Former NY Fed Goldmanite Dudley Attacks President Trump on Bloomberg Platform

It doesn't get any more transparent than this.

For anyone who doesn't already know, the Federal Reserve System is a private banking operation that controls the currency of the United States of America. The "System" issues "notes" at interest. The long-standing assumption is that the Fed is objective, impartial, and apolitical. Here's a taste of that "objectivism" from former NY Fed president, William Dudley.

(Bloomberg Opinion) -- U.S. President Donald Trump’s trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook. This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage by providing offsetting stimulus, or refuse to play along?

If the ultimate goal is a healthy economy, the Fed should seriously consider the latter approach.

Dudley states unequivocally that the President's trade policy is harmful and that the Fed should determine how to respond. Not exactly impartial, is it?

Here's more:

The Fed’s monetary policy makers typically take what happens outside their realm as a given, and then make the adjustments needed to pursue their goals of stable prices and maximum employment. They place little weight on how their actions will affect decisions in other areas, such as government spending or trade policy. The Fed, for example, wouldn’t hold back on interest-rate cuts to compel Congress to provide fiscal stimulus instead. Staying above the political fray helps the central bank maintain its independence.

So, according to conventional wisdom, if Trump’s trade war with China hurts the U.S. economic outlook, the Fed should respond by adjusting monetary policy accordingly — in this case by cutting interest rates. But what if the Fed’s accommodation encourages the president to escalate the trade war further, increasing the risk of a recession? The central bank’s efforts to cushion the blow might not be merely ineffectual. They might actually make things worse.

Fed Chairman Jerome Powell has hinted that he is aware of the problem. At the central bank’s annual conference in Jackson Hole last week, he noted that monetary policy cannot “provide a settled rulebook for international trade.” I see this as a veiled reference to the trade war, and a warning that the Fed’s tools are not well suited to mitigate the damage.

Yet the Fed could go much further. Officials could state explicitly that the central bank won’t bail out an administration that keeps making bad choices on trade policy, making it abundantly clear that Trump will own the consequences of his actions.

Again, Dudley appears to favor the Federal Reserve acting in a manner that runs contrary to the policy of the president. While that may be objective, it is hardly impartial...

...and it gets worse:

Such a harder line could benefit the Fed and the economy in three ways. First, it would discourage further escalation of the trade war, by increasing the costs to the Trump administration. Second, it would reassert the Fed’s independence by distancing it from the administration’s policies. Third, it would conserve much-needed ammunition, allowing the Fed to avoid further interest-rate cuts at a time when rates are already very low by historical standards.

I understand and support Fed officials’ desire to remain apolitical. But Trump’s ongoing attacks on Powell and on the institution have made that untenable. Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks — including the risk of losing the next election.

There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.

To Dudley's globalized mind, Trump's trade policies are "disastrous" and imperil his chances at "re-election." Since when are the unelected members of the Federal Reserve experts on election politics? Dudley's remarks reek of political partisanship.

The author and editor's emails are provided here as a public service. In a sane world, Dudley's email in-box would be flooded with contrarian opinions. The world of 2019 does not seem to be particularly sane, however.

To contact the author of this story: Bill Dudley at wcdudley53@gmail.com

To contact the editor responsible for this story: Mark Whitehouse at mwhitehouse1@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Bill Dudley is a senior research scholar at Princeton University’s Center for Economic Policy Studies. He served as president of the Federal Reserve Bank of New York from 2009 to 2018, and as vice chairman of the Federal Open Market Committee. He was previously chief U.S. economist at Goldman Sachs.

Other than the yield curve re-inverting and stocks reversing course midday, nothing much happened in the world of investing on Tuesday.

At the Close, Tuesday, August 27, 2019:
Dow Jones Industrial Average: 25,777.90, -120.93 (-0.47%)
NASDAQ: 7,826.95, -26.79 (-0.34%)
S&P 500: 2,869.16, -9.22 (-0.32%)
NYSE Composite: 12,474.05, -45.57 (-0.36%)

Trends Take Time; Why Tuesday's Sharp Gains Should Be Discounted

Less than 24 hours after making the bold proclamation that the bull market was over, Wall Street traders seem to disagree, sending the Dow Industrials up nearly 400 points at the open, with the Transportation Index cruising 130 points to the upside when the bell rang to start trading.

