Bernanke’s policies were certainly not a Roadrunner

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Former Fed chief Ben Bernanke was taking jabs at President Donald Trump’s economic stimulus and tax cuts on Thursday in DC to a like-minded leftist crowd.

Bernanke, whose monetary policies helped every institution in the US except the US consumer, says the stimulus will only have a short-term effect and that by 2020 it will peter out.

The former Fed chair sounding quite jealous  since he begged the White House and Congress for this type of economic plan for most of his term as Fed chief to help pull the US out of the Great Recession.

Bernanke using the cartoon character Wiley E Coyote to say the US economy will go off a cliff in 2020. This happens to coincide with Trump’s re-election campaign.

Bernanke — citing the amount of stimulus coming from the White House of  $1.5 trillion in personal and corporate tax cuts and a $300 billion increase in federal spending — saying these policies  “make the Fed’s job more difficult all around” because it’s coming at a time of very low U.S. unemployment.”

While the unemployment rate is 3.8%, the number really does not take into account people working part-time and wish to have a full-time job. It also does not count the people who longer collect benefits.

So to say the US is at full employment is disingenuous at best, since Bernanke knows he is citing flawed data to take a shot at the Trump White House.

I find it ironic Bernanke would use the Wiley E Coyote imagery since no matter what he did as Fed chief both he and President Obama resided over the first modern 8-year term that did not achieve a 3% annual GDP growth. So to suggest that Trump’s economic policies are basically futile and will fall off the cliff is very rich.

 

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Deutsche Bank executive woes continue

Deutsche Bank announced over the weekend that its top C-Suite executives would not be getting a bonus again this year.

CEO John Cryan strangely made the announcement Friday night at Austin’s South By Southwest conference, stating that for the third consecutive year top execs would forego year end payouts as the bank struggles to pull itself out of the mire of questionable trading practices.

As many of you may know I wrote extensively three years ago about the rash of suicides within the bank just as the Libor scandal was breaking.

The German uber bank did note that bonuses for other employees would total just over $2B for 2017.

The news comes as the 10-year anniversary of Bear Stearns’ demise hits Thursday, which led to the Great Recession. On March 14th 2008, the Federal Reserve agreed to provide a $25B loan to keep the bank solvent for 28 days as they unwound Jimmy Cayne’s troubled bank.

As the Fed dug deeper into Bear’s books that offer was pulled a day later and on the 16th of March, JPM CEO found the pot gold scooping up Bear for seven cents on the dollar with a $2 a share offer.

Dimon also made sure that nothing on the troubled bank’s books could come back and bite him with Fed chief Ben Bernanke assuring Dimon the Fed would take the hit as it put up $29B and JPM invested $1B for the sale.

In the following week a Bear shareholder lawsuit was filed and JPMorgan raised its offer price from $2 a share to $10 a share to quell the suit. As a point of contrast Bear Stearns stock was trading at $93 a share in late February 2008.

Can the Fed chair, please take a seat

Today at 2 pm The Federal Reserve will most likely announce a 0.25 bps move higher in Fed Funds rate taking it toward 0.75 bps.

I say most likely since it would only be the second rise in eight years, so I feel I want to couch that comment.

Nevertheless, the more important aspect comes a half-hour later, when Fed chief Janet Yellen holds her press conference.

Yellen’s comments on the incoming Trump administration will be what drive the bond and equity markets.

The Fed chair needs to tell markets the board’s  policy will take its keys off of the incoming Trump policy, not that it will assess that policy and then move in a counter-direction in order to keep the status quo.

I believe the Fed chief  and the board of governors need to take a back seat on monetary policy and get off of the TV. With the exception of the last two Fed chiefs — Ben Bernanke and Yellen — most Americans never knew who led the Federal Reserve.

Monetary leadership should come from the White House, not the Marriner S. Eccles Federal Reserve Board Building just off of the Great Mall. Unfortunately, this has not happen under the Obama Administration. Both Tim Geithner and Jack Lew — Obama’s two Treasury chiefs — had their photos on a milk carton because no one knew where they were and what they thought.

The question is how do you put these “genies” back in the bottle after they have been enjoying more celebrity status than the Treasury Secretary for the last eight years?

The bombastic Trump, when it comes to the Fed, could overwhelm the academics and eggheads at the central bank. We may get a taste of this on Twitter at 2:01 pm today from the President-elect on his reaction.

No yen for helicopter money, maybe?

Wednesday night news out of Tokyo said Bank Of Japan was going to launch a Y10 to Y20 TRILLION in helicopter money.

Helicopter money is where the government gives cash to the general population in leiu of the banks to spur spending and growth.

Well the headlines drove high frequency traders to buy, buy, buy on the news. By Thursday morning Bank of Japan chief Kuroda said there is no plan to execute that plan and in fact the news was a month old.

The news had credence, since ex-Fed chief Ben Bernanke was said to be talking to the Japanese central bankers about what to do to break an almost 30-year economic malaise.

The news had the markets gyrating due to USD-YEN movements. Stock markets move higher on a weaker yen, which helicopter money in the trillions would do. So when the announcement from central banker Kuroda walked back that news the yen strengthened and US futures fall.

There is such a coorelation between $/Y and US equity markets that trumps all other economic/monetary news. The yen carry trade is mother’s milk to high-frequency trading algorythms

Now don’t be surprised if the market takes the news that Kuroda said no helicopter money a month ago and says that he might be for it now. Stranger things have happen.

And just for good measure we get ECB chief Mario Draghi talking Thursday morning on what that central bank may or may not do with Italian banks.

 

Omaha, Omaha: It's the old 5pm audible from Asia market

The helipads around the world are about to get busier.

That’s the central bankers of the world jawboning about “helicopter money coming soon from Japan, Europe and even in the US, while the UK cuts its prime lending rate and perhaps launches a new round of easing.

Does this sound like things are going well and that the equity markets should be making all-time highs? Yup, welcome to the new world.

It all starts at roughly 5PM in NYC. Futures markets are down for the Dow, S&P and Asia while precious metals are rising. In Asia the markets look very soft on a strengthening yen.

The Bank of Japan puts out a — what seems like a daily statement saying that the government will be in the market “to protect” the yen, which really means BOJ wants a weaker, not stronger yen. When it came close to 100 yen  to the dollar on the Fx exchanges due to Brexit, that was too strong.

And we use to laughed at Mexico, when on vacation the peso felt like monopoly money at 25 pesos to the dollar. Whose the third-world country now?

So what does the Bank of Japan suggest during a visit by ex-Fed chief (Helicopter) Ben Bernanke? To give cash to the general population to spur spending, which may spur growth.

Asian stock markets soar, Europe can’t wait to open and US futures rise, bond yields rise, precious metal sink. Got it, ok we’ll do it again tomorrow night.

So now, we still have Deutsche Bank and many Italian banks teetering. We have a Bank of England starting a Quantitative Easing program. And we have a Federal Reserve still divided on want to do this month with rates?

So the short answer is: In a world awash with debt, let’s created more debt — albeit at a very low-interest rates — to get out of this quagmire called stagflation.

Doesn’t sound to me like equities are on a long-term growth cycle to me, but it is election time here in the US, so all bets are off.