Business

Submitted by Pater Tenebrarum via Acting-Man.com,

Hiking Into a Slowdown

It becomes ever more tempting to conclude that the timing of the Fed’s rate hike was really quite odd, even from the perspective of the planners – even though the U3 unemployment rate has fallen to a mere 5% and they are probably correct about the transitory nature of the currently very low headline “inflation” rate (as we have recently pointed out, actual monetary inflation currently stands at almost 8% y/y).

One of the most frustrating aspects of today’s financial system is the fact that the Fed is being lead by lifelong academics with no real world banking or business experience.

Consider the cases of Ben Bernanke and Janet Yellen.

Neither of these individuals has ever created a job based on generating sales of any kind. Neither of them has ever had to make payroll. Neither of them has ever run a business. What are economic realities for business owners (e.g. operating costs, capital and profits) are just abstract concepts for Bernanke and Yellen.

Who could have seen that coming?

Which has pushed The S&P 500 back into negative territory for the year...

As the Treasury curve flattens dramatically... Down 4bps today alone (as 2Y rises ahead of today's auction and the long-end drops)...

Look out below for Financials?

Charts: bloomberg

After a Q1 collapse, the Dallas Fed Manufacturing Outlook managed a bounce for a few months (though never got back above zero). It appears, Dallas Fed's aptly-named 'Dick' Fischer was entirely wrong when he progonosticated that "on net, low oil prices are good for Texas." December's Dallas Fed print crashed to -20.1 (from -4.9) massively missing expectations of -7.0 and back at the lows not seen since June 2009.

Dallas Fed is in contraction for the 12th month in a row...

In practice, there is no bottom to how low oil prices can drop: as Canada's Bank of Montreal calculated over the weekend, as a result of an unsustainable supply-demand balance "something has to give", and for that to happen oil may drop to $25, $20 or even $15, as some aggressive put buyers are speculating. This is what the Canadian bank said:

We believe that the weakness in crude oil prices reflects a combination of fundamental factors and financial flows. Fundamentally there is simply too much oil.