Bernie Sanders Raised $6 Million In One Day After Launching Campaign

Just one day after officially launching his campaign for the 2020 Democratic nomination during an interview on Vermont Public Radio, Bernie Sanders has already raised more than $6 million through more than 220,000 individual contributions, according to CNN.

Sanders, who consistently ranks near the top of most polls alongside former Vice President Joe Biden, saw the money pour in from donors in all 50 states. The average contribution was $27, which is roughly in line with the average contribution from Sanders 2016 upstart primary campaign against Hillary Clinton, in which he won a number of crucial primaries (all while actively working against the DNC). Confirming his outsize popularity in an increasingly crowded field, the self-described “Democratic Socialist”‘s haul dwarfs the $300,000 raised by Elizabeth Warren during the 24 hours after her official campaign launch.

Sanders

Of the $6 million raised, some 10% (about $600,000) came in the form of recurring donations, providing “a huge, dependable grassroots donor base that will afford the campaign a consistent budgeting baseline.”

During his last race, Sanders regularly touted the fact that his campaign was largely funded by small donations. And it appears this is already emerging as a central theme for the 2020 race.

“The only way we will win this election and create a government and economy that work for all is with a grassroots movement – the likes of which has never been seen in American history,” Sanders said in his message announcing his campaign. “They may have the money and power. We have the people.”

On top of that $6 million haul, Sanders is entering the race with more than $9 million left in his US Senate campaign committee: funds that he can transfer to his presidential campaign. That puts him behind only Warren ($11 million) and Sen. Kirsten Gillibrand ($10.3 million).

That ought to give Sanders plenty of cushion to stick it to the “millionaihs and billionaihs”.

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Author: Tyler Durden

Confused Market Slides Then Rebounds After FOMC Minutes

In light of the relative lack of new information in the Fed minutes, which reinforced the Fed’s dovish, patient, “data-dependent” posture with hint of growing dovishness when it comes to future inflation, however coupled with the new data that “almost all” FOMC officials wanted a “plan” to step reducing the balance sheet by year end, it is perhaps not surprising that markets haven’t done much.

Indeed, as Bloomberg’s Ye Xie notes, “many participants don’t know what will be the next move later this year, which perhaps is the definition of being neutral.” Furthermore, the Fed underscored its data-dependence, perhaps to an extreme, after several participants argued that rate hikes are only necessarily when inflation surprises on the upside, while some hawks say higher rates are needed if the economy performs as expected.

In keeping with this take, there has not been any notable move in Fed Fund expectations, which still call for a rate cut in early 2020, a divergence with the Fed’s dots which will have to be address by the Fed next month when the FOMC releases its latest economic projections and dot plot, which still sees 2 rate hikes this year versus the market’s zero.

Following the minutes, the broader market has drifted, first sliding to session lows, then rebounding before stabilizing modestly in the green…

… with bank stocks, energy and small caps leading and homebuilders and tech dragging stocks lower.

Meanwhile, with the dollar back to unchanged on the day, yields along the curve were pushed modestly higher, led by the long end as the steepening discussed earlier by Charlie McElligott appears to be taking hold:

The bottom line is that the Fed can afford to wait and see because inflation pressure is muted. It’s more about risk management. Bond yields and the dollar moved a bit higher but the minutes shouldn’t move the needle for markets by much.

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Author: Tyler Durden

Smollett Indictment Expected In “A Matter Of Hours”

Empire star Jussie Smollett is expected to be indicted in “a matter of hours. Not days,” according to Chicago’s Fox 32 reporter Rafer Weigel. 

The news comes shortly after word that Smollett’s defense team was able to postpone testimony in front of a Cook County grand jury testimony by two men once considered potential suspects in the case

Two men once considered potential suspects in the alleged attack on “Empire” actor Jussie Smollett were moments away from testifying to a Cook County grand jury, before a last-minute phone call from Smollett’s defense team convinced prosecutors to postpone the testimony.