Days like this are precisely why investing is a longer-term proposition. Markets can turn on a dime, on a word from some prominent investor (see: Warren Buffett), a Fed President, a presidential tweet or even something more innocuous, like the trade balance (a new record, ignored), or jobs data (a bad miss on Friday, not ignored).

It's imperative to maintain perspective and not question what your own eyes told you a day ago, a week ago a month ago. In fact, for the Dow Theory components to finally trigger a sell signal took nearly three months from start to finish, all that time merely suggesting something ominous, before finally saying, "yes, here it is."

Tuesday's massive bounce contained no earth-shattering qualities in and of itself. The way the markets have been performing of late, one could hypothesize an equally violent downturn on Wednesday, Thursday, or Friday, though it appears the bulls are discounting the Dow Theory as a false flag for now. One wonders what the perma-bulls will be eating come June - steak tartar or boiled crow?

Instead of taking a short-term approach and admitting one was/is wrong, it's likely a better plan to look back at the charts and see exactly where the Dow Jones Industrial Average has to go before making a judgement on the efficaciousness of Dow Theory. I's a simple number: 26,616.71, the high from January 26, and the Transportation Index would have to close above 11,373.38, the all-time high from January 12.

Those numbers are far away, so the test will come over the coming weeks of earnings releases, when Wall Street and the financial news-speakers on CNBC, Bloomberg, and Fox Financial Network will be falling over each other to proclaim the greatness of the latest "beat." Bear in mind that all of these funny numbers coming out over the next three weeks, especially the EPS (earnings per share) figures, have all been manipulated by stock buybacks, diluting the number of shares outstanding, and in many cases, by lowered expectations by analysts. The true comparisons can be found from year-ago EPS (i.e., growth) and gross revenue numbers.

So, despite the snorting of the bull for a day, reserving judgement on a dead-cat, one-day wonder of a rally may be not only prudent, but prescient.

Dow Jones Industrial Average April Scorecard:

Date	Close	Gain/Loss	Cum. G/L
4/2/18	23,644.19	-458.92	-458.92
4/3/18	24,033.36	+389.17	-69.75
4/4/18	24,264.30	+230.94	+161.19
4/5/18	24,505.22	+240.92	+402.11
4/6/18	23,932.76	-572.46	-170.35
4/9/18	23,979.10	+46.34	-134.01
4/10/18	24,407.86	+428.76	+294.66

At the Close, Tuesday, April 10, 2018:
Dow Jones Industrial Average: 24,407.86, +428.76 (+1.79%)
NASDAQ: 7,094.30, +143.96 (+2.07%)
S&P 500: 2,656.85, +43.69 (+1.67%)
NYSE Composite: 12,575.63, +195.08 (+1.58%)

Stocks Rock No Matter The News As Long As Central Banks Spend

Proof that you can't fight people who print their own money...

Courtesy of Bloomberg and various central banks, the correlation between central banks sucking up trillions in assets and gains in global stocks is remarkable.

So, anybody thinking they're a stock-picking genius over the past eight years really needs therapy for an over bloated ego, just as the bloat in central bank balance sheets gently guides shares of all companies higher.

The frightening parts of this scenario - shown without doubt in the chart - are what happens when these central banks begin unloading assets, and what will be the timing and nature of this asset disposal sale? Will they all sell at once, or will be it be of the Chinese water torture variety, with a slow, drip, drip, drip as equities reach for fair value, far below where they reside today.

What are the consequences of this massive liquidity injection, since it's clearly already established policy and responsible for massive gains over the past eight years.

The most obvious solution for people with plenty of paper wealth would be to convert it to real assets, in the form of real estate, machinery, gemstones, precious metals, art, collectibles, and, realistically, staples, like food and water.

If the wheels come off the global Ponzi, people will starve. Look no further than Venezuela for proof that economic implosion causes severe social repercussions.

Of course, the vast majority of people living on planet Earth will be unprepared, duped into trading worthless paper and empty promises for more worthless paper and even emptier promises. Peer into underfunded pension plans - like Detroit's public plans, for instance, or many corporate plans that went belly up - for proof of what exactly that looks like.

