Yellen’s opioid comments smack of hypocrisy

Fed chief Janet Yellen in Congressional testimony suggested that the opioid epidemic hitting the Ohio Valley states and elsewhere could be attributing to the historically low workforce participation rates for men.

While drug use and abuse is a public policy program, the Fed has dipped its toe into the debate with Yellen telling Congress, “I do think it is related to declining labor force participation among prime-age workers,” Yellen told Senators last week about the crisis.

However here is the key idea. “I don’t know if it’s causal or if it’s a symptom of long-running economic maladies that have affected these communities and particularly affected workers who have seen their job opportunities decline,” Yellen continued.

While the Fed was bailing out the banks with its once-in-a-lifetime QE programs, middle America was running out of unemployment benefits, on the verge of losing their homes and struggling to stay afloat.

To stave of a further crisis, the Obama Administration loosened requirements for workers to go on Social Security disability. Look at the data of new disability enrollees during the 2009-2011 period.

In 2009, Social Security disability claims jumped 21 percent over the year prior. In 2011 the feds were paying more than 23 million Americans some type of disability claim. That’s about 7 percent of the overall population, and 16 percent of the workforce, according to publicly available data. None of this data takes into account private workers’ compensation cases.

Of course you still needed to prove you were injured on the job and part of that claim almost automatically was having to be put on pain medication for an injury sustained in a manufacturing job like most of the employment opportunities in the Ohio area.

There are recent stories of doctors in the area prescribing millions of opioid pills over the period in question. This is what happens when the treatment is discontinued, but the addiction is too strong.

So it seems a bit disingenuous for Yellin & Co. to say if their job creation policy shortcomings — the low participation rates of males in the Cleveland Fed’s area — may be attributed to opioid addiction of the workforce.

Other Fed regional banks have touched on the issue as well.

“Manufacturing contacts in Louisville and Memphis reported difficulties finding experienced or qualified employees, with some citing candidates’ inability to pass drug tests,” the St. Louis Fed reported in the July 12 Beige Book. The Boston Fed published research in September on the link between local economic despair and opioid use in New England.

The Fed knows how to administer stimulus to the banks when they get strung out on outrageous lending binges, but it has a tougher time with the victims of that policy when they need to numb from the pain of easing.


$10,000 bitcoin can’t happen with these exchange outages

While bitcoin was dropping like a stone on Monday with sellers clamoring for the exit, thereby crashing the Coinbase exchange, another digital crypto-like token, ethereum, soared to record highs.

Other exchanges like BTC-e, tweeted on Monday that it was hit by a distributed denial-of-service attack, or DDoS. Their website was back online at 4:00pm EST.

This was the second outage for Coinbase in the last three weeks and both outages were when bitcoin was falling.

So what is with the bitcoin exchanges, that they work fine when there are $200-$500 run ups in price, but fail miserably on the downside? And why can’t they get their stories straight?

For any cryptocurrency to gain broader appeal safeguards must be put in place to give each investor equal opportunity to buy and sell. The last thing anyone needs is a government to step in to regulate the market.

Another question is how is it that a digital currency exchange is developed that is not robust enough to handle spikes in traffic? The exchanges are built with the express purpose of having scalability. It’s not like you built a physical market and then people started trading it online and you were caught short.

The exchanges by using the ploy of server outages due to traffic or DDoS attack at a critical junction are setting themselves up for comparison with Mt. Gox and its implosion some years ago.

If you want to see a $10,000 bitcoin price, these exchanges — and there are about 10 of differing sizes on bitcoin — must come together to execute sales for each other if one exchange goes down.

You can’t expect neophytes, new to the cryptocurrency markets, to be able to manage navigating different exchanges to find one to buy or sell on.

The Federal Reserve is schedule to announce Wednesday the result of its two-day meeting on whether to raise rates another quarter point.

I’ve written numerous times that Yellen & Co. will not raise again this year.

So I’ll stand by that and say the Fed will stand pat and wish to monitor the markets and inflation and stand ready to raise at upcoming meetings, but will stand pat today.

