Dallas Fed Misses; Dumps To 9-Month Low, Harsh Texas Weather Blamed

Last month’s Dallas Fed print at 3.8 barely beat expectations of 3.7 to stall a 3-month missed expectations slump as the data basically has flatlined for 4 months. However, it appears the lack of snow in Texas did not help (though the word weather appears 7 times in survey responses) as Feb’s data missed expectations by the most in 4 months and slumped to a 9 month low. What is perhaps most concerning is the outlook for 6-months foward dropped dramatically (with 11 sub-indices tumbling) and CapEx also slumped to a 5 month low. Of course, US equities are surging to new highs on this dismal news…

 

 

The full table breakdown:

Buit wait, there’s more – from the Dallas Fed PR respondents:

Word count of weather in respondents: 7. To wit:

  • Our February business was affected by the weather
  • The extreme weather throughout the U.S. impacted our ability to receive components needed in our manufacturing process. Weather also impacted revenue, as customers are unable to deploy products, resulting in increased inventory in the distribution channels and reduced requirements for manufacturing.
  • Refinery activity slowed significantly due to the cold weather and the uncertain rhetoric coming from Washington and the EPA.
  • Weather has been a significant near-term factor in our business. We estimate a 5 to 10 percent revenue impact in both January and February at this point. We expect the major construction boom along the Gulf Coast (associated with new lower cost gas and gas liquids supplies) to begin to favorably impact our business in the second half of 2014.
  • We are getting information that the capital manufacturing businesses suffered a major slowdown due to the weather, transportation and materials problems.
  • Consumer activity is very strong, despite the horrible winter. We manufacture discretionary consumer goods sold through retailers and distributors. Our three largest resellers report retail sales (of our products) up 12 percent, 29 percent and 11 percent, respectively. Our number two customer reports sales trending up 54 percent in February. Weather will determine momentum. A long, bitter winter will negatively impact the spring selling season. We shall see.

To summarize: the weather is to blame – those heavy Dallas and Houston snowfalls – as usual.

But what about the future? Shouldn’t that be rosy?

  • Expectations regarding future business conditions remained optimistic in February, although most indexes of future activity fell from their January levels

So more snowfall for Texas exected.

Source: Dallas Fed


    



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Guest Post: The Dollar And The Deep State

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If we consider the Fed's policies (tapering, etc.) solely within the narrow confines of the corporatocracy or a strictly financial context, we are in effect touching the foot of the elephant and declaring the creature to be short and roundish.

I have been studying the Deep State for 40 years, before it had gained the nifty name "deep state." What others describe as the Deep State I term the National Security State which enables the American Empire, a vast structure that incorporates hard and soft power–military, diplomatic, intelligence, finance, commercial, energy, media, higher education–in a system of global domination and influence.

Back in 2007 I drew a simplified chart of the Imperial structure, what I called the Elite Maintaining and Extending Global Dominance (EMEGD):

At a very superficial level, some pundits have sought a Master Control in the Trilateral Commission or similar elite gatherings. Such groups are certainly one cell within the Empire, but each is no more important than other parts, just as killer T-cells are just one of dozens of cell types in the immune system.

One key feature of the Deep State is that it makes decisions behind closed doors and the surface government simply ratifies or approves the decisions. A second key feature is that the Deep State decision-makers have access to an entire world of secret intelligence.

Here is an example from the late 1960s, when the mere existence of the National Security Agency (NSA) was a state secret. Though the Soviet Union made every effort to hide its failures in space, it was an ill-kept secret that a number of their manned flights failed in space and the astronauts died.

The NSA had tapped the main undersea cables, and may have already had other collection capabilities in place, for the U.S. intercepted a tearful phone call from Soviet Leader Brezhnev to the doomed astronauts, a call made once it had become clear there was no hope of their capsule returning to Earth.

