Search Results for: Janet Yellen

By Pam Martens and Russ Martens: January 21, 2015 Television pundits and business writers who are relentlessly pounding the table on how cheaper home heating oil and gas at the pump is going to provide a consumer windfall and ramp up economic activity have a simplistic view of how things work. Oil-related companies in the U.S. now account for between 35 to 40 percent of all capital spending. Announcements of sharp cutbacks in capital spending and job reductions by these companies create big ripples, forcing related companies to trim their own budgets, revenue assumptions, and payrolls accordingly. The announcements coming out of the oil patch are picking up steam and it’s not a pretty picture. Last week Schlumberger said it would eliminate 9,000 jobs, approximately 7 percent of its workforce, and trim capital spending by about $1 billion. Yesterday, Baker Hughes, the oilfield services company, announced 7,000 in job cuts, … Continue reading →

By Pam Martens and Russ Martens: January 15, 2015 Plunging yields on U.S. Treasury notes and bonds, record low yields on the sovereign debt of countries in the European Union, together with plunging industrial commodity prices, are sending a crystal clear message to stock markets: there is a glut of supply and too little demand from consumers. Such a supply-demand imbalance brings about price wars. Thus we have Saudia Arabia slashing prices on oil to its customers in an attempt to grab market share, triggering a global price war in oil; supermarket pricing wars in Britain; gas station pricing wars in the U.S.; mutual fund fee pricing wars; magazine price wars. There is even a chicken nuggets pricing war. Collapsing yields, collapsing commodity prices are the result of distorted income dispersal, otherwise known as income inequality. Last August, researchers at the Federal Reserve released a study showing the fragility of … Continue reading →

By Pam Martens and Russ Martens: January 6, 2015 Yesterday was not an illustrious start to the first full week of the new year. The Dow Jones Industrial Average plunged 331 points on global deflation worries; U.S. crude oil dropped below $50 for the first time since 2009, with West Texas Intermediate touching $48.47 at one point on the New York Mercantile Exchange. The benchmark 10-year U.S. Treasury note, whose yield is a harbinger of future economic activity, traded below 2 percent and is yielding 1.97 percent in early morning trade today. In a strong signal that other economies are weakening around the globe, 10-year sovereign debt instruments in Australia, Austria, Belgium, Finland, France, Germany, Japan, Netherlands and the U.K. set record low yields yesterday. Against that backdrop, columnist Paul Krugman might have wished he hadn’t penned these opening words on page A17 of the New York Times yesterday: “Suddenly, … Continue reading →

By Pam Martens: December 31, 2014 According to the U.S. central bank, the Federal Reserve, in its December 17, 2014 policy statement delivered by the Federal Open Market Committee, America has become a veritable oasis in a sea of economic turmoil. Economic activity is “expanding,” labor conditions have “improved further,” housing spending is “rising moderately,” business fixed investment is “advancing.” And that plunge in oil prices? Well, that’s going to be “transitory” and “dissipate.” The Fed’s position that the United States can wave a magic wand and delink itself from the vicious deflationary forces besetting our trading partners is the stuff of fairy tales. As of November 2014, annual rates of inflation as measured by the Consumer Price Index (CPI), showed that ten of our trading partners, mostly in the Eurozone, were experiencing deflation: Belgium: -0.110 percent Estonia: -0.614 percent Greece: -1.246 percent Hungary: -0.739 percent Israel: -0.098 percent Poland: -0.484 percent Slovenia: -0.252 percent Spain: … Continue reading →

By Pam Martens and Russ Martens: December 23, 2014 There is a mushrooming false narrative taking over the business airwaves: lower oil prices lead to lower prices at the pump which put more cash in consumers’ pockets which will lead to a more robust economy in the United States in 2015. Yes, there are certainly lower prices at the pump. Yes, that gives consumers more disposable income. But it will decidedly not lead to a more robust economy in the United States for very long. This isn’t a little speed bump in oil prices. This is one of the most dramatic and rapid crashes in a key industrial commodity in history. Since June, the price of West Texas Intermediate (WTI), the domestic crude oil produced in the U.S., is down by 47 percent. The price of the internationally traded crude oil, Brent, is down by a similar figure. If this … Continue reading →

