Royal Bank of Scotland to investors: 'Sell everything'

I debated whether to even bother.

Yes, they have confused the hell out of the people who were actually dumb enough to have bought their bullshit in the past (but aren't anymore, FINALLY -- which is what makes this conversation ridiculous now). I don’t even know how to respond. They marched backward yesterday and you were seeing research notes saying, "What the hell? They are confusing the hell out of everyone." And you actually post that?

While we have a ridiculous conversation. ... In reality, they STILL have no ability (as I have said over and over again) to actually do anything except keep credit creation going, because they need to keep more and more phony money sloshing through their sinking economy to prop up the shit storm they have saddled us all with. I'd love for them to "raise rates." Their manipulation has been the PROBLEM, and the sooner we can put an end to this chapter of price fixing, the sooner we can let their toxic mess flush out and recreate an actual economy.

If they ever do try to normalize (not endlessly threatening to, only to panic at the reaction to their threats), the stock market bubble this thread is about (just one consequence) is done -- the valuations are beyond extreme. Just a 25 basis point toe in the water in December (while trying to convince markets that it was no big deal) led to them panicking and reversing course -- because of the market reaction.

Either way (whether they eventually DO try to close the barn door years after the animals have escaped. ... or if they just keep the credit creation going endlessly the way they are), they have reached their limit because they have left no room to do anything with rates (except negative rates and that is going to spook people) as we head into recession (the markets, however, will look for them to do something, as they always do).

At this point everyone knows the emperor has no clothes. Steve Liesman, of all people, asked her yesterday if they still have credibility! This is epic, if you know the players.

Here Is What Janet Yellen Answered When Steve Liesman Asked If The Fed "Has A Credibility Problem" | Zero Hedge

Here was what everyone else (people who were was buying the kool-aid 2, 3, 4, 5 years ago that you are STILL trying to convince me of -- that the rest of the world gave up on) was seeing yesterday:

Markets Relieved as Fed Turns Dovish, Dow Hits Year High

The whole world has been forced to admit the "data dependent" nonsense is the bullshit it always has been. It is debase, debase, debase. There is no magical "data." There is no magical anything. The blather you like to post about them calibrating an economy like they are German car engineers has zero credibility -- not that it ever really did before. They are simply trying to keep an out-of-control credit mess they created from collapsing. And they are panicked right now because they want out (what they didn't consider while they were making the mess)and there is no way out.

The problem for the stock market (and high-yield debt market) this thread was about is that it wants desperately to take the "good news" as "the party is still on." But it can't anymore, because all the cheap money and credit in the world doesn't change the fact (that everyone is staring at) that the recovery (as meager as it was) is either already done or is close to a business cycle turn down. Janet Yellen can't bluff earnings that don't exist and the manufacturing output that has been falling off a cliff and the inventories that have piled up. Which leaves just a pile of toxic debt and no credible fairly tale that everyone can cling to to avoid facing reality.

 

David Stockman did it the way I can't in a message board post I just can't spend enough time on. Cue cranberry avoiding addressing the substance, and trying to make it about Stockman:

Impaled On Its Own Petard——The Fed’s Folly Festers Further

Listening to even a small portion of Simple Janet’s incoherent babble makes very clear that the nation’s central bank is well and truly impaled on its own petard. According to the dictionary, the latter term refers to…..

…….. a small bomb used for blowing up gates and walls when breaching fortifications. It is of French origin and dates back to the 16th century. A typical petard was a conical or rectangular metal device containing 2–3 kg (5 or 6 pounds) of gunpowder, with a slow match for a fuse.

Maybe that’s what they have been doing all along—–that is, waiting for their slow match monetary fuse to finally ignite the next financial conflagration.

After all, the Fed is now 87 months into its grand experiment with the lunacy of zero interest rates. If our monetary central planners still can’t see their way clear to more than 38 bps of normalization, then, apparently, they intend to keep the casino gamblers in free carry trade money until they finally blow themselves up——just like they have already done twice this century.

In fact, by Yellen’s own bumbling admission the inhabitants of the Keynesian puzzle palace—-into which the Eccles Building has long since morphed—–can’t see their way to much of anything. They couldn’t even decide if the risks to the outlook are balanced to the upside or downside. And that roundhouse kind of judgment isn’t even remotely measureable or exacting; it requires nothing more than a binary grunt.

As a practical matter, the joint has lapsed into a state of mental entropy——apparently under the risible assumption that they have abolished the business cycle and have limitless time to normalize. Yet we are already at month 81 of this so-called expansion, and the signs of approaching recession are cropping up daily.

This week, for example, we got another month of declining industrial production, which is now down nearly 2% from its recent peak and falling business sales, which are 5.1% lower than they were in mid-2014.

