Dudley On Rates

Cape Town — Friday NY Fed President Dudley made his first comments on rates and the rate cycle since December 2014. Noting really new here — Dudley largely dismisses and doesn’t buy into the “secular stagflation” argument; he views raising rates too soon as a mistake. Dudley believes, like I, that normalization of monetary policy should happen gradually.

Dudley says monetary policy cannot be put on autopilot guided only by a fixed policy rule. He points out long rates are too low.

In this case, the fact that market participants have set forward rates so low has presumably led to a more accommodative set of financial market conditions, such as the level of bond yields and the equity market’s valuation, that are more supportive to economic growth.  If such compression in expected forward short-term rates were to persist even after the FOMC begins to raise short-term interest rates, then, all else equal, it would be appropriate to choose a more aggressive path of monetary policy normalization as compared to a scenario in which forward short-term rates rose significantly, pushing bond yields significantly higher.

My view — unlikely to see too harsh of a hike with the weak recovery we’re in. Dudley and Yellen both preparing the market for the inevitable hike. We’ll see just how well hedged market participants are. Personally believe there’s a lot of large one way directional bets to try and cash in before the coming hike cycle is viewed as less favorable to current asset prices.

No preset course in hiking. Dudley isn’t set on using the “taylor” rule — which, in my view, is a good idea NOT to. Stoping reinvest and drain excess reserves RRP and runoff. We don’t want the reserves anyways (stricter bank leverage ratio requirements). ER’s are deposit liability for large financial institutions. With reserve draining the overall balance sheet of the banking system levers down — hence fewer reserve assets and fewer liabilities.

Without draining excess reserves the Fed cannot achieve a functioning fed funds market. Institutions not eligible for IOR specifically GSEs, FHLBs are primary sellers of fed funds. Depository institutions don’t really have any incentive to lend at rates lower than IOR.

Foreign banks operating in the US do not have to pay the FDIC fees which explains why they are large holders of reserves. GSE’s and FHLBs have an incentive to lend into the fed funds market, even though the current rate is lower than IOR.

ZIRP won’t be around forever. For now too soon to tell, with the benefit of hindsight, if it’s a policy mistake for not tightening monetary policy aggressively enough — as hawks like Richard Fisher assert. My advice would be run it hot, cease reinvestment of securities principal allowing the Fed’s balance sheet to shrink as securities matured, then we can see if we’re all ready for RRP and the much talked about “lift off.”

Can The Monarch Be Saved?

monarch-butterflies-hope-1_84552_990x742Cape Town — The U.S. Fish and Wildlife Service recently announced it was pledging $3.2 million to help boost the levels of monarch butterflies. The FWS will spend $2 million to restore more than 200,000 acres of monarch habitat through the corn belt, the primary summer breeding grounds of monarchs.

Perhaps this is too little too late. In December 2014 it was announced that a one year review will be conducted to determine if monarch butterflies would be counted as a threatened species under the Endangered Species Act. While this move is good it goes to show the typical glacial pace of federal bureaucracy.

The outlook is extremely grim. Monarchs are tied to one single plant, asclepias, commonly called milkweed — its the ONLY plant females lay their eggs on and the only plant newly hatched caterpillars  feed upon. No milkweed = no monarchs. It’s that simple.

Milkweed has been decimated by our compulsion to spray roundup on everything that looks like a weed. While modern agriculture has vastly benefited American society the use of herbicides have increased crop yields it has lead to the gaping loss of milkweed we now find ourselves in. Farmers have every right to maximize all their farm acreage.

The issue now is there isn’t enough milkweed, I’d wager a bet 1 out of 10 people at random would have milkweed at their house. It’s not often sold at nursery’s. The big box home improvement stores — Lowes, Home Depot, amount others typically don’t sell milkweed.

