the fed funds rate to remain in the current 0 to 25 basis point range “for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.” Looking further ahead, the statement indicated that “even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.” In addition, the statement said that “the change in guidance does not indicate any change in the Committee’s policy intentions as set forth in recent statements.” We see this set of outcomes on the forward guidance as relatively neutral.

3. The assessment of economic conditions noted slower activity in recent months, but partly blamed the weakness on “adverse weather conditions.” The assessment of household spending and business fixed investment was changed from “has advanced more quickly” to “continued to advance.” The description of inflation and inflation expectations was unchanged.

4. As overwhelmingly expected, the Committee continued to taper the pace of its asset purchases by $10bn to $55bn/month, beginning in April. An accompanying statement on the New York Fed website indicated no other changes to operating parameters.

5. Minneapolis Fed President Kocherlakota lodged a dovish dissent, noting that the Committee did not express its commitment to return inflation to the 2 percent target strongly enough.

6. With regard to participants’ economic projections, the mid-point of the central tendency of the unemployment rate was lowered by 0.25pp to 6.2% in 2014Q4, by 0.2pp to 5.75% in 2015Q4, and by 0.15pp to 5.4% in 2016Q4. In addition, the longer-run or “structural” unemployment rate was lowered 0.1pp to 5.4%. Real GDP growth was lowered to 2.9% in 2014, 3.1% in 2015, 2.75% in 2016, and 2.25% in the longer run. Changes to core and headline PCE inflation projections were minor. The core PCE inflation projection remained at 1.5% at end-2014, rose a touch to 1.85% at end-2015, and remained at 1.9% at end-2016.

via Zero Hedge http://ift.tt/OCtYsj Tyler Durden