Diving Into the GDP Report - Some Ominous Trends - Yellen Yap - Decoupling or Not?

Yellen YapOn Thursday, Fed Chair Janet Yellen met with Senate Democrats at a private luncheon. She told the Democrats that the U.S. Economy is Strong. My first thought was "what the heck is Yellen doing holding a private lunch with Democrats only?" Had she met with Senate Republicans, I would have asked the same question.Apparently this is common procedure for Yellen, so perhaps I am reading too much into it. Yet, I cannot help wondering if the real purpose of the meeting was to persuade Democrats to block any "Audit the Fed" Initiatives.Glowing Report Regardless of the reason, Yellen had some pretty glowing things to say.“She went through the...

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Canada in Recession, US Will Follow in 2015

On January 21 when the Canadian Central Bank unexpected slashed interest rates, I wrote Canadian Recession Coming Up. Following the rate cut, the yield curve in Canada inverted out to three years. Inversion means near-term interest rates are higher than long-term rates.I saw no other person mention the inversion at the time. An inverted yield curve generally portends recession.Nine days later, the Canadian yield curve is still inverted. Let's compare what I posted about the curve on January 21 vs. January 30. Canadian Yield Curve January 2130-year: 2.044% (Today's Low 1.998%)10-Year: 1.426% (Today's Low 1.366%)05-Year: 0.791% (Down 19 basis points, an 18% decline)03-Year: 0.590% (Down 27 basis points, a 31% decline)02-Year: 0.560% (Down 29 basis points, a 34% decline)01-Year: 0.580% (Down...

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Greece Will Not Accept Bailout Extension or Deal With "Rottenly Constructed" Troika; Mish's Game Theory Math

Greece Will No Longer Deal with ‘Troika’It now strongly appears as if Greece, Germany, and the nannycrats in Brussels are all on one hell of a collision course. Both sides have dug in, and the war of words has escalated in all corners.For example, please consider Greece Will No Longer Deal with ‘Troika’, Yanis Varoufakis Says Greece will no longer co-operate with the “troika” of international lenders that has overseen its four-year bailout programme, the country’s finance minister said.Yanis Varoufakis also said Greece would not accept an extension of its EU bailout, which expires at the end of February, and without which Greek banks could be shut off from European Central Bank funding.“This position enabled us to win the trust of the Greek people,” Mr Varoufakis said during a joint news conference...

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Financial Blogger Profile of "Mish" on Equities.Com

Daniel Banas at Equities.Com interviewed me last week via phone for their profile series on "the most distinct and noteworthy voices in the world of financial blogging."The interview transcript follows. First a few words ... I am honored to be on that list.The interview kicked off with a question on how I got started. I have commented on this before, but the short story is I was out of work, hanging around stock message boards, and Bill McBride (Calculated Risk) created the first template to my blog. Bill had just started his own blog and within a few years we became two of the top three economic blogs in the US.    Somewhere along the line Barry Rithotz at the Big Picture Blog discovered me, frequently linking back to my blog. I like to mention those who have helped me out,...

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Eurozone, Including Germany, in Deflation; Strange Times for Denmark, Deutschland and EU

Eurostat released HICP Harmonized Index of Consumer Prices statistics today.In spite of promising that deflation would not hit again, here we are, and for the second month too. Euro area annual inflation is expected to be -0.6% in January 2015, down from -0.2% in December 2014 according to a flash estimate from Eurostat, the statistical office of the European Union. This negative rate for euro area annual inflation in January is driven by the fall in energy prices (-8.9%, compared with -6.3% in December). Prices are also expected to fall for food, alcohol & tobacco (-0.1%, compared with 0.0% in December) and non-energy industrial goods (-0.1%,...

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Marine Le Pen Soars Into Lead in French Presidential Polls for 2017; Don't Worry, Nothing Can Possibly Go Wrong

In spite of the Charlie Hebdo murders that raised the popularity of French president Francois Hollande and his staff, Les Echos reports than in the 2017 presidential election anti-euro candidate Marine Le Pen in the 1st Round Lead With Nearly 30% of the Vote. According to an IFOP 2017 presidential poll released Thursday, Marine Le Pen would come out clearly in the lead if the first round of presidential elections was held on Sunday. Le Pen would get 29 to 31% of the vote. No rival would exceed 23%. Nicolas Sarkozy, Manuel Valls, and Alain Juppé, each have around 23%. François Hollande would get 21%.Francois Bayrou would obtain 7 to 9%, Mélenchon 8%, Cécile Duflot and Nicolas Dupont-Aignan between 3 and 4% and the far left between 2 and 3%.Prime Minister Valls would do better than Francois...

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Conscription of People, Cars, Businesses in Ukraine for Mindless Slaughter; Entire Villages Leave to Avoid Servitude; Hop on the Bus Gus

Ukrainians Fighting UkrainiansForced military conscription (slavery is a better word) imposed on citizens of Ukraine has reached new heights recently. The government in Kiev now demands those forced into slavery to hand over their cars for military use. As one might expect, avoidance of needless military slaughter has also reached new heights. Before we get to those stories, I have a video to share. It is in Russian, but with English subtitles. I am told by reader Jacob Dreizin the translation is essentially correct, but a couple things were translated too literally.I do offer this warning. The video is graphic and it does contain a lot of harsh language. The video is about captured Ukrainian POWs on a fool's mission to retake the Donetsk airport. After about 12 minutes or so it gets gruesome,...

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Alexis Tsipras "Open Letter" to German Citizens Regarding Extend-and-Pretend Unserviceable Debt

Here's a story from January 13 that just came my way today thanks to a reader wootendw who posted a link as a comment to one of my articles.The background to this story is SYRIZA leader Alexis Tsipras' "Open Letter" to German Citizens, published on Jan.13 in Handelsblatt, a leading German language business newspaper.Alexis Tsipras, now prime minister of Greece, sent this letter to Handelsblatt:Most of you, dear Handesblatt readers, will have formed a preconception of what this article is about before you actually read it. I am imploring you not to succumb to such preconceptions. Prejudice was never a good guide, especially during periods when an economic crisis reinforces stereotypes and breeds bigotry, nationalism, even violence.In 2010, the Greek state ceased to be able to service its debt....

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Asset Price Deflation Coming Up? Food Prices About to Drop? CPI About to Go Negative? Credit Deflation?

When inflation alarmists want to convince everyone the dollar is about to become worthless, they post this chart of the CPI.CPI - Urban Consumers - All Items - IndexInflationists claim that is a trend to oblivion. And actually it is. But it's a slow trend towards oblivion with intermittent disruptions as the following chart shows.CPI - Urban Consumers - All Items - Percent Change From Year AgoAs measured by consumer prices, inflation went negative from December 2008 until October 2009.CPI - Urban Consumers - All Items - Percent Change DetailThe CPI hit a record low of -1.959 in July of 2009.My prediction made in 2005 or so, was and still is "The...

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Slope of Hope vs. Reality: Greek Assets Hammered, 3-Year Yield Near 17%; Worst Day Ever for Greek Bank Stocks

Investors who plowed into Greek assets ahead of Mario Draghi's QE €60 billion a month bond-buying spree figuring the ECB could paper over this mess have been pounded almost nonstop recently.Today alone, Greek bank shares plunged 22-29%, and yield on the 3-year Greek treasury hit 16.97%.Worst Day in History for Greek Bank SharesBloomberg reports Greek Markets Hammered as Fears Grow Over New Government. Greek bank shares suffered their worst one day loss on record on Wednesday, as anxiety grew over the new government’s plan to renegotiate Greece’s €240bn bailout.The country’s four biggest lenders saw their stock prices plummet by an average of...

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MarketWatch Infomercial: Can Millennials Finally Afford a Home?

The Outside the Box MarketWatch Opinion of Damian Maldonado is Millennials Can Finally Afford Homes with New Mortgage Rules.Let's start with a look at the new rules. New RulesThe administration earlier this month cut the premium that borrowers with a Federal Housing Administration loan must pay for mortgage insurance to 0.85% from 1.35%. The half a percentage point reduction will reduce the cost of the average FHA loan by about $1,000 per year.Fannie Mae and Freddie Mac last month dropped the minimum down payment to 3% from 5% on some of its mortgages. FHA requires a 3.5% down payment. Grant programs, such as CHFA in Colorado, allow home buyers to purchase a home with as low as a $1,000 down payment.Hoop JumpingMaldonado jumps through all sorts of hoops to justify the new rules, pretending...

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Clash Over Sanctions: Syriza Opposes Sanctions on Russia, Calls Them "Neocolonial Bulimia"; Negotiation Rules

The Blowout Victory of Syriza has taken on some new meaning outside of Grexit possibilities.Please consider Greeks Rebuff EU Call for More Russia Sanctions. A spokesman for the ruling coalition of Alexis Tsipras, prime minister, said Greece had not approved a statement from EU heads of government that asked their foreign ministers to review further sanctions in response to the latest flare-up of violence in eastern Ukraine, blamed by the US and most European nations on Russian-backed separatists.The Greek statement raised questions over whether the new government, led by the radical leftist Syriza party, would support a continuation of existing EU sanctions, including visa bans and asset freezes on Russian officials and Moscow-supported separatists, when they come up for renewal in March.German...

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Greek Payback Math at 0% Interest

Payback of Greek DebtGreece has something like €315 billion of public debt.Forget about that. Instead focus on liabilities as presented in Revised Greek Default Scenario: Liabilities Shifted to German and French Taxpayers; Bluff of the Day Revisited.The above total is a "modest" €256 billion to be paid back over time.Assume 0% interestAssume a Current Account Surplus of 3% of GDPAssume Greek Debt-to-GDP is 176%Assume Greek Debt €312 billionAssume Greek GDP is €178 billionPoint 5 is derived from points 3 and 4. The numbers seem to vary a bit depending on the source, but they should be close enough for this exercise.Payback Math at 0% InterestLet's assume that Greece can run a 3% current account surplus for as long as it takes to pay back €256 billion.3% of €178 billion is €5.35 billion. To...

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