Funding Markets just called The FOMC's bluff.
Janet Yellen and her colleagues would like to welcome you, not unlike Tim Geithner’s 2010 expedition in this area, to the recovery. They have removed pretty much all language that would make you think there was anything like lingering destructiveness or erosion. In doing so, they make it very plain that they want you to believe that they will be ending ZIRP, just as they have done to QE.
There is the “solid pace” of economic expansion which has meant “strong job gains”, though, curiously, there won’t be any of the mainstream “inflation” that usually accompanies this outlook. The world may be concerned about oil and all that, but the FOMC wants you to know that you should focus on them instead of such distractions.
Yet for all the supposed expertise and the “best and brightest” that sit upon the monetary throne in the US, funding markets just rejected everything the FOMC proclaimed. Knee-jerks are usually conforming, at least in some manner, but the eurodollar market, in particular, traded in the “opposite” direction of what you might expect had the FOMC left any impression.
The eurodollar curve has been more than suspicious about the Fed’s preferred narrative for some time, going back to June, but you would at least think that this latest statement might carry enough weight as to cause the “right” direction if only in short-term trading. These markets are conditioned toward policy proclamations almost at face value (again, in the short run).
The path of “projected” rate changes has noticeably declined, which amounts to either a lower probability of actually getting to policy rate increases or a much diminished period of receiving them (the Fed does raise rates, but the economy isn’t what they say and the asset bubbles cannot withstand the paradigm shift so that it all ends very badly once more). The inward, flattening of the eurodollar curve, which is supposed to be the closest “market” to funding rates, is a direct contradiction to the “booming” economy as spun by the economists and their models.
I have rescaled the curve to zoom closer to the action so you can plainly see the intraday eurodollar curve moving in the opposite direction of any intended rate increases. And the majority of those movements are right in that central area of focus, the policy window from 2015-17.
These may not seem like large moves, but given the volume of contracts and the amount of “money” in the notional values there is a bit of exaggeration here. A 10 bps swing in a matter of a couple hours is significant, but very much so given that the “money section” of the funding curve not only dismisses the monetary policy statement in full, but actively trades against it. Eurodollars are essentially calling the FOMC’s bluff.
I have said this pretty much since the beginning of the taper drama, that policymakers are acting out rational expectations theory or at least how they see it. In other words, their job is not to analyze actual economic conditions, but to condition economic thought toward the end goal. If they convince you that they believe the economy is on track they further believe you will act accordingly (“you” being both investor and economic agent). The more the economy diverges from the “preferred” projection, the more emphatic the cries of “recovery” become. At some point, desperation becomes palpable.
There are other factors to consider here, of course, but it is at least interesting as that seems to be theme guiding funding market trading here. The more the FOMC says the economy is great, the less credit markets seem to believe it – desperation rather than reality, now even to the shortest of timescale.
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NOTE: Things got even worse on Friday as the market really accelerated its bluff calling for The Fed...
A month ago, when we first observed the biggest monthly gold repatriation from the NY Fed since 2001, when 47 tons of foreign-owned gold were withdrawn from the vault below 33 Liberty street which lowered the gold inside to just 6,029 tons, and which brought the 2014 YTD total withdrawal to 166.5 tons, we noted a math anomaly when accounting for the previously reported 122 tons of gold withdrawn by the Netherlands:
net of the Netherlands withdrawals, there is some 44 tons of extra gold that has been also quietly redeemed (by another entity). The question is who: is it now the turn of Austria to reveal in a few weeks that it too, secretly, withdrew some 40+ tons of gold from "safe keeping" in the US? Or was it Belgium? Or did the Dutch simply decide to haul back some more. Or did Germany finally get over its "logistical complications" which prevented it from transporting more than just a laughable 5 tons in 2013? And most importantly, did Germany finally grow a pair and decide not to let "diplomatic difficulties" stand between it and its gold?
