The quote of the day goes to David Stockman. In a Bloomberg video, Stockman claims (and I agree) "Bubbles Ben to be Replaced by Calamity Janet".
They are stumbling into the endgame of this whole misbegotten spree of QE, ZIRP, and massive manipulation of financial markets.
We are going to basically replace bubbles Ben with calamity Janet.
She has no clue how to wean wall street from the pathetic addiction to this massive stimulus, easy money that has been going on for the entire century.
I backed that up because she has spent her whole life as a monetary bureaucrat in the Fed system, and has no clue what honest capital and genuine free markets are about.
[She] believes the entire system has to be run by a monetary politburo, turning all the dials and short-term interest rates and yield curves and the entire financial system.
She is part of group-think, part of the Keynesian consensus that 12 people are running at $16 trillion economy.
They are delusional.
Link if video does not play: Yellen Has No Clue How To Run the Fed
David Stockman was Ronald Reagan's Budget director.
Stockman is also the author of The Great Deformation: The Corruption of Capitalism in America and the #1 New York Times bestseller The Triumph of Politics: Why the Reagan Revolution Failed.
For more on Stockman, please see ...
End of U.S. Imperium—Finally!?
Heart of the War-Mongering Hypocrisy
Stockman nails the heart of US war-mongering hypocrisy with this question [on Syria]:
"After having rained napalm, white phosphorous, bunker busters, drone missiles, and the most violent machinery of conventional warfare ever assembled upon millions of innocent Vietnamese, Cambodians, Serbs, Somalis, Iraqis, Afghans, Pakistanis, Yemeni, Libyans, and countless more, Washington now presupposes to be in the moral-sanctions business?"
There is much more in the article. Please take a look.
Mike "Mish" Shedlock
I spoke a little bit on the show today about the failure of the Federal Reserve to actually do the thing that it was originally formed to do. Reserve banks are typically formed in order to provide a reserve of currency for member banks against panics during uncertain economic times.
In addition our reserve banks in the Western world picked up the additional task of smoothing out the business cycle, checking inflation, and providing for full employment.
There was an astonishing chart, however on, CNBC that should have us re-thinking what the Federal Reserve actually does.
The people at CNBC- and the technical analyst they had on- were talking about this as the end to 32 year long bull market in bonds. It just shows you that sometimes you can't see the forest for the trees.
Because if you use interest rates as a proxy for the business cycle you can see that we substituted the normal business cycle for a business super cycle. If you look at the gigantic V pattern on the right and of the chart from approximately 1946 to the present day, you'll see you a period of rising interest rates unlike any we've ever seen in our history. Then of course from 1981 to the present day we've seen a period of falling interest rates unlike anything else we seen in our history.
What it looks like it's happened here is that we've concentrated a number of many business cycles into one gigantic business cycle. While it appears that the Federal Reserve's activities on a daily basis have some positive effect on the business cycle, the actuality is that it's really having a negative effect on the business cycle.
You need only arrange the cycle to look at periods of time longer than 5, 10 and 20 years.
That's because the chart shows that there's more interest rate of volatility in a business cycle then there was in the past. And that's the exact opposite of what proponents would expect the Federal Reserve Bank to do when it comes to monetary policy.
I'm guessing that if you look at inflation that you'd see more volatility in the inflation numbers as well.
Ps. Hope you don't own bonds.
On September 16, Spain's economy minister, Luis de Guindos, said Spain on Track to Meet Budget.
Spain is on track to meet the 2013 budget deficit target it agreed on with its European Union partners and should emerge from recession before the end of the year, the economy minister said on Monday.
After the financial crisis burst Spain’s construction bubble in 2008, “no doubt 2014 will be the first year when Spain will have some recovery,” the minister said.
Given the depth of Spain’s recession, the European Commission agreed in May to give Madrid more time to reach its budgetary targets. Mr. de Guindos said he expected Spain’s deficit to fall to the new target of 6.5 percent of gross domestic product — rather than the initial target of 4.5 percent — from 7 percent last year.
Although officials from the International Monetary Fund and other creditors started another review of Spain’s banking progress on Monday, Mr. de Guindos suggested that “Spanish banks don’t have an important capital need,” implying that Spain would not require an extension of its bank bailout.
How many lies and distortions can one man present in a few short paragraphs?
If by some miracle Spain meets this year's target, it is only because the target changed 4 times in the past two years.
Yet, I still have to ask: how likely is that?
Spain Budget Deficit Soars
On September 17, Dow Jones Business News reported Spain Budget Deficit Soars
Spain's government said late Monday the country's budget deficit stood at 5.3% of gross domestic product in the first seven months of the year, an indication that the euro zone's fourth-largest economy may miss its deficit target for the fourth consecutive year.
