Larry Summers probably knew he had problems when he lost Bette Midler's support. The Wall Street Journal reported that "Even singer and actress Bette Midler tweeted in August that Mr. Summers was unfit for the job." If you lose Bette, let's face it you lose America. In fact the Boogie Woogie Bugle Boy might as well play taps for your nomination. Because as Bette knows, you got to have friends and Larry had too few up on Capitol Hill. Still global markets seemed to celebrate that the odds on favorite to replace Ben Bernanke is Janet Yellen, who has staunchly defending quantitative easing and is seen as more dovish and pro-QE than Ben Bernanke himself.
Yet oil markets (NYMEX:CLV13) rightly seemed more impressed with the possibility of a deal over Syrians chemical weapons stockpiles and the fact that the odds of an attack on Syria. Call it a peace dividend or a return to common sense but oil and stocks should have rallied as we pulled back from the brink of war.
Yet the focus of all markets will pay attention to the Fed. The most likely outcome in today's meeting is that the Fed will taper bond and MBS purchases of $85 billion a month by about a quarter. The market at first will freak out and we should see sharp drops in metals and a selloff in stocks and petroleum. Yet because three-quarters of analysts expect that the Fed will taper, more than likely we will see all of these markets rebound after the initial shock. The Fed will try in vain to explain that tapering isn't tightening but the bond markets already know better. Of course it is all about matters of degrees. Taper is tightening and it is the first step out of the abyss of negative interest rates and the first step in exiting extra ordinary stimulus. Yet it is possible that at the same time the yield curve is probably a bit ahead of itself.
Natural gas prices (NYMEX:NGV13) are on the rise ahead of what should be a bullish inventory injection. Warmer than normal temperatures should come in around 60 degrees. USA Today reports another reason to like natural gas long term. They say "The booming U.S. production of natural gas can be less environmentally harmful than estimated if gas companies take certain steps to cut greenhouse gas emissions, says a major study Monday that was done with industry participation.
“The study, billed as the first to measure the actual emissions of heat-trapping methane from natural gas wells, finds these emissions are slightly less than the most recent national estimate by the U.S. Environmental Protection Agency. In some cases, the emissions were only about 2% of EPA's estimate, done in 2011. The main reason for the difference? Two-thirds of the wells studied were capturing or controlling the methane to reduce emissions. The EPA assumed a higher percentage of methane, which is far more potent in trapping heat in the atmosphere than carbon dioxide, would be emitted. "This is good news in that it shows emissions can be controlled," says Eric Pooley, Senior Vice President of the Environmental Defense Fund, a research and advocacy group that teamed up scientists, two environmental testing firms and nine natural gas companies to produce the peer-reviewed study, published in the Proceedings of the National Academy of Sciences. The gas companies involved provided the majority of the funding. "Industry can get it right," says Pooley, saying companies are being prodded to reduce emissions by an upcoming EPA rule — effective January 2015 — that all methane be captured when liquids are being removed after drilling.”