Why The Scaramucci Appointment Should Scare The Fed

Since the Great Financial Crisis of 2008 there has been one consortium responsible for the current valuation of the stock market: Central bankers, and in-particular the Federal Reserve.

So adulterated have these once enviable capital formation repositories become that the term – markets – now has to be used in the following manner: “markets.” For what they now represent is further away from reality of anything resembling true price discovery, than Alpha Centauri is to Earth. i.e., The distance is near unimaginable.

The true problem with all of this over these years has been the central banking cabal itself, and its sheer indignant stance or responses when anyone dared question the efficacy of their interventionist policies. Even though, as history shows, it has been central bankers themselves that have been the ones most thoroughly blindsided by the resulting chaos that developed in regards to their prior policies, which by-the-way were enacted in response as to “fix” prior errors. Think: Great Depression, Dot-Com Crash, Housing Crash, et cetera.

The real problem of today is that we’re now in an era where it appears by all objective reasoning that central bankers have moved from “guardians of the money supply” to: an unelected cabal instituting what they believe national governance or policy should be via the printing press as either a blatant incentive, or bludgeoning weapon.

As I’ve iterated before: at no time has more authority been handed over to an unelected body that has the power to control not only the economy, but who gets what, and how much, since the days of yore reserved only for Kings and Queens via their blood lines. Today’s “bloodline” seems eerily similar. i.e., Ivory Towers and Ivy Leagues.

However, there now seems to be something on the horizon that I feel the Federal Reserve is once again going to be blindsided by, for its coming from an area (and I’ll dare say adversary) from which the Fed. has never truly had to play, let alone, defend itself against. That “area” is the Oval Office.

I am of the opinion the appointment of Anthony Scaramucci as White House Communications Director communicates much more than most realize, let alone understand. Here’s why…

There’s a lot here and far too much to try to cover in a single article, so pardon me for being general in terms, but for this discussion general is all I believe one needs to understand and possibly connect-the-dots as to where things may be going.

First: let’s tackle the big brouhaha about Mr. Trump claiming responsibility for the current market highs. If one peruses the media it’s hard to not see any article implying “He now owns it – and he’s going to regret it!” Personally, I believe that’s short-sighted because in actuality; it is at these heights for only one reason: “The Trump Bump Hopium Trade.” i.e., What was believed as a near slam dunk (e.g., GOP now controlling all three houses) for getting not only Obamacare repealed, but tax cuts, regulation relief, and more.

The rise since the election has been in spite of not only current Fed. actions into continuing abysmal data, but also, in rejecting the impending effects of that very same data. In other words: There is absolutely no other reason for the “markets” to be where they are currently except in response to the “Trump Bump of Hopium.” Below is a chart showing exactly that “bump”, along with another detail which needs to be remembered. To wit:

(Chart Source)

As one can see on the above chart I highlighted (shown in the square) what the “markets” response was to the reality QE was no longer. i.e., Direct QE that is, for the roll-over or reinvestment process behind the scenes QE remained in full force, and then some. Supplying all the necessary “dry powder” for their preferred entities to buy any – and all – dips.

Again, for this point needs to be asserted: the markets have not only continued to rise, but have mirrored the prior accent when QE was in full effect, all while the Fed. has embarked on a tightening schedule unseen since the crisis along with putting into its “forward guidance statements” that it is not only going to reduce the balance sheet, but has given a schedule where that process should be construed to possibly begin at any day, releasing the biggest bugaboo fear of Wall Street, bar none.

And the “markets” have so far resisted (actually gambled) putting more faith into the “hopium” trade than the Fed’s resulting actions.

But that was then, and this is now, and things have changed markedly. And it is the appointment of Mr. Scaramucci which I believe signals far more of that “change” then most suspect – especially – The Federal Reserve.

A lot of the so-called “smart crowd” are assessing the change in the Trump administration as some form of chaos, or proof that its falling into disarray. I believe that observation to be naive and ill-informed. Why? As I made the case early when the President was first assuming the role and people were reporting their consternation on why he was doing this, and not doing that. From the article, “Why Is The Media Perplexed? Because This Is What Business Looks Like – And They Don’t Get It”

“People forget that he’s a billionaire or successful businessman today for one reason, and one reason only: He is a proven turnaround specialist.

That point gets lost on a lot of people. They forget he has been not only “on the cliffs edge.” He’s also been over it. Most don’t recall, or never heard about the exchange he revealed in one of his books between him and his daughter when he spotted a homeless person and he pointed out as to make an instructive lesson to her (paraphrasing): “See that homeless person over there? He’s worth a $Billion dollars more than I am right now.”

He wasn’t being coy – he was telling the truth. People forget just much financial trouble he was in during that period. It was a turnaround worthy for entry into the business textbooks. Personally, I’ve taken cues from it over the years.”

Why the above is instructive is this: He (or his administration, if you will) is precisely six months into it. And what has he got to show for it? Nothing, except for the actions he could do alone. (e.g., executive action) And this is where people who’ve not only been over the edge, but who’ve fought back and survived show, along with further prove, their mettle is far more resilient than most.

All the so-called “help” that was supposedly at the waiting (e.g., the House, Senate, and more) has given nothing but lip-service to previously agreed upon legislative actions. e.g., Passed repeal of Obamacare dozens of times when it was sure to be vetoed. But now where it would be signed? All they can agree upon is to now disagree, with their prior agreements.

Let me be clear: I am not endorsing nor reprimanding one political side or the other. What I am doing is trying to point out what is the current reality and meaning for it, along with how it may affect not just business, but the entire global economy going forward. And how one might use these observations to either buttress, or at the least get one to think about what might be coming down the pike – before the hooves begin racing down the alley.

Again, whether or not one agrees with the President one thing is above reproach, as I stated prior: He’s not only been to “the edge” – he’s been over it, and clawed his way back to the top. Steve Jobs did the same, as have others. (I’ve been there albeit at a different level) And it is here where things not only from a business perspective change, but also in others, in ways most have no understanding.

It is from that viewpoint I have now deduced that Mr. Trump has now fully, and with intention, removed any and all gloves – and is about to not only come out swinging further, and harder. He might land blows others never dreamed forthcoming. Especially with the Fed.

The Scaramucci appointment particularly piqued my interest in its timing for two reasons. First: This is very typical in a turn-around situation if you’re at a 6 month point. i.e., evaluate prior assumptions and actions for efficacy, and jettison any and all that proved to be ineffectual – with immediacy and certainty.

Yet, it was the second where things begin to make more sense for not just its timing, but as well as the who, what, or why’s, because it happen to coincide with near immediacy of another release. That release? Via BI™ Pedro Nicolaci de Costa “A Federal Reserve committee executed a brutal takedown of Trump’s budget” To wit:

“Despite signs of strength and growth in aggregated data, there is persistent and perhaps even worsening anger among Americans living in marginalized communities across rural, suburban, and urban regions about their economic position,” the CAC said.

Unlike the Fed, which prefers to stay away from politics and has largely skirted discussion about the impact of Donald Trump’s economic policies, the central bank’s community council did not shy away from taking issue with the president’s proposals.

“While capital markets have shown continuing signs of strength, recent budget proposals and executive actions by the new administration, if enacted, would severely constrain capital flow into low- and moderate-income communities,” the Fed’s community council said.