To be sure, milkweed is a rather unsightly plant in winter and after it’s done blooming. It’s not like rose bushes, or boxwood shrubs, or junipers which everyone has in their yards. Milkweed is a perennial which is the lifeblood and heartbeat of monarch butterflies, without it, the species will perish within our lifetimes.

Very few animals have inspired as much devotion as the monarch. Its known for its incredible multigenerational, 3,000 mile migration from Canada to Mexico’s Sierra Madre for overwintering.

Milkweed has finicky germination tendencies. Seeds must go through stratification where seeds are exposed to cold/mosit conditions to trick the seeds into thinking they’ve gone through winter and encourage subsequent germination in spring. Some milkweeds have notorious poor germination rates. Yet it’s worth planting, at least having a few milkweeds in ones yard.

Swamp milkweed

Swamp milkweed

Once seeds are obtained it’s relatively easy. Soak a few paper towels in water, have them damp, put the seeds between, toss in a ziplock bag and put in the fridge for 2 months. After 2 months is up any basic seed starting potting mix will suffice. Lightly cover the seeds no more than 1/4 an inch. Germination will occur within 7-14 days if flats are kept at 70 degrees. After germination either keep under a grow-light or by a sunny side window — after the last frost plant in the spring.

Easiest way to help

1. http://www.monarchwatch.org/ — tremendous resource on all things monarch from how to raise them, how to propagate seed, what the ordinary person can do to help.

2. Obtain seed either via Monarchwatch, or Prairie Moon Nursery — I’ve had success with seeds from them.

3. Plant seeds. Either be a dork like me and plant them in 50 tray seed flats and have artificial light in my Manhattan apartment until they can be transplanted this spring (make sure your husband keeps the milkweed seedlings watered if gone for an extended period of time :) ); OR simply dig a hole and drop a few seeds in — preferable in the fall so they go through winter cold stratification.

4. Plant milkweed. Without it there are no monarchs. Since 1990 we’ve lost 970 million monarchs and who knows how many milkweed plants — vital for their very existence.

Every plant counts. And the sad reality if it isn’t viewed as a national priority then we will lose the monarch. I don’t know if its too late and if the grim reaper’s already calling them home, but I’d hate to see it lost on our watch.

Appreciating Life

Cape Town — Today marks the third year and 2nd day since Maurice André passed away at the age of 78. André was the greatest human being to ever pick up the trumpet. He is perhaps best remembered for his impassioned performances of Baroque era music, his soul-stirring high notes, and the piccolo trumpet.

I’ve been on the road for 17 days now. 5 different time zones. Living through the onslaught of “breaking news,” FOMC minutes, Greece exit threats, dysfunctional eurozone politics, GDP revisions,  and man-made controversies — so many — that it’s enough to make a person lose their mind.

Perhaps there just isn’t anymore camaraderie left in the world. Life will always be to a large extent what we ourselves make it. My father used to always say don’t let those cynical bastards ruin your life and take away your happiness. Live for you.

Even when dad was diagnosed with terminal cancer, for the most part, he kept his sunny disposition — that life was worth living. That we can accept the things we can’t change. There is an innate feeling that we all want to be connected to a universe which celebrates life.  To feel that there is always light at the end of the tunnel – and no – it’s not a freight train barreling towards us.

Life. It’s something so often neglected in our instant gotta-wana-have-it-right-now world. When monetary policy around the world is beyond frustrating. When politics is so demeaning and even diabolical in its very nature we feel helpless. The frustration becomes overwhelming.

Surely one has to find a way to deal with all the insanity in the world. Constantly thinking about a “collapsing economy” and “banksters” and interpreting the stupid shit Presidential hopefuls say, what algo 1 and algo 2 are trading, and the latest buzzfeed click-bait article isn’t healthy.

If we always dwelled on misery and human suffering we would want the first ticket out of here. In one way or another disappointment can be turned into drive or it very well could destroy us — if we allow it to. Move so you can grow, and get on with your life.

