Probability of October Fed Rate Increase Falls To 8 Percent (January ’15 Probability Falls To 41.7 Percent)

According to the Fed Funds Futures data, the implied probability of an October 28 Fed rate increase is only 8.0%. And the probability of a December 16 rate increase is only 33.8%. Even a January 27 rate increase is only 41.7%


But March is a different story. The implied odds of a March 16 rate increase is 56.9%.


On the good ship Follypop, Captain Janet Yellen sings a comforting tune.


The Great Commodities Collapse: Oil, Copper and Glencore (And Yellen’s Magical Thinking)

Commodities such as copper and West Texas Intermediate Crude oil have taken a beating, particularly since mid 2014. Along with the drop in commodities price is the staggering drop in Glencore (a Swiss diversified natural resources company, not to be confused with “Glengarry Glen Ross”).


Glencore’s 5Y CDS is exploding.


I wonder if Janet Yellen and The Fed are paying attention? After all, Yellen and The Fed are in the “age of magical thinking.”

Yes, Yellen is so magical.


Janet In Blunderland: Bubble State Home Prices Rising While Income Declines (Juiced!)

One measure of the effectiveness of Fed interest rate policy is the disparity it creates in terms of home prices relative to median family income.

As a reminder, The Federal Reserve started lowering their Fed Funds target rate in September 2007, then followed with asset purchases in late 2008 (known as quantitative easing or QE). The third round of QE was announced in September 2012 under Chairman Ben Bernanke.


Janet Yellen, the current Federal Reserve Chair, continued her predecessor’s policies.

To what end for American families?

Here are charts for several bubble state cities showing rising home prices since 2012 and declines in median family incomes.

San Francisco:

sfhpinc (1)

Los Angeles:

lawoman (1)


miamibubbl (1)



Las Vegas:


While not a bubble state or city, Detroit has a similar chart.


The common theme among these bubble state cities is the rise in home prices along with declining median family incomes.

I hope that The Fed in the future considers the damaging distortions in markets that it creates through its policies.


Fed Follies: U.S. Consumer Purchasing Power Fell From $1,000 In Dec 1913 To $40 Today

The Federal Reserve system was created in December 1913 with the stroke of the pen by then President Woodrow Wilson.

Since that time, consumer purchasing power has fallen from $1,000 in December 1913 to … $40 today.


Since 2007, the purchasing power of the dollar continues to fall along with average hourly wage growth YoY.


Thanks a heap, Woody.


JPMorgan Chase CDO Jamie Dimon says iPhones helps balance out U.S. Income Inequality. 

Let them eat iPhones?

China Syndrome: Are Negative Interest Rates Coming To The USA?

Once again, Janet Yellen and the Federal Reserve Open Market Committee (FOMC) failed to raise The Fed Funds Target rate. I wasn’t expecting them to raise The Fed Funds Target rate, so there was nothing shocking about Yellen’s speech.

Other than the words “negative interest rates” were uttered.

Let me be clear that negative interest rates was not something that we considered very seriously at all today. It was not one of our main policy options.

Ah, but negative interest rates are already in Europe.

The Central Banks of Switzerland and Sweden have already gone there and the Euro OverNight rate is negative as well.


For sovereign debt, Switzerland, Sweden, Netherlands, Germany and France have negative 2 year sovereign yields.


And The Fed’s “Connect The Dots!” study revealed some chance of negative rates.

FOMC negative

Yellen recognized that the economic (and financial) turbulence in the global economy (like China) are making The Fed nervous about raising rates.

Gee, negative interest rates certainly worked well for Europe!

Big Bubbles: Initial Jobless Claims Continue Downward Trend While Wage Growth Remains Depressed

Some economic recovery.

Initial jobless claims were lower than expected (264k vs 275k expeected). But wage growth remains stagnant.


Meanwhile, Janet Yellen and The Fed are like Hawaiian crooner Don Ho on steroids blowing BIG BUBBLES.


Sing along with Don Ho! Big bubbles, in the economy. Makes Janet feel happy, makes her feel fine.


The Great Recovery (NOT)! Real Median Household Income Soars … To 1996 Levels

The post-Great Recession recovery is here! Real Median Household Income for 2014 was just released and it rose … to 1996 levels!


If that isn’t enough to get you excited (or depressed), mortgage purchase applications are at 1997 levels while labor force participation keeps dropping. Average hourly wage growth remains stagnant.


Time to party! … NOT!