Former congressional staff member Mike Lofgren described the Deep State in his recent essay Anatomy of the Deep State:
 

There is another, more shadowy, more indefinable government that is not explained in Civics 101 or observable to tourists at the White House or the Capitol. The subsurface part of the iceberg I shall call the Deep State, which operates according to its own compass heading regardless of who is formally in power.

The term “Deep State” was coined in Turkey and is said to be a system composed of high-level elements within the intelligence services, military, security, judiciary and organized crime.

I use the term to mean a hybrid association of elements of government and parts of top-level finance and industry that is effectively able to govern the United States without reference to the consent of the governed as expressed through the formal political process.

I would say that only senior military or intelligence officers have any realistic grasp of the true scope, power and complexity of the Deep State and its Empire.Those with no grasp of military matters cannot possibly understand the Deep State. If you don't have any real sense of the scope of the National Security State, you are in effect touching the foot of the elephant and declaring the creature is perhaps two feet tall.

The Deep State arose in World War II, as the mechanisms of electoral governance had failed to prepare the nation for global war. The goal of winning the war relegated the conventional electoral government to rubber-stamping Deep State decisions and policies.

After the war, the need to stabilize (if not "win") the Cold War actually extended the Deep State. Now, the global war on terror (GWOT) is the justification.

One way to understand the Deep State is to trace the vectors of dependency. The Deep State needs the nation to survive, but the nation does not need the Deep State to survive (despite the groupthink within the Deep State that "we are the only thing keeping this thing together.")

The nation would survive without the Federal Reserve, but the Federal Reserve would not survive without the Deep State. The Fed is not the Deep State; it is merely a tool of the Deep State.

This brings us to the U.S. dollar and the Deep State. The Deep State doesn't really care about the signal noise of the economy–mortgage rates, minimum wages, unemployment, etc., any more that it cares about the political circus ("step right up to the Clinton sideshow, folks") or the bickering over regulations by various camps.

What the Deep State cares about are the U.S. dollar, water, energy, minerals and access to those commodities (alliances, sea lanes, etc.). As I have mentioned before, consider the trade enabled by the reserve currency (the dollar): we print/create money out of thin air and exchange this for oil, commodities, electronics, etc.

If this isn't the greatest trade on Earth–exchanging paper for real stuff– what is?While I am sympathetic to the strictly financial arguments that predict hyper-inflation and the destruction of the U.S. dollar, they are in effect touching the toe of the elephant.

The financial argument is this: we can print money but we can't print more oil, coal, ground water, etc., and so eventually the claims on real wealth (i.e. dollars) will so far exceed the real wealth that the claims on wealth will collapse.

So far as this goes, it makes perfect sense. But let's approach this from the geopolitical-strategic perspective of the Deep State: why would the Deep State allow policies that would bring about the destruction of its key global asset, the U.S. dollar?

There is simply no way the Deep State is going to support policies that would fatally weaken the dollar, or passively watch a subsidiary of the Deep State (the Fed) damage the Deep State itself.

The strictly financial arguments for hyper-inflation and the destruction of the U.S. dollar implicitly assume a system that operates like a line of dominoes: if the Fed prints money, that will inevitably start the dominoes falling, with the final domino being the reserve currency.

Setting aside the complexity of Triffin's Paradox and other key dynamics within the reserve currency, we can safely predict that the Deep State will do whatever is necessary to maintain the dollar's reserve status and purchasing power.

Understanding the "Exorbitant Privilege" of the U.S. Dollar (November 19, 2012)

What Will Benefit from Global Recession? The U.S. Dollar (October 9, 2012)

Recall Triffin's primary point: countries like China that run trade surpluses cannot host reserve currencies, as that requires running large structural trade deficits.

In my view, the euro currency is a regional experiment in the "bancor" model,where a supra-national currency supposedly eliminates Triffin's Paradox. It has failed, partly because supra-national currencies don't resolve Triffin's dilemma, they simply obfuscate it with sovereign credit imbalances that eventually moot the currency's ability to function as intended.