Spain is looking to bring its budget deficit to 6.5% of GDP this year, down from 10.6% last year. The target, set by the European Union Commission, was already relaxed earlier this year from a previous 6.3% of GDP, but many economists say even the easier target may be hard to attain, as the economy was in recession at least until the second quarter, and only moderate economic growth is anticipated in the second half, which should keep tax receipts at low levels.
Just Monday, think tank Funcas said 19 economists surveyed were expecting, on average, that the economy will grow 0.1% in the third quarter from the second, and Spain will post a budget deficit of 6.7% of GDP for the full year. The economists surveyed are also expecting that Spain will miss next year's deficit target, of 5.5% of GDP.
This is important because a string of large deficits has driven Spain's government debt to the highest level in over a hundred years. Last week, the country's central bank said debt stood at 92.2% of GDP as of June--well above the year-end target of 91.4% of GDP.
This reinforces the view held by many private sector economists, and the International Monetary Fund, that Spain's government debt will rise significantly above 100% of GDP before it peaks, despite government assurances to the contrary.
Spain's Budget Deficit €54 Billion Through July
Via translation from Guru's Blog, please consider Spain's Budget Deficit Rises to €54 Billion Through July.
Let's try not to lose the debt and deficit data since our politicians have a special ability to change forecasts as if nothing had happened.
The deficit totaled €54.293 billion in the first seven months of the year, and representing 5.27% of GDP against a target of 6.5% set for the full year, according to the latest data released Monday by the Ministry Finance and Public Administration.
The odds of meeting the deficit target, barring last-minute window dressing is quite low.
Total government debt is €947.184 billion, a new record. The ratio of public debt to GDP level is 92.6%, according to the Bank of Spain.
Recall that in September 2012, the government forecast for year-end 2013 was debt-to-GDP ratio 90.5%. Unless miracles, we will be well above that figure.
By the way, the total debt of €87.660 billion in short-term securities matures within one year.
Is Spain going to meet even four-times reduced targets? I highly doubt it.
Mike "Mish" Shedlock
As the world endures yet again another mass hysteria pandering by the Obama administration, I'm tempted to feel sorry for liberals.
There's been lots of bad news for them.
Earlier today I wrote about the CBO forecast that says that healthcare and Social Security will bankrupt the country. Then there was news that another electric car company is filing for Chapter 11 bankruptcy protection.
Ecotality Inc <ECTY.O>, a maker of charging stations for electric cars that won a $99.8 million grant from the U.S. Department of Energy four years ago, has filed for bankruptcy protection and said it plans to auction its assets next month.
The San Francisco-based company is among a growing number of U.S. alternative-energy companies that have struggled or succumbed amid consumer resistance to the high cost and restricted driving range associated with electric vehicles.
This on top of news that the Obama administration will be selling its loans in Fisker Automotive, which secured $192 million from the administration under the green car boondoggle. Fisker has been in financial trouble since 2011 and has lost 75% of its workforce. It also hasn't manufactured any cars.
From the AP:
The Energy Department says it is selling a $192 million loan made to struggling electric car maker Fisker Automotive Inc.
The sale, to be held next month, is the latest setback for a half-billion-dollar loan guarantee offered to the California car maker in 2009 as part of the Obama administration's program to promote green energy.
The administration suspended the loan in 2011, after Fisker failed to meet a series of Energy Department benchmarks. Fisker has not produced a vehicle in more than a year and has laid off three-fourths of its workers.
Fisker had received $192 million before the loan was frozen. The DOE says it has recouped about $28 million since then; the auction will allow the government to collect as much of the remaining $164 million as possible.
My bet would be that they get less than $.10 on the dollar. I don't know what Fisker has left in assets but it's got to be very puny. My father once auctioned off the remnants of a nuclear power facility in Washington state that went into bankruptcy. There's probably as much demand today for defunct to solar equipment as there was for defunct nuclear equipment back in the 1970s.
To put an exclamation point on the day for liberals and their misguided energy policies, consultant IHS just came out with a report saying that light, tight oil outside of North America could reach recoverables of 300 billion barrels.
Take it from the top Reuters:
Commercially recoverable reserves of tight oil in the rest of the world could be double or more those of North America and the geology of the 23 best opportunities is better in some cases, according to a new study.
Okay so remind me again Obama: Why are we building electric cars now?
Oh that's right: It was for your donors.
A new government study says that federal health care and retirement programs threaten to overwhelm the federal budget and harm the economy in coming decades unless Washington finds the political will to restrain their inexorable growth. The long-term pressures promise to quickly reverse recent improvements in the deficit.Hey federales, welcome to the world the rest of us inhabit.
