Locking Up the Monetary Brakes

What is possibly MORE important than even this morning’s job numbers – which we will get to in a sec.?

The answer is the Federal Reserve standing on the brakes of easy money and shortly this should result in move of interest rates up and perhaps a decline in stocks.

What I’m about to show you gets virtually no play from the financial press, but perhaps it’s because it’s not in a press release…

(continues)

So here are the two pictures of what’s going on:

The Fed H.6 Money Stocks Measure out Thursday reveals this:

Look at the dates and the top line of numbers.  Because it explains where the massive stock market rally has come for to a great degree.  It says that in the three months to March (in other words December, January, and February) Fed was rolling M1 (cash and equivalents) out the door at 13.3% annualized rate.

But then, they also publish the “What’s going on here lately” part of the report covering the sliding 13 week window

Observe that the MOST RECENT data says not only is M1 creation almost cut in  half (which in itself should slow the market) but M2 is down to a moderated 5.3% annual growth rate (AGR).

With less money sloshing into the system, what should happen?

For one, the interest rate on the 10 year note should be firming and gee, gosh, golly look surprised at this chart.

No question in our minds about it, the Fed has had a thumb on the market going up – and will have one (or is that present-tense HAS one) as the market climb slows and maybe reverses?

The answer should be obvious in coming weeks, but as the interest rates are arb’ed up by the Fed, it increases the odds of a rate hike at the next Fed meeting or two.

But that assumes the market doesn’t go into utter panic at the thought of higher rates which means that again, bonds will look like a more reasonable choice than stocks for the “widows and orphans” money which isn’t so much concerned with a return ON the investment but more OF the investment on an inflation-adjusted basis.

My sell it all and go to cash trigger finger (or outright short) is getting itchy for a second reason, too:  One that we will share in detail with subscribers to Peoplenomics tomorrow.  But let’s just say there’s an odd rhyme to 2015 coming up in one of our aggregated data studies.

Now About That Job Report

Hot off the press release:

“Total nonfarm payroll employment increased by 211,000 in April, and the unemployment
rate was little changed at 4.4 percent, the U.S. Bureau of Labor Statistics reported
today. Job gains occurred in leisure and hospitality, health care and social
assistance, financial activities, and mining.

Household Survey Data

Both the unemployment rate, at 4.4 percent, and the number of unemployed persons,
at 7.1 million, changed little in April. Over the year, the unemployment rate has declined by 0.6 percentage point, and the number of unemployed has fallen by 854,000.
(See table A-1.)

Among the major worker groups, the unemployment rate for adult men declined to 4.0
percent in April. The jobless rates for adult women (4.1 percent), teenagers (14.7
percent), Whites (3.8 percent), Blacks (7.9 percent), Asians (3.2 percent), and
Hispanics (5.2 percent) showed little change.

The usual 2-bits worth of analysis here:  Unemployment rate dropped a 10th.  (Good)

Labor participation rate dropped 1-10th of a percent (bad).

Total number employed went up 156,000 (OK).

And table “U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force dropped from 8.6 last month to 8.3% this month (good).

The questionable?  CES Birth-Death model accounted for 255,000 new jobs claimed and an amazing 90,000 in business and professional services.   (cough, cough, ahem…) So all of the job growth was “estimated?”

Hmmm…apps and software implementations must be smokin’ hot.

The futures at mixed levels: Dow down a few and the NAZ and S/P up tiny bits.

France Vote This Weekend

Bloomberg has it figured this-a-way: Traders Vote Macron as Le Pen Vows to Wipe the Smiles Off Their Faces.

The media money is on Marcon.

Wasn’t it on Hillary, though, too?

Air Snivels

I got no sympathy with the family as Delta Air Lines kicks US family off flight after row over toddler…if the child hadn’t bought a seat….

Having lived the joys of being an airline VP I can tell you (been there, done that)  if the little tike didn’t buy a seat, it goes on a lap or the adult or off the plane, simple as that.  Been airline policy most places, let me see, forever.

