NOT ALL OF THEM ARE GOOD

 
Here is a quote from Former Fed Chairman Alan Greenspan we posted earlier in our "House Painters" article.

But quantitative easing has been a “terrific success” in getting the real rate of return on long-term assets down, boosting all income-earning assets.

“It hasn’t been a success in the demand side,” he said, because banks are simply parking the reserves at the central bank.

 They just let it sit. Unless or until that happens, you don’t galvanize economic activity,” he said. “When that starts, all things can happen - and not all of them are good,” he said.

It's important because you have an ultimate insider telling you where most of the money from QE given to the banks wound up. Now view the chart on the below link.

The key point here is those who argue, as one Bloomberg columnist noted today, Speculation that the Fed’s almost $4 trillion of bond purchases since 2008 would cause runaway inflation has yet to be proven.  Even Greenspan hints at the reason why.

http://www.economicpolicyjournal.com/2014/10/so-what-has-fed-been-doing-since-start.html

STUPID STATEMENT FOR THE DAY

The news is out. The Fed has ended its QE hand-holding fiasco. For now.

Commentators, like a bunch of kids on Halloween night, were out in droves. Opinions and reactions are about as varied as those costumes people don on Halloween, too.

There's never been a paucity on Wall Street of stupidity. So here's our post-Fed report for the most stupid comment of the day.

Jack Bouroudjian of Index Financial Partners, also on "Closing Bell," said he thinks Fed skeptics are full of hot air. In a rather heated exchange he said Janet Yellen and the Federal Reserve deserved nothing but praise.

"I call this brilliant. I think what Janet Yellen has been doing is absolutely wonderful. They have been able to maneuver through the cycle with low inflation; they're starting to create jobs and we have companies making money."

He added: "It's about time we quit knocking the Fed. People are not unemployed because the Fed is keeping rates low."

Well now, Mr. Bouroudjian, you're correct. People are not unemployed because Yellen and her mad band of house painters kept interest rates artificially too low too long. 

They're just too income poor to purchase the necessities they need to live a relatively dignified life.

WAKE UP BUREAUCRATS

 
What do you expect is usually a fair question to ask.

And it couldn't be more appropriate when you put an infectious disease specialist in charge of a huge bureaucratic organization like the World Bank.

Open the curtains and let the saga begin. Doctor Jim Yong Kim, the Iowa-born Korean former president of Ivy League Dartmouth College took over the bank's presidency a little more than two years ago, an unlikely choice to many at the time, given Kim's apparent lack of credentials in this area.

But who among either his supporters or detractors saw the Ebola virus turmoil coming? It just goes to show the only real expected certainty is the unexpected. Even before the recent Ebola uproar, Dr. Kim started a funding program for those areas with the virus by pledging $200 million from the bank's special humanitarian crisis fund, a sum recently increased to $400 million, according to the Financial Times.

World Bank economists calculate the Ebola outbreak could whack west Africa for $32 billion by the end of next year as fear fuels the fallout to much of the rest of Africa as tourists and others cancel their plans to travel there. Think business conferences and such.

What comes to the fore in the debate about the World Bank's unusual response to what is seen as a health crisis, not the usual fare on the WBO's menu, is it a one time thing in a clear-cut time of crisis or something else again?

At a time when global central banks with their stress tests and so forth have been trying to gauge the financial system strength to withstand future calamity, Dr Kim noted:

"We really have to look carefully at these downside risks to the global economy that only come to our attention in these kinds of disastrous moments."

Should the Ebola crisis spread significantly outside Africa's borders, $32 billion will be a pittance of the real global costs.

To be sure, Ebola is not just an individual health risk. Out of control it's a global economic risk.

So wake up bureaucrats.

HOUSE PAINTERS

Despite what we've all been repeatedly told, Federal Reserve policy has nothing to do with stimulating jobs or increasing or decreasing inflation. Not at all.

In reality the Fed is little more than of bunch of incompetent sunshine makers. And their motto is an old one, Make hay while the sun shines because it won't last.

After what is now nearly six years of ZIRP, the Fed is about out of rays and their sweaty palms are beginning to show. The recent less-than-10 percent market correction brought the verbal interventionists out quicker than you can spell, well, interventionists.

A pure act of fear, it was.

After blowing $4 trillion on what is essentially an external paint job, the old pathetic structure remains unchanged. In real estate it's called curb appeal. What you need to know is these masters of monetary curb appeal are more dangerous to your economic health than the Ebola virus federal officials are so confused about.

No less a monetary curb appeal specialist than retired Fed chairman Sir Alan Greenspan yesterday admitted as much.