Tuesday's Congressional Budget Office report says that government spending on health care and Social Security would double relative to the size of the economy in 25 years and that spending on other programs like defense, transportation and education would decline to its smallest level by the same measure since the Great Depression.
Anyone smart enough to withdraw from the race to replace Ben Bernanke
as next Fed chairman must have something on the ball, at least
The Larry Summers' haters got their wish today as Summers withdrew his name from consideration.
Summers called president Obama, then issued a a formal withdrawal letter stating "I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration or, ultimately, the interests of the nation's ongoing economic recovery."
In response, the White House issued a statement "Earlier today, I spoke with Larry Summers and accepted his decision to withdraw his name from consideration for Chairman of the Federal Reserve. Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom, and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today. I will always be grateful to Larry for his tireless work and service on behalf of his country, and I look forward to continuing to seek his guidance and counsel in the future."
Barry Ritholtz at the Big Picture mocked the withdrawal with a spoof Translated into Truth: On Summers Withdrawing Name
“Earlier today, I spoke with Larry Summers and accepted his decision to withdraw his name from consideration for Chairman of the Federal Reserve.Will Yellen Be Any Better?
Larry was a critical contributor to the radical deregulation that was one of many causes of the worst economic crisis since the Great Depression. It was in no small part because of his lack of expertise, false wisdom, and inept leadership that the economy crashed and burned and even today is still failing to be to back to its full growth potential.
As Treasury Secretary, he helped to pass the Commodity Futures Modernization Act. This turned derivatives into a unique financial instrument with no oversight, reserve requirements, mandated disclosures, or listing minimums. The CFMA all but guaranteed that Derivatives would eventually implode. Summers further contributed to the crisis by Summers by overseeing the repeal of Glass Steagall. With this firebreak between Wall Street and Main Street effectively removed, the financial conflagration of 2008 spread from Wall Street to every corner of the economy.
Further, his terrible advice and lack of insight is in large part the reason we see so little progress being made today — the lack of economic growth, the concentrated bank power, the still dangerous financial system and of course, the sub par job creation.
I will always blame Larry for the way he damaged my presidency. To anyone who to seek his guidance and counsel in the future, please don’t make the same naive errors I did.
The Detractors WinYellen 100% Assured to Make a Mess
The detractors win both sides. Neither Yellen nor Summers is qualified. In fact, there is not a single person who would take the job that is qualified. There should not be a Fed at all.
The idea that a group of economic wonks can sit down and micromanage the economy to health is preposterous. Central bank clowns have proven time and time again they have no idea what the interest rate should be.
A massive bubble in dotcom stocks followed by a massive bubble in housing is proof enough. And this Fed on which Yellen sits has triggered asset bubbles in stocks and bonds and she cannot even see it.
Crisis Management Needed
Curiously, lots of analysts suggest we do not need Larry Summers because there is not going to be another crisis.
Rest assured there will be another crisis, and much sooner than most think. But that does not make Summers qualified. His role is to help create crises, not stop them.
Tweedle Dum vs. Tweedle Dee
The only candidate that makes sense is the candidate who will set a target date to end the Fed. Unfortunately, no such candidate is on the short list.
The choice is between Tweedle-Dee who rates to slosh money around even more than Bernanke in a futile effort to create jobs, and Tweedle-Dum who will do whatever Wall Street wants.
Practically speaking, is there really a difference?
Delta Air Lines Inc. (DAL, $23.15) rose 3 percent to $23.15 in Monday’s trading, as the Bloomberg U.S. Airlines Index rose 1.9 percent to the highest level since Aug. 2. Delta shares are being purchased by index funds since its stock was added to the S&P 500 index last week.
Delta’s earnings per share are expected to grow 48% in 2013. Earnings growth will then slow to approximately 6% and 12% in 2014 and ’15. The PE is 8.3, which seems low, but is fair in light of the rapidly slowing earnings growth. The company is focusing on debt reduction; and return of capital via increased dividends and a $500 million share repurchase program.
The share price is up 65% since we told Ransom Notes Radio listeners to buy at $14 earlier this year. The stock broke past short-term resistance at $22 last week, the day after we reiterated our buy recommendation on Delta. Delta Air Lines should appeal to growth, value, and momentum investors. We like both the fundamentals and the chart, and would continue to buy Delta.
Hussman's Open Letter to the Fed; The Problem with Bubbles; Textbook Pre-Crash Bubble; Reflections on Not Chasing Bubbles; Integrity vs. Respect | Mike Shedlock