If there was ever any question that the Federal Reserve has inserted itself into the political strata it is now laid bare via their own words.

Reading just Mr. Nicolaci de Costa’s breakdown of it is well worth the read. Did you know “climate change, health care, affordable housing, immigration” and more are now a focus of the Federal Reserve? So much so has its own committee to put forth its findings?

It’s been around for two years and was created as some form of PR vehicle to counter criticism. But suddenly, now it wants to be heard as to offer it. And the topics are of the political. Funny how that happens, no?

Here’s where I believe the Fed. has now overstepped so much so – it’s putting light where it once wanted to do things in the dark. And the Trump administration, especially Mr. Trump himself, not only knows it, but can see it coming a mile away. i.e., The Fed. is now openly waging “war” for control, and inserting itself into, and against the White House via monetary policy as to cripple it – if not worse. All while using arguments and reasoning reserved for political strata.

Or said differently: The Fed., an unelected consortium of policy wonks has now openly declared what it deems “politically important” and is good for the electorate or global community, thus influencing (a given extrapolation) and conducting monetary policy for those desired political outcomes.

Don’t take my word for it. Read the reporting and report for yourself, and come to your own conclusion. It’s actually breathtaking in its scope once you do.

As I stated in the headline the appointment of Mr. Scaramucci should give pause for the Fed inasmuch as when backstopped against the President’s own latest rebuttal of congress itself the other day.

Mr. Trump in no uncertain terms lambasted his own party in a manner not seen in generations. i.e., He put the blame squarely and empirically on them in no uncertain terms, with no place to reason away his assertions. e.g., (paraphrasing) “Where’s the legislation you passed when it was sure to be vetoed which you ran on, and promised to pass, should you and I win? I have my pen in hand, where is it?!”

These are the types of in your face rebuttals that come from people who no longer care about how something looks to others, or if feelings are going to be spared. This is now all about results. A fundamental “turnaround” process and distinction. (Think Jobs when he wasn’t getting the desired results from his subordinates, or was being openly questioned via Wall Street. It’s not that dissimilar.)

This is critical because if there is no “Obamacare” repeal, something which was supposedly a given – tax cuts and more are not just DOA, but possibly dead and buried. And these are the reasons for the “Trump Bump.” Period.

Add to this the forthcoming debt ceiling debacle that is sure to take place, along with all the negative press that will come pouring out from every mainstream media outlet, coupled with the ever-increasing resonating effects that the Fed. has not just raised the costs of borrowing on the nation at a faster rate than they ever signaled ( so much for all the forward guidance) but rather, into increasingly deteriorating data far worse (both in cycle timing, as well as for a supposed “data dependent” body) than the many times prior (such as 2011, 12, 13) when they sat on their hands as the “markets” overtook the prior highs of the original crisis exacerbating an already evident growing bubble.

The issue for the Fed. is not that this “blame” or “spotlight” will be regarded to just some “tin-foil hat wearing, conspiratorial crowd” as they’ve been referred to by the Ph.D set. No, the reason why Mr. Scaramucci should ring alarm-bells for this set is because he, unlike most of his predecessors, will be able to frame and articulate that very same argument squarely, forcefully, an unabashedly directly onto the Fed’s shoulders in a manner and extreme I believe they’ve never encountered. And it will leave them literally dumbfounded on how to react or respond.

I am also of the opinion any, if not all, blame for any ensuing faltering, or heaven forbid, any true correction in the near term will be thrust so directly and vehemently at the Fed. their reputation in the public eye will quickly go from some form of “saviors of the economy” they like to believe of themselves – directly to where the masses begin to look as to where to bring the torches and pitchforks.

Again, I am of the opinion this new iteration of the White House communication staff and players are not only willing, but capable of doing just that. And not by using lame constructs and reasoning like those of the Ivory Towered set. No: the most effective, as well as volatile ammunition that will be used will be the Fed’s own prior words and reasoning.

It will be their own words, actions, and more that will be regurgitated as to come back and “bite” them. i.e., One example is Ms. Yellen’s own “high pressure economy” argument just this past October vs her policy stance and actions to date.

A lot of people have mocked the idea that Mr. Trump has unwittingly taken claim of the current rise in the “markets” as to be an anchor around his presidency, let alone, neck. However, if looked upon objectively – it might be the singular weapon he can use to show against all odds – the “markets” since November rallied for one reason, and one reason only: what his presidency was believed to be bringing to the table as in repeals and tax reform.

All in spite of Fed. actions to the contrary.

And now with the GOP falling short of what was expected and the president willing to call them out for it in no uncertain terms? I surmise the only ones whom think they’re not next is the Fed. I also believe they’ll not need to wait too long for it to begin in earnest. After all – it’s not like Mr. Scaramucci doesn’t know these arguments for himself.

And here is an important observation: He’s not there because of any “love affair” or “political payback” for loyalty. Far from it.

In actuality they’ve (Mr. Scaramucci and the President) been adversaries via Mr. Trump’s vanquished opponents. And yet – there he is now. There’s a reason for it. I’m of the viewpoint it’s because of Mr. Trump’s now unmistakable pivot to taking the gloves off entirely. And I have a feeling it’s the Fed. that has now entered into these newly acquired crosshairs.

American’s love a fighter, especially one who seems to have their interest at heart. What far too many believe is that these latest impasses are hurting Mr. Trump politically. Far be it. The harder he fights – the stronger his base will not only get, but grow.

This is anathema to what the political class understands. And with Mr. Trump coming out swinging as he did in that latest press conference, along with his latest barrage of tweets bring back to light obvious one-sided dealings for political, if not legal hypocrisy. One should take these as not just clues, but rather obvious manifestations as to leave little to no doubt how things are going to be handled going forward.

And once again I feel the Fed. is about to be blindsided in a way they never dreamed imaginable. e.g., From the real Bully Pulpit.

© 2017 Mark St.Cyr

Future-Hype Arrives Right On Cue – Again

Not long back I made mention of a phenom which I’ve come to label as: future-hype. What this term means is what I describe as the now near comical press releases, CEO jawboning, or anything similar that takes place right before earnings (usually a week or so, give or take) either from “The Valley” or tech space in general.

Usually what you’ll read, see, or hear (and echoed jubilantly by some next-in-rotation fund manager) is some grandiose announcement of some super-duper, sounds really awesome, coming attraction that has the potential to not only change everything, but also, to fill investor coffers with riches beyond the imagination.

All one needs to do, as to engage and embrace in this vision, is to use their own imagination, then buy into the “dream” with real legal tender, literally. Because, without those investor dollars continuing to pour in? The “dream” as they say – will be lost. Along with any earlier proceeds. Rinse, repeat.

I made mention of this phenom a few weeks back when I pointed out what I see as the latest incarnation of this absurdity. e.g. Facebook™ internet providing solar drone. To wit:

Why is the above relevant? Fair point, and it is this: It sure is a nice thing to be able to bring access of the internet to – BILLIONS!

(Remember that “eye-balls for ads” model is the key, and this offers up the main course for the headline reading algos’ to feast upon. But, back to the headline.)

