ND MAR 20 19 SIT
EC y POL
ND denounce
Global-neoliberal debacle y propone State-Social + Capit-compet in Eco
ZERO
HEDGE ECONOMICS
Neoliberal
globalization is over. Financiers know it, they documented with graphics
Are
you not entertained: Enjoy this US ECON SITUATION TODAY
We don’t need
WW3 to take Trump out.. We need a Nation
in streets demand resigna IF Trump doesn’t
resign & use Fascist violence: REV is the
solution. No more fake Dem Que se vayan todos! The financial parasites in Wall St must be
jailed & confiscated.
Why he
should leave: Autorit-fascism, Inefic & lies, War crimes & crimes agst
humanity
This is
what it looks like when doves cry...Watch later https://youtu.be/UG3VcCAlUgE
The
Fed folded entirely to the market today, slashing its rate trajectory
dramatically lower nearer the market's implied dovishness...
See Chart:
Implied
Fed Funds Target Rate
Bloomberg's
Ye Xie noted that if we take the dot plot at face value (which, mind you, may
not be a wise thing to do), then it seems the Fed will hold rates steady this
year before raising one more time in 2020. If that pans out, it would be
unprecedented. Since the 1970s, there have been three times
when the Fed held rates steady for more than a year after raising them in the
previous three months: 2006, 2000 and 1997. Invariably, the next move was a rate cut.
However, the market has shifted even more dovish, pricing in almost an
entire rate-cut in 2019 now...
See Chart:
Stocks
initially surged on the dovish surprise, dragging the Dow green, but as the last
hour went on, traders wondered just how much fear The Fed must be feeling about
growth to take such a machete to its rate forecasts and started to sell stocks...
See Chart:
Only
Nasdaq managed to cling to gains on the day...
See Chart:
TICK gives
us a sense of the flow as programs charged in long as The Fed statement hit but
sellers dominated the last hour... (NOTE the drop
earlier in the day when Trump commented on China tariffs)
See Chart:
Regional
Banks were battered...
S&P
Buyback-related stocks pumped-and-dumped after The Fed...
The
Dollar Index crashed to its lowest since early Feb - perfectly back to the Jan
FOMC meeting levels...
See Chart:
And
finally, one wonders at the irony of a massively dovish Fed's action driving
the yield curve to collapse sparking the highest recession risk of the cycle...
See Chart:
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Despite doubling down on
dovish, things today did not pan out quite as Powell had expected...
Looking
ahead, while the overall Fed portfolio will be flat after September, the Fed should be buying roughly $45bn per
quarter to offset the liquidation of MBS. Annualized,
the Fed should be a net buyer of about $180bn per year of Treasury securities.
If the Treasury is financing $1.0tn deficits annually,
purchases by the Fed become a meaningful source of funding, which according to
Socgen "will enhance its ability to offer fiscal
stimulus when or if a slowdown takes place."
See Chart:
FED
expected to be net buyer of Treasuries by late 2019
Does the Fed know something Others don't?
The policy
prescription is therefore for the Fed to hold policy and be "patient"
for inflation to move up. This also means that the only gating factor for a
reversal to a more hawkish Fed will be a jump in inflation, something Morgan
Stanley expects
will take place in late 2019 and early 2020, at
which point the Fed will resume hiking an additional three times in 2020.
See Chart:
Exhibit
1: Outlook of GDP Growth
Exhibit
2: Outlook for Inflation: 2019 and 2020
The Fed
also tweaked its projection forecasts, looking for weaker growth this year and
next and a slightly higher unemployment rate. The forecast for inflation did
not change as the Fed looks for core PCE to hold at 2.0% through the forecast
horizon. This shows that
the Fed believes that the Phillips Curve is flat, penciling in no inflation
response despite the unemployment rate persistently sub-NAIRU and easy monetary
policy.
See Chart:
As Powell
said, the key tools for managing financial stability
are "regulatory" rather than rates. How regulation will bail
out the financial system once this current bubble pops, remains unclear.
Market implications
Since this
was an unexpectedly dovish statement, the reaction was abrupt and violent: the
rates market viewed Fed communications, especially through the SEP fed funds
projections, as signaling a very dovish stance by the FOMC. This was manifest
in the rates market rallying sharply following the release of the SEP led by
the front end given the expectation the Fed will not hike rates any time in the
near future. In fact, the yield curve is now
inverted between the effective Fed Funds rate
(2.40%) all the way to the 5 Year.
See Chart:
Effective
FED Funds Rate
What is
surprising, is that despite the Fed's express desire to increase future growth
and potentially allow the economy/inflation to run hot, the 10Y yield also
tumbled, as the bond
market is now growing concerned the Fed committed another policy error, with a
curve inversion once again imminent.
