The Mess That Greenspan Made - Part 8

Wednesday Morning Links

MUST READS
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

MARKETS/INVESTING
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

ECONOMY/WORLD/HOUSING/BANKING
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”.

Tuesday Morning Links

MUST READS
Baltimore riots: Looting, fires engulf city – CNN
Nonviolence as Compliance – The Atlantic
Orioles executive defends Baltimore protest – Quartz
Read David Simon’s powerful plea for peace in Baltimore – Vox
Uncertainty Over Impact of a Default by Greece – NY Times
Greek-Russia ties bloom as default looms – Reuters
Greek finance minister Varoufakis replaced as leader of debt talks – Guardian
China’s Slowdown Puts Asian Central Banks in a Bind as Fed Looms – Bloomberg
Nevada’s Lake Mead Is at Its Lowest Level Ever — and It’s Going to Get Worse – Vice News
Why Markets Are Manic—-The Fed Is Addicted To The ‘Easy Button’ – Contra Corner
How this debt-addicted world could go the way of the Mayans – MarketWatch
Meet IBR, The Student Loan Bubble’s Dirty Secret – Zero Hedge
The Real War on the Middle Class – Ron Paul Institute

MARKETS/INVESTING
Stock futures down ahead of Fed meeting – Reuters
Sell in May and Go Away? There’s a Smarter Play – Fiscal Times
Chinese shares slide after watchdog warns of market risk – MarketWatch
Treasury ETFs Inflows Outpacing All Other Bond Funds This Month – Bloomberg
Commodity prices: Over a hundred years of booms and busts – voxeu
Gold around $1,200/oz on softer dollar ahead of Fed meeting – Reuters
Gold Rises, Silver Surges on Short-Covering and Physical Demand – GoldCore
China is about to come clean about how much gold it really owns – MarketWatch
Silver, Shale, September – It’s Gonna Get Ugly – SRSrocco Report

ECONOMY/WORLD/HOUSING/BANKING
Economists: Drop the Signaling Fad – Bloomberg
Second-quarter GDP will tell the tale – MarketWatch
Inflation Expectations Have Little To Do With Inflation – Alhambra Partners
How Much Did the Recession Make 20-Somethings Delay Children? – WSJ
‘Damned Lies’ Threaten to Overshadow U.K. GDP in Election Fight – Bloomberg
World’s coolest economist hot on his numbers – New Zealand Herald
China’s Middle-Class Propels Apple’s iPhone Sales – WSJ
China Said to Consider PBOC Lending Tool to Help Local Debt – Bloomberg
Underwater Homes Still Plague Nevada Housing Market – Nevada Public Radio
Fed Seen Delaying Liftoff to September to Push Down Unemployment – Bloomberg

 

Turning Chinese?

Much has been made of the leveraged speculative frenzy by undereducated Chinese day traders halfway around the world but, based on this update on NYSE margin debt from Doug Short late last week, U.S. lenders (and markets) are quickly catching up.

Of course, this comes at a time when money continues to flow out of stock funds, at least according to this Marketwatch story from Friday. Not to worry though, confidence remains high as the price of just about everything is going up again today…

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