The Housing Bubble

I’ll bet they work pretty hard (meaning the younger folks who run the company).

If you look around a bit, you will find stories of trust fund babies who completely blow everything they are handed.

“Workers move large piano pieces at the Steinway & Sons piano factory in the Queens borough of New York.”

If the Steinway & Sons piano factor slows down, the New York City economy is doomed!

Nov. 15, 2013, 9:15 a.m. EST
October industrial production down 0.1%
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November Empire State index turns negative
By Steve Goldstein

WASHINGTON (MarketWatch) — Industrial production fell 0.1% in October, the first drop since July, as mining and utilities output fell, the Federal Reserve said Friday. Economists polled by MarketWatch had expected no change. The 1.6% drop in mining output came after six months of gains, and output there is up 4.8% from the same period of 2012. Manufacturing output edged up 0.3%, the third straight rise, and was up 3.3% from a year ago. Utilities output fell 1.1% but is up 0.2% from a year ago. Capacity utilization slipped to 78.1% from 78.3% in September and below the 78.2% seen in a MarketWatch-compiled economist poll.
…

The Empire State index fell to negative 2.2 from positive 1.5 in October. Economists polled by MarketWatch expected a positive 5.5 reading ??

From a expected expected 5.5 positive to a 2.2 negative number ?? Sounds like quite a miss…

Meet Andrew Huszar, the ex-Fed insider who hates QE
November 14, 2013, 9:50 AM
Bloomberg
Andrew Huszar

When you write a takedown piece about the most controversial monetary policy measure in recent history, there are loads of points and counterpoints to be dredged up in response.

Andrew Huszar is certainly no fan of the Fed’s quantitative easing program, but his problems with it extend to a broader indictment of the current economic and financial system in the U.S. than just the central bank’s most recent policy tool, he said in an interview with MarketWatch.
…
Huszar asserts that the big banks ultimately profited from QE by skimming off the top: As the Fed drove down benchmark interest rates, bringing with it the wholesale costs for banks to make mortgages, the retail rates being charged to customers weren’t dropping accordingly. The increasing spreads went toward the banks’ bottom line.

On the other hand, lower interest rates made other parts of banks’ businesses less profitable. But, Huszar countered that banks also benefited from two other factors, which were briefly mentioned in his piece: the run-up in prices on banks’ own securities holdings, and commissions from brokering the Fed’s QE trading.

Quantitative easing had its benefits when it was first introduced, Huszar said, including stabilizing a financial system that was reeling at the time. But five years later, the landscape he imagined when he went to work for the Fed hasn’t come to fruition.

Is the Fed’s easing program to blame for this? Huszar says yes. But there are other factors at play as well, he says, including a regulatory regime that isn’t tough enough, and leaves too much power in the hands of a few big banks. On that point, Huszar isn’t alone: during the same day his op-ed ran, Ken Griffin of the hedge fund Citadel also called for the U.S. to break up the big banks.
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“My belief when I went back to the Fed was that I was going to be helping to stabilize the economy, which would then open the door for real restructuring and reform by the rest of the U.S. government,“ said Huszar. “I believe five years later, we see the same size and concentration of banks in the U.S. banking sector. You have a huge cartel at the top of the industry.”

– Ben Eisen

The Fed is not a cartel subject to Antitrust laws. It is a public utility.

Is the Fed driving people to drink?
November 15, 2013, 1:06 PM

It’s conventional wisdom that quantitative easing by the Federal Reserve is propping up stock prices, a “sugar high” as Mike Johanns, Warren Buffett’s senator, claimed as he questioned Janet Yellen yesterday.

Consider: Since the Fed began its second round of QE in November 2010, the Fed’s balance sheet has risen by 69% to $3.86 trillion. Meanwhile, the S&P500 index is up by 600 points, or 50%. The correlation between QE and stock prices is an impressive 0.94.

It surely follows that when the Fed begins to taper, the stock market will stall. And when the Fed begins to shrink its balance sheet, prices will plunge. Right?

Not so fast, says Ethan Harris, global economist for Bank of America Merrill Lynch, who calls the relationship between the Fed’s balance sheet and stock prices a “spurious correlation.” That’s what happens when you confuse a coincidence with cause and effect. “One of the big no-no’s in statistics is to correlate two trending variables,” Harris writes in a weekly note to clients.

Harris notes that the Fed’s balance sheet has been growing for the past three years, and a lot of other things have also been growing over that time. It’s easy to draw pretty charts that reach ridiculous conclusions using spurious correlations.

The Fed’s balance sheet has a 0.95 correlation with the U.S. population, a 0.94 correlation with vehicle sales, a 0.92 correlation with liquor sales.

“Taken literally, the Fed is pushing people to drink, drive and have children,” Harris says.

Yeah “too perfect” is exactly how I would describe it. Something is gonna give!