One Chart Explains Why Gundlach Says FED Should Not Raise Rates

In one chart--Global Nominal GDP (YOY), below, why Jeffrey Gundlach (DoubleLine) thinks the FED should not raise rates in December:

Gundlach – The Scariest Indicator In The World https://t.co/qEFCF7FBus pic.twitter.com/mOUHj7zZfr

— ValueWalk (@valuewalk) November 20, 2015

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Mohamed El-Erian video, Fed Missed Window, No October Rate Hike

Mohamed El-Erian: Oct. Fed Rate Hike Won't Happen - Mohamed El-Erian, Pimco's former chief executive officer and a Bloomberg View columnist, comments on what the September jobs report means for Federal Reserve monetary policy. He speaks with Bloomberg's Betty Liu on "Bloomberg Markets," October 2, 2015.

Jobs Report Is Lackluster, Raising Concern on Economy’s Course - The New York Times: "“There’s nothing good in this morning’s report,” said Carl Tannenbaum, chief economist at Northern Trust in Chicago. “We had very low levels of job creation, wage growth isn’t budging and the unemployment rate would have risen if the labor force participation rate hadn’t fallen.”" (Oct 2, 2015)

Economists Can't Find the Silver Lining in Today's Jobs Report - Bloomberg Business: "When the U.S. jobs report is released each month, there's typically enough nuance to offer something for everyone — the good and the bad. Today proved to be a feast for the bears. "When you look through all the details of the data, there just isn't anything good to hang your hat on," said Thomas Simons, a money-market economist at Jefferies LLC in New York. "It's been years since we've seen such an unambiguously bad report." Silver linings were tough to come by in the September jobs data. Payrolls came in at a much-weaker-than-forecast 142,000, while August and July figures were revised down. Wage growth was nonexistent for the month, with average hourly earnings actually falling by a penny on average. The softness in manufacturing endured, with factory payrolls falling by 9,000 when they were expected to show no change. With dollar appreciation and sluggish overseas growth providing headwinds, it was the biggest back-to-back decline since 2010... "

It's Been a Terrible Week for the Credit Market - Bloomberg Business: "According to Bank of America Merrill Lynch credit strategists led by Hans Mikkelsen: "The two weakest days in recent memory for high-grade credit occurred this week [on Monday and Thursday]." Meanwhile, Deutsche Bank Strategist Jim Reid pointed out that spreads on corporate debt are nearing levels usually seen during recessions. While credit has often been called the canary in the coal mine for global markets, because of its tendency to show signs of strain before stocks, the question now is whether bond investors are saying something important about deteriorating fundamentals or overshooting in their pessimism."

Gundlach warns of 'another wave down' - Business Insider: ""The reason the markets aren't going lower is people are holding and hoping," Gundlach told Reuters in a telephone interview. "The market bottoms out when people are selling and sold out — not when they are holding and hoping."

Traders Don't See Fed Moving Until at Least March, Futures Show - Bloomberg Business: "“The Fed has been overoptimistic for a long time on their forecasts for growth,” said Gary Pollack, who manages $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. Markets are also signaling expectations for a lower Fed target down the road, according to a note from Jim Vogel, an interest-rate strategist at FTN Financial Capital Markets in Memphis, Tennessee. Last month, the Fed forecast the tightening cycle will end with the funds rate at 3.5 percent. However, Treasuries now indicate a peak of 1.75 percent for almost five years, according to Vogel."

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Fed Is Stuck In a QE Trap

Don't look now, but Ben Bernanke is getting out at the right time, as we now know that Quantitative Easing Policy (QE ) HARMS the Economy In the Long-Run --

Architect of Japanese Quantitative Easing Policy Says QE HARMS the Economy In the Long-Run … and that the Fed Is Stuck In a QE Trap | Washington's Blog: "Many top economists have said that quantitative easing doesn’t help the economy . . . One of the main architects of Japan’s QE program – Richard Koo – Chief Economist at the Nomura Research Institute – explains that QE helps in the short-run … but hurts the economy in the long run (via Business Insider):

"Initially, long-term interest rates fall much more than they would in a country without such a policy, which means the subsequent economic recovery comes sooner (t1). But as the economy picks up, long-term rates rise sharply as local bond market participants fear the central bank will have to mop up all the excess reserves by unloading its holdings of long-term bonds.". . ." (read more at link above)

See also: The downsides of quantitative easing, Cardiff Garcia smackdown watch | FT Alphaville

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The Fed: Clueless

The Folly of the High and Mighty has now been revealed in the release of FOMC minutes of 2006 after a standard five-year delay:

Friday, January 13 - The Scan Article - American Banker: "Clueless: For all their power, pedigrees and Wall Street connections, senior Federal Reserve officials were as out to lunch about the state of the economy and housing market in 2006 as a roomful of polyester-clad Miami Beach condo flippers. That's the takeaway from Thursday's release, five years after the fact, of meeting transcripts from the Federal Open Market Committee. . . . "

New York Times:
. . . The transcripts of the 2006 meetings, released after a standard five-year delay, clearly show some of the nation’s pre-eminent economic minds did not fully understand the basic mechanics of the economy that they were charged with shepherding. The problem was not a lack of information; it was a lack of comprehension, born in part of their deep confidence in economic forecasting models that turned out to be broken. . . .

Doesn't give one much confidence that any of the so-called experts have any real understanding of the economy--or as the American Banker said: "and John C. Bogle, Vanguard Group's founder. . . for one, would give them an earful about what a fool's mission they're on trying to out-guess the economy and markets and how the truly enlightened focus instead on preparing to ride out their inevitably unknowable gyrations."
Read more here: American Banker, New York Times, Washington Post, Wall Street Journal

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