The Mess That Greenspan Made - Part 19

Thursday Morning Links

Fed Signals Tightening, Loosely – Bloomberg
Ignore the ‘whiff of panic’ as US economy stalls – Telegraph
Shrugging Off Slow Growth, Fed Predicts a Rebound – NY Times
The economy’s biggest weakness is … winter? – Washington Post
Analysts Cut Q2 GDP Forecasts Even More After Ugly Report – Bloomberg
A Tale of Two Cities: How Baltimore Reached Its Boiling Point – Vice News
Protesters are right: Smashing police cars is a legitimate political strategy – Salon
Some Baltimore residents see rioting as a rational response to daily despair – Vox
Financial Pros Now Say Greece Is Headed for Euro Exit – Bloomberg
California’s drought and water crisis, explained – Vox
Lies, Damn Lies, and the British Election – Project Syndicate
The austerity delusion – Guardian

Stocks stabilize after global drop on weak US data – AP
Twitter is in trouble and its options are now bleak – Slate
The Dollar Is on Its Longest Losing Streak Since 2011 – Bloomberg
Here’s why oil is rallying to its highest level this year – MarketWatch
Longtime stock bull now concerned about earnings and rising rates – MarketWatch
Euro-Area Bonds Slump for Second Day, Extending $61 Billion Loss – Bloomberg
Gold steady on weaker dollar after cautious Fed statement – Reuters
Silver set for longest slump in 24 years – CPM – Mineweb
Gold price slides as Fed rate hike draws nearer –

Consumers Near Collapse? – Alhambra Partners
How Millennials Could Damage the U.S. Economy – Fiscal Times
Student-Loan Surge Undercuts Millennials’ Place in Economy – Bloomberg
Bank of Japan stands pat as inflation weakens – MarketWatch
Eurozone Consumer Prices Stopped Falling in April – NY Times
The Oil Slump is Emptying the Stores of Dubai – Bloomberg
How millennials and Depression-era generation are similar – S&P Housing Views
New York Construction Booms With Focus on Luxury Housing – Bloomberg
Why Ben Bernanke’s new PIMCO gig is so troubling – The Week
Fed Removes All Calendar References Statement – Confounded Interest
FOMC Snoozer – Fed Watch


Atlanta Fed’s GDPNow Nails Q1 GDP

A screenshot of first quarter U.S. economic growth was quickly grabbed from the Atlanta Fed’s GDPNow page as they will soon switch over to estimating economic activity for the second quarter, but they really did a bang-up job for the first three months of the year.

They’ve had the Q1 GDP growth rate at about 0.25 percent for some time now as analysts have repeatedly revised their forecasts lower.  The government said today that their first estimate of first quarter growth is 0.2 percent, far below analysts’ estimate of 1.0 percent.

Market reaction to this news along with whatever it is Federal Reserve officials have to say at the conclusion of their policy meeting today should be fun to watch, the operative question being whether “bad news is still good news” for stock prices.

Wednesday Morning Links

U.S. Sends Destroyer After Iran Detains Ship – NY Times
Fed could give clues on first rate hike today – USA Today
Draghi Needs Yellen Support as Investors Hoard Debt – Bloomberg
The Economic Devastation Fueling The Anger In Baltimore – ThinkProgress
Homeownership rate drops to quarter-century low – MarketWatch
Absence of contagion changes the whole Greek game – Reuters
Greek Banks Count on More ECB Cash as Bailout Talks Drag On – Bloomberg
Negative interest rates put world on course for biggest mass default in history – Telegraph
Man’s first day of wearing Apple Watch to work not going as hoped – Daily Mash
Workers say Wal-Mart closing of 5 stores isn’t a coincidence – DMN
Walmart plans to open 115 stores in China – BBC
News now mostly read on cell phones – CNN/Money

Stock futures jittery ahead of Fed, GDP – MarketWatch
Byron Wien on Population Growth and Stocks – Barron’s
Rule No. 1 in China’s Bull-Market Rally: Don’t Look at Earnings – Bloomberg
UK ‘flash crash’ trader to appear in court after failing to make bail – Guardian
German Bunds Are Tanking After Big Investors Say to Get Out – Bloomberg
Goldman: $1 trillion lift in 2015 via US stock buybacks, dividends – Reuters
This is a better way to ‘sell in May and go away’ – MarketWatch
Gold snaps two-day rally before Fed rate statement – Reuters
GFMS update confirms China as world No. 1 gold consumer – Mineweb
Gold Prices Could Push Higher If Fed Signals Delay In Rate Hikes – Kitco

Consumer Confidence Tumbles in April – Barron’s
Great Graphic: G7 Quarterly GDP – Marc to Market
China Is Set to Lose Manufacturing Crown – Bloomberg
Notion that Stock Market Can Boost Economy Is Misguided – Caixin
Bank of Canada Tries to Calm Fears over Housing Bubble – Bloomberg
Case-Shiller: Home prices continue steady march upward – LA Times
Riksbank Increases Bond Purchases as Key Rate Left Unchanged – Bloomberg
2% Inflation Rate Target Is Questioned as Fed Policy Panel Prepares to Meet -NY Times
The Taylor Rule: A benchmark for monetary policy? – Ben Bernanke’s Blog
Bankers Shouldn’t Be Running Central Banks – Bloomberg


Real Fed Funds Rates Since 1971

As Federal Reserve officials (i.e., the most powerful group of unelected policy makers in the world) gather to discuss if and when they should raise short-term interest rates, it’s worth reviewing how we got here from the perspective of real interest rates.

Since this chart hadn’t been updated since Ms. Yellen took over at the Fed and the official measure of inflation reached its lowest level since the 1950s (save for a few months in 2009 during the financal crisis),  a slight uptick in real rates was expected.

The 0.11 percent Fed funds rate and current annual inflation of -0.1 percent have combined to push real interest rates back into positive territory for the first time in five years.

Paraphrasing Bill Murray in Caddyshack, “So, we got that going for us, which is nice”.

© 2010-2011 The Mess That Greenspan Made