I’ve always found solace from the raging, unrelenting news cycle humanity finds itself living though, in the unsurpassed greatness of Baroque era music. Bach. Telemann. Handel. Corelli. The immortal Vivaldi. But perhaps today, more so than ever, Maurice André does that for me. Clarifies raw human emotion in the most astonishing way with his playing style and ability to hold the high notes.

There’s nothing petty, there’s nothing vulgar, nor cringeworthy about how  André plays Telemann’s Trumpet concerto in D. It’s preformed flawlessly. It’s one of the few pieces of music that captures every emotion. Perfect in every way like bees processing nectar into golden honey.

I’m left with such an appreciation of his talent. That life is so worth living — to the very fullest.

It’s been a long few weeks away from home, and I’ve still got a few miles to go. I’ve tried not to dwell in the past, yet the world’s changing, and I’m changing, too.

Life is so very precious. Each day is a gift. Maurice André was a gift to humanity. That for two minutes and 30 seconds, after closing my eyes and turning the volume all the way up can maybe, just maybe almost touch heaven.

And life goes on. Things change. There’s so much I’d want to tell my father. And although I am no longer bitter and have accepted reality, on some nights it still hurts. And I miss him.

Maybe what they say is true relying on our faith. That perhaps those whom we love who are no longer with us have the very best seats in the house. Lord knows I’ll need some guidance over the new few months. I just wish he could’ve meet him, and held him, and looked me in the eye and said “thanks — now you finally understand life, Lauren.”

Maybe children are like little emerging market economies. And they just need someone to lead them along the way. To teach them right from wrong. To support them through thick and thin. Someone to believe in them and love em.

Because like it or not, parents won’t always be there by our sides. I found that out the hard way and much sooner than I would’ve liked. And losing someone so close is devastating in itself, you hold onto the good times. But it’s times like now… many emotions.

I know I’ve made the investment for the long haul. We’ll see what happens. The only appropriate response is one of gratitude.

We protect what we fall in love with.

BOJ Keeps Monetary Policy Unchanged, Strikes Optimistic Tone On Economy

February 2015 — The BOJ kept monetary policy unchanged continuing with QQE and pointed to Japan’s “moderate recovery trend.” The central bank noted that CPI would likely be constrained with the decline in energy prices.

Japanese exports picked up while business fixed investment has been on a moderate increasing trend as corporate profits have improved noted the BOJ.

Kuroda told the Lower House Budget Committee, “So far I don’t see any problems about implementing the quantitative and qualitative easing.”

With the central bank continuing to buy bonds it has weakened the currency thus helping boost profits for exporters. The BOJ notes private consumption remained resilient against the background of steady improvement in the employment and wages (which many view as finally getting a jump this year).

The BOJ is buying all new government debt in the secondary market to keep long-term interest rates pined to the floor, however many point out that this has vastly reduced liquidity in the JGB market.

Overall an optimistic note. That said a few in Japan whom feel the BOJ does not appear to be fully convinced of the strength of the economic recovery, and perhaps more stimulus measures will be announced this spring.

Abe and Kuroda strong fiscal and monetary stimulus has been the strategy for countering deflation. Kuroda believes that the BOJ’s 2 percent inflation target and that QQE was not causing “any problems” in the JGB but he was closely monitoring developments.

* Side note — my time in Tokyo is up, what an incredible experience. It’s off to Dubai now — the good in all this travel… I’m missing out on all the snow in New York…

Japan Escapes Recession For Now…

February 2015 — It’s been an eye-opening experience here in Japan. Tokyo has been a bit overwhelming. Definitely a booming city with great food, great nightlife, and fantastic hospitality.

Japan reported GDP annualized growth of 2.2% from the previous quarter — which declined 2.3%, and officially the country is back out of recession after previously declining the past two quarters.

