Five Rate Hikes This Year?

Five Rate Hikes This Year?

Janet Yellen’s announced plans to raise rates three times this year…

But could she actually deliver five?

A scandalous question no doubt. Three hikes are possible, and barely. Four’s over the top, and five is simply out of court. Five would kill the economy.

So how do we get five?

Let’s untangle the yarn…

The Fed’s balance sheet was about $800 billion before the great crisis of 2008. Modest. Or at least… manageable.

Then the Honorable Mr. Ben Bernanke responded to the crisis with the grandest, most swashbuckling monetary experiment in world history.

The Fed purchased trillions of dollars of bonds under QE numbers 1, 2 and 3 and Operation Twist and heaven knows what.

Its balance sheet ballooned to $4.2 trillion — some four times larger than pre-crisis levels — where it stands today

It was an emergency measure, they said. They’d worry about unwinding the balance sheet later, when things returned to normal.

It’s now 2017. Things have returned, in their own nervous and winding way, to conditions approaching normal. Official unemployment hums at 4.8%. Inflation, years dormant, musters steam. Green shoots of growth appear here, there and points between.

Many now claim it’s time to start unwinding the balance sheet. To take away the crutch. But no one’s ever tried to unwind a balance sheet this size.

So here’s the $4.2 trillion question:

Can the Fed unwind its balance sheet — take away the crutch — without panicking the markets?

Not according to Bloomberg’s Vincent Cignarella: “With so much uncertainty in the market about how it will be reduced, a few mistimed words could roil markets faster than you can mouth ‘taper tantrum.’”

“Taper tantrum” being a reference to the open revolt markets mounted in 2013 at the mere suggestion that Ben Bernanke might wind down the bond purchases — take away the crutch.

Mark MacQueen, co-founder and portfolio manager at Sage Advisory Services agrees: “The unwind will not be pretty.”

We said Janet Yellen could end up hiking rates five times this year — even though she plans for three. Where do we get the other two?

Here’s where rubber meets road…

In the opening rounds of QE, the Fed bought gobs of long-term bonds to keep long-term interest rates low. Now, several years later, the debt is beginning to mature.

Maturing Treasuries only totaled about $3.5 billion in 2015, for example.

But that figure’s expected to hit $195 billion this year. It’s further expected to top a gargantuan $422 billion next year, according to Bank of America Merrill Lynch’s Mark Cabana.

In other words, a lot of the air used to elevate markets post-crisis could soon be leaking out of the system.

That means less cushion for the markets, less cushion for the economy. It means tightening, even without rate hikes. Janet Yellen said so herself in January.

She claimed a shrinking balance sheet this year has the same impact as two rate hikes.

That means if Yellen goes ahead with her three planned rate hikes, a shrinking balance sheet could essentially add two hikes — five in total. So if she still wants three rate hikes this year, she might only need one!

According to Francesco Garzarelli, interest-rate strategist at Goldman Sachs, a dwindling balance sheet could mean a 0.5–0.75 rise on the all-important 10-year Treasury yield. It’s currently 2.45%.

Add 0.75 to it and it takes the yield on the 10-year note above 3%. So what?

As “bond king” Jeffrey Gundlach has warned, a 3% yield on the 10-year is a “line in the sand” for the bond market (Remember, bond prices fall as bond yields rise):

“If we take out 3% in 2017, it’s bye-bye bond bull market. Rest in peace.”

Gundlach also says it could also trigger an equities sell-off:

Mr. Ben Bernanke says there’s no need to rush with any of this: There’s “little evidence that, at current levels, the Fed’s balance sheet poses significant problems for market functioning or for the economy.”

Maybe. But if the Fed just keeps rolling over the debt, it means the Fed has no room to maneuver in another financial crisis, as Jim Rickards explains:

The balance sheet is still over $4 trillion. It has not been normalized, so they have lost the capacity to deal with the next crisis. What are they going to do, print another $4 trillion? You’re at the outer boundary of what’s politically possible or what you can do without destroying confidence.

So these are the options before Janet Yellen:

Roll over the debt, kick the can further down the road and deprive the Fed of “dry powder” to handle the next financial crisis…

Or start unwinding the balance sheet this year — on top of any rate hikes — and risk kicking out the crutch that’s kept markets vertical all these years.

Our money’s on Option 1. Yellen’s term expires next February. She’ll probably let the next sucker deal with the balance sheet… and deal with Trump.

Regards,

Brian Maher
Managing editor, The Daily Reckoning

Trump Says Administration Will Issue New Immigration Order Next Week and Appeal Ninth Circuit Ruling

JONATHAN TURLEY

donald_trump_president-elect_portrait_cropped200px-US-CourtOfAppeals-9thCircuit-Seal.svgCNN is reporting that President Trump said today that  he will sign a new immigration executive order next week and that he  would appeal the 9th Circuit Court’s ruling against his travel ban.  He further called the Ninth Circuit a court “in chaos” and “turmoil.”  I do not see the chaos or the turmoil on the Ninth Circuit, which is the largest circuit in the country.  One can certainly disagree with the decision on the executive order, but the panel decision was a good-faith decision of three judges who unanimously ruled against the order on the effort to stay the lower court’s temporary restraining order (TRO).