Ironically, less than three weeks later, our bolded speculation above was proven to be absolutely correct when Germany confirmed that not only had it resumed repatriating its gold from the NY Fed as originally announced two years ago, after the mere 5 tons of gold transported to Frankfurt in all of 2013, but had substantially picked up the pace, when on January 19 the Bundesbank reported that it had indeed "grown a pair" and repatriated 35 tonnes of gold from Paris and, more importantly, 85 tonnes of gold from the NY Fed in all of 2014.
This is what Buba said:
The Bundesbank successfully continued and further stepped up its transfers of gold last year. In 2014, 120 tonnes of gold were transferred to Frankfurt am Main from storage locations abroad: 35 tonnes from Paris and 85 tonnes from New York. "Implementation of our new gold storage plan is proceeding smoothly. Operations are running very much according to schedule," said Carl-Ludwig Thiele, Member of the Executive Board of the Deutsche Bundesbank.
The Bundesbank took advantage of the transfer from New York to have roughly 50 tonnes of gold melted down and recast according to the London Good Delivery standard, today's internationally recognised standard. "We also called on the expertise of the Bank for International Settlements for the spot checks that had to be carried out. As expected, there were no irregularities," said Mr Thiele.
According to its new gold storage plan, unveiled in January 2013, the Bundesbank will be storing half of Germany’s gold reserves in its own vaults from 2020 onwards. This necessitates a phased transfer to Frankfurt am Main of 300 tonnes of gold from New York and all 374 tonnes of gold from Paris.
Since the transfers began in 2013, the Bank has relocated a total of 157 tonnes of gold to Frankfurt am Main - 67 tonnes from Paris and 90 tonnes from New York. This is equivalent to roughly 23% of the total quantity to be transferred. The following table gives an overview of the gold that has been transferred to date.
As at 31 December 2014, the Bundesbank's gold reserves were stored at the following locations.
The Bundesbank assures the identity and authenticity of German gold reserves throughout the transfer process - from when they are removed from warehouses abroad until they are stored in Frankfurt am Main. As soon as the gold was removed from the warehouse locations abroad, Bundesbank employees cross-checked the lists of bars belonging to the Bundesbank against the information on the bars removed. Finally, once they arrived in Frankfurt am Main, all the transferred gold bars were thoroughly and exhaustively inspected and verified by the Bundesbank. When all the inspections had been concluded, no irregularities came to light with regard to the authenticity, fineness and weight of the bars.
At the time we commented that there was "a curious amount of precautions and safeguards when transporting the "safe" and "untainted" gold held at the NY Fed to Frankfurt. Almost as if the Bundesbank, gasp, did not trust the quality and content of the NY Fed-held gold, nor its well-meaning intentions."
Judging by the latest disclosure by the NY Fed, Buba may have had good reason to be "concerned" about its gold at the Fed, because according to the Fed's latest update of "earmarked gold" for December there was yet another math anomaly.
Whereas in November, the cumulative total correctly hinted that there was more withdrawals than had been disclosed, the December 2014 total suggests that either the Fed just made an egregious math error, one costing literally about $1.1 billion, when keeping track of its entrusted physical gold, or someone is lying.
As a reminder, based on purely public information, between just the Netherlands' 122 tons of repatriated gold and the Bundesbank's 85 tons, at least 207 tons of gold were quietly withdrawn from the NY Fed in all of 2014. This is what the NY Fed should have reported in its December earmarked gold update delivered yesterday. It also means that the NY Fed should have reported some 40.5 tons of gold withdrawn in December, after reporting 166.5 tons of withdrawals for 2014 through November, for the math to make sense. Instead, according to Federal Reserve data, only $14 billion in earmarked gold was withdrawn in December, bringing the total down to $8,170 billion, or 6,019 tons.
Translated into actual metal, this means that the Fed reported only 10.3 tons of gold withdrawals in the last month of the year, suggesting that there is a quite substantial hole of 30 tons in publicly withdrawn gold that, at least for the time being, is unaccounted for by the Fed.
