SP 500 and NDX Futures Daily Charts - Emerging Markets Give Wall St the Shimmy Shakes - The Recovery™

“We plan more leisure for men and women and better opportunities for its enjoyment. We plan not only to provide for all the new generation, but we shall, by scientific research and invention, lift the standard of living and security of diffusion of wealth, a decrease in poverty and a great reduction in crime. And this plan will be carried out if we just keep on giving the American people a chance.”

Herbert Hoover, 15 June 1931

“The depression has been deepened by events from abroad which are beyond the control either of our citizens or our government.”

Herbert Hoover, 18 October 1931

Stocks gave up most of yesterday's big bounce largely based on jitters in the emerging markets reflected quite well in their currencies.

Jeremy Siegel of the University of Pennsylvania reiterated this Dow 18,000 target today on Bloomberg TV.  What a surprise.

So why the sell off? Is this a taper tantrum as some have speculated? I think not. The FOMC did exactly what was expected of it today, and it is stressing that it will not be deterred from easy money policies in the foreseeable future.

Facebook beat revenues after the close with $2.58B versus $2.35B expected. I wonder if those numbers are ex-NSA.

The reasons stocks are selling off is because, despite official numbers and reassurances, The Recovery™ is humming along like it's 1931.  

Without increases in median disposable income there will be no sustainable recovery, despite the concerns about the growing 'wage-price spiral' from some corporatist economists. 

Have a pleasant evening.

FOMC Statement 29 January 2014

This was Ben Bernanke's last meeting of the FOMC. Notice that this time the statement was approved unanimously.

Even as it promises easy monetary policy as far as the eye can see, it also provides an historical 'fig leaf' for Bernanke's legacy.  They will say that he expanded the Fed's Balance Sheet as required, even to the extent of engaging in non-traditional practices such as buying mortgage and long Term Treasury debt, AND he had started the process of 'tapering' ongoing the purchase programs before he left the chairmanship.

My own personal opinion is that history will not be kind to either Greenspan or Bernanke and their trickle down approach to monetary policy, weak regulatory environment, and The Recovery™.  Future economists will look on them and the Obama Administration with kindly condescension, much as they look at the tragedy that was the Herbert Hoover presidency, even while they continue to propagate different, but similar, policy errors with great gravity and self-confidence.

Press Release
Federal Reserve Press Release
Release Date: January 29, 2014

For immediate release

Information received since the Federal Open Market Committee met in December indicates that growth in economic activity picked up in recent quarters. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate declined but remains elevated. Household spending and business fixed investment advanced more quickly in recent months, while the recovery in the housing sector slowed somewhat. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.

Taking into account the extent of federal fiscal retrenchment since the inception of its current asset purchase program, the Committee continues to see the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee's sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate.

The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.

In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Richard W. Fisher; Narayana Kocherlakota; Sandra Pianalto; Charles I. Plosser; Jerome H. Powell; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen.

Statement Regarding Purchases of Treasury Securities and Agency Mortgage-Backed Securities (PDF)

The Predators Feast: Ex-JPM Bankers Raise $375 Million For Mining Company Buys

Companies.  Countries.

We will find an opportunity, or we will make them.

Ex-JPMorgan Bankers Raise $375 Million for Mining Fund
By Jesse Riseborough
Jan 29, 2014

Former JPMorgan Chase & Co. bankers Michael Scherb and Verne Grinstead raised $375 million from investors to target acquisitions of mining assets through their Appian Natural Resources Fund LP.

“The whole thesis was really created when I was at JPMorgan, when I could see that traditional sources of capital were going to dry up to the industry,” Scherb, who founded Appian two years ago after leaving the bank, said in a phone interview from London yesterday. “I thought that private equity made sense. I thought it made sense to match long-term capital to a long-term industry.”

Declining prices and a tapering in demand for commodities has dried up financing for new mining projects as investors retreat from the industry. Appian started raising funds a year ago and got commitments of $1 billion from investors, Scherb said...

Read the entire story here.

Gold Daily and Silver Weekly Charts - FOMC Tomorrow

"Our government...teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy."

Louis D. Brandeis

Another ten tonnes of eligible gold came out of the JPM Comex warehouse yesterday. I had some commentary on the inventories intraday here.

Gold and silver were under some slight selling pressure much of the day, as the word went out to bounce the equities market higher to restore confidence.

So what next. The FOMC is tomorrow, and I would think that the usual taper of $10 billion will be done. This is Bernanke's swan song meeting, and I do not expect anything otherwise important to be announced.

We might see some monkey business with the metals. The deceptions will continue until confidence returns.

Have a pleasant evening.