CBS 2’s Charlie De Mar has learned the brothers were waiting outside the grand jury chambers at the Leighton Criminal Courthouse on Tuesday, just minutes from testifying, when the Cook County State’s Attorney’s Office got a call from Smollett’s lawyers, claiming they may have new evidence. –CBS Chicago

The two men, brothers Ola and Abel Osundario were arrested last week, however Chicago PD released them without charges after they reportedly said that Smollett paid them $3,500 each to stage a January 29 predawn “hate crime” attack designed to make Trump supporters look like bigots

According to CBS, “About a dozen search warrants have now been issued, including ones for Smollett’s financial and phone records, and detectives are waiting for those records to come back.”

The Osundario brothers said that Smollett concocted the hoax after a racist letter containing a white substance which was mailed to the Chicago Empire studio failed to have the impact Smollett intended. 

The evening of the alleged attack, the Osundarios poured a chemical on the actor, placed a noose around his neck and yelled racist and homophobic slurs, including “this is MAGA country.” 

Earlier Wednedsay, 20th Century Fox TV tweeted their ongoing support for Smollett: 

And while some people have begun to feel sorry for Jussie – others, such as their spouses, not so much.

(h/t Cassandra Fairbanks of Gateway Pundit)

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Author: Tyler Durden

Over At Last? AG Barr To Announce End Of Mueller Probe Next Week: CNN

Barely a week after being sworn in as the head of the Justice Department, Attorney General William Barr is reportedly planning to announce as early as next week that Robert Mueller has completed his investigation and that a confidential report on Mueller’s findings will be submitted to Congress in the very near future.

According to CNN, the preparations – which are in line with an NBC report from late last year that the Mueller report would be completed by the end of February – “are the clearest indication yet that Mueller is nearly done with his almost two-year investigation.” Barr has said that he wants to be as “transparent” as possible while being “consistent with the rules and the law.”

Mueller

According to the law, Mueller must submit a “confidential” report to the AG after the investigation ends. But the rules don’t require it to be shared with Congress or the public (though, like everything involving the Mueller probe, it will almost certainly leak).

One thing that remains unclear is to what extent Mueller’s findings will be shared with Congress (since the DOJ typically frowns on publicizing embarrassing or compromising information about people who haven’t been charged with a crime…though that principle has apparently gone out the window over the last two years).

CNN also noted that it’s possible that Mueller has made referrals to other prosecutors besides the New York US attorney who brought charges against Michael Cohen. The existence of other investigations might also soon come to light. CNN reported that attorneys from the US attorney’s office for Washington DC have been visiting Mueller “more than usual.”

Signs that the Mueller probe is winding down have been multiplying in recent weeks. Four of his 17 prosecutors have been reassigned, and the grand jury he has used to secure his indictments hasn’t convened since late January.

While Trump is probably hoping that the Russia collusion narrative will decidedly die after the report is released, former DNI James Clapper – whom Trump threatened to strip  of his security clearance – warned that the report might leave open the question of whether there actually was collusion between Trump and Russia, giving the release a disappointingly anti-climactic feel, according to the Hill.

Former Director of National Intelligence James Clapper said Wednesday that he’s far from sure that special counsel Robert Mueller’s investigation will clear up questions about President Trump and Russia.

He said he was hopeful the Mueller probe will provide some answers, but warned it might not even draw a conclusion on whether there was collusion between the Trump campaign and Moscow.

“I think the hope is that the Mueller investigation will clear the air on this issue once and for all. I’m really not sure it will, and the investigation, when completed, could turn out to be quite anti-climactic and not draw a conclusion about that.”

So, it appears that, after a series of false alarms and blown deadlines, maybe the Mueller probe really is winding down. But the notion that Russia helped Trump cheat during the 2016 campaign might not die yet.

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Author: Tyler Durden

“An Unavoidable Global Recession”: The Warnings Get Louder As Worldwide Economic Numbers Continue To Deteriorate

Economic numbers all over the world continue to get worse, and as you will see below, even New York Times columnist Paul Krugman is now warning of “an unavoidable global recession”.  Unfortunately, most Americans still have absolutely no idea that this is happening.  Most ordinary citizens are still under the impression that everything is going to be just fine, but the numbers suggest otherwise.  The Baltic Dry Index just plummeted to the lowest level that we have seen in three years, and this is yet another indication that the global trade war is causing widespread economic pain.  And according to Bloomberg, global economic growth has now dropped to the lowest level that we have seen since the Great Recession…

The global economy’s loss of momentum has left expansion now looking like its weakest since the global financial crisis, a development that’s already sparked a dramatic shift among central banks.