Finally,
and perhaps related to this, was the surprise reaction in stocks: after
initially spiking higher, as risks always does when the Fed surprises dovishly,
the market then sold off, and while the drop wasn't substantial, the fact that
the day's biggest sell program hit at precisely 3:30pm and pulled stocks
sharply lower, indicates that at least one player decided that - for one reason
or another - the top was in. Whether that has to do with the recurrent concern
of "what does the Fed know about the economy if it is doubling down on
dovish", and is signaling
an imminent recession, or because of growing conviction that the Fed is now powerless and has committed a policy error
will be revealed in due time.
See Chart:
Emini
However,
the most disturbing feature of today's late-day selloff, is that after the aggressive seller emerged, not only major investor
had the conviction to reverse the late-day drop in what appears to have been a
major hit to the "dovish Fed is bullish" narrative.
If today's
late day swing lower is not reversed tomorrow now that traders have had time to
digest the FOMC decision, it will be a concerning indication that all the market upside that can be extracted from monetary
policy has now been priced in, and would suggest that another retest of the
December lows would be required to force Powell to commence rate cuts or even
launch QE4.
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Huge dovish surprise as Fed
folds - seesno rate-hikes in 2019,
one rate-hike in 2020, and will end
balance sheet normalization in September.
Summary:
- Fed leaves rates unchanged, says economic growth has slowed form Q4, even as labor market still strong, job gains solid
- As expected, the Fed will taper its balance-sheet rolloff, sees it ending by the of September
- Fed signals no rate hike this year with one increase in 2020
- 11 officials for zero 2019 hikes, four for one hike
- Fed says median funds rate 2.4% in 2019, 2.6% in 2020-2021
- But, the median estimate for the neutral funds rate remains unchanged at 2.8%
The Fed has some 'splaining to do. The market is pricing in 16bps of rate-cuts in 2019 while
they are forecasting - at last call - 2 rate-hikes...
See Chart:
Implied
Fed Funds Target rate
One of the big issues the Fed's wrestling with is
what constitutes neutral, and while there's a
lot of false precision in the r* framework, by one popular measure the funds
rate is already bang on neutral. Bloomberg notes that if we compare the real
policy rate (deflated by the core PCE price index) with the Laubach-Williams
estimate of the real neutral rate, we find a perfect match.
See
Chart:
AS Neutral
as it Gets?
And
furthermore, 10Y yields have been glued to the Fed's long-term dot-plot rate
forecast since the start of 2018...
See Chart:
FED
Long Term Dot vs. 10Y UST Yield
Expectations
are that the FOMC will maintain its more dovish
"patient" stance and shift from two hikes to one (zero would
likely scare the markets) in 2019. Currently, there is
a 73% chance that the Fed doesn't
hike in 2019. This will be evident in the
SEP with a lowered inflation and
growth outlook. As
of December, the Fed was anticipating 2.3% growth in 2019 and 2.0% in 2020.
“The focus is
going to be entirely on their dot plot and whether or not the Fed
has taken any chance of a rate hike out of their own internal forecast,” said Lara
Rhame, chief U.S. economist at FS Investments, which manages $24 billion.
“It’s going to be interesting to see if any of
the Fed has priced in a rate cut, which I doubt they have, and then how many are thinking they may still
need to adjust rates higher once or twice more throughout the year -- because I
think it’s been a little premature for the market to
discount any rate hike.”
And, along with when to stop shrinking
its asset portfolio, the Fed faces another decision - what mix of Treasurys it
holds, with implications for the economy.
Of course,
The Fed's biggest issue is being perceived as dovish enough - the rates market
is priced for 16bps of cuts... and how dovish is too dovish (what does Powell know that we don't?) and too hawkish risks a violent repricing in bonds and stocks which are expecting the
Fed to be patient, data-dependent and on hold.
See Chart:
So what did
the Fed do today to bridge the gap between their hawkish, optimistic forecasts
for growth and their pessimistic narrative for rate trajectories. Well, Jay Powell went full dovetard:
- *FED LEAVES RATES UNCHANGED, SAYS ECONOMIC GROWTH HAS SLOWED
- *FED SIGNALS NO RATE HIKE THIS YEAR WITH ONE INCREASE IN 2020
As
expected, Fed officials reaffirmed their commitment to being “patient” on
future rate moves, while downgrading their assessment of the U.S. economy. They left the fed funds rate target at 2.25%-2.50% and kept
much of the statement relatively unchanged since January.
- ECONOMY: Policy makers now say economic activity has slowed from a solid rate in 4Q, say labor market remains strong; job gains still seen as strong on average amid low unemployment rate. Recent indicators point to "slower growth of household spending and business fixed investment in 1Q."