That’s just “FANTASTIC!” right? I mean all the ads for fresh eye-balls that have not only never had the opportunity to have a Facebook account, but never had access to the internet, and probably never even hear of it! Oh, the money they’ll spend and the profits to be made.

Did you just have a “Wait…What?” moment there? I hope you did. If not read that last line again only slower and let it sink in. I’ll come back in a moment.

Did it hit you? For those not sure of where I’m going re-read my earlier quote above, particularly the line: “Spend (or lose) $100mm per quarter is perfectly acceptable, and even encouraged, as long as you can show 102 million eyeballs came for free.”

In that article I cavalierly made the comment that Elon Musk and Jeff Bezos would nod their head in approval. For this has become so blatantly obvious to anyone paying attention, it’s now downright comical.

Why? As I’ve been stating for years – It’s all about how to play the headline reading, algorithmic, front running, HFT, trading bots.  Hint: Remember how every time it seemed Amazon™ stock valuation was questioned there was suddenly barrage of “news” about drone deliveries? All coincidence I’m sure. After all it’s not like it worked for the Fed, right?

Yet, if you want to possibly buttress the idea that maybe there’s a little more to all this “coincidence” than meets the eye or press release. Today we have no finer example for one to ponder than Mr. Musk himself in what can only be deemed as one of the most blatant examples of what I’ve coined “future-hype.” Via his Twitter™ feed. To wit:

“Just received verbal govt approval for The Boring Company to build an underground NY-Phil-Balt-DC Hyperloop. NY-DC in 29 mins.

If you want this to happen fast, please let your local & federal elected representatives know. Makes a big difference if they hear from you.

City center to city center in each case, with up to a dozen or more entry/exit elevators in each city”

Sounds “fantastic!”, right? Sure does, only one problem. This is all “news” to those whom one would construe are the “approvers.” Again, to wit:

Via New York City’s mayoral press secretary Eric Philips:

“This is news to City Hall.”

“also, if you’re stopping by City Hall, please bring a copy of the proposal. That would help.”

Via USATODAY™ reporter Nathan Bomey:

“I just talked to the New York MTA about this. Press aide is so flabbergasted that they’re asking me to spell Elon Musk’s name for them.”

Can you say, “It’s different this time?” Or, does one need to be shown a “picture” as the Silicon Valley aficionados likes to call them, for why this seemingly brazen, over the top claim, needed to be stated in the first place? Fair enough. Once again, to wit:

(Chart Source)

Suddenly everything about the “future” is getting questioned. Especially when it comes to all that future P/E payoff in riches. Or. said differently: “If it sounds too good to be true, maybe it is.” But we shall see, after-all…

Earnings are just around the corner.

© 2017 Mark St.Cyr

How To Solve The Healthcare Conundrum

Over the last decade there’s been no other subject more debated and central to people’s lives, than the current healthcare debacle making its way through the economy. Since the inception of what is colloquially known as Obamacare, the entire complex that was once the envy of the world seems to now be circling around the edge of some giant sinkhole before it renders itself to the forces of gravity, and finally descends into the abyss, taking everything with it in some horrifying sucking sound.

If you try to garner any information on how to solve this current debacle (and people like to gloss over this very point) from any of the so-called “smart crowd.” All one gets are mumbo-jumbo filled constructs about why the issue is so difficult to fix and more. It’s moved beyond resembling any sense of intellectual type arguing. Now – it’s pure emotional screaming, crying, and incoherent mumblings making kinder garden look scholarly in comparison. It’s beyond pathetic. Yes – on both sides.

I don’t get into politics and I’ve always stated: “You should not know which side of the political aisle I stand on if I’m making my arguments correctly.” Today is no different, for this isn’t about politics per se – this is about business, especially small business, the life blood of America , its economy, as well as the nations main employer. And the current draconian measures being thrust upon them gets little to no attention via the main stream press is not only appalling – it’s damn near criminal.

Why? Because it’s killing not only them, but with them goes, as it destroys, the areas of the economy that most people get their first leg up into the economy. This is where people looking for decent work, or chances to prove themselves, or maybe try to put back together, or reinvent from a recently shattered past or life: rebuild, relaunch, or reinvent. Sometimes themselves- sometimes the business itself. All for the better.

This is where people go apply for a job face-to-face to an owner looking for a chance as to prove their worth. Or if they can’t find one – invent one. Not send 100’s of applications to H.R. computer screening black-holes that will disqualify an applicant for not dotting some i, or crossing a t, literally.

Think: your local market, retailer, sub shop, distributor, manufacturer et al with about 50 or 100 employees give or take. The Small Business Administration has different criteria as in up to “500 employees” and more, but for this discussion, it’s about what most understand as “small.” It’s these businesses that are the dynamism for most towns.

Without the relief that was expected (and sold) to the entire small business community – it is at risk, even more so, than it already is. That alone should make politicians on both side take notice, but currently it’s like they’re (small business) screaming in a vacuum. And no one seems to care. Not the politicians, and certainly not the Chamber of Commerce.

Small business used to look to agents such as this for help in having their voices heard. But now? It’s more like lip service, then, “Have you sent in a donation?” It’s now moved beyond pathetic.

So in this vein I’m going to wave my usual fees (and I don’t do that lightly) and will now detail precisely how to fix the entire healthcare question and return it, along with its once lofty reputation, for being the best in the world. To wit:

  1. As has already been suggested: Repeal the current law (Obamacare) in its entirety today, with a two-year delay for full compliance.
  2. Make all politicians, staff, along with all government employees: to have to purchase and acquire insurance plans that are available to the general public. No special provisions, no special carve-outs. If the general public can’t purchase it? Neither can a politician or other government employee. And if for any reason “insurance” or “healthcare” is part of their compensation? A stipend equivalent to, and no more than: the median or average of available plans. No work around, no exceptions. Period.

If those two solitary provisions were met – the entire healthcare/insurance fiasco would be solved at a minimum “on time”, and probably for the first time – ahead of schedule.

Everyone would benefit near immediately (and would be covered regardless of anything prior or existing) the moment the politicians had to pay, and abide, by what their constituents have, especially if full payment was only for “the median.” This would take the “median” or “average” plan standards to stratospheric heights (along with pushing down its costs via the competitive model and market) making today’s “gold” standard look more like fools-gold.

Again: Make that second item in the list above into law? America begins getting back to work far faster, and far healthier, than we have in decades.

The above is worth $Trillions, upon $Trillions of potential GDP gains along with employing many of the millions currently being forced off jobs everywhere just because they are number 50 in the employee roster. And the effects, along with affects, would be felt throughout the nation with near immediacy. All at no charge from me – and more importantly – no charge to the nation.

In fact: The only “charge” will be; what is heard from America’s business sector once the shackles of Obamacare are cast aside. Something they’ve been wanting to scream for years.

© 2017 Mark St.Cyr

Whole Foods Could Be Amazon’s Waterloo

Although the Battle of Waterloo means different things to different people, one of the more widely held meanings it’s come to represent is something along the lines of a battle that one side held certain of victory, only to not only be beaten, but then lose everything they had fought for to begin with. This is what ended Napoleon, but it wasn’t for that he had no plan. On the contrary, he just believed his plan wouldn’t fail. That plan was: isolate, and annihilate, each army separately. (e.g., the Allied and Prussian armies.)