A UBS model suggests world growth slowed to a 2.1 percent annualized pace at the end of 2018, which it says would be the weakest since 2008-2009.

Unfortunately, it appears that things are getting even worse during the first few months of 2019.  In North America, Europe and Asia, signs of a major downturn are seemingly everywhere

Unfortunately, there hasn’t been much sign of that. China car sales dropped in January, and data last week showed U.S. retail sales posted their worst drop in nine years in December. In Europe, where the slowdown has been particularly marked, sentiment indicators continue to weaken, and the latest OECD leading indicator has also declined.

The numbers coming out of China are particularly striking.  Experts were stunned this week when it was announced that Chinese car sales had plunged 17.7 percent

Car sales in China continued to decline in January after their first full-year slump in more than two decades, adding to pressure on automakers who bet heavily on the market amid waning demand for cars from the U.S. to Europe.

Passenger vehicle wholesales fell 17.7 percent year-on-year, the biggest drop since the market began to contract in the middle of last year, while retail sales had their eighth consecutive monthly decline, industry groups reported Monday.

That is an absolutely disastrous number, and it is a sign that this will be a very, very tough year for the global auto industry.

Meanwhile, German industrial production is falling at a pace that we haven’t seen since the last global recession

“Unexpectedly,” German industrial production fell 3.9% in December 2018 compared to December 2017, after having fallen by a revised 4.0% in November, according to German statistics agency Destatis Thursday morning. These two drops were steepest year-over-year drops since 2009.

Even during the European Debt Crisis in 2011 and 2012 – it hit Germany’s industry hard as many European countries weaved in and out of a recession, with some countries sinking into a depression — German industrial production never fell as fast on a year-over-year basis as in November and December

But as bad as things are in Germany, they are even worse in Italy.

Italy’s economy has already fallen into a recession, and their debt problems continue to grow with each passing day.

Watch Italy, because it is going to be a key to the drama that is currently unfolding in Europe.

Here in the United States, we are still doing relatively better than much of the rest of the world, but our economy is slowing down too.  U.S. retail sales just suffered their “biggest drop in more than nine years”, and the stunning bankruptcy and liquidation of Payless ShoeSource has made front page news all over the nation

Payless ShoeSource confirmed Friday that it will close its 2,100 stores in the U.S. and Puerto Rico and start liquidation sales Sunday. The company is also shuttering its e-commerce operations.

The closings mark the biggest by a single chain this year and nearly doubles the number of retail stores set to close in 2019.

So what does all of this mean?

What all of this means is that this is the beginning of the end for the global economic bubble.  It is time to start getting serious about the economy again, and it is time to get prepared for the tough years that are ahead.

At this point, even the most clueless pundits in the mainstream media can see what is coming.  For example, New York Times columnist Paul Krugman is now warning that we are heading for “an unavoidable global recession” either at the end of this year or the beginning of next year

Professor Paul Krugman has warned a series of isolated downward economic trends around the world will spiral into an unavoidable global recession towards the end of 2019 or the beginning of next year. Mr Krugman said there is not “one big thing” prompting the stark forecast but instead blamed a number of incidents happening at the same time. He said a slump in the eurozone combined with the long-running US-China trade war, President Trump’s tax policy and world leaders’ lack of preparedness are increasing the risks of a worldwide economic slowdown.

If even Paul Krugman can see what is happening, then you know that time is short.

Prior to the Great Recession of 2008 and 2009, most people never would have imagined that we were about to enter a terrible global economic downturn.  Here in the U.S., it seemed like the economy was buzzing along quite nicely, and the vast majority of us had absolutely no idea what was really going on behind the scenes.

Similarly, right now most of us are conducting our lives as if nothing is going to change.  To most people, the system seems to be functioning normally and there appears to be no cause for alarm.

Unfortunately, things are not that simple.

Rubber bands can keep stretching for quite a while, but if you put too much pressure on them they will eventually snap.  At this point there is an enormous amount of pressure on our global economic bubble, and someday it will “snap” too.