No ticky, no seaty as passenger load factors are high.

But if the toddler had a ticket?  Oh-oh…lawyers will have fun with this one…How big is the Delta checkbook?

Paranoia Med Check

The North Koreans are reporting an alleged US plot using biological weapons to kill the chief twerp in charge.

Med check?

Washington Post Backs Soros?

Are we surprised to read the WaPo op-ed “How the United States can stop Hungary’s descent into authoritarianism“?

Wait…regime change?  Yep a favorite tactic of the Left.  Keeps people focused on dirty wars in foreign lands so 70-years of democrat political failures at home seem smaller.

Besides, with all the dough Soros has passed around to left-leaning groups, its no wonder some could be duped into a foreign promoted coup to keep Soros in power and doling out the cash…

What’s missing in jurisprudence?  Well, obviously 18 U.S. Code § 2385 – Advocating overthrow of Government only applies to actions within the US.

And the Logan Act is aimed at negotiations with a foreign power…

But for the US press to advocate overthrow of an elected foreign leader…should that be banned, too?

There Goes Obamacare

Which I’m sure you know:  House have voted to kill the Obamacare deal.

Is it the Big Deal the left is whining over?  Well, we go by the Government Accountability Office assessment of what’s in play:

“GAO reviewed the Department of Health and Human Services’ (HHS) new rule on the Patient Protection and Affordable Care Act and market stabilization. GAO found that (1) the final rule (a) makes changes that HHS expects will help stabilize the individual and small group markets and affirm a state regulator role; and (b) amends standards relating to special enrollment periods, guaranteed availability, and the timing of the annual open enrollment period in the individual market for the 2018 plan year; standards related to network adequacy and essential community providers for qualified health plans; and the rules around actuarial value requirements; and (2) HHS complied with applicable requirements in promulgating the rule.”

Expect the full court press by the special (insurance industry) interests in the Senate.

World Comes to its Senses?

From Showbiz 4-1-1:  “Dept. of Fleeting Fame: “Kardashians” TV Show Ratings Tanking, Caitlyn Jenner’s Book A Bust.”

Aw, gosh…flags at half staff?

Comments

Locking Up the Monetary Brakes — 27 Comments

  1. Today, Trump lauded Australia’s health care system, saying. “We have a failing health care,” Trump said, before adding, “I shouldn’t say this to our great gentleman and my friend from Australia because you have better health care than we do.”

    After getting mocked by liberals, Trump lashed out on Twitter over the issue on May 5.

    “Of course the Australians have better healthcare than we do –everybody does. ObamaCare is dead! But our healthcare will soon be great.”@realDonaldTrump

    Of course, Trump didn’t know this when he said it, but Australia has universal health care, which is something the GOP is 100% against. So, after destroying America’s health care, he praises Australia’s who has the opposite of what his party is trying to make law.

    This is the type of fodder that fuels the opposition. You can’t praise a system that is in complete contrast to what you are fighting for. It’s like a Republican saying “ I love Bernie Sanders political views.” then voting against every piece of legislation that Bernie brings to the floor.

    When are you people going to realize that Trump really is harming America right now. As much as a stiff as Pence is, I almost would rather see him as the POTUS.

    • I’m retired 25 years. My wife died 3 years ago. Every time either one of us needed healthcare we were treated like royalty in NYC. I belief that US healthcare is prime!!
      Maybe some folks have had bad experiences or are never satisfied, but US healthcare cannot be matched by any other country’s healthcare.
      I am speaking from personal experience!

    • No, Obama, goober, Nancy pelosi and their ilk destroyed health care access. Your ignorance flag is flying high.

    • Australia does not have universal health care, in the way that many people think. They have a 2-tier health system. The “free” universal part means that you go to a clinic, and wait many hours to be seen. If you need a hospital, you go to a “free public” hospital. If you are middle class or rich- you buy health insurance and go to a “private” hospital just like in the USA. This always reminded me of the way that Medicaid people here use the ER’s as office visits- because doctors dont take Medicaid patients. Australia’s system wont work here, because we dont have a 2-tier hospital system.

      On a barely-related note, My brother has friends who live on the US side of the Canadian border. It’s really hard to see a specialist in a timely manner because of all the Canadians crossing the border to get health care.

  2. As for the North Korean wacko in charge, he is taking a page right from the Trump playbook. He is making wild accusations to get attention.

    This is similar to the fear mongering Trump spews on a daily basis. For instance, Trump saying that Obama wiretapped him without any proof whatsoever, or Trumps birther claims about Obama, or the myriad of other false claims and comments he makes with proof. There are too many to list, but this link of 7 pages of statements should make for interesting reading. http://www.politifact.com/personalities/donald-trump/statements/byruling/false/

  3. Still very upset Trump hasn’t ordered a revamp of the garbage BLS spews…he should coax John Williams into Fedgov service since he knows the truth…
    And on the Delta family screwing story-it goes like this….the Dad had purchased a ticket for his 18 yr old who subsequently decided to take an earlier flight, so they decided to use that seat for the 2 yr old in a car seat instead of holding the kid for the 5 hour flight. Delta reclaimed the seat due to overbooking and the fact the ticket wasn’t being used by the named passenger. My opinion? I think Delta isn’t “ready when you are”.

  4. If banks were able to change your status from depositor to unsecured lender, and the brokerage firms can seize your account to keep themselves solvent, then it’s not hard to imagine that airlines have or most certainly will change passenger status to screw the public as well when you have a seat they want. It’s probably illegal by now to even move to an empty row for a comfortable nap without getting charged for two more seats. Because you are all criminals when you walk into an airport, until you prove otherwise multiple times.

    In a bank or brokerage firm, if an employee embezzles your account, the firm is not liable, and the only only recourse is the same as if you loaned a relative $5k and they refuse to pay you back.

    The only rights Americans have these days are those that will get some law firm a healthy six or seven figure percentage of a settlement.

    I doubt if there is a single reader of this website that could Afford a retainer to sue a fortune 1,000 corporation.

  5. A friend sent me a link to an article that says that Central Banks are / have been actively buying major indices around the world becaause they ran out of bonds to balance their balance sheets. Any thoughts as to the implications of this (if it turns out to be factual) and how would this impact the markets.

    Source” “A Serious Warning About the Coming Collapse….”

    • (I deleted the info on the “newsletter” in question since they were forecasting the world should have ended several times over by now.)

      Running out of bonds? LOL. See Assets, liabilities, and capital of the Fed for March 17 here:” https://www.federalreserve.gov/monetarypolicy/files/quarterly_balance_sheet_developments_report_201703.pdf And show me some of the stocks, please? Ain’t no one “running out of bonds” Jeez…

      How much more than Peoplenomics are these folks charging for this Doom is their stuff? Buy a PN subscription and remember whose model has been non-stop long since nov 11 2016. Criminees sakes

      And no, Maiden Lane LLc is a hangover from the AIG woes, it’s not a stock buyer… https://en.wikipedia.org/wiki/Maiden_Lane_Transactions

      • Speaking of PN: I’ve been reading US for years and years and have been interested in subscribing. However, I’m and old fart and can’t waste money for a pig in a poke. How about putting up an older one so we can see what it looks like?

        Thanks.

      • I don’t think so. Because many of even old reports have high value both in terms of seeing how our charts evolve and also how we think privately.
        Like an article from several years ago on th eevolution of the micro and media home – the immersives to come. That kind of stuff is just as valuable today…so no, the past 17 years of library has some value, too. Have thought about making a book out of some of it, though…

    • Look at Japan.gov, my Lord, ETF crazy. Things are different this time round due to CB buying shed-looads of equities/ ETFs. This is why it’ll go on longer than we all think, God knows how long…

  6. Nothing is going to change with the airlines until people stop flying (they probably won’t)and punish the airlines in their wallets.

    I for one eschew flying whenever possible (travel 75% for my company). Screw the airlines and the TSA. I have more flexibility with a car, can listen to my own music, set my own temp, eat when I want and not deal with a 400 Lb Bubba encroaching on my seat.

  7. NO: the airline is not correct under Homeland rules, which are supposed to PROTECT passengers from bodily harm. Period.

    Whatever happened to “probable cause?” Those passengers posed no threat to themselves, others or that aircraft which renders those “Homeland” regulations moot.

    That’s precisely why the airport police are so agressive in their approach to these innocent passengers – they deliberately ramp up the dialogue to inflame the passenger into an equally aggressive posture thereby giving them their assumed authority under safety regulations. How DARE these thugs threaten a passenger with jailtime or seizure of their children? Simple: to justify their illegal actions!

    When a passenger buys a ticket on a bus, train or aircraft for CONFIRMED seating they are entering into a legally-binding TIME-SPECIFIC contract; and in order for it’s dissolution BOTH parties must agree to do so- the carrier cannot casually decide when/how that contract will be honored… that’s why they must first ask for volunteers who are willing to surrender their seats and therefor nullify their own contracts. This is precisely why cheaper stand-by seating was created: you pays-your-money-you-takes-your chance!

    But, these hamfisted airline tactics smack of abuse of authority – especially when passengers are threatened with jailtime or seizure of their children! The routine overbooking of flights is the CAUSE of this whole mess and those policies are what should immediately be changed to reflect the true nature of an airline’s passenger manifest. It’s not the passenger’s responsibility to guarantee contractual fulfillment – all they have to do is show up with their boarding pass, sit down and strap in.

    Sure! I’ve “sold” my seat back to an airline [TWA in my case] and gotten a handsome cash reward [3x my purchase price] with a seating upgrade and travel that was only delayed by 45 minutes or so. But, I AGREED to such terms even though I was not legally required to do so. Will I ever do it again? Absolutely NOT! They’d have to drag me off that plane and I would use every second of video to fight them in court.

    That’s the rub: the passengers are being treated like they are stowaways instead of consumers whio entered into their contracts with the same good faith that the airlines now are choosing to ignore.

    Don’t expect to hear what the out-of-court settlement was for the first recent victim of this scam – the airlines definitely DON’T want the public to realise how seriously they are violating contract law [I would expect that settlement to have been around $10M – especially since United bumped their buyback limit up to $10,000… that tells the story right there].

    Those airlines may actually fly those planes… but it’s the paying customers on the ground that keep them in the air, and the sooner they again recognize that the more quickly we can all move forward to the next contrived social crisis.

    • Great comments, Greg(ory)
      Let me give it to you from someone who has actually dealt with airplanes and the government of multiple countries.
      The first problem in the US is that Homeland has this thing called eAPIS – short for electronic passenger information system.
      The rule is pretty clear: Names of persons in seats MUST match the names of people going into Customs or going through security of someone is screwed.
      As I noted in the follow on this morning, this could all have been avoided if the gate agent had thee authority to change the PNR (passenger name record) at the gate. But since that didn’t happen, and the other person (son who flew different flight) did not appear, the a/l then cleared some of their wait listed or whatevers and assigned that seat.
      No doubt the family should be comp’ed for the costs and damages (we assume they were private persons before all this!).
      On the matter of full airplanes, though, that’s an entirely different kettle of fish from buses or trains.
      That’s because of the HUGE list of costs associated with the operation of an aircraft. If they are not flying 12-hours per day with a passenger load factor of 75-80% odds are good the airline is losing money.

