A Glance at the Dashboard

With all of the noise coming from general politics there’s hardly been any space left over for economic news. There’s nothing like a huge distraction to keep people’s minds off of how things are going in the areas which really matter the most.

So how are we doing?

One handy measure comes to us from what Barataria has taken to calling Yellen’s Dashboard. This is a list of the five most stubbornly bad indicators that were simply not turning around 3 years ago, despite many signs of improvement. With the Fed sending strong signals that rate hikes are assured in coming months they make a good place to start the conversation.

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A New Fed?

The annual Jackson Hole conference of the Federal Reserve starts today! If you’re a little under-enthusiastic, it’s OK. There’s a lot going on, what with the State Fair, back to school preparations, and the fact that hardly anyone cares what the Fed is up to.

Except, that is, more people all the time. The mysterious workings of the Fed have come under a lot of scrutiny lately – from left, right, and center. The most powerful bank in the world does indeed control more of our destiny than many otherwise free people would like, and that’s worrying.

The Fed knows this, of course. They also know that in an era of dysfunctional government and globalism they have more power all the time – as well as more responsibility to get it right. Will there be a new, more open Fed?  The answer, a very strong “Yes!” may surprise you.

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Fed Futzes, Fuses Financial Fracas

Janet Yellen – is there anything she can’t do?

In a speech to the Economic Club of New York the most powerful person in the world, elections be damned, called back the need for continuing “ramp up” in the Fed Funds Rate. The stock market rallied as the happy days of last year returned and everyone had reason to believe that free money was on the horizon.

Funny, they don’t cheer like that for Bernie Sanders.

What is going on? Are we not going to raise rates this year after all? Has Yellen started channeling her inner Greenspan by saying as little as possible in the maximum number of words?

No, this is what we have to expect. It’s really all about China, which is to say all about currency conversion, and the much-hyped “dual mandate” of the Fed that’s really a much more complex triple mandate or more. And we all, sadly, have to stay tuned to find out what it really means.

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Ready for Anything! (?)

By the time you read this, the Fed Open Market Committee (FOMC) has probably raised their benchmark Fed Funds rate and given guidance for the next few years. More importantly, everyone has freaked out one way or the other and the stock and bond markets have probably done something that has everyone puzzled.

We still live in a financial world that defies expectations. It has to be “experienced”, just like the various things you did in your mis-spent youth that built “character”. The question becomes – what great wisdom are we learning from all of this?

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Not so Fast …

It’s been week since a blowout jobs report set fire to financial markets and signaled that everything is about to change. Barataria predicted a good report, if very timidly, and gave everything a week to shake out. So where do we stand a week from the first clear signal liftoff is occurring?

The short answer is that markets have absorbed the reality of a rising Fed Funds Rate. The long answer is that it sure doesn’t look like it for a lot of reasons which are complicated and confusing. In an increasingly smaller world there is nothing that confines money to one “market”, meaning that pressure is on from all directions.

The upshot is that after an initial spike there is reason to believe a rise in interest rates by the Fed may yet trigger a net medium-term fall in interest rates paid by consumers, as predicted. It’s worth explaining further.

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Ready for Liftoff?

Another first Friday of the month, another jobs report. By the time you read this the Bureau of Labor Statistics’ (BLS) monthly Employment Situation Summary for October may have been released diligently at 8:30AM Eastern Time on the appointed date. The stock market may be reacting and everyone will turn their attention to the Federal Reserve.

It’s a strange ritual which keeps financial writers busy. But does it mean anything?

If all goes as it should this one should really move the markets. Exactly which direction is hard to tell for a variety of reasons – but that is what will matter more than anything else if this report comes in as “good” (in quotes) as it should be.

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Bad Jobs Numbers

Last Friday the monthly Bureau of Labor Statistics (BLS) Employment Report came out, and it was lousy. Instead of an expected gain of 200k jobs it came in at 142k – a miss of 58k or 29%. The reaction in the financial press was swift and conclusive – there is no way the Fed can raise interest rates given this weakness. But there’s a bigger problem with the report than that.

It honestly can’t be believed.

It’s fashionable to say that the BLS cooks these reports to get the results they want and that no one should believe the government reports in general. That’s a general paranoid delusion that is utterly unreasonable all around. But the reports can’t be taken as pure gospel when they don’t come in exactly where they should be because there is no way they can possibly be as accurate as is demanded.

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