Many people assume the corporatocracy rules the nation, but the corporatocracy is simply another tool of the Deep State. Many pundits declare that the Powers That Be want a weaker dollar to boost exports, but this sort of strictly financial concern is only of passing interest to the Deep State.

The corporatocracy (banking/financialization, etc.) has captured the machinery of regulation and governance, but these are surface effects of the electoral government that rubber-stamps policies set by the Deep State.

The corporatocracy is a useful global tool of the Deep State, but its lobbying of the visible government is mostly signal noise to the Deep State. The only sectors that matter are the defense, energy, agriculture and international financial sectors that supply the Imperial Project and project power.

What would best serve the Deep State is a dollar that increases in purchasing power and extends the Deep State's power. It is widely assumed that the Fed creating a few trillion dollars has created a massive surplus of dollars that will guarantee a slide in the dollar's purchasing power and its demise as the reserve currency.

Those who believe the Fed's expansion of its balance sheet will weaken the dollar are forgetting that from the point of view of the outside world, the Fed's actions are not so much expanding the supply of dollars as offsetting the contraction caused by deleveraging.

I would argue that the dollar will soon be scarce, and the simple but profound laws of supply and demand will push the dollar's value not just higher but much higher. The problem going forward for exporting nations will be the scarcity of dollars.

If we consider the Fed's policies (tapering, etc.) solely within the narrow confines of the corporatocracy or a strictly financial context, we are in effect touching the foot of the elephant and declaring the creature to be short and roundish. The elephant is the Deep State and its Imperial Project.


    



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S&P 500 Surges To New All-Time Highs

Weakness in Asian data, check. Weakness in European data, check. Weakness in US data, check. USDJPY overnight sell-off primed for US day-session ramp, check… New highs for US stocks, check…

 

S&P new all-time highs and thus positive year-to-date…

 

The Buying panic ensues…

 

Sparked by just a little USDJPY momentum ignition…


    



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S&P 500 Surges To New All-Time Highs

Weakness in Asian data, check. Weakness in European data, check. Weakness in US data, check. USDJPY overnight sell-off primed for US day-session ramp, check… New highs for US stocks, check…

 

S&P new all-time highs and thus positive year-to-date…

 

The Buying panic ensues…

 

Sparked by just a little USDJPY momentum ignition…


    



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Ukraine’s President-In-Hiding Yanukovich Located In Russian Base In Sevastopol, Preparing To Depart For Russia

Ever since the weekend’s coup d’etat (as he called it: remember, it isn’t officially a coup until John Kerry deems it so – see Egypt), Ukraine’s overthrown president Victor Yanukovych (despite signing an agreement with the opposition and blessed by Europe which foresaw new legitimate presidential elections sometime after September) has been in hiding, following an aborted attempt to depart the country by plane. This is understandable: after all a warrant has been issued for his arrest. Which perhaps explains why as Gazeta.ru, citing UNIAN.net, reports his latest location is the Russian military base in Sevastopol, the one place where the Ukraine government, legitimate or not, will never dare to tread. UNIAN adds that Yanukovich will “board a landing ship of the Black Sea Fleet of the Russian Federation, which the deposed president will use to go to Russia, according to TV channel ATR.

What happens To Yanukovich once he arrives in Russia, and more importantly, how Russia will respond to Ukraine, and EU, and US, demands for his deportation, is unknown.

What is known is that as Interfax Ukraine reported, “At the entrance to Sevastopol near restaurant “Puck” at the Yalta highway appeared antitank hedgehogs – crew patrol says it measure against frequent carjackings in Sebastopol, said “Sevastopol newspaper.”

For those confused, “antitank hedgehogs” are these things:

What is also concerning is the following unverified video released yesterday, which shows military vehicles on the road outside of Sevatsopol.

Legitimate military preparations or not, all eyes remain on Russia.