Inflation is “dead in the water” because effective demand is “dead in the water,” he said.

But quantitative easing has been a “terrific success” in getting the real rate of return on long-term assets down, boosting all income-earning assets.

“It hasn’t been a success in the demand side,” he said, because banks are simply parking the reserves at the central bank.

“They just let it sit. Unless or until that happens, you don’t galvanize economic activity,” he said.

“When that starts, all things can happen - and not all of them are good,” he said.

Greenspan said monetary policy is in uncharted territory. He said he was worried the “real pressure” will come when the markets demand higher rates from the Fed to keep reserve balances where they are, he said.

The former Fed chairman said he still has doubts about the viability of the euro. He said that without full political integration in Europe, the euro zone would break up.

There is so much economic gobbledygook in these Greenspan statements that it's defies all common sense. Here are just a few. 

Sure, Mr. Greenspan, it boosted "all income-earning assets," but killed the income stream from those assets. You know, Mr. Greenspan, the ones the infirm, the old and the fixed-income crowd live off. 

Yet one of your Fed successors wants us to believe she's mightily concerned about income inequality, an inequality she and her band of house painters helped create.

Your compatriots at the ECB and its Keynesian-steeped backers are screaming for more American style QE. In short, they wish to emulate a program which you just acknowledged up to now has failed to do what it was touted to do, loosen the lending purse strings of bankers. And that's after nearly six years and $4 trillion has been toss its way. 

Greenspan is well-known for his "irrational exuberance" statement, a phrase reportedly he lifted from Yale economist Robert Shiller. 
Now that he's expressed his concern about "the viability of the euro," we're sure his European friends are duly thrilled also.

According to history, Adolph Hitler was a retired house painter. One wonders how long it will be before the public demands the retirement of another group of house painters?

THE NEXT MOVE

 Energy prices has been much in the news of late.

Gasoline prices in many areas of the U.S. have dropped below $3 a gallon, according to the Wall Street Journal "delivering a welcome lift to American consumers and retailers heading into the holiday season."

In the meantime, oil prices on Monday fell below $80 a barrel, a 25 percent decline since mid-June before recovering slightly. For four years the energy sector was one of the better performers owing in part to all the fracking that higher prices made feasible. 

Now concern grows almost daily about how low is low enough to roll back much of the drilling. There's been lots of guesses, with some saying $70 a barrel to others $50 a barrel, but truth is no one knows for sure.

The lower prices along with sanctions have hit Russia, not to mention other oil-exporting nations, particularly hard, putting downward pressure on the Russian ruble. And the recent Goldman Sachs report suggesting that the 25 percent drop in prices won't be turned around anytime soon didn't help much either.

Goldman Sachs, however, is hardly alone in this as other banks lowered their first quarter 2015 price expectations for oil. Wall Street is famous for its short-term views.

And the simple answer is: risk. The longer one goes out the more  room there is for error. To be sure trends are important. And they are also pretty safe in the world of predicting, as in more of the same.

So much of the money is now moving to firms that will benefit from lower prices as the gloom grows.

We don't know about anyone else, but we definitely like all this gloom. And here's why.

Let's take the much maligned British Petroleum. Notwithstanding its continuing legal problems connected with Gulf spill, it has, like Exxon Mobil, ties to Russia, not the most endearing thing with investors these days.
 
After announcing it earnings recently, here a quote covering that story.

BP can’t seem to catch a break.

As it struggles with the cost of the 2010 BP oil spill cleanup, it now must confront falling oil prices and declining profits from its stake in Rosneft.

Those challenges were apparent on Tuesday when BP BP announced its earnings, which fell about 18 percent to $3 billion in the third quarter, compared to $3.7 billion in the same period of 2013. Net income for the period dropped about 63 percent to $1.3 billion.

Still, the company put a positive spin on the quarter, emphasizing that it would increase its dividend by 5.3 percent from a year earlier, to 10 cents a share. That is expected to be paid out in December.

To begin with, we think much if not all the ugly Gulf spill news is in the price at this point and the British government has twice spoke to U.S. authorities about the harshness of the prospective fines. Low oil  prices are one thing, resolution of the matter another.

If one is long BP in particular and oil in general one is long the Russian ruble which has taken a huge hit. We think there's much money there once the sanctions get lifted and they will barring Armageddon.

Another big meme today is the lack of demand and the concerns about too much supply as if the market has never seen these things before.  Some are leasing big tankers and storing the stuff off shore. Fracking itself is not the most popular kid on the block and after the upcoming elections things could get riled up there.