Private consumption increased just 0.3% from the previous quarter. Wage compensation declined 0.5% on the year; wage growth hasn’t kept pace with the April 2014 sales tax increase, the sales tax is set to increases an additional 2% to 10% with Abe delaying the increase for 18 months.

Capital spending increased by a meager 0.1% while exports increased by 2.7%.

Abenomics aside Japan has a major problem — its population – declining by 268,000 in 2014. Just over 1 million were born last year while 1,269,000 persons died. On average every 32 seconds a baby is born while every 25 seconds a person dies. Simply put – we need more babies, and we need them now.

In the long run without addressing this problem of population decline, sustained economic growth will not happen. Another hindrance is the number of reproductive-age women in Japan is on the decline. Yet even if Japan were able to raise the birth rate tomorrow, it would be at least 20 years before any impact on Japan’s economic growth was noticed.

Japan needs to address its immigration policies to find working alternative means (foreign workers that would take the place of jobs traditionally going to Japanese natives) to offset the negative impacts of a declining population. Leaders would face the challenges of openly discussing the social and economic impacts of having more foreigners working in Japan.

The choice is pretty stark: economic power wanes as its population ages or implement a more open immigration policy — which could perhaps revitalize a dynamic economy. Either way Japan is working against unfavorable demographics unless policy changes are implemented.

$3.8 Billion Will Be Illegally Wagered on Super Bowl Sunday

Tom BradyJanuary 30, 2015 — This year the American Gaming Association projects that Americans will illegally wager $3.8 billion on the Super Bowl between the Patriots and Seahawks. With Nevada being the only state in the United States where full-fledged sports betting is allowed, it’s blatantly obvious why so much of the handle is bet illegal offshore and on internet sites.

The National Football League is extremely popular and it’s what literally makes the weekend. It’s fun to watch most NFL games, sans the bucs, and dolphins, and many sports fans even partake in the latest craze “fantasy sports” leagues. (Personally I stick to betting the actual games in at Vegas books, not fantasy teams which make me no money). There’s no doubt that recreational betting is also going on — on the side to make things more interesting.

This past November the American Gaming Association was looking to partner with the NBA and other professional sports leagues to determine the size and scope of the illegal sports betting market.

NBA Commissioner Adam Silver even penned an op-ed in the New York Times encouraging changes to how we view sports betting – sepifically Congress adopting new federal framework that allows states besides Nevada to authorize betting on professional sports.

As an avid bettor I wholeheartedly support the NBA Commissioner. For most people it’s very unrealistic to place bets in advance in Las Vegas, much less fly there to place a bet. Not everyone has a team of runners placing bets on one’s behalf either.

The AGA continues to state that the illegal sports betting market is a “staggering” 38 times bigger than the legal market in Nevada. Vegas books typically handle up to $100 million a year on Super Bowl Sunday. Nevada casinos want in on the action.

Vegas opened the line at -2.5 SEA with the Patriots being a 2.5 point underdog against Seattle, the line quickly jumped to pick ‘em as early bettors took Pats +2.5. Pick’ em completely takes the money line bets out of the equation, which is always a popular bet either rolling heavy with the favorite or laying cash on the underdog.

Most of the early action has been coming in on the Patriots, typically small $100 – $500 bets by the public. Typically 80% of the handle won’t come in until the weekend. Last year a record $199.4 million was bet on the game between DEN and SEA. With no money line in play this year it will take at least 10% of the potential handle out of the equation.

If money continues to come in over the to on the Patriots there might be a liability for the house. As typical with Patriot Super Bowl’s; back in 2012 at Super Bowl XL VI the Giants cashed as +2.5 dogs, winning outright 21-17 vs Tom Brady and the Patriots.

This year’s game is expected less will be wagered because the ML isn’t in play. For me personally, it will be a hard game to watch as I’m still pretty devastated by the Packers outright collapse. Not really a fan of either team, but it’s a pretty interesting match up.