It is just a matter of time.

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Contributed by Michael Snyder of The Economic Collapse.

Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream , The Truth and Economic Collapse Blog.

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Author: Michael Snyder

CBD Oil Is More Than Just A Fad: Holistic Vets Effectively Use It On Dogs

CBD oil (cannabidiol oil) is proving itself as more than just a fad. It seems like everyone, from athletes to everyday busy moms, and even veterinarians are using it as a natural and safe holistic treatment for a variety of ailments.

Many deeply entrenched in the realm of “Big Pharma” are going to say CBD oil (cannabidiol oil) is just a fad and it won’t ever gain real popularity like their drugs. But trusting Big Pharma has proven deadly for so many, and now some are choosing a more natural path to healing for themselves and their beloved pets.

Dogs Naturally Magazine reported on a holistic veterinarian that has had success with natural CBD oil. Australian veterinarian Edward Bassingthwaighte discovered how CBD oil could be a necessity in his holistic veterinary practice. “I simply can’t explain the improved heart murmur,” says Bassingthwaite. “They normally don’t get better,” he added, speaking of a Jack Russel terrier’s improved heart murmur. The ailment improved to the point of the dog wanting to go on long walks outside.

As more people seek natural remedies for health problems, interest in cannabidiol (commonly known as “CBD”) is growing, as it is safe and effective when used not just on yourself, but on your beloved dog. CBD oil is a fascinating substance that has tremendous therapeutic value. As Ready Nutrition previous reported, it is just one of over 100 compounds found in cannabis plants (including hemp!) that belong to a class of naturally occurring, biologically active chemical constituents called cannabinoids. CBD is non-intoxicating and unlike THC, the psychoactive ingredient in marijuana, CBD is a phytochemical that won’t get you or your dog “high.”

While you can use CBD oil on yourself, as it has been known to help regulate to regulate basic bodily functions, including mood, temperature, digestion, sleep, pain, appetite, and many more in humans, veterinarians are also finding it essential in their practice.  Those who live a more naturally healthy and holistic lifestyle seem to be onto something with CBD oil.

CBD oil can aid a dog who has separation anxiety. We all know the type of dog; the one that can’t stand to be away from his family.  But CDB has already been extensively studied on anxiety in humans, and it has been found to reduce anxiety caused by public speaking, reduce anxiety in both healthy people and people with anxiety disorders, and be effective for diminishing panic disorders and post-traumatic stress disorders

CBD oil and other substances found in hemp and cannabis have been found to have an anti-tumor effect on both humans and dogs. Dr. Bassingthwaighte experienced this first hand when he used CBD oil on senior Staffordshire Terrier had a 6cm mammary tumor. That tumor disappeared in 3 months and didn’t come backCBD has even been shown to stop cancer cells from growing and increased tumor cell death.

Further animal studies show that CBD can help prevent colitis (IBD) and restore normal gut motility in inflammatory bowel disease. CBD also has antibiotic properties, including Staphylococcus Aureus (MRSA).

CBD oil is perhaps used the most for pain, as its likely the most common and broad ailment.  The cannabinoids in CBD work so well for pain that scientists are considering it as a new class of drug for the treatment of chronic pain. Studies show CBD to be very effective for decreasing pain (including neuropathy and nerve-related pain) and decreasing the impact of inflammation on oxidative stress (which causes degeneration and premature aging). CBD oil also has been shown to decrease inflammation in acute pancreatitis and reduce inflammation, including intestinal inflammation which is associated with irritable bowel disease.  And it works just as well on your beloved dog as it does on you!

CBD use on dogs is safe and legal too. With so many studies showing the health benefits of CBD, the most encouraging result is that CBD appears to be safe, even when taken in high doses (more than recommended) and over extended periods of time. It can decrease the activity of liver enzymes used to metabolize many prescription drugs, so if your dog is on medication, you might want to check with your holistic veterinarian before using CBD.