At the end of this grand experiment called "global fiat money" for lack of a better term, what will become of the global economy, the ECB, the World Bank, the IMF, the Federal Reserve, the most massive control frauds ever foisted upon an unsuspecting public? They, and their governors, directors, and executives will try to "save us" from the financial blight, when it is they themselves causing it.

And people will continue to be duped into lives of slavish devotion to false gods.

At The Close, 7/25/17:
Dow: 21,613.43, +100.26 (0.47%)
NASDAQ: 6,412.17, +1.37 (0.02%)
S&P 500: 2,477.13, +7.22 (0.29%)
NYSE Composite: 11,965.72, +61.01 (0.51%)

Stocks End Losing Streak On Vix Fix Buying Spree

Apparently, somebody at the controls of the VIX machine, the one that supposedly measures market volatility, cranked the mechanism down on Tuesday, after the thing just ran off on its own Monday, spiking above 14 (14.85 at the open Monday morning) for the first time in what seems like eons.

Not that it mattered to anybody in particular, but there were some worries deep in the bowels of Wall Street's finest casinos, brokerages the the completely contrived and extremely overbought rally would not extend into year nine with gusto, so the eight-day losing streak for the Dow was dealt a swift, manipulated whipping, as stocks took off at the open and continued a steady ascent throughout the session.

According to various and supposed "expert analysts" in places like Yahoo Finance, Market Watch and Bloomberg, Tuesday's rally was the result of impressive consumer confidence, as though the average consumer has any truck with stocks, other than, of course, being roped and prodded into various pension and 401k schemes designed to enrich their advisors retirement portfolio.

As the case may be, consumer confidence is largely tied to Wall Street's excessive enthusiasm and outrageous fees, insofar as the supine congress and the brilliant politicians in the District of Columbia (that's D.C., for all you low information investors) have decided that financial advisors and retirement planners do not have to work in a fiduciary capacity, as was supposed to be required under part of the Dodd-Frank reforms. That's not an issue now, however, as these investment "pros" can once again lead the naive retail consumers into their own vehicles with their own sets of fees and refinements. It's a lovely arrangement... for the brokerages.

Just so nobody is confused, the casino always wins, and today was further proof. Now, wait until you're 57 1/2, or 59 1/2, or 62 or 65 or 70, to begin feeling the joy of getting roughly 5-10% less return on your hard earned money than if you had just invested it yourself in a no-load mutual fund or some safe bonds, or, perish the thought, gold or silver, the latter of which continues heading higher (over $18/ounce), despite the best efforts of the central bank cartel to suppress the price, as they did again today with gold.

Funny how the only real money (intrinsic value) in the world continues to be spat upon, denigrated, and by the elite supra-nationals in our midst.

King Midas is spinning in his crypt.

At the Close, 3/28/17:
Dow: 20,701.50, +150.52 (0.73%)
NASDAQ: 5,875.14, +34.77 (0.60%)
S&P 500: 2,358.57, +16.98 (0.73%)
NYSE Composite: 11,493.84, +79.51 (0.70%)

Stock Indices Displaying the New Minimalism

If not for the power of levitating algos, stocks would have ended the week with losses.

As it is, the major indices end the week (markets closed on Good Friday) with minuscule gains on puny volume, except for the NASDAQ, which actually finished negative for the fourth week in the past five.

Here's how the week shook out:

Dow Ind. +50.58 (0.29)
S&P 500 +5.94 (0.29)
NASDAQ -4.28 (0.09)

... and on the day:
Dow 17,763.24. +65.06 (0.37%)
S&P 500 2,066.96, +7.27 (0.35%)
NASDAQ 4,886.94, +6.71 (0.14%)

For this, we need not one (CNBC), not two (Bloomberg TV), but three (Fox Business) cable networks devoted to stocks?

It would be worthwhile, one supposes, if even one of them told the truth about Wall Street half the time.

These public markets and the networks devoted to coverage of them, are epic fails. The world is rapidly moving beyond their facile facades of importance and heft. Most of the world's population does not own stocks and has no use for massive, unfair, unfeeling corporations and their oligarch-like executives.