The point is, the only thing certain is uncertainty and no one knows when or from where it will come. As former President Eisenhower once noted: "If everyone is thinking the same thing, then nobody's thinking."

The next move is yours.

 http://www.marketwatch.com/story/dumb-money-unloads-bullish-oil-bets-as-prices-pose-threat-to-stocks-2014-10-28?link=MW_popular

 http://finance.yahoo.com/tumblr/blog-smart-money-decreases-crude-oil-shorts-by-record-amount-125003462.html

IN THEIR GENETIC CODE

What a difference a day makes.

Yesterday much of the financial crowd was agog over the European Central Bank's report on stress testing 130 EU banks. After the initial news bank shares rallied only later to give most of those gains back.

At closer inspection investors apparently pulled their yin side and exercised their yang sentiments as the Euro Stoxx Bank Index closed down 1.7 percent for the day.

Twenty five of the 130 banks tested failed, most likely a soft number to keep the report as positive as possible and buoy investor confidence. It not an original tactic.

But what about, as the saying goes, the morning after? Well, according to today's Financial Times, "...bankers and analysts cast doubt on claims that the (stress tests) exercise would open the floodgates" of new lending.

"We are here to lend, but there is very little demand," one European banker noted. "This is the problem. Loans are a lagging indicator. People borrow after the economy turns around."

The article then quoted  ECB Vice President Victor Constancio who on Sunday said: The report would "guarantee that going forward, the economic recovery will not be hampered by credit supply restrictions."

Now we know you're smart enough to detect a contrast of opinions here. But again, according to the Times, though"the ECB health check was likely to reduce the European banking sector's 11 per cent implied cost of capital by 2016," the sector was hardly something to breakout the sweet-tasting drinks over.

Quoting a JP Morgan Chase analysts: "However, the sector is not of the woods yet, in our view. We expect 0.5 per cent lending growth for our banking universe in 2015 as banks continue to rebuild capital rather than lend in an uncertain regulatory environment."

What this should tell you is in the regulators' zeal to do good they create consequences they never think entirely through. It's in their genetic code.

IT SHOULD BE INTERESTING

Lowe's the big NYSE-traded Home Depot competitor in the do-it-yourself home fix-it business is set to introduce robotic shopping assistants next month in California, according to the Wall Street Journal

The first such robots in America, they bring to mind the old yin-yang principle in the increasing decline of employment importance of the human worker. Judge for yourself from the now nearly ubiquity of robot-guided menus one gets when calling companies these days.

And that leaving out for the moment drones, as the say in poker, is just for openers. It has all the earmarks of a genocide, a species annihilation.

Big-box stores once offered convenience with one-stop shopping. But with Amazon.com Inc. AMZN +1.92% and smartphones, customers can check stock and read reviews and details about products.

“Instead of seeming ultra-convenient, the big-box experience starts to look like it has a lot of friction,” said Doug Stephens, founder of advisory firm Retail Prophet. “If robots are a means of alleviating some of that friction, I’d expect to see a lot more robots,” he added.

As customers follow OSHbot to the correct aisle, they will see ads for in-store specials on its back screen as they pass various departments, communicated through in-store beacons. Customers who need help with, say, a specific type of plumbing project can initiate a video conference on OSHbot’s front screen with available experts at any Orchard store. 

OSHbot also can help customers match a certain-size nail or hinge with a 3D-scanner and determine immediately if the part is in stock. In the future, OSHbot may be able to create the part with a 3-D printer, said Marco Mascorro, CEO of Fellow Robots, based in Mountain View, Calif.

To navigate the Orchard store, OSHbot uses lasers to sense its surroundings, the same light detection and ranging system, also called Lidar, used by Google Inc. GOOGL +0.62% ’s autonomous cars. OSHbot creates a map of its surroundings using technology called simultaneous localization and mapping that it can refer to later. By matching the map it creates to the Orchard Supply map of where products are located in the store, it can lead a customer to a specific hinge or hammer.

I think we’re going to see a rush of companies wanting to be the first [in their industry] to have robots. ” —Andra Keay, managing director of Silicon Valley Robotics

 A rush of robots translates into more than likely a big rushing sound of humans beings ushered out the workplace door.

Now don't get us wrong because we get it. Robots bring many employer benefits to the workplace. As far as we now know, no lost maternity time, no mandatory 401K contributions, sick leave or social security matching for starters, not to mention fewer needed temps.

So the big octopi in places like Brussels and Washington who love to tax employers and now perhaps robots will have to conjure some new stuff. Mostly likely it will force them to actually do some work--that is, until the populace elects the first robot.

It should be interesting.