If you interchange “armies” for “business sectors”, Amazon’s strategy over the last few years seems much aligned. i.e., War against big-box retail, then all retail, media, spacecraft, and now – retail food shopping. I am of the opinion Amazon™, much like Napoleon, are going to find this battlefield has far more challenges that may end up costing them far more dearly, than they ever bargained for. Here’s why…

Unbeknownst to most, when it comes to the perishable food segment, the regulations and more (i.e., meat, dairy, et cetera) that allow what we American’s take for granted when it comes not only to variety, but for the safety and assured wholesomeness that our food supply is – it’s unlike anything most retailers outside of the industry have ever encountered. Let alone understand.

The ones whom find it the most difficult to acclimate to; are those who are all ready in the retail business (think: department store mentality) and believe it’s all just a case of applying what they know, or what they perceive as “what they know”; and switch it out using a shelf full of, let’s say toys, for a shelf full of steaks, as an example.

Many believe the only difference (an assumed difference) is that one shelf is refrigerated, yet, all the rest is the same. i.e., You have a product, a price, a label, a way to accept money for it, and a place to store back-stock. Sounds easy-peasy right? And that’s the problem, it sounds like it. But it’s anything but in the real world.

The reasons why I know this to be true is because this was the industry I made my marks in. i.e., The meat industry. And when it comes to what Amazon is going to have to contend with going forward I can speak directly to that because (using a hypothetical) when Amazon will be looking to make “deals” or “set up a supplier”, I would be the one on the other-side of the table they would need to negotiate through. And yes, I’ve actually done it, at that level. So I know intimately what I’m talking about, which is why I’m making this case.

This isn’t going to be the first time some retail behemoth decided they were going to get into the “food” market and show the industry a thing or two on how “they” believed the complex should run. It’s been done before, only to have their management sent packing arse-in-hand, shell-shocked, and mumbling for days, “WTF just happened there? Don’t they understand who we are?!” I’m referring to Walmart™ and their initial foray into groceries.

At about the turn of Y2K Walmart entered into the “supermarket” business with gusto. At the time they were gaining quite the reputation for negotiating (more like strong arming or bullying) food suppliers. (think “prepared” like: canned, or boxed product, sodas, etc., etc.) And when they were through – they set their crosshairs on the fresh meat suppliers. (think: steak, chicken, et cetera.) And it was here where they heard what seemed for the first time in response to their: “You’ll do it our way, and at our price, or no way!” demands. That response?

“Take a hike, a don’t let the door hit you on the way out. Oh, and welcome to the meat business.”

The meat industry was the only industry that (at least to my knowledge) sent Walmart reeling with no way for recourse other than to deal on meat industry terms and pricing. In other words Walmart’s “size” or “buying power” wasn’t a dominating factor that could gain leverage for discount. In fact – it could actually work against them, something considered unfathomable to its product buyers. I’ll give you a quick example to help clarify.

If a company wants to purchase 1mm widgets they can find a factory that already has supply with excess inventory if needed (or can ramp up) and negotiate a price. Simple construct for this example. Now: want to buy 1mm pounds of meat?

If there’s some available on the spot market, fine. If not? What are you going to do – make it?

You can – but – that takes well over a year. And here’s the other key – 1mm pounds how often? Daily? Weekly? Monthly? And if you begin buying all the “spot” available? Guess what? Prices may go up for you – and not your competition. For your competition may already be locked into long-term contracts. And what can be even more baffling to the uninformed is this: All your competitors will have it, as in product – and you won’t. Maybe at any price.

Again, it’s a different business. And in the end it took them (Walmart) years with a lot of painful trial and errors as to try to innovate pricing and suppliers for differentiation. Today, if you look at meat prices from their cases comparing to any other (in my opinion) they’re basically right in line with any other national retailer. You don’t see any “WOW!” type price discrepancies unless, it’s a sale item.

The above thumbnail sketch is important, because it will help explain why this, Whole Foods™/Amazon merger might come into resistance not only from the competition, or suppliers. But also – from its existing customer base.

Whole Foods (WF) has garnered the moniker “whole-paycheck” for as long as I can remember, and with good reason. As I stated, being in the food industry for most of my career, when I walk around any supermarket, it’s with a far different eye than most, especially when it comes down to pricing. And WF has never ceased to amaze me.

I am always stunned (again, all my opinion) at the prices being paid by its customers. But there’s a reason for this. And it’s not what most people think. The reason why people pay those exorbitant prices is because of what they deem as some form of “exclusivity” shopping there gives them. e.g., They are showing they can afford it.

Sure, some may say the ambience is better than most other national stores (although I would argue today, that’s far from true) and there’s certainly a different product selection than others. But that’s everywhere. But where the rubber-hits-the-road (i.e., the meat department) all I’ll say too that is: I go “WOW!!!” But not for the reasons WF would like. Which brings me to my point.

WF customers aren’t buying there because of some form of pricing structure that lends itself to discounting. In actuality – it’s the exact opposite.

There are now multiple competitors surrounding many a WF that offer the same type of “wholesomeness” implied by shopping there. One example that’s in my own area is called FreshThyme™ (FT), and I’ll use them to demonstrate my point using a friend of my wife.

Her friend shops WF, but within the last year FT opened here less than 2 miles away from her recently opened WF about a year prior. My wife took her around the store where she purchased similar items as her go-to store. But this time her bill was noticeably cheaper. And I mean much, as in even she was quite surprised. Did she switch? Has she been back there again? Answer: No. And here’s where you begin to understand where I’m going.

Why hasn’t she? Is it because she doesn’t “need” or care to save money? Again, the price differences were not nickel and dimes, but rather, dollars on many items. Was it the “2 miles away” that did it, because we’re all such creature of habit? The answer again is no, because she doesn’t even live in this town, she actually lives some 20 miles outside. But location is the key. And here’s why…

The new WF was built in what is known in my area as “Easton.” It is a very exclusive retailing area. To give you an idea, if you’re walking around the shops and suddenly you have an impulse to buy a Tesla™ after your dinner at Smith & Wollensky™, you can do just that by crossing the walkway. And if you want to celebrate that with some one-of-a-kind key ring? Tiffany™ is right there to accommodate you along with many others. All within a manageable stroll – even if you’re in heels.

Why this is important is this: You are not going to gain market share, or customers, via the discounting model. It just doesn’t work that way to this clientele. And that is an “Achilles heel” to any management team coming from a “race to the bottom” pricing model, which Amazon is. And that leads to the following for consideration.

What advantages does Amazon bring to the WF concept model? Pricing? Management? Logistics? I would argue they aren’t relevant. And actually, the mindset of current senior management at both companies are in for a culture shock that will surely be epic. Imagine the meetings that will be discussed (as in shouting matches) on why reducing prices doesn’t work, or not spending money for a key display in an effort to cut costs, not understanding (or listening to reasoning) that reducing the display purely for “cost” might reduce actual sales.

I’ve seen it happen, and I know how they turn out. All I’ll say is this: not good.

Walmart was a different animal, for they already had brick and mortar stores – adding on a grocery store to existing models was (for lack of a better term) a natural fit. But it has been anything but the slam dunk many first envisioned. Especially Walmart itself.

