Next Step In ‘Dollars’?

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

I continue to believe that the Swiss National Bank’s action on January 15 opened a “release valve” of sorts inside the world of the global “dollar.” Prior to that day, heightened bearishness all throughout dollar-denominated credit dominated trading. That included funding markets, especially eurodollars. The eurodollar curve itself ignored almost everything else, including the FOMC switch to “patience” in December, running quite dramatically and contrarily to any idea of an end to ZIRP.

ABOOK Feb 2015 Dollars Eurodollar1

The curve stabilized sometime between January 15 and February 2. Granted, there was a lot that happened in those few weeks so I would not hold it against anyone who viewed the ECB’s QE or even the lack of Greek finality with the new election results as being the primary factor, but I think the timing of a lot of this relates to that Swiss pressure in and out of the “dollar.” After February 2, the eurodollar curve started to act more aligned with mainstream outlook for monetary policy (or what the FOMC wants everyone to believe).

ABOOK Feb 2015 Dollars Eurodollar2

Obviously, there are daily variations in between these generalized moves, but for the most part between the beginning of February and last Friday the eurodollar curve was commonly moving upward. Trading this week so far has seen the largest and most sustained countertrend (once more alike the Dec-mid Jan move). That might suggest an end to the “reprieve” that was offered at least starting with the SNB’s peg removal on January 15. Continue reading

Proof that Market Valuations Have a Negative Correlation to Expected Future Cash Flows… Welcome to Wonderland

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

Janet Yellen once again repeats that the economy is “looking stronger” although still it has yet to manifest into actual strength.  In fact, it is still so weak that the Fed cannot even suggest that rates will raise anytime over the next several FOMC meetings.  In short, the economy is still very sick.  But so let’s break down Janet’s point of view on the economy and respective policy decisions.

  • No rate increase in the foreseeable future.
  • Economy is looking stronger but fails to have any real strength or even signs of strength to predict when a rate increase may be forthcoming.
  • Agrees the U3 figure might be misleading and that U6 tells a more accurate story
  • Believes Congress has a major problem with the Federal Gov forecasted cash flows
  • Strongly opposes an audit of the Fed
  • Believes housing, albeit more likely via multi family construction, could improve
  • Wages and incomes are still weak

So essentially nothing has changed in 6 years.  In fact, absolutely nothing has changed in 6 years.  So then there has been no material improvement in the economy whatsoever.  Material meaning enough to even forecast when a rate hike may come.

The Pundits (Liesman) are suggesting Janet feels the economy is strong but that the “data just isn’t cooperating”.  What does that even mean??  “I’m a billionaire although my bank account just isn’t cooperating”.  Umm Steve Liesman, you are by all accounts and absolute ignoramus.  Like a monkey Mr. Liesman, you’re a mix of amusing for a few minutes and cute in an ugly way.  And according to Jim Lebanthal, of Lebanthal Asset Mgmt, “there was no bad news”.  Now remember, by ‘bad’ he means ‘good’.  Because bad means more QE, which has actually never stopped and you can see this in the duration of Fed assets, which Janet touched upon.  But again, the point being the economy is not strong enough to support even a forecast of a rate hike.  That means the economy is weak.  I don’t know how that gets confusing.

And so if the economy is weak, then the economy must have either no or a negative relationship to equity valuations.  Market is at all time highs and pushing higher on bad is good.  So in fact, there does seem to be a negative correlation between the economy and market valuations.  Interesting if not mind blowing.  The market has, after 6 years of the most extreme monetary easing in the history of the world,  traded to all time highs on an economy that is too weak to warrant even an indication that rates could move above 0%.  There is no other way to see this.  I’m sorry but there isn’t.  Seriously have a look!

Screen Shot 2015-02-24 at 11.49.18 AM

That giant X constitutes as a pretty solid negative correlation between market valuations and American’s ability to support future cash flows.  This is a very simple chart.  However, the implication of this chart is actually incredibly important.  What it suggests is that market participants have seen the detriment of the American working class as a financial market driver.  That is, the less able American consumers are to drive future corporate cash flows the higher the market valuations grow.  How could this ever be you ask given market valuations are fundamentally based on expected future cash flows??  Well, as I’ve discussed many times before, the Fed and only the Fed.