Indeed, would half of the Fortune 500 companies in the world fail, markets would clear and more entrepreneurs would take up the slack, having the chance to make an honest living.

Corporations, like the governments which support them, are leeches which prey upon the blood of individuals and communities. The sooner people wake up to the fact that they are strip-mining operations of productive capacity, the better.

Peace. Out.

Fake, Fake, Fake Rally After Non-Farm Payroll Jobs Disappointment

With baited breath, the world awaits the January non-farm payroll report, and, when it is released, and it is far worse, far weaker than expected, stocks go straight up.

Yes, that's exactly what happened. Yes, it defies logic. NO, we're not buying it.

Just in case anybody hasn't noticed, banks, brokers and high government officials have variously been accused - and some even admitted (though untried and none convicted) - of manipulating Libor rates, FX markets, precious metals, mortgages, commodities, municipal bonds and probably every other financial asset where a market is made.

So, should it surprise anyone if stocks are manipulated, rigged, fixed, flogged, whipped and played to the whims of the rentier class?

No, it certainly should not.

While the handwriting is plain as day on the Wall Street walls, scrolled in the signature style of the PPT.

When the announcement was made at 8:30 am ET Friday morning, that the US created a mere 113,000 jobs in January - after posting a horrifying 74,000 (upgraded to 75,000 this morning) for December - stock futures headed due south, sending the implied opens for the major indices to morning lows.

However, within minutes, those losses in the futures markets were wiped away, as the futures galloped up, up and away, pointing to a counterintuitive higher open for US markets.

The Dow, together with Thursday's vapor ramp, put in the best two-day performance since October, and US markets still haven't had a 10% correction since August of 2011.

Apparently, one should believe that the lower jobs numbers are somehow good for the economy, in that the Fed may begin to "un-taper" their recent tapering of bond purchases and bring the legendary punch bowl back to the Wall Street jubilee, where the connected truly do get "money for nothing" and the chicks (and coke) for free.

Apparently, one should believe that $100-per-barrel crude oil and $3.50-4.00-a-gallon gas are good for the economy.

We wisened investors should also believe that gold is permanently priced at $1250 per ounce, silver at $20, all mortgage-backed securities are worth 100% of their par value, real estate never goes down, Janet Yellen and the rest of her Fed brethren have the best interests of the US citizenry at heart, pigs fly and flying unicorns that poop rainbows are real and are stabled in the basement of the Mariner-Eccles building.

We should embrace a president who openly lies, a congress which will not impeach, a spy agency who reads this, knows you are reading it, listens in on everything, everywhere, all the time, a steadily-declining median household income even in the face of the top 10% making more than ever, part-time jobs replacing full-time ones, taxes that only go up, regulations on everything and penalties for anything not covered by regulations.

It's all good, all the time, even if you're losing your home, having your kids taken from you and starving to death. At this pace, as the US economy plunges even deeper into depression than it already has, stocks should set all-time highs endlessly, without pause, forever.

For the record, Money Daily will stick to its call made days ago, that the market has turned from bull to bear, be proven wrong, but understand that nothing is really as it seems. As conditions in the real world worsen, they'll only get better on Wall Street, in Washington and on the paper facade that is CNBC and Bloomberg. Buy it, own it, be it.

Good is evil. War is peace. Love is hate. Stay short and get slaughtered. After all, if Wall Street doesn't take your phony paper money, Washington will.

Emerging market economies will always be emerging, and never become "developed" even if their GDP is larger than that of all the developed nations combined. And, besides, they don't matter.

George Orwell would be proud.

We have always been at war with Eastasia... or Eurasia.

DOW 15,794.08, +165.55 (+1.06%)
NASDAQ 4,125.86, +68.74 (+1.69%)
S&P 1,797.02, +23.59 (+1.33%)
10-Yr Note 100.57, +0.44 (+0.44%) Yield: 2.68%
NASDAQ Volume 1.92 Bil
NYSE Volume 3.75 Bil
Combined NYSE & NASDAQ Advance - Decline: 4216-1466
Combined NYSE & NASDAQ New highs - New lows: 141-44
WTI crude oil: 99.88, +2.04
Gold: 1,262.90, +5.70
Silver: 19.94, +0.008
Corn: 444.25, +1.25

INEVITABLE: Dow Sets New All-Time Closing High

Without a doubt, this headline news story is about the least anticipated - because it was such a sure thing - of this or any recent year.

