The Height of Garbled Pinocchio Speak

The FOMC’s minutes struck me as the height of garbled Pinocchio Theory. Other than scraping their unemployment threshold,  the key line of FOMC minutes was this doozy.

“… Several participants suggested that risks to financial stability should appear more explicitly in the list of factors that would guide decisions about the federal funds rate once the unemployment rate threshold is crossed.”


This could mean about anything, but this quip from Zero Hedge describes it well:

“What the Fed is now suggesting is that the Fed will ‘qualitatively’ guide to more intangible factors: like ‘risks to financial stability’ better known as the prevailing level of the S&P 500. Also, one wonders just what form this guidance will take? A 25 bps rate hike for every 100 upside points in the S&P 500? Or 50 bps if a semi-insolvent Caa/CCC company can issue covenant-lite fourth lien debt at Libor + 1% to widows and orphans from the Ukraine? Alternatively, will the Fed guarantee that the second the S&P enters a correction then it will proceed to resume $85 billion of monthly QE. What about a 1000 point correction – will the Fed simply buy every share of AMZN then?”

Now, when the masters of the world enter  the stage when they are trying to balance “market stability” with reigning in out-of-control Ponzi finance, you have long since hit the point of no return. I think we can take our cues on this from the half-assed moral hazard inducing attempts of the PB0C [see “Dicey Situations“]. The problem becomes that one or more of these wizards makes a mistake. The second oft-overlooked problem is that members of ”The Parasite Guild“ make a lot of money from crashes and routs. History is currently being ignored on that front. Incidentally, here are the maturing trusts with which China needs to deal.

To complicate matters further, there are institutions, such as the Parasite Guild’s International Monetary Fund, urging the European Central Bank to consider cutting interest rates to below zero and warning that euro-zone deflation is significant new risk for the world economy.

Lee Adler of Wall Street Examiner and I have done podcasts together on Radio Free Wall Street for many years. In that time we’ve argued and butted heads. But through it all, if I have learned anything it’s that Lee has a wise sense of what is transpiring, especially in the realm of central banking. He lays it out pretty succinctly in our Wednesday podcast.  You should especially draw your attention to what he says about gold between minutes 4 and 7:30. I strongly concur with his analysis.


In my eyes, the real news yesterday on gold is this new report that cites a senior government official saying India may cut its gold import duty to between 6% and 8% before the end of February. That would be from 10% today. If it was 6% next week, that would be faster and more bullish than general consensus.

I’m going to look more closely at the gold stock charts Friday. The reaction of GDXJ on Wednesday following the FOMC’s garbled Pinocchio speak was severe. My best guess is that we saw some stops being triggered from funds that, in turn, created a vacuum. Ultimately, as discussed in my “ABCD Pattern” post on Monday, what I still want to see is a three- or four-week duration bullish flag to form around the 200-day moving average, which in the case of GDXJ is currently at 39.38.

On the Ponzi economy front, it appears that retail employment is now far exceeding core retail sales. In a cutthroat environment, this can mean only one thing: Employees are going to be cut to the bone.

As we get ready to post, Wal Mart reported Q4 comp store sales, which declined -0.4% compared to an expectation of a +0.2% increase. Company guidance now expects Q1  EPS of $1.10-1.20 versus consensus of $1.24.

Source: Renaissance Macro

Source: ShopperTrak

ShopperTrak’s chart shows how gutted the overall customer base is in retail.  The drop in retail’s foot traffic during the last several years is absolutely stunning.

The whole financing of retail space has been to kick the can down the road in order to keep loans performing while hoping and praying for a strong rebound. In reality, the gutted lending shows it’s in a world of hurt.