Continue reading

Kick-The-Can Has Morphed Into A Blatant Farce


Kick-the-can has morphed into a blatant farce. Everywhere in the world central banks and financial officialdom are engaging in desperate, juvenile maneuvers to buy time—–amounting to hardly a few weeks at a go. Never before has the debt-saturated, speculation-ridden global casino rested upon such a precarious foundation.

This week, for instance, Janet Yellen will again waste two days of Congressional hearings in forked-tongue equivocations about an absolutely stupid issue. Namely, the exact date when money market interest rates will be permitted to blip upward from the zero bound by even 25 basis points.

But this “lift-off” drama is flat-out surreal. How could it possibly matter whether ZIRP will have been in place by 80 months or 83 months from its inception point way back in December 2008? There is not a single household or business on main street America which will change its behavior in the slightest during the next year regardless of whether the federal funds rate is 5 bps, 30 bps or 130 bps.

The whole Kabuki dance in the Eccles Building is about hand signals to Wall Street carry traders; its a reflection of the desperate fear of our monetary politburo that having inflated for the third time this century the mother of all financial bubbles, they must now keep it going literally one meeting at a time—lest it splatter again and destroy the illusion that an egregious spree of money printing has saved the main street economy.

Likewise, it now transpires that the bruising political war of words between the Germans and the “radical” Greek government has been suspended for another few weeks. And the reason is a pathetic fear that unites the parties despite their irreconcilable substantive policy differences. Namely, that the markets will crater upon even a hint that a real solution is on the table, and that the way to keep the beast at bay is to cover their eyes, kick-the-can and hope something turns up to avert the next crisis a few weeks down the road.

Still, this is getting beyond juvenile. If there were any adults in the room they would focus on quickly shaping a workable Greek default and exist—-not on perpetuating the lie that Greece can ever recover from its debt servitude to the EU superstate and IMF.

Ironically, the fire breathing leftists who have taken over in Athens have compliantly strapped on the poodle collar left behind by the Samaras government. It seems that their game-theory spouting Keynesian financial spokesman, Yanis Varoufakis, also fears a thundering upset in the casino. So the Syriza government stumbles forward——now visibly toting the massive debt imposed on them by the Eurozone and IMF in order to bailout the German, French and Italian banks.

Indeed, in a new variation of the Stockholm syndrome, Syriza has not only embraced the views of its debtor’s prison jailors, but has actually invited them to secretly author their own attestations of subordination.  As Zero Hedge noted about today’s shocking revelations regarding the so-called Varoufakis letter to the Troika, aka “institutions”:

As it turns out, the reason why not only the Troika received an agreed to version of the Greek reform proposals “before midnight on Monday”, but rushed these through with a favorable agreement today, is that, drumroll, the European Commission drafted the entire letter! 

And, no, this isn’t tin foil hat stuff. Here’s the smoking email which reveals that the “first list of comprehensive reform measures” submitted by Greece, which is actually a six-page air ball completely devoid of numbers and specifics, was actually written by one Declan Costello, an apparatchik at the European Commission.

This is all truly pathetic, but it should be a reminder that there is no escaping the global regime of central bank financial repression and state manipulation of debt saturated economies and gambling-infested financial markets.  It took Syriza all of four weeks to hoist the white flag. As an astute Greek worker commented,

 “We went through two months of agony, emptied the banks, to realize we are still a debt colony,” 54-year-old electrician Dimitris Kanakis told Reuters. “The paymasters call the shots.”

Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth


Russell Lee Washington DC, “Cafe on L Street.”  1938 
• Will Yellen Set The Dollar Free? (CNBC) 
• European Commission Backs Greek Reform Proposals (WSJ)
• Greek Plan to Tackle Economy Goes Before Finance Chiefs (Bloomberg) 
• Greece ‘Delays Reform Plan Deadline’ (BBC) 
• ‘It’s Treason!’ Greek Anger At Government U-Turn (CNBC) 
• Interventionism Kills: Post-Coup Ukraine One Year Later (Ron Paul) 
• Why the World Is So Bad at Tracking Dirty Money (Bloomberg) 
• Medicines To Cost Taxpayers Millions More In Secret TTIP Trade Deal (Guardian) 
• Apple Now Twice As Big As World’s 2nd-Largest Company, ExxonMobil (Telegraph) 
• The Performance of Many Hedge Funds Just Comes Down to Owning Apple (Bloomberg) 
• How Goes the War? (Jim Kunstler) 
• Putin Says War With Ukraine ‘Unlikely’ (BBC) 
• Tales From an Oil-Sands Slide: Angst Amid Bravado in Alberta (Bloomberg) 
• European Shale Dream Is Dying Before It Started (CNBC)
• Work Of Prominent Climate Change Denier Funded By Energy Industry (Guardian) 
• UK Will Need To Import Over Half Of Its Food Within A Generation (Guardian) 

The Magical Debt Disappearance

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Corporate Leverage Gets Corzined …

A friend pointed us to a post by Macroman that discusses revisions to the flow of funds data published by the Fed that have apparently already been made a few months ago. Nothing about them seems remarkable, until one gets to corporate non-financial debt. Apparently, all that debt that has been taken on by companies in recent years has suddenly disappeared, as if by magic.


Photo credit: ThinkStock


We admittedly don’t know what motivated the revisions and why the data now show such a huge discrepancy to what they showed before, but the change is truly remarkable. Macroman shows a “before” and “after” chart combination of US non-financial corporate debt as a percentage of GDP that is really quite stunning. It looks like this:

nf corp liabilities


The new and improved corporate debt picture, following some “benchmark revision” data fiddling, compared to the previous, slightly more concerning debt picture – by Macroman, click to enlarge.

The Greenspan and Bernanke credit bubbles apparently never happened; it was all just a bad dream. From eyeballing the difference between the revised and the original data, some 14.5% of GDP, or $2.568 trillion in corporate debt have evaporated into thin air. They existed one day, and abracadabra, ceased to exist the next. Pure magic.

As Macroman comments:

“[…] it’s hard to know what to make of this, as the magnitude of the revision renders the data literally unbelievable. As the saying goes, there’s lies, damned lies, and statistics…

Continue reading

The Day the ATMs Run Out …

Submitted by William Bonner, Chairman – Bonner & Partners

Receding Tide

Please remember this warning when you go to the ATM to get cash… and there is none! While we were thinking about what was really going on with today’s strange new money system, a startling thought occurred to us.

Our financial system could take a surprising and catastrophic twist that almost nobody imagines, let alone anticipates. Do you remember when a lethal tsunami hit the beaches of Southeast Asia, killing thousands of people and causing billions of dollars of damage?

Well, just before the 80-foot wall of water slammed into the coast an odd thing happened: The water disappeared. The tide went out farther than anyone had ever seen before. Local fishermen headed for high ground immediately. They knew what it meant. But the tourists went out onto the beach looking for shells!



The same thing could happen to the money supply: Cash could evaporate suddenly and disastrously – just before we drown in it.

Photo via


Credit Money

Here’s how … and why:

If you look at M2 money supply – which measures coins and notes in circulation as well as bank deposits and money market accounts – America’s money stock amounted to $11.7 trillion as of last month. But there was just $1.3 trillion of physical currency in circulation – about only half of which is in the US. (Nobody knows for sure.)

What we use as money today is mostly credit. It exists as zeros and ones in electronic bank accounts. We never see it. Touch it. Feel it. Count it out. Or lose it behind seat cushions. Banks profit – handsomely – by creating this credit. And as long as banks have sufficient capital, they are happy to create as much credit as we are willing to pay for.

After all, it costs the banks almost nothing to create new credit. That’s why we have so much of it. A monetary system like this has never before existed. And this one has existed only during a time when credit was undergoing an epic expansion.

So our monetary system has never been thoroughly tested. How will it hold up in a deep or prolonged credit contraction? Can it survive an extended bear market in bonds or stocks? What would happen if consumer prices were out of control?


Currency in circulationCurrency in circulation: inflating at warp speed since 2008, via Saint Louis Federal Reserve Research – click to enlarge.


Continue reading