WF is different, for it is a stand alone market. It has to fight to get (let alone retain) every customer into its store for a specific purchase. There’s no “We’ve got TV’s, and furnishings over here, toys over there. Oh, and now you can shop for groceries also!” e.g., There is no other reason to go to WF than to buy at WF. And they don’t go there because it’s cheaper than the competition, far from it.

If the culture of Amazon doesn’t mesh properly with the now management of WF the resulting missteps that may send customers once loyal elsewhere to shop alternatives (and they’re everywhere) could unfold faster than a next day delivery. And if you’re looking for further clues of where such missteps can happen, look no further than what is currently unfolding at the Washington Post™.

Again, this is the type of “culture shock” that typically takes place when an “outsider” comes in, and its management team (along with style) tries to impose what it now deems as “policy” going forward. More often that not the backlash that result over time begins to cripple the management of both. This WF deal could add to that already mixing cauldron.

Maybe the best indication of where this might all be going comes from none other than what is surely this whole war’s leading general. e.g., Rodney McMullen, CEO of Krogers™. To wit:

“Whole Foods is a ‘good fit’ for Amazon.”

I believe Wellington said something similar as he watched Napoleon deploy his troops. But that’s pure speculation.

© 2017 Mark St.Cyr

Suddenly, Then All At Once

From the article “Is This Uber’s ‘Theranos Moment?'” To wit:

“Now, much like Ms. Holmes, the founder and CEO had to quit, or resign, to appease those calling for change. And, much like the previous example – those closest, and who should be the greatest ally for change and stay as to help weather out the storm are also jumping. Sound familiar?

The optics of such a “jump” while in the midst of such a sh*t-storm at Uber, from my perspective, shows only one thing: You know the jig is up, it’s all about managing the fall, and there’s no need to do that in plain view.

If I’m wrong, then why would such a staunch defender of the company and its CEO resign when the negative optics of such a move are clearly visible? Unless? See above.”

Now this appeared yesterday afternoon at about the market’s close, from Bloomberg™, again, to wit:

“Uber Backers Discuss Stock Sale to SoftBank, Others”

“Uber Technologies Inc. shareholders and its board, led by early backer Benchmark, have discussed selling some of their shares to SoftBank Group Corp. and other potential investors, people familiar with the matter said.”

For those who may not have taken the time, nor cared, to click the link I used to note who that “closest” or should be “greatest ally” that was jumping ship was:. It was Bill Gurley of Benchmark™. And with that now makes two points I stated earlier very prescient.

Again, from the above:

“The optics of such a “jump” while in the midst of such a sh*t-storm at Uber, from my perspective, shows only one thing: You know the jig is up, it’s all about managing the fall, and there’s no need to do that in plain view.”

And the leading lines into my original article:

“There comes that moment where the veiled threats against logic such as the go-to excuse of “it’s different this time” are exposed against the harsh light of reality for all to see with such clarity, “it’s different this time” is precisely the apt statement to show why it was all fallacy to begin with.

Uber™ has just had that moment, and the resulting fallout as I’ve iterated before: Will. Be. Legend.”

And as I stated Thursday: And just like that: Suddenly, then all at once.

© 2017 Mark St.Cyr

And Just Like That – The Hits Just Keep On Hitting

It wasn’t all that long ago (actually only months) that the idea of invincibility was attached so firmly to the tails of Silicon Valley’s unicorns, questioning their business models, or any other metric, was met with a cloak of invincibility so powerful it would make DARPA jealous.

And then, suddenly, it appeared someone found the off switch, and with it, the vulnerability to everything that was once seen as inevitable (e.g., world domination along with riches beyond this world) not only came to a screeching halt. It seems to be have now assumed a far more ominous tone, as in: It suddenly seems to be all crashing down, along with – all at once.

Today is a revealing day to that notion.

A few weeks ago I opined an article “Is This Uber’s ‘Theranos Moment?'” In it I made the following statement when comparing the current state of Uber with that of the now humiliated thesis of Theranos. To wit:

“Nevertheless – it was over with near immediacy once it was blatantly obvious people once loyal and intimately involved, along with companies using the service publicly began jumping ship.

Suddenly every “news” outlet that once couldn’t get a flattering story out quick enough tripped all over themselves to re-write the now how, and why, for the imminent collapse of the once storied unicorn.”

In a subsequent article I pointed to the fact that this seems to have begun in earnest with none other than The Harvard Business Review™ opining that Uber was a failure and should be shut down – not saved.

I don’t know if the HBR ever wrote a flattering article, but that’s neither here-nor-there. It’s the sudden appearance of articles containing such headlines and reasoning from these well read outlets, that’s the point.

Until recently any questioning of the “disruptor” business model was basically either met with vehement push back, or just tossed out as something along the lines of “they just don’t get tech” analogies. Again – until now. For it seems everyone is beginning to “get” it. The issue now is – the results aren’t what the tech world wants hear, let alone admit.

As of this writing there have been a few additional stories not only about Uber per se, but when put together shows (in my opinion) just how precarious the entire once coveted disruptor narrative, along with its unicorn stable, is rapidly deteriorating. Let me explain.

The first is this: Uber has just relinquished its pursuit of being the #1 dominating cab service in Russia, and announced it has entered a joint venture with its once top rival Yandex.Taxi™. The reason for this was pretty straight forward as explained by Recode™. To wit:

“The why is fairly straightforward: Uber was losing, and badly. The annual run rate of the rides Yandex.Taxi was doing as of June 2017 was more than double that of Uber’s. That’s in spite of Uber’s persistent attempt to undercut Yandex’s prices. Based on data provided by Yandex, Uber did less than 12 million rides in June 2017, while Yandex.Taxi did close to 24 million.

That amounts to $47 million in gross bookings for Uber, while Yandex.Taxi saw $84 million in just that month.”

Again, as I stated, pretty straight forward. But with that a larger question looms and it is this:

Square this circle (other than trying to put the best spin possible) as reported in Tech Crunch™, again, to wit:

As shareholders in our company, all of us should be incredibly excited about this next stage. Over the last three years we have invested around $170 million in the Russian-speaking territories alone to build and expand our business to 21 cities in the region.

“Not only is this partnership good news for our two companies, it’s also great for riders, drivers and cities across the region. This deal is a testament to our exceptional growth in the region and helps Uber continue to build a sustainable global business,” says Pierre-Dimitri Gore-Coty, Head of Uber in Europe, the Middle East and Africa.

I would be of the assumption that the “shareholders” that invested giving this unicorn a valuation $68 BILLION, invested based on the narrative of being the #1, or global dominant hailing app – not – investing as to watch those “dollars” blown out quicker than exhaust through a pipe only to relinquish China, and now Russia. I don’t think “excited” is the term I would use. Especially since that latest valuation is based on the $3.5 BILLION raised from a Saudi fund back in June of last year when that narrative was all but a given and echoed throughout “The Valley.”

And now, as the title implies – the hits just keep coming. And this is one that holds one of the greatest fears to all of the so-called “disruptor” models. e.g., The inherent disregard of current laws, or regulations to become “disruptive” and the now reflexive backlash being put forth by not just regulators, but by workers, as well as the current businesses being disrupted that have no alternative other than having to abide by the rules or regulations. e.g., Adhere to current state, local, or federal laws, etc., etc.

Uber’s bugaboo (all in my opinion) is the employee vs independent contractor regs. And too that – Uber has just received another troubling ruling against their claims that they are not employers of the drivers.

Via The New York Times™ just yesterday “Uber Drivers Win Preliminary Class-Action Status In Labor Case” 

“The ruling today is going to allow drivers across the country to band together to challenge Uber’s misclassification of them,” said Paul B. Maslo, a lawyer for the plaintiffs. “They are employees and should be getting minimum wage and overtime as required by federal law.”

Yes, this is only in the preliminary stages, and is not yet settled. But add this to the backdrop that Uber has lost this same or similar argument in Europe just this past October? Remember what I said in that earlier article. Hint: “But once the term “law suits” and more get thrown across a unicorns saddle? Let’s just say – viewpoints, and valuation metrics begin to change, and change quickly.”

“Quickly” has now morphed into the only thing considered to be worse. e.g., Relentless.

Why do I say such? Easy, because now not only is it just Uber. You’re now beginning to see the same appearing for that other “super-unicorn” (yes, that’s actually a Silicon Valley term) that has, until lately, flown under the radar. However, with the questioning now of Uber’s model? It’s an easy jump to now question Air Bnb™. And they are.

Here’s a story just a few months back from the Chicago Tribune™. To wit:

“Hotel industry group says Airbnb hosts running ‘illegal hotels'”

“The report debunks the story Airbnb likes to tell of themselves as merely a home-sharing platform where hardworking Americans may occasionally rent a room in their home,” Lugar said.

Sound familiar?

Much like Uber’s issue of employee vs independent contractor. Air Bnb’s is – the scofflaw issue. And this is picking up more and more quickly, along with relentless, every passing week.

So pervasive is this issue becoming as reported just today via Axios™ New York city has now developed a cottage industry of sorts to report (as in snitch) on users. Again, to wit:

“NYC’s cottage industry of hunting Airbnb scofflaws”

As the Yale Law & Policy Review puts it, “The short-term rental sector, for example, thrives in the shadow of land-use regulation that . . . restricts supply, drives up costs, and segregates housing from employment and amenities.”

In other words, a company like Airbnb profits by offering suppliers and customers a way to avoid onerous regulation. In some cases, they force a public discussion about the legitimacy of commercial regulations.

And just like that – It’s different this time.

© 2017 Mark St.Cyr

Great Moments In Rorschach Word-Clouding Studies

I make no apology for what I have now coined exercises in “Rorschach Word-Clouding” when it comes to listening to the so-called “smart crowd” (i.e., The Ivory Tower’ed, Ph.D, Think Tank aficionado set) as to what should be inferred when reading, or listening, to anything coming from the Federal Reserve. And now it’s been proven to be just that. i.e., A de facto, ludicrous, exercise of providing “Forward Guidance.”

This was supposedly “the tool” for helping manage expectations for any, if not all, forth coming monetary policy moves. Well “tool” now seems fitting. So much so, it’s now become worse than a joke. And it seems everyone is beginning to see it for what it is. Albeit rather late.

Just to make my argument a little clearer I stated many moons ago that once the Fed. began focusing on, and making R* (Known as R-Star) deeming it as the actual effect of interest rates (i.e., 1%, 2%, 3 potato four) you now had proof (in my opinion) they had lost control. Because turning the argument for what interest rates were being set at, into offering a theoretical number to be the actual, showed they were grasping at straws to show efficacy and judgement.

Again: The defense for their policy rate stance was turned to now imply that the “rate” doesn’t mean what the number is. It means what they say it is, because in actuality – it’s something different. e.g., R*

If you’re thinking “Wait…What?” Or “Did I just read a different version of what is, is?” That’s right, something you can’t do on your mortgage payment or credit cards. i.e, Self-interpret the rate of interest you’re going to be legally liable for in the real world. Only in the Fed’s world can you do that. Even though whatever empirical rate is set by the Fed. is directly responsible via hard math (e.g., Your rate will be Prime + X) and to be paid by you in the real world.

You just can’t make this stuff up. (Unless you’re a central banker, but I digress.)

But that’s what a Ph.D in economics gets you these days, because it’s now all about R*. i.e., The best theoretical obfuscation tool for sidestepping monetary policy’s real world debacles to come out since sliced bread. Also known as “The neutral rate.” Or said differently: Think “R-Star” when you hear the term “Monetary policy is still accommodative.” That’s the moniker (and reasoning) that allows the stating of that line. Regardless of what it may be doing too the economy.

How often do you hear that line? Hint: After every meeting.

Here’s what I said about this last year in the article “R*: The Rock Star Of Central Banking Lunacy” To wit:

Yes R* assumptions for stability and control-ability can turn into WTF* moments of panicked reality in the blink of an eye. All it takes is one (and just one at that) hiccup and the whole theoretical construct comes crashing down along with all those seeming stable lofty values and assumptions when suddenly – no one trusts who’s solvent, if anyone, regardless.

Whether you’re listening to the Fed. or any other central bank today the immediate response along with their working assumptions hinges around the same presumptive arguments that revolved right before the last crisis. i.e., “We have more tools.” “We’ll do whatever it takes.” “Sometimes you just have to believe.” etc., etc.

This is today’s equivalent by both Central bankers, and their gaggle, intoning words of “surety” much like the mortgage brokers, banks, real estate agents, media and more right before the crisis. i.e., “Relax, you can always refinance.”

Now, add to this construct the following as one tries to gain any, let alone, more insight into what the Fed. is doing, or about to. Ready?

Here’s just one take away from Ms. Yellen’s prepared remarks before her testimony today.

In regards to Monetary Policy. To wit:

“As I noted earlier, the economic outlook is always subject to considerable uncertainty, and monetary policy is not on a preset course.FOMC participants will adjust their assessments of the appropriate path for the federal funds rate in response to changes to their economic outlooks and to their judgments of the associated risks as informed by incoming data. In this regard, as we noted in the FOMC statement last month, inflation continues to run below our 2 percent objective and has declined recently; the Committee will be monitoring inflation developments closely in the months ahead.

In evaluating the stance of monetary policy, the FOMC routinely consults monetary policy rules that connect prescriptions for the policy rate with variables associated with our mandated objectives. However, such prescriptions cannot be applied in a mechanical way; their use requires careful judgments about the choice and measurement of the inputs into these rules, as well as the implications of the many considerations these rules do not take into account. I would like to note the discussion of simple monetary policy rules and their role in the Federal Reserve’s policy process that appears in our current Monetary Policy Report.”

Got that? Sorry, trick question, because if you think you do? Welcome to “Rorschach world” is all I’ll say. Actually, never mind what I say, let’s use the words contained within the prepared statement that appeared directly above that quoted text in regards to the “Current Economic Situation and Outlook” Again, ready? To wit:

“Nevertheless, with inflation continuing to run below the Committee’s 2 percent longer-run objective, the FOMC indicated in its June statement that it intends to carefully monitor actual and expected progress toward our symmetric inflation goal.”