When looking for a CBD oil for your dog (or yourself for that matter) you’ll want to choose a high-quality organic oil. It’s also important that you don’t “cheap out.” A cheap CBD oil may cost you less, but you also won’t get the full holistic benefits if you try to save.  This is one area where frugality is not necessarily your best friend. The CBD oil that has linked below is our favorite and highly recommended:

https://www.organicanaturals.com

This oil by Organica Naturals is not only organic, but it also comes in three specially formulated versions for pets of all sizes; even horses! And if you have any questions, you can get them answered online on the website quickly.

*This article is for informational purposes only.  It is not meant to treat, cure, or diagnose any disease, illness, or any other ailment.

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Contributed by Sara Tipton of www.ReadyNutrition.com.

Every day, somewhere around the world, there is a major disaster.  Whether it be natural, man made, or felt on a personal level with family disasters, many people are caught off guard and are ill-equipped to handle the unexpected. Ready Nutrition encourages peace through self-reliance and preparedness in every facet of your life. The website was founded by Tess Pennington, the author of The Prepper’s Blueprint: The Step-By-Step Guide To Help You Through Any Disaster.

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Author: Ready Nutrition

“Something Is Happening” In US Stocks, Where Nomura Sees A “Very Different Story From 2018”

Over the past two months, as the market soared higher from its December lows, it wasn’t just financial conditions that eased dramatically, and in fact to levels where the Fed was hiking (the same Fed that complained about tighter financial conditions as being a driver behind its decision to put rate hikes on pause), inflation expectations have also rebounded and over the past week, we’ve seen US 5Y Breakevens jump from 1.733% (and below 1.50% at the start of the year) to the current 1.814%, the highest print so far this year.

Commenting on this move, Nomura’s Charlie McElligott notes that it is likely due to two development trends: i) the market’s growing acceptance of a “new-and-improved” Fed inflation framework — one which would in-theory help “pump-up” inflation expectations via an “inflation averaging” (or even “targeting”) approach as Bill Dudley hinted at last Friday; and ii) the record credit- and money- data showing the extent of Chinese liquidity-boosting efforts) risk “tipping over” the market’s consensual belief in “the death of inflation.”

So as hints of reflation start to be appreciated by the market, another potential market reversal may be in store: a renewed curve steepening, which would have material consequences across all asset classes.

Laying out his argument why a steeper curve is one of his “core 2019 trading view expressions”, McElligott writes that despite the past month’s “stalling” of curve steepening – with the 2s10s oddly rangebound in the past 3 months between 15 and 20bps, he sees four scenarios which could act as catalysts for a potential “steepening impulse” moving-forward:

The first “steepening” scenario would be a meaningful deterioration in US data, which would then see the market “pull-forward” the Fed CUT priced-into 2020—in turn, the front-end rally would accelerate even further (entire curve would ‘bull-steepen’)

The second scenario would be what several strategists, including Nomura’s George Goncalves, have been discussing, which is the case for the Fed to address adjusting the composition of its balance-sheet in coming meetings via a “Reverse Operation Twist”, where reinvestments would be allocated towards the front-end in order to shorten the weighted average maturity of the portfolio (while still seeing MBS run-off to zero)

An additional benefit of a “Reverse Op Twist”, is that the implicit “steepening” (as the reinvestments into T-bills would then help push front-end yields lower) would also assist the Fed in avoiding the “negative optics” of curve inversions; the steepening too would provide potential “wiggle room” w.r.t. IOER vs effective Fed Funds; the steepening too would “throw a bone” to the health of the banking industry; and ultimately, a steeper curve would then make it easier for the Fed to engage in an EASING via resumption of the original “Operation Twist” down the road to again flatten curves and ease financial conditions in the case of the next crisis–but in a manner that is “sterilized” without the politically sensitive “creating money” discussion

The third scenario includes the newest information inputs regarding potential drivers of a global “reflationary” impulse, and is potentially the highest risk/reward for global markets according to the Nomura strategist: That would be a reflationary mix of 1) record PBoC / China easing-/ stimulus-/ liquidity- pumping (last week’s data showing that Chinese credit growth hit a new record in January, with shadow banking rising for the first time in eleven months, and new Yuan loans jumping by the most of any month in data back to 1992) in conjunction with 2) the introduction of the Fed’s new inflation framework (“trial ballooned” by Dudley comments Friday / Fed inflation focus paper Friday / consultant and strategist ‘trending’ talk etc) which highlights an “inflation averaging” approach, while others have spoken to the potential for “price targeting,” which in-turn would allow inflation to overshoot / run-hot without forcing the Fed to immediately tighten

