Will Janet Hint at Negative Rates?

Today at 10 am....Janet Yellen will take the stage at what is sure to be most widely watched media event today....What will she say? Will she acknowledge the global turmoil and the FED's role in it? Will she talk about the enduring strength of the US economy and how all of this recent mkt action is just noise - nothing to be concerned about? Will she remind us about how many jobs we created and that the unemployment rate is now 4.9% - as fictitious as that is....but will she use it? Will she continue to tell us that the FED is on schedule to raise rates 4 times this year or will she now acknowledge that maybe, just maybe - that is not such a good idea? Will she call Congress out on their inability to govern?

Will she be so bold as to suggest NEGATIVE RATES here in the US?

Remember that the Fed has announced that its bank stress tests for 2016 will include a period of negative yields on short-term Treasuries as part of its “severely adverse scenario”. Wink, Wink......So will she acknowledge that the economy is in a bit of trouble, will she suggest that the December rate hike might have been a bit pre-mature? Don't count on it.....because such talk would be like raising the white flag and waving it around saying 'I give up'! And that my friends would be a bad thing to do.....The best she could do is to put the next move 'on hold' as we make our way thru another month of weakening macro data......

Now the media is awash in speculation about what else global central banks can or will do.....Bloomberg runs with this headline:

"How Low Can Central Banks Go? JPMorgan Reckons Way, Way Lower"

"There are “no limits” to how far central banks can ease monetary policy. That’s a recent declaration of both European Central Bank President Mario Draghi and Bank of Japan Governor Haruhiko Kuroda, who have joined their counterparts in Denmark, Sweden and Switzerland in embracing interest rates of less than zero. The rethink is global, even in places where rates are still positive. Bank of England Governor Mark Carney conceded in November that his benchmark could fall below the current 0.5 percent if needed, while Federal Reserve Vice Chair Stanley Fischer said last week that negative rates were “working more than I can say that I expected in 2012.” Citigroup Inc. economist Willem Buiter says even China could shift below zero next year."

And then you ask - why the banks are getting hosed? Negative rates would kill the banks..

"Rather than spurring lending and spending as intended, subzero rates would become more a problem than solution. Such a concern could still flare up anew given the recent selloff in global bank stocks...."

Are the mkts just waiting for her to solidify the 'FED PUT"? Are global mkts now so dependent on central banks that they need to be guaranteed a floor before they really commit and come back to the mkts? I mean we have seen a bloodbath in the banking sector - yesterday alone - some of the Italian banks hit limit down and then were suspended from trading - this led UniCredit's CEO Federico Ghizzoni to say that the mkts NEED central bank coordination.....

"One central bank alone is not enough, so there is a need for strong coordination among the most important ones in the U.S., Europe, Japan and maybe also China”

Is this guy kidding? One central bank? Coordination? Where has he been for the past 8 yrs? Under a rock? Does he not realize that the US alone has spent $5 TRILLION trying to 'fix this' - never mind what the ECB, BoJ, PBoC, RBA etc have all spent?

Stocks are getting pummeled - for a host of reasons - lack of global growth, collapsing commodity prices, unsettled geo-political issues, blah, blah, blah..... as well as a complete FAILURE of FISCAL policy initiatives and the lack of any elected official taking an ounce of responsibility for legislation that has killed/strangled capitalism.. (think DODD/FRANK) - which is why we now see Bernie Sanders - a devout communist (otherwise known as a Democratic Socialist) rising in the race for the Presidency. I mean - it's laughable (almost). Which leads me to ask - Have they legalized marijuana in NH? Because that is the only reason I can think of that would cause anyone to cast a vote for him.....

Now back to Capitol Hill -

Can you hear the Democrats - crooning* the lyrics from the famous Chicago song - "If You Leave Me Now"?

(*Crooning - is to sing in a soft low voice; in a sentimental manner)

'If you leave me now, you'll take away the very heart of me, Ooohh no...Baby please don't go....Ooohh girl, I just want you to stay.....We've come too far to leave it all behind, How could we end it all this way - When tomorrow comes, we'll both regret the things we said today..."

And so - as the world waits for her testimony - the mkt is already fantasizing about her and what she will say....US futures are UP 18 pts at 1865 - thrusting us back into the 1850/1920 trading range as traders/investors expect her to be the DOVE that she is.