While the low rates have created numerous asset bubbles from stocks to bitcoin, the tightening of credit will have a disastrous effect on the overall economy. GDP is looking at below 2% for the quarter after coming off a sub 1% first quarter.

That’s my call we will see at around 2PM EDT whether I am right or not.

Happy Pi Day as the Fed rise is not baked in

Happy Pi Day — 3.14159265358979323846264338327950288419716939937510582097494459230781640628620899862803482534211706798214808651328230664709384460955058223…

All life is a circle and everyone in the world has their birthday and age in that number.

Janet Yellen told markets Monday that the Fed would hold their two-day meeting despite a winter storm hitting the DC area. You need to understand that DC considers itself a southern city and snow and ice usually shuts the town down.

So that said, the Fed is meeting to discuss whether to raise their benchmark 25 basis points. The decision will be announced Wednesday at 2pm.

As I have said most recently, I do not think the Fed will raise. No this is a highly contrarian view, since the Street has priced in the rate rise with 100% confirmation.

I have often called the bond market as the adults in the room for being stalwarts of sensibility and not subject to whims of the market. So if you look at the 10-year note over the last two weeks, since Yellen spoke of the data showing that a rate rise could be in the offering. This was probably the third time the Fed chief has spoke about prepping the market. No surprises is her mantra for the markets.

However, the Fed’s dual mandate of full-employment and stabilizing prices, are going in different directions, so which mandate will Yellen & Co. feel needs more attention.

Employment numbers appear to be improving as sentiment on President Trump’s economic proposals have spurred businesses to add full-time staff.

Pricing is where the problem is. Look at energy prices have been falling and retail pricing is cratering as sales fall off the cliff and store chain bankruptcies explode. These developments have the Fed looking at deflationary concerns since energy pricing cycles through a large part of the economy and retail spending makes up a chunk of discretionary spending.

Also look at first quarter GDP, which in late February was projected to be 2.5% is now looking like 1.2%, according to the Atlanta Fed’s GDPNow.

I am going to say the Fed will opt for weighing prices, growth as more important to longer term economic growth at this time. Yellen & Co. will let sentiment take care of the job market for the time being, in order not to constrain credit or strengthen the dollar further.

So I may be eating crow Wednesday afternoon, but I believe I have laid out a solid case for staying still in March.

History is on my side as the Fed has only raised rates twice over the last 10 years.

Ides of March trifecta may bring more change

Wednesday — the Ides Of March — is the a day of reckoning times three.

As I wrote earlier the Fed is concluding its two-day meeting on whether to raise rates. Although I am alone in this camp, I still believe Yellen & Co. will see many aspects of the economy that would greenlight a rate raise, there will be a continuation on the pause.

Despite what the bond market is saying with yields rising in anticipation of the hike, the Fed will cite falling GDP along with inflation slowing — due to falling energy prices.

I believe if you look at retail sector as the canary in the coalmine with growing bankruptcies and mall closures, must be on the radar of the regional Fed presidents and governors.

Wednesday also brings a hard stop on debt ceiling. This means Treasury cannot issue more debt unless it pays off earlier-issued debt paper.

Congress needs to approve a measure to raise the debt ceiling. The government does still have cash to operate for a few months, so there will not be an imminent shut down, but it does take some of the wind out of the sails of what the Trump administration can do in the short-term.

Lastly on March 15th the Dutch go to the polls to vote for Prime Minister. The anti-Euro candidate Geert Wilders, who leads the populist newish movement called the  Party of Freedom, was the leader according to media in the Netherlands. Now Wilders, with his shock of dyed yellow hair, is said to be behind a more traditional socialist candidate. (Now where have I seen this before?)

Wilders is the equivalent of Brexit and Trump. He has run on a nationalist program with an anti-immigration focus, like the other populist movements of 2016.

And just like Trump and Brexit, the local media is saying Wilders is not going to win, so that tells me he should win handily.