Today, I will not be writing a market review. Today I am upset, and I do not see the point in doing a report on the markets, describing what happened and analyzing what is to come since the market is completely rigged. The Federal Reserve and U.S. authorities are leading us down the garden path for one reason only: To make us believe that their monetary policy is working and now is the time to raise interest rates before inflation catches up to us.
Frankly, I reckon we are being duped and the funny thing about it is that everyone is fine and finds it normal.
Let’s sum up what happened during the last couple of months in terms of employment figures:
1) In September, we are told the U.S. figures were bad — August was slow — blaming China and seasonal activities;
2) By the end of August, financiers suffered from a downward trend — while nobody reacted, the consensus on raising interest rates started to erode, downplaying the long-awaited September meeting;
3) The September meeting proved the skeptics right, and caused a postponement of a possible interest rate increase to December, if inflation, growth and employment levels are met;
4) When the September employment figures were published, we learned that September was as bad as August, while the August forecast was revised and adjusted downward to reveal that it was even worse than previously published. The usual suspects: China and heat;
5) Economic experts started to wonder whether the Fed would be able to raise interest rates since the U.S. economy is more like an asphyxiating canary trapped in a coal mine than the flourishing economy the common Yellen-Bernanke policy promised. At this point, onward to December, only a miracle could save us from our demise — since it is unlikely that Volkswagen will hire 200,000 lawyers to deal with problems regarding interest rates; and
6) We can reasonably start to doubt the mathematical abilities of the U.S. government since overlooking so many job losses is more akin to "biased statistics" than anything else.
You know the rest … hype with thrilling suspense for the last two weeks while being told the economy is past recovery by Janet Yellen, who reckons all the stars are aligned for an interest rate raise, and who expresses faith in the economy. It was whispered into Draghi's ear as an unconscious hint for him to order another round of quantitative easing (quantitative easing = money printing) since it worked so well for the U.S. economy.
Then the "economic experts" started publishing their expectations on the October employment figures. Keeping in mind what happened in the two previous months, they took a cautious approach and stayed "low-key" while hinting at a likely recovery for October, since students would be back to school and China was in recovery, nay, in a bull market, for a week.
In a nutshell, the "experts" expressed their "expectations": Some 185,000 new jobs, which looks suspiciously inflated right after the debacle.
And then the prodigal son returned, behold the miracle ... The government of King Obama announced 271,000 new jobs!
That is 86,000 more jobs than expected, and 86,000 is just more than a packed Giants stadium. While I admit economics is not an exact science — financiers and other experts have already made an entrenched habit out these monumental errors — it is time to ask if we are being taken for fools.
Once again, let’s contextualize:
• You have a central bank betting on its credibility: If the Fed does not raise interest rates, it means the last eight years were a sheer debacle — Don Quixote looks nobler fighting windmills than the Fed does injecting dollars into the economy, all for nothing;
• If the employment figures were bad this time around, it was very likely that the interest rate hike would be postponed beyond 2015. It HAD to be good in order to fully justify a raise in a stormy economic conjuncture; and
• As if it were fate, we have superb employment figures, soon to be crowned by the publication, in the coming weeks, of the Producer Price Index and the Consumer Price Index announcing a bit of inflation ... What's left is to raise interest rates. Satisfied!
A "happy ending" that the producers of “Rocky” and “Rambo” would have not dared dreamed of. But the U.S. government and the Fed did it.
The real irony is that it is not the first time. Back when Bernanke started the downward trend of the Fed interest rate in 2008, employment figures were massaged to provide a great excuse for the Fed’s pontiffs to lower interest rates. And now, here we go again. And no one cares.
Besides, I bet the October employment figures will be revised downward in a few months, with the usual explanation: "We confused 100,000 with 100.000. Sorry. We are sorry."
Oops. I Did It Again
The United States’ new trick is nothing but the same old show. If a shadow of doubt remained regarding how the market and figures are manipulated, I believe this time it is clear. Since it seems to content everyone and surprise no one, there is no reason to panic or get upset. That is how the world rolls now.
Since Monday, the likelihood of a rate hike in December is more than 70 percent and an "expert," one of those who got it wrong Friday, reckons only a CATASTROPHE could prevent the Fed from raising interest rates. Truth be told, they had a hard time setting up the very situation that would entail their happy ending. Why would the Fed whistle at the end of their most profitable game yet?
On the whole, the interest rate debate is a story of big egos obfuscating the dire reality; namely, that there was only one alternative from the beginning. As of today nothing is certain, but considering the mainstream media narrative, all seems to converge to an ineluctable rise.
The funny part starts here: Reality knocking on the door delivering the sad news, and even though the rise was sealed with foolishness written in capital letters, the U.S economy will slow down, tilting toward a recession. How entertaining it will be to decipher their new manipulated data.
In conclusion, currently, everyone is staring at the next figure publications in order to know what the Fed is going to do the coming weeks. For me, it is crystal clear.