And then, this one:

“Of course, considerable uncertainty always attends the economic outlook. There is, for example, uncertainty about when–and how much–inflation will respond to tightening resource utilization.”

When it comes to the “Ivory Tower’ed” set, or next-in-rotation “smart-crowd” aficionado, the above is just a brilliant summation on just where, when, and how the Fed. intends to proceed once they extract what ever wording contained in the above “word-cloud.”

It’s all hogwash and would never be allowed to be given in any C-Suite worth its salt. I’ll illustrate it below with the following hypothetical inserting Ms. Yellen as the CFO:

CEO: “I now call on the CFO to address the board and give an explanation as to why our current state of affairs, as it pertains to our financial soundness, seems to be going awry.”

CFO: (Insert quoted text above replacing only “FOMC” with “finance department”  and “inflation” with “the interest rate being paid on debt being carried by the company as replacements.)

Here’s an example:

CFO: We continued to overpay on our debt because what we believed would happened hasn’t. We thought this was prudent because if what we thought would have happened, did happen, then we would have already been doing what we would have needed to do. But we still believe this will happen, even though the facts show that are assessment has been wrong. But we have faith that maybe we’ll be right in the end, so overpaying and depleting our account balance still appears to make financial sense. We’ll evaluate over the period between our next meeting as long as someone doesn’t throw an unforeseen shock into the mix like calling in one of our notes unexpectedly. For that, we currently don’t know what we’ll do should that occur. But not too worry, because we’ve been assured by our creditors or loan holders we can always “refinance” should things change.

Here’s what you would have heard next after the conclusion of the meeting…

“I would like to present a motion to begin the process of seeking a new CFO to begin at the conclusion of this meeting. Can I Get a second? “Aye!” And with that second all those in favor please signal by saying Aye. “Aye!!!” Those opposed same signal. (Insert crickets here.)

That’s how it works in the real world of business. Why? Because it’s not hypotheticals, ambiguity, and printing presses that you’re playing to help wallpaper over past mistakes. Business – real business – goes out of business if the balance sheet is not correct for the proper reasons or reasoning.

Today, the above only works – until it doesn’t. No matter what the experts “think.” Period.

© 2017 Mark St.Cyr

 

MYTR Update

After what has seemed to be an eternity (actually now going on over a year) I finally received answers to some very specific questions I needed answered, to my satisfaction, before I went any further. And with it, hit the “proceed” button for it to move forward in earnest.

In retrospect I’m very glad I put the brakes on, because there were a few details, although small, which had the potential to be very big issues down the road had they not been handled properly, today. An example would be the difference in setting a course that’s off by 1° degree. It’s fine if you’re only going across town, but cross-country? Never-mind not ending up where you thought, you could end up in another country all together.

Although it puts my scheduling a bit more into arrears, at least it now is able to move forward. So with that we went ahead and registered the following domains: MYTRbroadcast dot com, and dot net.

I know to many it’s about the equivalent of the old skit from the movie “The Jerk” with Steve Martin. But it was an important step on my end, for it means actual progression towards completion is, once again, on in earnest.

On a side note, if you looked at the above reference and didn’t get the implied joke? i.e., You’re not as old as Methuselah as the kids call me. It’s worth watching. If you are one of those “kids” who don’t “get” what a phone book is, or was? Just replace the phonebook and think instead of a newly created Facebook™ page.

Same thing.

Mark

Imagine That – Who’da Thunk It?

Remember when the only thing being serving up was the latest “red-hot IPO” and was all the craze? You know, when it was all “so worth it” because “It’s different this time?” All I’ll say is, “Well, welcome too it.” To wit:

(Chart Source)

As one can clearly see – It is indeed different this time. That is, for those still believing. As of this writing another of the stalwarts of the “You can do it!” unicorn IPO’s to save the world, Snap™ aka Snapchat™ has now joined Blue Apron™ and served up a closing price below that “so worth it” debut. Or said differently – everyone’s now in the same boat, as in – losing money.

Yet, if you would like a little more detail for how things go when suddenly what never mattered before like “profits” or “prudent use of precious resources such as investor dollars.” Look no further than – Da, Da, Da, Daaaaa……Tesla™, and again, to wit:

(Chart Source)

And then of course there’s none other than that other “high-flying big-spender”, as in one with the ability and gusto to spend money on projects that are just sure to bring in Billions, upon Billions of users and their wallets. e.g., Mark Zuckerberg.

Remember Oculus Rift™? You know, where spending $3 BILLION was just “the right thing to do” given as a reason by Silicon Valley aficionados everywhere, as long as it wasn’t their money? Well, here’s something from Reuters™ to shed a little light onto that subject – no head set required. To wit:

“Oculus, the virtual reality company owned by Facebook Inc, is temporarily cutting the price of its hardware, as the industry tries to figure out why the technology for immersive games and stories has not taken off among consumers.”

Sure does seem to be getting a lot more different’er by the day, no? Funny how that happens when there’s no more “play money” being printed out of thin air and made available from the Fed., yes?

And last but not least, (since this is based in a bit of a rant vibe, and I’m in a mood.) The other day I was speaking with a group when I was questioned (more like an insinuation in the form of a rhetorical question) about the authenticity behind my “Remember When…” post. The tone (and what I deemed more like snark) revolved around, “I noticed the date of your example was 2015, that’s a long time ago for an example, nothing since?” Let’s just say 20 years ago I would have handled the situation a little bit differently.

I decided it was better for everyone involved for me to keep my composure as I rattled off a few other examples far more recent, and far larger. (like the biggest story to hit the media in decades.) But when I returned home I thought there must be others (and I know you’re far more well-mannered, and much better looking) whom may also be inquisitive since it was a 2015 reference. And it’s a fair point.

So In that light I thought what better example to use than one everyone knows, not just those within the financial/business spectrum as to demonstrate something I have been stating for years, e.g., “You never know just where my writings will appear.” And, for those who may not know – is one of the main resources used and referenced by all of media, globally. To wit:

But what do I know.

© 2017 Mark St.Cyr

The Fed. Minutes aka Adventures In Navel Gazing

This past Wednesday the Federal Reserve released the minutes of its prior deliberation in June. There was a time when looking deep into what words were used, for what reason, and in what context, had the semblance that maybe, just maybe, there was an edge to be found in what the participants might actually be signaling without actually signaling. i.e., Leaving clues for the industrious investment sleuth to find without directly stating it.

But that was then, and this is now. And as Bob Dylan elegantly stated years ago, “You don’t need a weatherman to know which way the wind blows.”

That now holds true for Fed. watching sleuths, because the more I listened to the next-in-rotation economist on either radio or television tout their “insights” about what the Fed. meant by this, that, and the other thing contained within the minutes – the harder it was to keep my lunch.

It was an absolute real-time example of what I now call, ” a word-cloud Rorschach test.” i.e., As long as you use any of the words or phrases contained within the release – you can make stuff up all day long (or at least to fill a segment) about what it means. Here’s a news alert: It means nothing. Period. End of story, or segment.

If one wants to see just how relevant “forward guidance”, or “reading between the lines” of any so-called communique or reporting of what possible “words for profiting” might be contained within. Look no further than one who at one time was considered “The Fed. Whisperer”, Jon Hilsenrath of the WSJ™.