Yesterday stocks finished a choppy session - lower as investors struggled with continued weakness in overseas mkts, a run on European banks as well as another plunged in oil prices. Volumes dried up - vs. what they have been which suggests that investors are a bit tired and are now lining up to listen to what she has to say.

Overnight - Japan closes lower yet again - falling another 2.3% as both banks and natural resource stocks come under pressure. It seems that the Chinese Year of the Monkey - has decided to throw his Monkey Wrench into his neighbors back yard. Hong Kong and South Korea remain closed until tomorrow while China won't open again until Monday.

In Europe - mkts there are in rally mode....the banks are leading the charge after having been so beaten up in the prior sessions... word has it that Deustche Bank might do a bond repurchase program, which would be a needed sign of confidence for the financial sector........ and all of the victims - Deutsche Bank, UniCredit, Banco Popolare, Intesa Sanpaolo - are screaming higher as value investors pick up the pieces.

US futures are now up 20 pts as the excitement builds over Janet's performance on the central stage...now while she does not want to appear weak - she can't be so insensitive to the recent volatility to be viewed as completely 'out of touch' with reality. A move higher today - will do some good to calm the nerves of investors - but the reality is - until global mkts stabilize, oil stabilizes, global macro data stabilizes and we get clarity on FED policy - the volatility will continue....So - keep your seatbelt fastened - the pilot is warning of continued rough skies ahead.

And last night - Obama submitted a $4.1 trillion budget which will increase the deficit by $500 billion if he gets what he wants........And the world turns....

Chicken & Sausages (add in Hot Cherry Peppers for a Kick)

It feels like a game of chicken (and sausage) lately – so let’s try the Chicken Scarpariello – This is the classic Chicken and Sausage dish. There are many ways to make this – so it is about being creative….remember – as long as you have the basics down – you can make it your own by improvising seasonings etc. Try this one – it is easy and very good. For this you need:

Chicken pieces on the bone! Legs and thighs are always best – the dark meat is tender, juicy and moist. Sweet Italian Sausage (you can use hot sausage if you prefer), sweet cherry peppers (you can substitute hot if you like), potatoes, garlic, olive oil, s&p, Italian Herb seasoning, red wine vinegar, white wine, Chicken stock and cut Italian Parsley.

Preheat the Grill

Preheat oven to 475 degrees - In a roasting pan – add in the potatoes (you can slice them, qtr them, cube them - your call) – season with s&p and some of the Italian herb seasoning, drizzle some olive oil and a bit of chicken stock – toss and roast for 25/35 mins….stirring occasionally ..remove.

Wash the chicken and dry with a paper towel. Season with s&p and the Italian herb seasoning.

On Med – hi - Heat some olive oil in a large frying pan. When hot – add the chicken pieces skin side down – do not crowd…Cook the chicken until golden brown – careful not to keep turning the pieces – the trick is to let them brown nicely before turning….You should be thinking maybe 4/5 mins before turning….(but watch – as you do not want it to burn). When browned – remove the chicken and place in the roasting pan with the potatoes arranging nicely. –

Next place the sausages on the grill - the trick is to just get the grilled flavor....stay close so that they do not burn....turning as they cook. When done – remove and slice into bite size pieces. Add to the roasting pan.

Now – add the chopped garlic to the frying pan and sauté until golden – do not burn. Next add in the sweet cherry peppers – you can cut these in half and remove the seeds. Sauté. Now add in about ¼ cup of the red wine vinegar – allow it to come to a boil – scrape the sides of the pan to release any of the browned bits. When the vinegar is reduced by half – add in the dry white wine – not chardonnay – maybe like ½ cup or so….bring to a boil and then reduce by half. (no longer than 4 mins max). (if you want a thick sauce - then feel free to add some flour to thicken it up - I do not think you need it - but that is the beauty of cooking - you choose).

Now the chicken stock – about 1 full cup – once it comes to a boil – remove from the heat and pour the whole thing into the roasting pan with the chicken, sausages and potatoes. – Place back in the oven and roast – as it is roasting the sauce and all of the parts will blend nicely. You should only need to keep it in the oven for 15/20 mins..... Remove from the oven – toss in the chopped parsley and serve.

This makes a great dish for a get together. Easy to make a lot of it and present it family style on a nice platter – accompany with a large mixed salad and you are good to go.


Buon Appetito.