Tale of the Taper; Bond Rally Coming?; FedEx Hits With Miss
Recapping the day's news and newsmakers through the lens of CNBC.
Full Speed Ahead on QE
The Fed tiptoed around any solid guidance on when it will begin tapering its $85 million-a-month bond-buying program, saying only that it will seek more evidence that the economy is on solid ground, such as a fuller jobs recovery.
The central bank expects that its jobless target will be hit sometime in 2014. It also cut its inflation forecast. That's about it. Expecting more concrete guidance, the markets sold off while Treasury yields rose.
Critics wonder why the central bank continues QE at full speed even though the economy is far stronger than when the program started and the S&P 500 stock index has gained more than 140 percent since its March 2009 low.
Prior to the announcement, it was clear all eyes were on Bernanke. One commentator compared the market's Fed obsession to a teenager's infatuation with Justin Bieber.
Others saw the meeting as an opportunity to speculate on Bernanke's next step, as all evidence points to him leaving his post in January. One watcher expects him to return to academia, and investor Ken Langone went as far as to call him a lame duck.
"I think we may be on a trajectory that the market could possibly understand from here, which is the idea that the economic and labor market risks have diminished. It echoes language we've seen in the past of forecasting what the next statement might say or what the next movement might be, so I think they have set the stage for some flexibility on tapering here, and we're back on a path that reminds minds people of how the Fed made policy a couple years ago."
—CNBC's Steve Liesman
"Ben, what are you afraid of? I want to know what you're afraid of. CNBC, all the channels that cover business, we have person after person after person, buy side, sell side, upside, downside, how is the economy? The economy is great. What about stocks? You got to buy them. What if they break? You have to buy the dips. What's wrong with the economy? I don't hear these people saying anything is wrong with the economy. So what's wrong, Ben?"
—CNBC's Rick Santelli
It's the Deficit, Stupid
DoubleLine Capital's Jeffrey Gundlach believes that quantitative easing should start to slow at the end of the year because the Federal deficit is shrinking. Also, when the Fed finally signals that it will begin slowing its bond-buying program, long-termgovernment bonds could be the best place to be. He adds that nobody is making any money anywhere right now.
"I think that the Fed is going to reduce their bond purchases later this year because, as you know, my theory has been that what's really going on is the Fed is financing the budget deficit, and the budget deficit is smaller than it was a year ago, and therefore the need for financing is less, and so bond purchases should be less."
"I can't find anything that I think is going to be a moneymaker, and when we look around the world, that's been the case. There's really nobody making any money in anything in the past month. Stocks are down, not much in the U.S., but they're down hard in a lot of emerging markets and in Japan. Gold looks like it's going to break down to a new low. Bonds are going sideways. No one is making any money anywhere, and I think that's because people think that the conviction of central banks to continue the amount of monetary stimulus through bond purchases is less."
More Mortgage Funny Business
Apparently a $26 billion settlement and more stringent procedures to which the nation's five-largest mortgage servicers agreed for allowing improper foreclosure procedures such as "robo-signing" document fraud weren't enough. The settlement's monitor has found that of Bank of America, JPMorgan Chase, CitiMortgage, ResCap (formerly Ally/GMAC) and Wells Fargo, only ResCap showed no violations of the servicing settlement parameters. The other four could be on the hook for millions of dollars in fines if they don't fix the problems. Of course, there was at least one bank apologist.
"The most consistent failure across the servicers was the prompt response to borrowers telling them what documents are needed to complete their applications for relief. That's really important because it's the basis upon which the consideration of an application can be made and it's been the source of the so called dual-tracking problem."
—Joseph Smith, National Mortgage Settlement Monitor
"Let's not forget that this problem surfaced not because of notification, not because of improper signatures, but because people who had mortgages couldn't make the payments."
—Ken Langone, investor and Home Depot founder
FedEx Hits With Miss
FedEx, an economic bellwether, traded higher today after somewhat mixed news. It announced higher earnings but missed its revenue target. Analysts say the company is doing well at controlling costs, managing Wall Street's expectations and it remains a good buy. Its shares were up about 2.5 percent in afternoon trading.
"It is about the capital discipline of [FedEX]. Obviously, they are taking steps in the right decision to cut some of their aircraft out of the challenging and slow growth global environment, but that said, they are increasing their capital outlays for next year. The earnings are definitely going to be up a little bit and the outlook is conservative, but the cash flow generation is going to be light."
—Barclays analyst Brandon Oglenski
"The guidance, initially, gave cause for concern when they put it out this morning. It was much lower than consensus numbers, and I think that spooked people a little bit. When you start to go through the details, particularly on the conference call, it was clear that it was fairly conservative and adjusting a little bit of way they guide the street. So they have been aggressive historically with their forward outlook and now they are bringing that in and it is set up to go forward from this point."
—Citi analyst Christian Wetherbee
The Rich Get Richer
Rest easy, the stock market rally—propped up by the Fed's quantitative easing program—has helped the global high-net-worth population reach an all-time high with $46.2 trillion in assets. That's a 10 percent rise in 2012. And better yet, the U.S. still leads the way, though Asia-Pacific is closing the gap. The CapGemini and RBC Wealth Management World Wealth Report found that 28.2 percent of HNW assets remain in cash and deposits, though, so at least asset management salesmen still have justification for their jobs. The U.S., Germany and Japan account for over half of the high-net-worth individuals in the world, by the way.
"I still think there is a big wealth-preservation versus growth bias that does vary regionally. You do see some areas of the world where they're more growth-oriented."
—George King, head of portfolio strategy at RBC
Facebook's Big Fete
Facebook said that it will make an announcement at 1 p.m. ET on Thursday. What's up? No one's sure, but it probably will have to do with mobile strategy. The best guess is that it is a launch of a short-form mobile video sharing service—perhaps an extension of Instagram and similar to Twitter's Vine.
"Facebook sent out physical information—that's right, snail mail—saying 'a small team has been working on a big idea,' with a coffee-cup-stain ring in the corner. One thing is for sure. ... Whatever Facebook unveils, it's sure to have something to do with mobile where Facebook has been focusing to keep its shifting user base engaged and to figure out how to generate more revenue."
—CNBC's Julia Boorstin