The US Federal Reserve risks causing a 1937-style stock market slump when it finally moves to raise interest rates, one of the world’s most powerful hedge fund managers has warned.
Ray Dalio, founder of the $165bn hedge fund group Bridgewater Associates, said in a note to clients and followers that he was avoiding large bets on the financial markets for fear that the Fed’s expected change of policy could have unintended consequences.
The note emerged as Christine Lagarde, head of the International Monetary Fund, warned on Tuesday that US rate increases could trigger instability in emerging markets, leading to a re-run of the Fed-induced “taper tantrum” of 2013.
The comments frame a high-stakes Fed meeting at which the central bank’s policy makers are expected to open the door to the first US rate rises in nearly a decade.>> Read More
Interview with Mario Draghi, President of the ECB, conducted by Giovanni di Lorenzo on 17 December 2014, published on 15 January 2015
You have a clear-cut reputation. Luca di Montezemolo, the former CEO of FIAT and Ferrari who attended the same school as you in Rome, said that you were always the most competent and serious one – Mario, the prize pupil.
He exaggerates. I’ve never regarded myself as the best. Most certainly not. I went to school because I was sent there.
But you may have felt the burden of responsibility more than others: you lost your father at the age of fifteen, and your mother passed away only a little later. You were suddenly a very young head of family.
I can remember when, as a 16-year-old, I came back from holidays at the sea with a friend. He went home and could do what he liked. I, by contrast, was confronted with a stack of letters that I had to deal with, bills that had to be paid. But young people do not reflect on what they have to deal with and how they should do so. They simply get on with it. That is important, that is what prevents them from becoming depressed even in adverse circumstances.
They perhaps also understand at an early stage what they must do to survive, for example, work hard.
Belief in hard work was something that my parents taught us. My father used to say that work is the most important element in any person’s life.
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises
The surreal nature of this world as we enter 2015 feels like being trapped in a Fellini movie. The .1% party like it’s 1999, central bankers not only don’t take away the punch bowl – they spike it with 200% grain alcohol, the purveyors of propaganda in the mainstream media encourage the party to reach Caligula orgy levels, the captured political class and their government apparatchiks propagate manipulated and massaged economic data to convince the masses their standard of living isn’t really deteriorating, and the entire façade is supposedly validated by all-time highs in the stock market. It’s nothing but mass delusion perpetuated by the issuance of prodigious amounts of debt by central bankers around the globe. And nowhere has the obliteration of a currency through money printing been more flagrant than in the land of the setting sun – Japan. The leaders of this former economic juggernaut have chosen to commit hari-kari on behalf of the Japanese people, while enriching the elite, insiders, bankers, and their global banking co-conspirators.>> Read More
Moments ago, after Yellen earlier explained that the Fed may hike rates at any moment, and certainly not only during press-briefing days, she also explicitly, and very unexpectedly, said that the Fed will likely not hike for a “couple” of meetings. And when she was subsequently asked to explain what “a couple” means, she further explained that it means “two.” As a reminder, this comes from a Fed chairwoman who had a trial by fire when, fresh after replacing Bernanke, she locked herself in the “6 month” calendar interval. In other words, she knows not to give the market a timing bogey. And still she did so. Which, quite explicitly, means that anything starting with the 3rd meeting, currently scheduled for April 28-29, 2015, and onward is very fair game and the market will be foolish to expect the Fed not to follow through with this warning, a Fed which is already dangerously close to losing all credibility it has.
And another way of stating it comes from Peter Tchir of Brean Capital. His take:
Looks like the April/May meeting could be the date. 3 reasons:
1) A couple means 2 – just stated 2) then could host a conference call on a non press conference meeting 3) she said, i keep telling the market what we are going to do, i wash my hands of the market if they won’t listen
She also does not get about oil as transitory. She is remaining very consistent. Core is what matters.
Former Federal Reserve chairman Ben Bernanke has revealed that he recently tried to remortgage his house, but was turned down.
Mr Bernanke, who was paid almost $200,000 a year leading the US central bank before stepping down in January, also suggested that banks are tightening lending too much following tough regulation that was brought in following the financial crisis.
Speaking at a conference in Chicago on Thursday, Mr Bernanke told Mark Zandi of Moody’s Analytics: “Just between the two of us, I recently tried to refinance my mortgage and I was unsuccessful in doing so.”
When the audience laughed, he added: “I’m not making that up.”
Investors are not betting Janet Yellen will follow a fellow central banker’s lead and declare interest rate rises “could happen sooner than markets currently expect”.
Suck hawkish cries can be left to Mark Carney. The Federal Reserve chairman, by contrast, will likely use her post-policy meeting press conference this week to reiterate US rate rises are still a way off. But are they?
What if we were to look not at what Ms Yellen says, but at what Ms Yellen has done? We might then conclude that the Fed’s first rate hikes could indeed happen sooner than expected.
This is the intriguing premise of a tool being used internally at BlackRock, the world’s largest fund manager, which it has nicknamed “the Yellen index”. It is a measure that suggests, on the economic indicators favoured by Ms Yellen, monetary tightening is already overdue and the Fed falls further behind the curve with every passing day.>> Read More
Traders may have made up to $256 million in illicit profit by getting early word of the Federal Reserve’s decisions to loosen or tighten the money supply, according to researchers at Singapore Management University.
The researchers cited “robust evidence” of abnormally large price movements and imbalances in buy and sell orders from September 1997 through June 2013, when Ben Bernanke was chairman of the Fed.
The price movements were “statistically significant and in the direction of the subsequent policy surprise,” researchers Gennaro Bernile, Jianfeng Hu and Yuehua Tang said in a paper.
Business Week first reported the findings Tuesday.
The researchers said the moves occurred before and during the time that reporters at the Treasury Department were given advance notice of the Federal Open Market Committee statements in periods known as lockups.
The committee’s closely watched policy decisions include setting short-term interest rates and a range of other actions to stimulate or rein in the economy.>> Read More
He may no longer be the US Federal Reserve chairman, but when Ben Bernanke speaks, the world still listens, carefully. On Tuesday evening, an auditorium packed with India’s famous names listened with rapt attention when Bernanke took centre stage at Mumbai’s Jamshed Bhaba Theatre and spoke on a broad range of issues, including the takeaways from the tumultuous economic events on his watch from 2006 till early this year.
Independence of the central bank is something clearly close to his heart. Asked for his advice to the next government about its relations with the Reserve Bank of India, Bernanke said he didn’t know much about India’s political dynamics, but what was critical for any country was that its central bank’s independence be guarded. He was speaking at the second Kotak Presidium, a forum for global leaders to share ideas that shape the future.
“You have an excellent central bank governor in Raghuram Rajan, who has been my long-time colleague as an academician in the US. As the Indian economy matures, an independent and responsible central bank is really central to its success,” he said. Bernanke, who has worked with both the Republican and Democratic governments as Fed chairman, said he was lucky as both President George W Bush and Barack Obama were strong defenders of the central bank’s autonomy.>> Read More
Former Federal Reserve Chairman Bernanke was in the audience of a conference at Brookings Institution. The Governor of India’s central bank Rajan critiqued the Federal Reserve’s unconventional policies and the spillover effects. He essentially laid India’s financial problems at the feet of the Federal Reserve, quantitative easing, tapering and forward guidance.
Ironically, in order to help minimize the repeat of past Fed tightening cycles, the Federal Reserve gave the world a long advanced warning of the pending shift in policy. Moreover, rather than deliver it in September 2013, which many (though not us) expected, the Fed waited an extra three months. Bernanke responded to the criticism, in a way that perhaps only he can.
With Bernanke gone, the remaining Fed members knowing full well they will be crucified, metaphorically of course (if not literally) when it all inevitably comes crashing down, are finally at liberty with their words… and the truth is bleeding out courtesy of the president of the Dallas Fed, via Bloomberg.
FISHER SAYS QE WAS A MASSIVE GIFT INTENDED TO BOOST WEALTH
Which incidentally coincides with Bernanke’s heartfelt “admission” that “my natural inclinations, even if it weren’t for the legal mandate, would be to try to help the average person.“As long as helped to boost the wealth of the non-average billionaire., all is forgiven. “The result was there are still many people after the crisis who still feel that it was unfair that some companies got helped and small banks and small business and average families didn’t get direct help,” Bernanke said. “It’s a hard perception to break.” The truth, as again revealed by Fisher, will not help with breaking that perception.
We wonder how President Obama, that crusader for fairness, equality and all time Russell 200,000 highs, will feel about that? In the meantime, just like the Herp, QE is the gift that keeps on giving.. and giving… and giving… to the 0.001%.