- GUIDANCE: Federal Open Market Committee still sees a sustained economic expansion, strong labor market conditions, and inflation near 2% objective as the most likely outcomes; will be “patient” in determining what rate moves may be appropriate, given global economic and financial developments and “muted” inflation pressures
- RISKS: Fed makes no reference to balance of risks
- INFLATION: Now says overall inflation on a 12-month basis has declined, largely due to lower energy prices, while core gauge remains close to 2 percent; now says market-based measures of inflation compensation have remained low in recent months; continues to see survey-based measures of longer-term inflation expectations as little changed
- VOTE: The decision was unanimous
On
the balance sheet, the Fed provided more specificity and detail than most had
expected. The Fed announced that they would:
- End the securities portfolio unwind at end Sept '19.
- Taper the Treasury unwind by reducing the cap on monthly redemptions from the current level of $30 billion to $15 billion beginning in May '19.
- Reinvest maturing MBS across the UST curve, not towards the front end as some expected.
- Cap MBS redemptions at $20 bn/month, which would limit impact of a large pre-pay wave.
- Prepayments above this amount would be reinvested into MBS.
- Hold their aggregate securities holdings constant for a time and allow for a continued shrinking of reserves via non-reserve liability growth (i.e. currency in circulation).
Looking at
the dots, the median assessment of appropriate pace of policy was slashed as the Fed's "dots" lose all credibility:
- 2019 2.375% (range 2.375% to 2.875%); prior 2.875%
- 2020 2.625% (range 2.375% to 3.375%); prior 3.125%
- 2021 2.625% (range 2.375% to 3.625%); prior 3.125%
- Longer Run 2.75% (range 2.500% to 3.500%); prior 2.75%
Compare
December vs March:
See
Charts:
December
dots vs.
March dots
And
simplified:
See Chart:
Implied Fed Funds Target Rate
The Fed has
entirely folded to the market (but the market is still
pricing more dovishness)...
See Chart:
Implied
FED Funds Target Rate
As
expected, to justify its Dovishness, the Fed cut its economic outlook, now
seeing 2.1% GDP in 2019 (from 2.3% in Dec) and 1.9% in 2020 (from 2.0%). The
unemploymen rate is projected to rise modestly to 3.8% by the end of 2020, from
2.6% in 2019, while inflation remains subdued, rising from 1.8% to 2.0% in 2020
vs 1.9% and 2.1% in the previous forecast. Finally, as noted above, the
median Fed Funds rate was slashed from 2.9% in 2019 to 2.4% and from 3.1% in
2020 to 2.6%
See Graph
GDP,
Unemployment & Inflation
Additionally, The Fed plans to end balance sheet
normalization in September.
Read the Full Red line below:
…
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Very usefull
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US DOMESTIC POLITICS
Seudo democ
duopolico in US is obsolete; it’s full of frauds & corruption. Urge cambio
We talk about the 'Deep
State'...
===
“We’re on really risky ground when we’re
trying to place conditions on a federal election.”
====
The US is formally committed to dominating
the world by the year 2020...
“Full spectrum dominance” is not only a
danger to the world, it is a danger to US citizens who would also suffer the
consequences, if and when something goes wrong with their leaders’ complicated
space weapons.
See Chart:
….
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"Today we will launch a
criminal investigation about this and we will give legal assessment
of this information."
====
Governments
have lost control of the
narrative that they are in control of events... and they are scared to death...
====
US-WORLD ISSUES (Geo Econ, Geo Pol & global Wars)
Global
depression is on…China, RU, Iran search for State socialis+K-, D rest in limbo
WORLD
investors in big trouble..
For
investors, one of the most important pieces of information is understanding where we are in the economic
cycle as it offers a critical gauge in risk-taking...
====
Citibank plans to sell the gold held as a guarantee... and deposit the excess of roughly
$258 million in a bank account in
New York... out of reach of Maduro.
====
... the Trump administration’s coup-by-narrative has not gone as planned...
====
SPUTNIK
and RT SHOWS
GEO-POL n
GEO-ECO ..Focus on neoliberal expansion
via wars & danger of WW3
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NOTICIAS
IN SPANISH
Lat Am
search f alternatives to neo-fascist regimes & terrorist imperial chaos
REBELION
Banda d Trump vs el mundo: Rubio, Pompeo,
Bolton, Pen, Abrams
Ramón Pedregal Casa
Ramón Pedregal Casa
====
ALAI ORG
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COUNTER
PUNCH
Analysis on
US Politics & Geopolitics
Binoy
Kampmark Global Kids
Strike
T.J.
Coles Countdown
to “Full Spectrum Dominance”
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GLOBAL
RESEARCH
Geopolitics
& Econ-Pol crisis that leads to more business-wars from US-NATO allies
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DEMOCRACY
NOW
Amy
Goodman’ team
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PRESS
TV
Resume of
Global News described by Iranian observers..
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