With unemployment at 7.9%, 47 million Americans on food stamps and after millions of foreclosures, bank bailouts, company bailouts (GM, Chrysler, AIG, others), a downgrade of the US from AAA to AA+, Wall Street has its new record high.

Big whoop.

That's the good news.

Keeping a level head and household, as prices rise and wages stagnate, that's the tough part. Not everyone in America has participated in this miraculous four year rally off the March, 2009 lows. The main beneficiaries have been the big Wall Street brokerages, which, thanks to the magnanimity of the Federal Reserve - whose balance sheet has more than triple in that time period - were able to at least partially repair their broken balance sheets and claim victory over the evil financial crash.

At this level the Dow Jones Industrials are up a stunning 117% off the lows, as good a period for stocks as ever has been, though one might argue that it was bought on the backs of homeowners, many of whom are still trapped in their domiciles, with prices well below what they owe or what they paid back in the heady days of the early to mid-2000s.

It would be a different story were the US economy growing at a pace of better than two percent - where it's been stuck for these past four to five years, but, realistically, there aren't many Americans who can camly state that they've doubled their net investment value over the past four years. Most of the gains were made on Wall Street or close to it, by the traders, players and hedge funds who expressed their blind faith that the system would not - could not - fail, and dove headlong into stocks.

Bully for them, and may they enjoy their profits. There's absolutely nothing wrong with making money. But, the evidence that the majority of Americans are not participating is clear. Average daily volumes are less than half what they were in 2007, the last time the Dow posted a record close.

There's also the fear that keeps people out of markets. It's no coincidence that after making new highs, stocks have lately had the nasty habit of recoiling and falling back, as was the case in both 2000 and 2007.

So, this may be short-lived if recent history is a guide, or, are we on the path to a new and glorious epoc of American exceptionalism?

One would be hard-pressed to find anyone of that undiluted opinion... except maybe on CNBC or Bloomberg TV, where "guests" are paid handsomely to talk their book.

Buy, buy, buy at the new all-time high?

You're kidding, right?

And, not to rain on anybody's parade, here are the changes to the makeup of the Dow Industrials since 2007.

On February 19, 2008, Chevron (CV) and Bank of America (BAC) replaced Altria Group (MO) and Honeywell (HON).

On September 22, 2008, Kraft Foods (KRFT) replaced American International Group (AIG).

On June 8, 2009, General Motors (GM) and Citigroup (C) were replaced by The Travelers Companies (TRV) and Cisco Systems (CSCO).

On September 24, 2012, UnitedHealth Group (UNH) replaced Kraft Foods (KRFT).

It seems, especially in that September 22, 2008 swap, that some bad was replaced with good. GM was restructured and salvaged by the US government. Citigroup went through a 1:10 reverse split in 2010. Where would the Dow be today, without these changes? Travelers alone is up over 100% since joining the Dow.

And, lest we forget that little thing called inflation, which, experts tell us, has been running at about 2.5% for the past five years, today's record for the Dow is a nominal one, not a real one, and, just to throw some more fuel on the fire, measured in gold instead of dollars, it's not even close. In fact, measured against gold, the Dow has barely budged off the bottom.

It's all a matter of which metrics you want to use.

No matter what, though, let's see how high it goes from here. With the Fed backing it at the rate of $85 billion a month, it should rip right through 15,000 before even breaking a sweat.

Dow 14,253.77, +125.95 (0.89%)
NASDAQ 3,224.13, +42.10 (1.32%)
S&P 500 1,539.79, +14.59 (0.96%)
NYSE Composite 8,978.12, +77.07 (0.87%)
NASDAQ Volume 1,849,814,250
NYSE Volume 3,686,912,250
Combined NYSE & NASDAQ Advance - Decline: 4532-1728
Combined NYSE & NASDAQ New highs - New lows: 688-50
WTI crude oil: 90.82, +0.70
Gold: 1,574.90, +2.50
Silver: 28.60, +0.108