In this scenario, theoretical inflation would then see the long-end sell-off on potential “bear-steepening” fashion, especially in light of the consensual view that “inflation is dead” alongside now “Max Long” positioning in global fixed-income witnessed per our CTA Trend model (“+100% Max Long” in USD 10Y, EUR 10Y, JPY 10Y, GBP 10Y, AUD 10Y, CAD 10Y, CHF 10Y, FRA 10Y, ESP 10Y along with “+100% Max Long” in ED4, ER4, YE4 and L4)

Finally, a fourth driver for a curve steepening could come from a continuation of recent easing/compression in funding markets— with the front-end chasing LIBOR fixings-, x-ccy basis- and CP rates- lower, which then looks set to extend further “catch-down” in the front-end echo-chamber.

McElligott’s conclusion: a “realization” of this interplay of policy tweaks, mechanical adjustments and a broad CB “pursuit of inflation” message advocates tactical positioning in Steepeners, Breakevens, US Equities Value vs Growth / Cyclicals vs Defensives

Indeed, if one looks below the surface of the market, and specifically the leadership in stocks, Nomura notes that “something is happening”, as in something different, because equity “value” factors are telling a much different story from 2018, where they continuously lagged growth.

This is seen clearly in the next chart, showing the outperformance of Value over Growth over the past week:

Meanwhile, as we discussed before, when it comes to trend-followers such as CTAs, there is little room for additional upside as virtually every major asset class is now in the “Max Long” bucket:

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Author: Tyler Durden

China Says It Won’t Use Exchange Rates As A “Tool” In Trade Dispute

Responding to reports that the US had asked China to commit to not devaluing its currency (presumably to compensate for any new tariffs), China’s Foreign Minister said Wednesday said that China “doesn’t engage in competitive currency devaluation” and reportedly hopes that the US doesn’t politicize exchange-rate issues.

Flags

China added that it will not use the yuan as “a tool to handle trade disputes.”

According to ForexLive, China is pushing back against the insinuation that it intentionally pushed the yuan lower during the trade dispute. So the Chinese side will likely push to exclude a currency clause from the memorandum of understanding that the two sides are reportedly close to reaching.

Of course, the irony in the US’s demand that China keep its currency “stable”, while demanding that it also commit to liberal market reforms, was clear to many.

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Author: Tyler Durden

Illinois Doubles Minimum Wage To $15 An Hour

As if Illinois sky-high taxes, outsize cost of living and teetering public pension fund weren’t enough reasons for people and business to flee the state (it suffered record population loss in 2018, the fifth straight year of declines), newly inaugurated Democratic Gov. JB Pritzker – heir to the Pritzker fortune – signaled Thursday that he would sign a bill to double Illinois minimum wage from $8.25 to $15 by 2025 after it passed both houses of the state legislature.

As the Daily Caller reported, the bill will raise the state minimum wage incrementally to $9.25 on Jan. 1, 2020, then to $10 an hour the following July, and it will continue to increase by $1 a year until 2025.

Pritzker

JB Pritzker

“Phasing in the minimum wage over the next six years will put $6,300 a year into the pockets of nearly a quarter of our state’s workforce and billions of dollars into local economies in every corner of our state,” Pritzker said in a statement.

Of course, while fighting economic equality sounds like laudable goal, minimum wage hikes ignore the fact that by raising costs, employers will be incentivized to hasten their adoption of automation, which, as McKinsey warned in a study published back in 2017, is expected to kill 800 million jobs by 2030.

Robots

Illinois’ wage hikes are among the most extreme being adopted by US states in 2019.

Pritzker’s decision to sign the bill comes after his predecessor, Republican Gov. Bruce Rauner, vetoed a similar proposal back in 2017.

To be sure, Illinois won’t be the first state to reach a $15 minimum wage. That honor will likely go to California, which is expected to adopt a $15 minimum wage in 2022. Massachusetts is set to have a $15 minimum wage in 2023 and New Jersey in 2024. New York’s minimum wage will eventually hit $15 through a series of increases tied to inflation. Cities like New York City and Seattle have already caved to unions demands – pushed by the “Fight for $15” initiative – and hiked minimum wages independently.

In fact, a study of Seattle’s minimum wage hikes found that, contrary to the city council’s stated intentions, the decision to raise wages actually had an adverse impact on the city’s poor by killing thousands of jobs.

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Author: Tyler Durden

What To Look For In Today’s FOMC Minutes

Last month, the Fed made dovish tweaks at its January meeting, and with the FOMC now firmly in “data-dependent” mode, discussion on the balance of risks will be key; additionally, markets will be keeping an eye out for any clues that there is a consensus on the FOMC to halt its balance sheet run-off this year.

Here is what traders will be looking for heading into today’s Fed minutes, courtesy of RanSquawk

MEETING RECAP: Heading into the FOMC’s rate decision and statement, the market was looking for an update on the balance sheet, whether the Fed would maintain a “gradual” pace of rate hikes, whether it judges the balance of risks as “roughly balanced” and whether it revises its assessment of the economy.

All of those factors saw dovish tweaks in the latest statement:

  • on the balance sheet, the FOMC indicated that it was prepared to adjust the pace of the balance sheet run-off, it dumped language on “gradual” rate hikes, adding in that the Committee will be “patient” on future hikes.
  • The language around “roughly balanced” risks was also dumped, and it downgraded its view of the economy slightly, now characterising it as “solid” from “strong”.
  • The Fed also changed its view on inflation, which it now sees as “muted”.

There were some fears among traders that the Fed might not be as dovish as hoped for; that fear was jettisoned with the release of the statement, and the dovish Fed saw risk assets bounce higher.

POWELL PRESS CONFERENCE: In the press conference, Chair Powell sounded upbeat on the economy, reiterating his now familiar message of data-dependence and patience. He did note cross-current headwinds from the slowdown in Chinese and European growth.

On rates, Powell said the case for raising rates has weakened somewhat. On the balance sheet, Powell said the policy will be driven by reserve demand, which he suggested was higher than it was a year ago. He also suggested that it was still not the Fed’s primary tool of normalization, that remains rates, though the balance sheet could be used if required (he later said that in a future downturn, the balance sheet would be used to stimulate the economy, but after using rates).

He was quizzed about the ideal size of the balance sheet, though he dismissed the question, suggesting the size will be whatever is most efficient to implement the Fed’s policy. Powell said rates were now in the range of estimates of neutral; previously he had seen them in the bottom end of the range of the estimates neutral. On the government shutdown, Powell said that it would leave an “imprint” on Q1 growth, though much of that would be made up in the Q2. On trade talks, Powell said that drawn out negotiations could weigh on business confidence.

WHAT TO LOOK FOR IN THE MINUTES: In 2019, Fed officials have pivoted away from seeing two hikes this year (in the December projections), to a patient, data-dependent approach. Currently, markets are pricing a flat rate hike trajectory, and sees a possibility of rate CUTS next year. Accordingly, traders will be attentive to commentary around the balance of risks, to see if FOMC members believe that risks have materially shifted to the downside. “Although Chair Powell in subsequent remarks continued to note that the economy entered the year on solid footing, several officials since have remarked that slowing global growth, tighter financial conditions, and the lagged effect of prior rate hikes could combine to slow growth by more than the Fed expected,” SocGen writes.

Naturally, comments around the balance sheet will also be eyed. There are risks that the minutes will not reveal anything materially new on the balance sheet, in terms of when the Fed plans to end the run-off policy, however, SocGen says that the minutes may give some clues on whether the central bank sees the run-off ending this year, as was suggested by Fed Governor Lael Brainard last week.

Additionally, even some of the more hawkish on the FOMC, like Loretta Mester (non-voter), have suggested that she’d be comfortable with slowing – or even halting – the pace of reinvestments of maturing securities in 2019. Mester added that if it were her choice alone, she’d favour slowing reinvestments of maturing securities, and suggested that her preference would be for the Fed to hold primarily Treasuries, with a bias towards shorter-dated securities.

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Author: Tyler Durden