As I said last week in "Markets: What's Big and Bad and On the Horizon?":
Now here's funny. Mr. Edwards' comment that won him the prestigious Climateer 'Line of the Day' last October:
I usually don't have much time for Gluskin Sheff's David Rosenberg. His pig-headed refusal to listen to the market as the averages advanced more than 70% was not only arrogant but expensive for his firm's clients.
I can handle arrogant as long as you're right; hell I can tolerate a fat guy in a grass skirt and spike heel Manolo Blahniks if he's right.
It would be fun to watch him tottering around.
But Mr. Rosenberg hasn't been right for a while and he's not funny.
Funny is important if you're doing the Angel of Death schtick. Here's our thinking:Unlike his fellow gloomster David Rosenberg, Société Générale's Albert Edwards amuses* as he forecasts gloom, doom and despair. They both bow to the master, the Telegraph's international business editor, Ambrose Evans-Pritchard whose writing I once described as a "continuum that ranges from morose to suicidal.
Here he is at his despondent best...
“Investors think this is a sweet spot, but it is in fact a putrid boil that has not been properly lanced”On Sunday evening (6:35 p.m.) Mr. Evans-Pritchard hit a walk-off home run with the sub-head of the headline piece:
The most audacious monetary experiment in modern history ended on April Fools' Day. America must walk without crutches, on gangrenous legs.Here's the rest, from the Telegraph:
The US Federal Reserve has completed its purchase of $1.7 trillion (£1.1bn) of mortgage securities, agency debt and US Treasuries, the conjuring trick of "credit easing" that allowed Ben Bernanke to create stimulus equal to 12pc of GDP.
The Fed's money creation has been more or less the size of Washington's borrowing needs for the last year, as Beijing notes with suspicion.
We will never know whether it was wise to go nuclear. My view – anathema to readers, I fear – is that Ben Bernanke and Britain's Mervyn King saved us from potential calamity. We were all too close to the tipping point illustrated in Irving Fisher's Debt Deflation Causes of Great Depressions, the moment when the sailing ship catches water and capsizes instead of righting itself by natural rhythm.
Work by Berkeley Professor Barry Eichengreen shows that global trade, industrial output, and stock markets all crashed at a faster rate over the six terrifying months after the Lehman crisis than during the early 1930s. How quickly we forget, and how easily we are seduced by a 76pc stock rally into thinking it was a storm in a teacup. Just wait until the day fiscal retribution comes.
The $1.7 trillion created out of nothing will vanish as the bonds are sold on the open market. Not too quickly, let us hope. Easy money must cushion the blow of spending cuts. Even talk of ending QE amounts to tightening. While the US economy has begun to create jobs again – plus 114,000 in March, stripping out short-term census workers – there were false dawns in 2002 and 1982. The broader U6 jobless rate nudged up to 16.9pc.
Bond vigilantes ask who will step into the Fed's shoes to soak up the flood of debt from Washington, whether from the Obama Treasury or from Fannie Mae and Freddie Mac – the mortgage giants on death row.
Yields on 10-year Treasuries have jumped 30 basis points in two weeks to 3.94pc. Alan Greenspan called it "the canary in the mine" for US sovereign debt.
The yield spike is happening even though core inflation (trimmed mean PCE) has been dropping like a stone, touching a record low of 1.04pc in February. The Fed's Monetary Multiplier is languishing at 0.815, a flat tire.
The basic 30-year fixed mortgage has risen to 5.08pc from 4.71pc in December. The US housing market looks too sickly to withstand this. New home sales have fallen for four months in a row, dropping to a half-century low in February. The inventory of unsold homes has jumped to 8.6 months supply. Some 24pc of mortgages are in negative equity.
Mr Bernanke is taking the fateful decision to knock away the props of the mortgage market even though the M3 broad money supply has been contracting at an epic pace of 6pc since September. If M3 gives early warning of six to 12 months, beware.
Mr Bernanke does not look at M3, disdaining such monetarist eccentricities as medieval sorcery. The M3 signal has certainly been erratic over the years. It can be distorted by portfolio shifts. But the refusal to even look at it has been the root of much trouble over the past four years....MORE
For the record, regarding that bolded bit, on Mar. 24 we posted Uh oh: "Treasury Chief Rules out GSEs as Buyers of MBS" (FNM: FRE):
This seems like rather a big deal. Who will buy my MBS's now?
From Structured Finance News...