At the start of last January, around 1.5% of ‘professionals’ thought the Fed would still be happily Zirping along after March 2016. Today, 52% think so.
If you asked most ‘professionals’ whether the value of the Dollar has been going up or down this year, they would unhesitatingly say ‘up’. But in fact, the US Dollar trade-weighted index (vs other major currencies – the USDX) has seen a net fall in value from 96.4 to 93.3….and in the last few weeks alone, it has dropped from 96.6 to 93.3. [the index is related to a dollar’s value at 100 in 1970 on the same trade weighted basis]
If you quizzed the average investor about whether T-Bill yields have fallen or risen over most of 2015, I’d say over 90% would say ‘fallen’. In reality, the general yield trend in 1 year bills is was up from this time last year until the start of September 2015.
During September, that yield fell rapidly…but the trend is only six weeks old.
Taking all such misconceptions together, this is the conclusion: the general mood in the US at the start of this year was that the worst was behind us. The general summary of the year to date is one of a continuing overestimation of how ‘well’ the American economy is doing and how stable the US Government seems. But the fact is, most people were wrong about rate rises to signal full recovery; they’re misinformed about US trade performance and the cost of short-term Sovereign borrowing; and although the Fed is making quiet, cautious-but-nice sounds about the how things are looking, the FOCM’s minutes record book is actually very pessimistic. This ‘beige book’ had 75 average monthly mentions of ‘slow, weak or subdued’ about the economy in 2014: in 2015 so far, that average has gone from 70 to 100.
In short, we the moaning Minnies have been proved right about the real situation, whereas everyone else has been not only proved wrong…most have clung on to the impression that everything’s just tickerty-boo.
To be more cynical (and exact) opinion formers and Establishment media have been so many elegant-looking swans gliding across the waters of a mill pond in a reassuring manner, while their genetically modified webbed feet have been peddlingLF underneath. Ben the Banker used to have this down to a fine art: he came onstage looking like he’d just dropped 20 milligrams of diazepam, and spoke with enormous calm bordering on a state of catatonic hibernation about how many secret tools he had in his proprietary tool bag to keep the American Empire powering forward. Janet Yellen has a different technique – the newish Fed Chair clucks contentedly as if she’s at least 95% on the way to laying the golden egg: the effect is just the same….’everything’s just fine and there’s nothing to worry about’.
But six years on, the Fed is provably full of it. It has been helped, of course, by the natural human belief that everything is infinitely durable….even though from the Romans via the Nazis to the Brits and the Soviets, the theory is obviously 100% invalid. And the Feds have also been given a massive assist in the politician’s equally natural instinct to fiddle the data, and/or fix the markets to make them look OK.
It is becoming tedious (and I’m getting stale) taking another lump of clay every day and piling it on the ten thousand other bits of clay in order to show, effectively, that the overwhelming weight of evidence remains irrefutable: the US is down a rabbit hole, the UK is built on financial rice paper, the euro is a lead balloon, the stock markets are a South Sea Tulip, China has nobody to export to, the energy exporters (Russia and the Arabs) have no customers in a net growth phase, and when the entire Lusitanic finally hits anything from a stray financial iceberg to a commodity fraud torpedo, Australia will go down with it, as little more than an exporter of raw materials.
So until there is a very clear sign that Something Happened At Last, I’m going to give this subject a well-earned rest.