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The $100,000 Challenge: Proving Mercury (eHg) In Vaccines Is Safe

Tales from the Conspiratum

Source: The $100,000 Challenge: Proving Mercury (eHg) In Vaccines Is Safe

activistpost.com

Catherine Frompovich

Feb 15, 2017

February 15, 2017 is a day that should live in infamy!  Why? Because that’s the date independent vaccine safety advocate, Robert F Kennedy Jr., Esq., offered a $100,000 reward to any journalist who “can find a peer-reviewed scientific study demonstrating that thimerosal is safe in the amounts contained in vaccines currently being administered to American children and pregnant women.”

How’s that for raising the bar on vaccine science research?  And, it had to be done by a consumer and parent rather than the vaccine industry, Big Pharma or the CDC/FDA who lack the intestinal fortitude to admit their science not only is wrong and misleading, but damaging innocent infants, toddlers, children and fetuses.

The World Mercury Project, of which Robert Kennedy is chairman, is sponsoring the $100K challenge.

Kennedy explained that the WMP…

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The Neocons and the “deep state” have neutered the Trump Presidency, it’s over folks! (UPDATED 2x)

I won’t count him out yet, Trump is still learning the game, knows he has to give some to get… still making deals with the deep state. Reform is slow, he’s still learning from the master Putin how to handle political enemies.
This is where his abilities as a ruthless businessman will come in handy!
Trump as the new Yanukovich is not quite accurate, possibly being set up as the fall guy like a Gorbachev, but Trump is much more aware of changes to come. The ship can still be turned around, but Titanically Slow! Read Lada’s world class predictions on Trump, and the future of US, EU, Russia, China, Middle East. Blow your mind:

https://futuristrendcast.wordpress.com/

Hacker News: Yahoo Hacked Once Again! Quietly Warns Affected Users About New Attack

Yahoo Hacked Once Again! Warns Affected Users About New Attack

Has Yahoo rebuilt your trust again?

If yes, then you need to think once again, as the company is warning its users of another hack.

Last year, Yahoo admitted two of the largest data breaches on record. One of which that took place in 2013 disclosed personal details associated with more than 1 Billion Yahoo user accounts.

Well, it’s happened yet again.

Yahoo sent out another round of notifications to its users on Wednesday, warning that their accounts may have been compromised as recently as last year after an ongoing investigation turned up evidence that hackers used forged cookies to log accounts without passwords.

The company quietly revealed the data breach in security update in December 2016, but the news was largely overlooked, as the statement from Yahoo provided information on a separate data breach that occurred in August 2013 involving more than 1 billion accounts.

The warning message sent Wednesday to some Yahoo users read:

“Based on the ongoing investigation, we believe a forged cookie may have been used in 2015 or 2016 to access your account.”

The total number of customers affected by this attack is still unknown, though the company has confirmed that the accounts were affected by a security flaw in Yahoo’s mail service.

The flaw allowed “state-sponsored attackers” to use a “forged cookie” created by software stolen from within the company’s internal systems to gain access to Yahoo accounts without passwords.

“Forged cookies” are digital keys that allow access to accounts without re-entering passwords.

Here’s how the attack works:

Instead of stealing passwords, hackers trick a web browser into telling the company that the victim had already logged in by forging little web browser tokens called cookies.

You use cookies every time you log into any service and check that box that says “keep me logged in,” or, “remember me.”

So, even if you close the window, or shutdown your system, you will not have to log back into your account because the cookie stored by your browser tells the online service that you already submitted your username and password.

Here’s what a Yahoo spokesperson said about the recently disclosed breach:

“As we have previously disclosed, our outside forensic experts have been investigating the creation of forged cookies that could have enabled an intruder to access our users’ accounts without a password.”

“The investigation has identified user accounts for which we believe forged cookies were taken or used. Yahoo is in the process of notifying all potentially affected account holders.”

The warning notification has been sent out to almost all affected Yahoo users, although investigations are still ongoing.

The notice sent to Yahoo’s customers on Wednesday, the same day it was reported that Verizon is slashing the price the telecom service will pay for Yahoo by at least $250 Million, following revelations of two security breaches last year, according to a report by Bloomberg.

The price cut appears to indicate the troubled deal will go through.

With yet another disclosed security breach, one might think about closing online accounts associated with Yahoo.

Mohit Kumar - Hacking News
Entrepreneur, Hacker, Speaker, Founder and CEO — The Hacker News and The Hackers Conference.

Why Trump Was Forced to Sacrifice His National Security Adviser Michael Flynn

Futurist Trendcast

Below are my thoughts on why Trump was forced to sacrifice Michael Flynn. I am posting them here along with an excerpt from The New York Times. The NYT bit is posted as a mere record of what is floating out there, so don’t hold me to it. Whether the sequence and content of the events described by NYT is true (most likely, these are half-truths) or not… one thing is for certain. What you will read below is yet another spectacular confirmation that Trump is being put in that proverbial straight jacket I’d predicted in October 2016. It also confirms my other prediction: that he will be forced to make deals, dilute his original agenda and toe the line – all this per my 10/2016 EARTH REPORT 16!

Notice that a conversation between newly appointed by the US president Trump national security adviser Michael Flynn and Russian Ambassador…

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