By Pam Martens: November 13, 2014 On November 6, Bloomberg News reporter, Matthew Boesler, set off a flurry of comments with an article headlined: “Fed Concern With Repeat of 1937 Blunder Echoed by Markets.” The reference to 1937 relates to the fact that as the U.S. economy was showing signs of improvement from the conditions of the Great Depression of the 1930s, the Federal government and the Federal Reserve overreacted to inflationary concerns with contractive measures in 1937, sending the economy into a sharp slump in late 1937 and 1938. The chief worrier at the Fed about it making the same mistake today is Charles Evans, President of the Federal Reserve Bank of Chicago. Evans’ background is that of a long-term researcher. Prior to becoming President of the Chicago Fed, he served as its Director of Research, and earlier, its Senior Economist in charge of the Macroeconomics Research Group. In … Continue reading →

By Pam Martens and Russ Martens: October 30, 2014  Back on June 25 of this year, Wall Street On Parade ran the following headline: “BOE’s Carney: Inflated Central Bank Balance Sheet the New Normal; Expect to Hear the Same Conclusion from the U.S. Fed.” The day before our headline, Bank of England Governor, Mark Carney, had just explained to Parliament why their central bank’s balance sheet, bloated through quantitative easing, was not going to be shrinking anytime soon. Carney: “…I would define – picking up on what my colleagues have said – pre-crisis position as a position that’s consistent with the normal course of liquidity requirements of the banking system…What has changed, to the good, in terms of the banking system here is that through regulation and supervision we have put much more responsibility on the banks themselves to hold liquidity to manage liquidity shocks. And, as a consequence of … Continue reading →

By Pam Martens and Russ Martens: October 27, 2014  The contrast between Wall Street’s continuity government in Washington under another Clinton in the White House and the charismatic populist voice of Senator Elizabeth Warren as she stumps for Democrats in the midterms, is awakening millions of Americans to the idea that there may be choices after all in the 2016 presidential election. Columnist Eugene Robinson said it best last Monday in the Washington Post, writing that Senator Warren’s “swing through Colorado, Minnesota and Iowa to rally the faithful displayed something no other potential contender for the 2016 presidential nomination, including Hillary Clinton, seems able to present: a message.” What Robinson really means is “a message of hope” – that Wall Street’s wealth transfer system, institutionalized under a protection racket by members of Congress who keep their seats using Wall Street’s campaign dough, could come under serious challenge with Warren in … Continue reading →

By Pam Martens and Russ Martens: September 15, 2014  Last Friday, the Dow Jones Industrial Average closed down a mere 61.49 points or 0.36 percent, but the overall market breadth (number of stocks advancing versus those declining) was abysmal. At the New York Stock Exchange, there were 666 stocks advancing versus 2,515 declining. Nasdaq showed 893 advancers versus 1,834 decliners. Equally troubling for those who have jumped into stocks with both feet, Bloomberg News has a heart-stopper headline out today: “Record S&P 500 Masks 47% of Nasdaq Mired in Bear Market.” The article, by Lu Wang and Joseph Ciolli, advises that: “Beneath the U.S. Stock market’s record-setting gains, trouble is stirring. About 47 percent of stocks in the Nasdaq Composite (CCMP) Index are down at least 20 percent from their peak in the last 12 months while more than 40 percent have fallen that much in the Russell 2000 Index … Continue reading →

By Pam Martens and Russ Martens: September 4, 2014  The Federal Reserve Board of Governors, together with the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency – the top regulators of Wall Street’s largest banks – finalized liquidity rules yesterday that make absolutely no sense to anyone with a historical perspective on how Wall Street operates in a crisis. The Federal regulators adopted a new rule that requires the country’s largest banks – those with $250 billion or more in total assets – to hold an increased level of newly defined “high quality liquid assets” (HQLA) in order to meet a potential run on the bank during a credit crisis. In addition to U.S. Treasury securities and other instruments backed by the full faith and credit of the U.S. government (agency debt), the regulators have included some dubious instruments while shunning others with a higher safety … Continue reading →