      But here’s the reality:

      If we (I had to set overbooking levels in that part of my life and it’s a bitch) did not overbook, airliners would habitually fly with 10-20% fewer passengers than have booked.
      That means the system wide load factor drops and when that happens either service is reduced on a city-pair, or the cost of tickets is going up.

      The real question that comes out of the news story really distills down to this: Is air travel preserntly too cheap?

      The simple answer is YES if don’t want to have periodic bursts of passenger complaints related to bookings and overselling.

      The simple answer is NO if you can deal with occasional unintended overbooking messes. We’ve just been through how many? (Airline accidents happen in 3’s so we are hoping this is the substitute for actual aircraft disasters!)

      The operating cost of an aircraft is made up of some big numbers. Typical 737-300 or later with 15 in first and 134 in the back means what?
      Pilot, copilot, 3 cabin attendants (one for each 50 seats) so figure $1,000 per hour…
      Fuel burn will be (depending on stage length) about 1,000 gallons per hour so c all it $1,410 but that’s at the raw Gulf Coast pricing. DFW (Dallas) is $3,130 per hour just for fuel.
      Toss in $1,000 for maintenance per hour, maybe $500 per hour for the lease, then you have landing and gate fees ($3,000 per stop but higher in NE) and let’s not forget about insurance….
      Put in overhead for SG&A (sales general and administrative) and then put some load on all that for stock dividends and and…
      I could round it off to $10,500 in costs per flight hour. The second hour is cheaper because the gate and landing fees are cycle based , but it is ALWAYS cheaper to fly further on a cost per seat mile basis.

      The numbers are what drives the station managers (IAH or DFW is called a “station”) to push every butt into each seat whenever they can because airline seat are high regulated, perishable, and the positioning flights late at night kill system averages and PLF numbers…most people don’t like to fly short hops at high because it’s such a PITA.

      I’m with you all the way on driving, though. We sold our plane as you know and part of that has to do with the ever-increasing over=reach of government tilting at the wrong windmills. Another story for another day.

      But I wouldn’t be too hard on any of the execs in this stuff: They are all trying to keep the cost of flying low and recognize that in doing so, you are going to have some upset passengers and have to pay from DBC (denied boarding comp) sometimes.

      But to make a big news deal? Yeah, very sorry for the family. Sent the gate agent in for retraining, but it’s a big, ugly system with a million movine parts behind the scenes. The lost luggage numbers are miraculously low, too, given all the flying people do.

      Our 10 year old lexus is still the best most comfortable way to travel and I don’t like flying because we’re married and I don’t think anyone but me should be fondling my honey. Unless they want to chip in on the bills, know what I’m sayin? Even then, no….

      Sadly the vics in this whole latest press festival realize there’s no way to drive to Hawaii and (like bomb threats) the ensures that everyone who doesn’t get a seat on an airplane from now to Kingdom Come will have a fan base on youtube.

      FMTT

      Well, you get the idea.

      • George,

        Thanks for your lengthy, thoughtful reply. I am now more aware of the airline operating costs… but, is that really the concern of the passengers? Your overall defense of such boorish behavior is that the parent corp has the right to do whatever they choose to keep their cabin seats filled. And, that reminds me: notice that these outburst never happen in 1st-class? Upfront those butts in the seats can be as sloshed and rude as they want yet the airline [and the DHS] tolerate them just fine. That thin curtain seperating the classes defines more than just ticket price. Back among the real folk the rules are very different where you can be booted from a plane for excessive farting. [Not that that’s a BAD thing, but an example’s an example!].

        So: if the airlines have to raise their fares to cover their inflated operating costs [still trying to wrap my head around how the wages of only four employees adds up to $1,000/hr], so be it… but they’d also better ensure that their passenger’s lives won’t be disrupted [or their pets killed] during travel.