    



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Ukraine's President-In-Hiding Yanukovich Located In Russian Base In Sevastopol, Preparing To Depart For Russia

Ever since the weekend’s coup d’etat (as he called it: remember, it isn’t officially a coup until John Kerry deems it so – see Egypt), Ukraine’s overthrown president Victor Yanukovych (despite signing an agreement with the opposition and blessed by Europe which foresaw new legitimate presidential elections sometime after September) has been in hiding, following an aborted attempt to depart the country by plane. This is understandable: after all a warrant has been issued for his arrest. Which perhaps explains why as Gazeta.ru, citing UNIAN.net, reports his latest location is the Russian military base in Sevastopol, the one place where the Ukraine government, legitimate or not, will never dare to tread. UNIAN adds that Yanukovich will “board a landing ship of the Black Sea Fleet of the Russian Federation, which the deposed president will use to go to Russia, according to TV channel ATR.

What happens To Yanukovich once he arrives in Russia, and more importantly, how Russia will respond to Ukraine, and EU, and US, demands for his deportation, is unknown.

What is known is that as Interfax Ukraine reported, “At the entrance to Sevastopol near restaurant “Puck” at the Yalta highway appeared antitank hedgehogs – crew patrol says it measure against frequent carjackings in Sebastopol, said “Sevastopol newspaper.”

For those confused, “antitank hedgehogs” are these things:

What is also concerning is the following unverified video released yesterday, which shows military vehicles on the road outside of Sevatsopol.

Legitimate military preparations or not, all eyes remain on Russia.


    



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Greenspan Speaks: Bitcoin, Bonds, & China “Bubble”; US Stocks “No Bubble”

Since his historical track record has been spot on until now, we thought it useful to reflect on the wisdom of the maestro as he speaks this morning and his recent appearances. On the heels of the success of his un-best-selling book, Greenspan explains:

  • *GREENSPAN SAYS ‘NO DOUBT’ BUBBLES ARISING IN CHINA’S ECONOMY
  • *GREENSPAN SAYS OF BITCOIN: ‘IT’S A BUBBLE’
  • *GREENSPAN SAYS ‘I DON’T SEE’ SIGNS OF A BUBBLE IN STOCK MARKET
  • *GREENSPAN SEES SIGNIFICANT RISE IN LONG-TERM RATES COMING

It appears he bubble-vision is strong and yet he notes that US income inequality is potentially harmful to the US political system and Dodd-Frank doesn’t work; adding that the US needs 4% growth to fix itself.

He had plenty more to say…adding to his recent comments…

US Stocks

  • *GREENSPAN DOESN’T SEE AN ASSET PRICE BUBBLE IN EQUITIES
  • *GREENSPAN SAYS HE’S MORE CONCERNED ABOUT THE FUNDAMENTALS

 

US Economy:

  • *GREENSPAN EXPECTS `MORE OF SAME’ IN ECONOMIC PERFORMANCE
  • *GREENSPAN SAYS `HOUSING CLEARLY HAS COME BACK’
  • *GREENSPAN SAYS PART OF SLOWING ECONOMY IS SEVERE WEATHER
  • *GREENSPAN EXPECTS DOWNWARD REVISION IN 4TH QTR GDP
  • *GREENSPAN SEES `SLIPPAGE’ IN INDUSTRIAL PRODUCTION

 

US Regulation:

  • *GREENSPAN SAYS DODD-FRANK MAY PROVE `COUNTER-PRODUCTIVE’
  • *GREENSPAN SAYS DODD-FRANK REGULATORY STRUCTURE DOESN’T WORK
  • *GREENSPAN FAVORS REQUIREMENT FOR CONTINGENT COVERTIBLE BONDS
  • *GREENSPAN SAYS CONTINGENT CONVERTIBLE BONDS COULD AVERT DEFAULT

 

US Income Inequality:

  • *GREENSPAN SAYS U.S. INCOME INEQUALITY `DANGEROUS’
  • *GREENSPAN: INCOME INEQUALITY HARMFUL TO U.S. POLITICAL SYSTEM
  • *GREENSPAN: U.S. NEEDS 4% ANNUAL GDP GROWTH TO CUT INEQUALITY

 

Bitcoin:

  • Dec – *GREENSPAN SAYS OF BITCOIN: `IT’S A BUBBLE’
  • Dec – *GREENSPAN: DOESN’T UNDERSTAND WHERE BITCOIN BACKING COMING FROM

 

Bonds:

  • Dec – *GREENSPAN SEES SIGNIFICANT RISE IN LONG-TERM RATES COMING

 

China

  • Dec – *GREENSPAN SAYS `NO DOUBT’ BUBBLES ARISING IN CHINA’S ECONOMY


    



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Greenspan Speaks: Bitcoin, Bonds, & China "Bubble"; US Stocks "No Bubble"

Since his historical track record has been spot on until now, we thought it useful to reflect on the wisdom of the maestro as he speaks this morning and his recent appearances. On the heels of the success of his un-best-selling book, Greenspan explains:

  • *GREENSPAN SAYS ‘NO DOUBT’ BUBBLES ARISING IN CHINA’S ECONOMY
  • *GREENSPAN SAYS OF BITCOIN: ‘IT’S A BUBBLE’
  • *GREENSPAN SAYS ‘I DON’T SEE’ SIGNS OF A BUBBLE IN STOCK MARKET
  • *GREENSPAN SEES SIGNIFICANT RISE IN LONG-TERM RATES COMING

It appears he bubble-vision is strong and yet he notes that US income inequality is potentially harmful to the US political system and Dodd-Frank doesn’t work; adding that the US needs 4% growth to fix itself.

He had plenty more to say…adding to his recent comments…

US Stocks

  • *GREENSPAN DOESN’T SEE AN ASSET PRICE BUBBLE IN EQUITIES
  • *GREENSPAN SAYS HE’S MORE CONCERNED ABOUT THE FUNDAMENTALS

 

US Economy:

  • *GREENSPAN EXPECTS `MORE OF SAME’ IN ECONOMIC PERFORMANCE
  • *GREENSPAN SAYS `HOUSING CLEARLY HAS COME BACK’
  • *GREENSPAN SAYS PART OF SLOWING ECONOMY IS SEVERE WEATHER
  • *GREENSPAN EXPECTS DOWNWARD REVISION IN 4TH QTR GDP
  • *GREENSPAN SEES `SLIPPAGE’ IN INDUSTRIAL PRODUCTION

 

US Regulation:

  • *GREENSPAN SAYS DODD-FRANK MAY PROVE `COUNTER-PRODUCTIVE’
  • *GREENSPAN SAYS DODD-FRANK REGULATORY STRUCTURE DOESN’T WORK
  • *GREENSPAN FAVORS REQUIREMENT FOR CONTINGENT COVERTIBLE BONDS
  • *GREENSPAN SAYS CONTINGENT CONVERTIBLE BONDS COULD AVERT DEFAULT

 

US Income Inequality:

  • *GREENSPAN SAYS U.S. INCOME INEQUALITY `DANGEROUS’
  • *GREENSPAN: INCOME INEQUALITY HARMFUL TO U.S. POLITICAL SYSTEM
  • *GREENSPAN: U.S. NEEDS 4% ANNUAL GDP GROWTH TO CUT INEQUALITY

 

Bitcoin:

  • Dec – *GREENSPAN SAYS OF BITCOIN: `IT’S A BUBBLE’
  • Dec – *GREENSPAN: DOESN’T UNDERSTAND WHERE BITCOIN BACKING COMING FROM

 

Bonds:

  • Dec – *GREENSPAN SEES SIGNIFICANT RISE IN LONG-TERM RATES COMING

 

China

  • Dec – *GREENSPAN SAYS `NO DOUBT’ BUBBLES ARISING IN CHINA’S ECONOMY


    



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European Inflation Has Biggest Monthly Drop On Record

For those who have been following the abysmal loan creation in Europe, which recently dropped to an all time low…

… today’s inflation, or rather make that deflation, data out of Europe should not come as much of a surprise. Then again, with January inflation posting the biggest drop in history, when it tumbled by a record 1.1% from December levels, even the skeptics may be stunned by how rapidly deflation is gripping the continent.

