By Pam Martens and Russ Martens: January 29, 2015 There is growing unease in stock and bond markets around the world that the current Chair of the U.S. Federal Reserve, Janet Yellen, has retrieved former Fed Chair Alan Greenspan’s blinders out of the mothballs in some musty old closet at the Fed, thus setting the U.S. economy up for more epic convulsions. Yesterday, the Federal Open Market Committee (FOMC) released its policy statement and rattled markets here and abroad overnight. The statement contained a number of economic absurdities. The first sentence argued that “economic activity has been expanding at a solid pace” while a few sentences later we are told “inflation has declined further below the Committee’s longer-run objective.” A solid expansion simply does not correlate with declining inflation in the U.S. and mushrooming deflation among our trading partners. Later in the statement the Fed tells us that inflation will … Continue reading →

By Pam Martens: January 28, 2015 The Federal Open Market Committee (FOMC) of the Federal Reserve will release its monetary policy statement at 2 p.m. today against a backdrop of extraordinary global events since its last statement on December 17. Since that time, deflationary forces have picked up steam in the 19-member Eurozone forcing the European Central Bank to announce a large scale quantitative easing program to buy up government bonds in the hope that the added liquidity will spike spending and inflation. A political earthquake has also been unleashed by the Coalition of the Radical Left, known colloquially as Syriza, seating their candidate, Alexis Tsipras, as Prime Minister in Greece. The win came on a platform to end austerity and renegotiate the terms of the Greek bailout. This is causing spasms in stock and bond markets in Europe over concerns it could lead to Greece’s exit from the Euro … Continue reading →

By Pam Martens and Russ Martens: January 27, 2015 Earlier this month, Jim Clifton, Chairman and CEO of Gallup, published a stunning indictment of Wall Street as a job creating engine. Clifton reported that the U.S. now ranks 12th among developed nations in business startups with countries such as Hungary and Italy having higher startup rates. Of equal concern writes Clifton, “American business deaths now outnumber business births.” Clifton has a theory on why America’s crisis in creating new businesses is a well-kept secret. He writes: “My hunch is that no one talks about the birth and death rates of American business because Wall Street and the White House, no matter which party occupies the latter, are two gigantic institutions of persuasion. The White House needs to keep you in the game because their political party needs your vote. Wall Street needs the stock market to boom, even if that … Continue reading →

By Pam Martens and Russ Martens: January 26, 2015 Just imagine what would happen in the United States, land of the billionaire Koch brothers’ well-heeled minions and their obsessive hysteria against the government helping those in need, if a political party called the Coalition of the Radical Left (Syriza is the Greek shorthand) took over the country in a landslide victory. Even though it happened in Greece yesterday, not the United States, it is sure to provide plenty of fodder for the Kochs to incite fear in their ranks and ramp up campaign spending by billionaires heading into the 2016 U.S. election. Just this past Saturday, Charles Koch was warning his Ayn Rand-worshiping followers at their annual confab in Palm Springs, California that “Americans have taken an important step in slowing down the march toward collectivism.” In excerpts of his speech leaked to the media, Koch said his vision is … Continue reading →

By Pam Martens and Russ Martens: January 22, 2015 The big story this week has not been news coming out of the widely covered World Economic Forum in Davos or the much anticipated bond-buying program in Europe known as QE. The big story is the sheer number of central banks moving into panic mode in the span of a week. We may be forced to change the name of our web site to “Central Banks On Parade.” Since last Thursday, seven separate central banks have taken action to guard against deflationary forces now moving like an out of control wildfire around the globe. Central bank moves in Switzerland, Canada, Denmark and Peru came as a surprise to markets and may have had a secondary agenda of drawing some blood from speculators. The most heavily anticipated announcement came today from Mario Draghi, President of the European Central Bank. At 2:30 p.m. … Continue reading →

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 20, 2015 After blowing up in spectacular fashion in 2008, receiving the largest taxpayer bailout in the history of modern finance, Citigroup’s FDIC-backed bank, Citibank N.A., is allowing retail customers around the globe to gamble in the high-risk world of currency trading with leverage as great as 50 to 1. It has been more than four days since wire services reported that Citigroup’s trading desk had lost more than $150 million as a result of Switzerland’s central bank removing the cap on the Swiss Franc’s peg to the Euro. During that time, Citigroup does not appear to have demanded a correction or retraction. Thus, that much of the story has made it into the hands of the public. What is not widely known is that Citigroup, a global behemoth bank which is on a short tether by the Federal Reserve after failing its … Continue reading →

By Pam Martens and Russ Martens: January 19, 2015 U.S. stock and bond markets are closed today in honor of Martin Luther King, Jr. but market turbulence continues around the world. Last night the Shanghai Composite stock market index plunged 7.7 percent after the China Securities Regulatory Commission announced a crackdown on the margin lending operations of the country’s three largest brokerage firms. The firms were given a three-month ban on opening new margin accounts. According to the regulator, the brokerages had been failing to reassess risk before extending margin loans beyond a six-month term. The China upheaval comes on the heels of a plunge in industrial commodity prices over the past six months with crude oil falling almost 60 percent in that period. Then there was last Thursday’s shock and awe from the Switzerland central bank’s decision to remove the 1.2 cap on the Swiss Franc’s peg to the … 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 14, 2015 JPMorgan Chase reported 2014 fourth quarter earnings this morning, missing analyst estimates. Analysts had expected $1.31 per share while the actual number came in at $1.19. Listening to the conference call this morning, there was the impression that the $1.19 would have been worse had the bank not released loan loss reserves in a number of business areas. Jamie Dimon, CEO of JPMorgan Chase, was back to characterizing the bank’s P&L as the “fortress balance sheet.” The London Whale credit derivatives traders almost blew up the fortress in 2012 and the markets are becoming skeptical as to just how much visibility there is on energy and emerging market loans souring on the books of the mega Wall Street banks. In early December, Oppenheimer analyst Chris Kotowski noted in a report that plunging oil prices could be the greatest threat to the … Continue reading →