For years reading or listening to what Mr. Hilsenrath had to say on Fed. insinuations, or possible policy innuendo was like reading crib sheets produced from a fly on the wall that would make any spy agency jealous. Many times it bordered as if he no longer needed the fly and could just read their minds, because of the curious timing of his subsequent releases in respect to official embargoed time frames. Nevertheless, more often than not, far more was garnered reading or listening to his take on what really might be forthcoming, rather than trying to decipher the Rorschach inspired press-releases.

But then something changed. That change? Hint: Donald J. Trump.

In August of last year it was none other than Mr. Hilsenrath himself that took to the pages of the Wall Street Journal slamming the Fed. for it enabling the rise of Mr. Trump via its monetary policies. So informative was this sudden, and what appeared to everyone (well, those actually paying attention) as a “biting the hand that feeds you” moment, it prompted this observation from ZeroHedge™. To wit:

“For years we have argued that the main reasons for rising social anger, populist sentiment, and general disillusion with the US economy boils down to one thing: the Federal Reserve, which as we have argued since 2009, has approached the crisis aftermath in a wrong way, generated unprecedented wealth inequality through its monetary policy favoring a tiny fraction of the population – those invested in risk assets – and instead of reflating another debt bubble, should have allowed the system to undergo a debt purge and start afresh.

For this we have been branded perpetual conspiracy theorists and permabears.

Moments ago, none other than the WSJ’s Fed “whisperer”, Jon Hilsenrath admitted these allegations have been correct in an article titled “Years of Fed Missteps Fueled Disillusion With the Economy and Washington”, and which as the WSJ notes “helps explain one of the US’s most unpredictable, populist political years.”

In other words, it is the Fed’s policies that have led to the current failed economic regime (as noted again yesterday by Citi’s Matt King and today by former Fed governor Kevin Warsh), and which are responsible for the rise of such candidates as Donald Trump. Which, incidentally, is also something we have predicted over the years would happen. As such we are delighted that one of the most popular establishment Fed watchers now agrees with our assessment.”

Now with the above for a little context let’s move onto what we heard emanating from the so-called “experts of everything that is the Fed. and economics” on television, print, and radio following the release of the minutes. i.e., The next-in-rotation Ph.D crowd.

I’m going to sum up the basic premise that was used via the word-cloud generated. Ready?

“Well there were participants that questioned this, that, and the other thing. This implies that the Fed. is really concerned and may not be as aggressive for this, or that reason. I expect the Fed. will watch very carefully the financial conditions based on this, or that, and tread carefully, blah, blah, blah.”

The only difference between what I just typed, and what was dispensed by this crowd, was a greater use of $10 words. The meaning is the same. Or said differently: An exercise in Rorschach Word-Clouding. i.e., Means anything you want – including delusion.

I have said since the December meeting of 2016 after watching Ms. Yellen’s follow-up news conference that the Fed. was not only about to raise again, and soon, but would raise far more aggressively, regardless of any financial conditions. I posited that argument around the idea that it was in direct opposition of the election results.

Once again, the Ivory Towered economists raved “That’s crazy!” only they used more of those $10 words. Today? It’s so blatantly obvious it’s getting harder and harder for those trying not to admit it to continue that the ensuing arguments against, along with the rationale, now borders on incoherent drivel. Expensive wording or not.

In other words – the excuses of why the Fed. is raising, at the rate it is, while also throwing the balance sheet into the mix against the current data for a self-identified and staunch defender of the idea that they are “data dependent”, is making anyone trying to hold that monetary line look more foolish by the day.

And that leads me right into another axiom which fits this situation possibly better than any time prior. i.e., “If you have nothing good to say, don’t say anything at all.”

Here is where omission (in my opinion) screams for attention to those truly looking for clues. Once again, I’m using Mr, Hilsenrath. To wit:

As per Mr. Hilsenrath’s bio on the Wall Street Journal’s website:

“Jon Eric Hilsenrath is the chief economics correspondent for The Wall Street Journal and is based in Washington. He is responsible for covering the Federal Reserve. In cooperation with reporters in the economics and other bureaus, he also covers major developments in the U.S. and global economies for all print and on-line editions of The Wall Street Journal and contributes to WSJ.com’s Real Time Economics site.”

Now with the above for context here’s his most recent article archive lineup from late 2016 thru today:

From October 2016 thru December 2016. e.g., 3 months: There are seven Federal Reserve based articles. The skew going by the headlines, via my eye, are that they are of the more dove inclined arguments than hawkish. I suggest you don’t take my words for it and view them for yourself, and make your own conclusions.

Now – from January 2017 until today, as of this writing (all the while remembering this is now a seven month stretch as compared to three prior) the total number of Fed. articles?: One.

What is the tone or reasoning of that article? Well, it is in January, and in relation to Davos. A story that one might say (for the financial/business media et al) is covered in one way or another, no matter what, just to make sure any and all “receipts” can get reimbursed by H.R. or the I.R.S.

In other words – it’s the biggest junket of the business/financial media bar none and get’s covered regardless, although his headline is Fed. specific. So counting it as a “Fed.” specific article is appropriate.

I don’t know if Mr. Hilsenrath was there or not, and it really doesn’t matter. What I’m trying to make clear is there is no way this event doesn’t get press one way or another. Especially by someone in Mr. Hilsenrath’s position. Why is this point so informative you may be asking? Fair question, so once again, re-read the above bio, particularly the line, “He is responsible for covering the Federal Reserve.”

Now do you notice anything in his article archives now? Hint: Not a single Fed. article since, now going on seven months. And if one wants to try to read deeper, here’s another way one can view things: If you want to exclude the “one” article based on its “must be reported on status – regardless by who.” e.g., Davos. It would be fair to say the total over the last 7 months goes from one – to zero. As in Zip, zero, nada.

Again, as of today, there is the one referenced article, and two others which revolve around other topics, not The Federal Reserve.

I can’t make this point more strongly:

During what is now quite arguably the most important shift in both policy and timing in the history of the greatest monetary experiment conducted via the Federal Reserve, with the hiking of rates into increasingly deteriorating data, while subsequently launching the most troubling bugaboo that Wall Street fears more than a bench warrant (e.g., balance sheet reversal.) And there is not one, again, not one single article opined by what many deem as “The Fed. whisperer?” Not one (again if excluding the Davos piece) now nearly 7 months in? And per his bio: “He is responsible for covering the Federal Reserve.”

Are you beginning to see my point?

Here’s my take away – If you think “participants raised concerns” trumps ” participants voting record?” You must have a Ph.D. Because only this crowd seems more caught up in “mights” rather than “deeds.” Deeds as in – every once deemed dove voted affirmative to raise, and begin reducing the balance sheet not only this year, but possibly as soon as September if not earlier.

Now what in the world could have made such a metamorphosis happen? Any guesses? Hint: Donald J. _____.

Forget reading between the lines. If you take Mr. Dylan’s affirmation to heart and use it properly – you’ll know everything you’ll need to know not by reading, but from noticing there are no lines to read from what has been the most well-connected “weatherman” or Fed. writer over the last decade.

Gives a whole new interpretation for insight into “what goes unsaid” rather than what is, doesn’t it?

No ink blot required.

© 2017 Mark St.Cyr