 

On an anual basis, Euro area inflation rose by 0.8% for the second month in a row and the 4th month of sub 1% annual inflation in a row. At this rate, Europe will enter outright deflation in a few short months.

Broken down by country:

Reuters explains:

Euro zone consumer prices fell in January at their fastest ever pace on a monthly basis, dragged down by a slump in the cost of non-energy industrial goods, keeping annual inflation well below the European Central Bank’s target.

 

Inflation rate in the 18 countries sharing the euro dropped by 1.1 percent in January when compared with December, keeping the annual inflation rate at 0.8 percent for a second month in a row, the EU’s statistics office Eurostat said.

The annual inflation rate was revised from 0.7 percent, which Eurostat released in a flash estimate on January 31.

Economists polled by Reuters expected consumer price inflation to accelerate slightly to 0.9 percent in January, a level that is still well below the ECB’s target of close to but below 2 percent.

The annual rate was influenced by a 1.2 percent decline in the highly volatile prices of energy, while the monthly decline was hit by a 3.9 percent fall in prices of non-energy industrial goods and a 0.4 percent drop in the price of services.

The ECB, which cut its key interest rate to a record low of 0.25 percent in November, is expected to stay put until mid-2015 unless money market rates rise and the euro strengthens.

 

 

Italy, the euro zone’s third largest economy, showed a 2.1 percent month-on-month decline, the biggest drop from among all euro zone members.

 

In Germany, Europe’s largest economy, consumer prices fell by 0.7 percent on the month, keeping the annual inflation rate steady at 1.2 percent, with both figures coming below expectations.

And now back to Mario Draghi who which struggles to find new and improved ways of making sure European purchasing power continues to decline in light with the canons of Keynesian fundamentalism.

Source: Eurostat


    



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US Services PMI Slumps To Weakest In 4 Months (Ignores Manufacturing Renaissance)

Much as the 3rd grade Markit US Manufacturing PMI ‘beat’ was blamed for the furious rally last Thursday in stocks, it appears bad news in the form of today’s 3rd grade Markit Services PMI ‘miss’ is (rightly) completely ignored by the market. While the Services segment of the economy is vastly larger and more important for ‘guessers’, it seems USDJPY would not provide the juice this morning as this is the weakest services performance in 4 months. Of course, “weather” is blamed and optimism for the future remains but what was odd to us is that economists claim that in February manufacturing returned to normal… but clearly services did not.

 

The overall index plunged…

 

The employment sub-index slowed notably…

 

Commenting on the Services PMI data, Chris Williamson, Chief Economist at Markit said:

The unusually severe winter weather undoubtedly looks to have taken its toll on the economy in the first quarter. Over the first two months of the year, the manufacturing and services PMI surveys are signalling an annualised growth rate of just 1.6%, which represents a halving of growth compared to the 3.2% pace seen in the fourth quarter.

 

Payroll growth in the vast services economy also weakened alongside the disruptions to business activity, hitting the weakest for almost a year. However, companies clearly remained in expansion mode, with just over half of all firms expecting activity to rise over the coming year against just 3% expecting a decline.

But this is what he said about the US Manufacturing data just last Thursday which printed so positively…

The flash manufacturing PMI provides the first indications that production has rebounded from the weather-related slowdown seen in January. Having slumped to a three-month low in January the PMI surged to its highest for almost four years in February, as companies reported business returning to normal after freezing temperatures and snow disrupted operations and supply chains.

so in February, Manufacturing returned to normal (not affected by weather?), but services not so much…

Credibility?


    



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