Somehow Yellen deduced from the chart below that the US economy has been “very resilient in recent months”. Since the commerce department’s report on total business sales includes manufacturing, wholesale and retail, and despite the current slump still clocked in at a $15.5 trillion annualized run rate in January, it might be wondered just exactly what hidden crevice of the US economy is exhibiting all that “resilience”.



At the same time, CapEx orders are down by 7% from September 2014 levels and the inventory to sales ratio is at its highest level since April 2009.

The Fed has never seen a recession coming, of course. It apparently doesn’t even believe that business cycles die of old age, too much credit expansion and malinvestment or even of its own inept handiwork. The cause is always an “external shock” or even an extraterrestrial “contagion”, as per Bernanke’s specious history of the September 2008 market meltdown.

Still, you might think that a posse of economists, which purportedly is laser-focussed on the “incoming” data, might have noticed the deteriorating trends so starkly evident in the chart below. Why do they think all of this is just “transient” and that they have until 2018 by their own latest “dot plot” to get money market rates out of what will have been a decade long sojourn in negative real rate land?



In other words, if a recession has not already commenced, they are using up the recovery phase runaway real fast. But never mind the very real risk that the entire global economy is sliding into a deflationary contraction, and that normalization would then be put off indefinitely.

By her own assertion Yellen espies no such danger, and even asserted during the presser that there are “upside risks to global growth”.

Let’s see. In the most recent months, the three bellwether economies of Asia reported plunging exports. Japan was down 13% from last year, South Korea was off by 20% and China’s exports tumbled by 25%.

Beyond that, there is a veritable CapEx depression underway throughout the global energy, mining, shipbuilding, steel, aluminum and most other heavy industrial sectors; China is drifting ever closer to a spectacular credit collapse and violent labor unrest; and its satellite economies like Brazil are rapidly becoming economic basket cases.

Yet Simple Janet could not explain why the Fed has lapsed again to a “hold” position or when global economic conditions would actually permit it to resume its path toward normalization.

The unstated effect of the Fed’s perpetual “hold” policy, therefore, would seem to be free gambling chips for the Wall Street casino, world without end.

And we do know how that ends.

We also now have an absolutely clear idea of why the Fed is impaled on its own petard. Yellen explained to her ever credulous audience of financial journalists that all of its shilly-shallying is due to the fact that the “neutral value” of federal funds is currently very “low” by historic standards, and that, accordingly, an exceptional degree of “accommodation” is warranted.

Here’s a newsflash for the passel of shills who attended the post-meeting press conference.

First, as a technical matter there is no Federal funds market. It has been killed deader-than-a-doornail by the Fed’s massive money printing campaign since September 2009. The resulting $2.4 trillion of excess bank reserves parked at the New York Fed simply suffocated the Federal funds market in its crib.

More broadly, there ain’t no such thing as the “neutral value” for federal funds or any of the related money market instruments. It’s an entirely imaginary construct conjured up by Keynesian academic scribblers, and ultimately rests on purely religious belief.

Indeed, Yellen might as well have been reciting the rosary and fingering her beads.

The only valid price of money is that set by the interaction of supply and demand in an honest free market. But that was quashed decades ago when Greenspan inaugurated the present regime of bubble finance.

What we have in this age of monetary central planning, instead, is pegged rates arising from abstract theory and the blundering pretensions of the bubble-blind apparatchiks ensconced on the FOMC.

At the end of the day, pegged rates will prove to be the ultimate destroyer of capitalism. They transform financial markets from organizers and allocators of real capital and the savings of producers and workers into gambling casinos which fuel massive speculative bubbles.

Until the blow. Someone should tell Janet to let go of the petard.

 

I'll give you another "rant" from another "crackpot." Just cause.

Stephen Roach, former chief economist at Morgan Stanley and now a fellow @ Yale, on Bloomberg.

Fed 'Fiddling' While the Economy Burns: Stephen Roach

If the Fed's focus here is to just boost asset markets and provide a lot of euphoria for investors, but that is not translating into growth in real aggregate demand, the Fed is basically pushing on a string and policy makers are fiddling while the economy burns."

You are trying to have a conversation that you didn't even understand 3, 4, 5 years ago when it was hysterical to come on here and be a dick toward me. Then, though, a lot of people were still content to try to live a fairy tale and use "hope" as a strategy for avoiding the economic reality we had saddled ourselves with.

Now, people are finally starting to ACKNOWLEDGE the reality--they can't avoid it--and they are talking about the sheer madness I am pointing out.

What's kind of depressing about this thread is that I know people who are earning boatloads of money right now in the casino -- and aside from their willingness to profit from the insanity, THEY are depressed as hell about where they know it ends -- and what it means for ALL of us. I have one conversation all day long with people who are knowledgeable. And then come on here wondering what stupidity I am going to find.