Brady is lighting fast with throwing against the blitz. Wilson can improvise with his scrambling ability and Packer fans like me know what he can do in 3 minutes…. Brandon Bostick onside kick disaster notwithstanding.

kam-chancellor-db-seattle-seahawks_pg_600We know how the media portrays this game Marshawn “Beast Mode” Lynch and Rob “Gronk” Gronkowski and Kam “jump the offensive line” Chancellor, Darrelle “Revis Island” vs “don’t try me with a sorry receiver like Crabtree” Richard Sherman and the “Legion of BOOM”, and of course Tom “my uggs may be on injured reserve, but I’m still sleeping by Giselle” Brady.

I’ve got a decent amount wagered on the Patriots right now and will likely add more. Closely watching the line moves. Those who were lucky to have a team in Vegas to spot the early line might’ve gotten lucky taking Pats +2.5.

To the victor go the spoils.

Into The Heart Of Winter — First Bee Check

InnerCoverJanuary 24, 2015 — I finally had a chance to check on the bees this weekend as right now marks the heart of winter for the colony and the most stressful time of year.

Going into late fall / winter perp the goldenrod and asters provided adequate nectar and pollen and both hives quickly backfilled the top brood boxes. I didn’t have to do much supplemental feeding of 2-1 sugar syrup to bring them up to weight.

November 23, 2014 was the last day I had the hives open making sure they were set for overwintering here in the northeast part of the US. I overwinter in 2 deep’s typically, but this year I also left each hive with a medium super that I didn’t pull. I’m feeling pretty confident in that decision as this week we are expected to get slammed with up to 2 feet of snow in Greenwich.

It’s was such a relief to see them flying today (in the mid 40s) and even bringing in pollen. The source of the pollen, I have absolutely no idea! But it’s pretty amazing to see in January. It’s one of the small joy’s in life, peaking in the hive when weather permits and seeing the bees still hanging around — alive!

A few bees making work of the dry cane sugar

A few bees making work of the dry cane sugar, used to absorb condensation and as emergency food.

Based on colony weight they still have a full deep left of stores and the top supers, from what I could see, had plenty of honey — just the very top 3 cell rows were uncapped.

I’m pretty happy with the cluster size, didn’t see the queen, but I didn’t expect to spot her and I didn’t pull any frames or break the propolis seals on the deeps. Most of the bees were in the middle box, not up at the top with the cane sugar. I had a GoPro set on a time-lapse and can check in on them while in NYC. I wasn’t seeing much activity until today. It’s just been too cold to fly, too rainy.

No small hive beetles either on the inner cover, which have been the absolute bane of my existence this year. No wax moths either or any varroa spotted on any of the bees up top.

Any clear day with the sun shining, and clear skies, is a great day to fly — for pilots and honeybees alike. I’m reminded of their resilience to work together as a team when each night we are well below freezing, rain, sleet, and snow.

This weekend was a glimmer of hope that beneath the outer cover, and inner cover, life is teeming and even thriving with all the bees working to keeping the cluster warm. I think they’re gonna make it with 2 months left to go and ample stores. It depends on the weather if it’s warm enough to break cluster and move to other frames of honey.

Video of bees getting some pollen in…

I’m sure I’m not the only one ready for spring, the bees are too, which is when the cycle and race to harvest liquid gold (honey) starts all over again.

Bringing in some pollen!

Bringing in some pollen!

In comparison going into late fall was just a massive cluster, the height of aster and goldenrod honey. Overwintering much smaller with not much brood rearing. In the spring they will ramp up production and the population explodes again.

In comparison going into late fall was just a massive cluster, the height of aster and goldenrod honey. Overwintering much smaller with not much brood rearing. In the spring they will ramp up production and the population explodes again.

See ya’ll in the spring. I will definitely be doing some splits off hive 1, and hopefully get a few more hives going. Not an easy thing to manage on my limited schedule, especially in the summer and spring when M&A rages on.

* Click the pictures for larger images.