        Next point: you try to dismiss train travel as having lower operating costs than airlines. George, did you ever wonder why there are so few passenger railroads operating in this country? The reality is that their operating costs were so high that they had to scale back and only focus on high-traffic commuter corridors instead of the full-blown cross country travel of the past. Your precious airlines priced them nearly out of business. I live in a good-sized city but in order to take Amtrak’s Southwest Chief to Albuquerque I have to first drive to a train station [more of large kiosk] 30 miles North that isn’t even open after 10pm… even though the train only rolls through at 3am. BTW: that train ticket costs me much more than a flight would… but, it’s worth every inconvenient penny.

        So, overall I think the airlines are doing just fine when it comes to raking in every free buck they can. I’m old enough to remember when headphones were always free and at least one employee-owned airline [bet you remember them!] where cocktails were also gratis. You could even stuff a duffel bag into the overhead for no extra charge. Today’s standards seem to be centered on how apprehensive a passenger can be made to feel as they wonder if a SWAT team will descend upon their seats.

        The bottomline still seems to be a hefty revision of the overbooking processes and at least some outdated [but venerable] Dale Carnegie courses for flight crews on how to treat passengers. For that matter, airport cops should not be immune from a little more sensitivity training either.

        In the meantime, I’ll still take the train… at least I know they won’t toss my ass off the caboose!

        Thanks[!] for listening… somehow I think the airlines ran a little better when you were aboard.

      • LOL we sure did! I had a glass of Blue Nun and a steak and lobster dinner most nights coming back from Miami and that was a 55 minute flight. Real silverware up front, too.

        The hard part about crews are FAA (and for me CAA) regs on pilot and crew ho9urs. Mostly it was under 100 hours per month and so when you have that kind of limit (try 70-80 hours per month)( you really end up with two (or more) per day per airplane when the utilization is good. Same on the back end.
        Where do you put the crews when they are in Miami, Houston, NYC, Atlanta? All; adds to crew costs. People forget them details. But5 they are real – as in costly. And per diem and transportation and phone allowances and retirements and…(my head goes back to an ache it hasn’t had since 1985 lol)
        Then there was recurrent water landing trailing for all, sim time, check rides, flight checks and equipment in training…yeah it does add up!

      • Also don’t forget crew positioning costs…if a crew “times out” in NYC…oh god…

      • Hi George,

        With all the various classes, surcharges and rules, is there any reason that an airline can’t have a special class of passengers who cannot be bumped, and if they’re a no-show, their ticket is non-refundable and worthless? That way the load factor(financially) is the same. Is there a valid reason that a ticket cannot be transferred to another individual? I’ve always wondered if there was a valid non-marketing reason for that. Regarding airlines, I’ve not flown commercially since TSA since I find them totally unacceptable. I’d love to visit far flung places internationally but I find the security crap to be a deal killer. I don’t know what the rules are for tramp steamers, etc., but being irradiated or groped seems to be deliberately dehumanizing, with very little to show other than compliance. If I were to have the joy of a S.O., I’d want her treated with respect, just as you do yours.

  8. Lets see they goose the market then take some away, then they goose it again and the game goes on ever higher, with the only ones winning are the 1%.
    When we look at Trumps grand tax scheme it looks like Reagans grand tax scheme, a big increase for the working class to make up for the cuts for the 1%.Little changes regardless of who or which party occupies Washington’s levers of powers, but then again only those who have sucked up the propaganda of change we can believe in or making America great again thought that there would be…

    • Bigmoney or the 1% rule! Others dream their individual ideology to keep them self happy.
      Voting is just a grand illusion for the 98%.

  9. George; Wrong in the toddler seat. They paid for the seat but because they over sold they insisted they hold the kid and give up the seat to an adult.

    Airlines are going to cause someone to snap and really cause a serious issue. This too will be settled out of court like United!

    • The airline is technically right under Homeland rules – passengers with seats assigned and all
      the screw up was with the gate agent who didn’t change the name (in the pnr – passenger name record) showing the right name.
      So if you ever get into a situation like this, get the gate agent to change the name in he computer and get a boarding pass for the kid!!!