So what happened: did an intern input the Fed's gold redemptions figures for December, supposedly a different intern than the one who works at the IMF and who caused a stir earlier this week when the IMF, allegedly erroneously, reported that the Dutch - after secretly repatriating 122 tons of gold - had also bought 10 tons of gold in the open market for the first time in nearly a decade.
Or perhaps some "other" bank, central or commercial, decided to offset the redemptions by the Netherlands and Germany, and inexplicably added 30 tons of gold in December? The question then becomes: "who" deposited said gold, especially when one considers that even the adjoining JPM vault which is allegedly connected to the NY Fed by a tunnel, only contains some 740K ounces of gold, or about 23 tonnes.
Or is it simply that when it comes to accurately reporting the flows of physical gold, classical math is incapable of keeping track of the New Normal gold moves, and the Fed has decided that even when dealing with physical gold there is a "settlement" period?
We will find out the answer for sure next month, when unless the Fed revises its 2014 numbers, or plugs the outstanding repatriation "hole" with a late January withdrawal, then a key question will emerge, namely: how can central banks report 2014 inflows of 207 tons from the NY Fed, while said NY Fed only reports 177 tons of outflows.
And no, the GAAP vs non-GAAP excuse won't work this time.
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According to the American Academy of Family Physicians, around 10 percent of family doctors already offer shared medical appointments, sessions that bring together a dozen or more patients with similar medical conditions to meet with a doctor for 90 minutes. With pressure from the government and insurers to bring down the cost of care while treating the increasing number of people with health insurance, patients can expect group visits to become more common. “It’s efficient. It’s economical."
– From the Bloomberg article: Your Next Doctor’s Visit Could Get Crowded
Get ready, this is coming. While this trend was already happening before the passage of Obamacare, it’s not hard to imagine that private medical consultations could soon be a thing of the past for your average American serf.
Somehow I doubt members of Congress will be having group visits any time soon…
In a typical doctor’s visit, you wait around for a while, get your vitals checked, and spend a few minutes alone in a room with a physician. It’s private and short. Some doctors, frustrated by a relentless schedule of 15-minute, one-on-one visits, are experimenting with appointments that are neither.
According to the American Academy of Family Physicians, around 10 percent of family doctors already offer shared medical appointments, sessions that bring together a dozen or more patients with similar medical conditions to meet with a doctor for 90 minutes. With pressure from the government and insurers to bring down the cost of care while treating the increasing number of people with health insurance, patients can expect group visits to become more common. “It’s efficient. It’s economical. It’s high-quality care when it’s done right,” says Edward Noffsinger, a California psychologist who created the model in the 1990s at Kaiser Permanente, the state’s largest health maintenance organization (HMO).
In a group visit, exams and tests are still conducted privately, but patients discuss their ailments in front of the group. The theory is that each patient can learn from the others’ experience, and doctors get to have a longer, more relaxed discussion instead of hopscotching to three or four exam rooms in an hour. “You have one appointment with 10 observers,” says Marianne Sumego, an internist at the Cleveland Clinic. “Patients are really getting the equivalent of 10 visits.”
They’ve already started with the hedonics. Incredible.
Here’s what is clear: Seeing several patients at once can be good for harried doctors’ finances. In 90 minutes, a physician might be able to complete five or six one-on-one visits. A group visit could allow doctors to see double that number or more in the same time, and medical assistants or nurses can take care routine aspects of care—checking patients in, taking vital signs, writing refills of medication.
Finally, the real reason for groups visits is revealed.
Often it takes a fair amount of promotion by doctors to get patients interested in exploring group appointments, which require them to sign privacy agreements. “Patients have a lifetime of expecting a one-on-one visit,” says Noffsinger. “We’re asking them to do something entirely different.”
Yeah they’re “asking” you now, but I suspect they’ll be “telling” you faster than you can say free healthcare.
Never forget, group doctors visits are what happens to a society with an increased standard of living. Keep telling yourself that.
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For other healthcare related articles, see: