I am very confused by the constant bombardment of the news headlines that tend to contradict each other. One begins to wonder if the “ARMS” race media outlets are running is to craft headlines that have the greatest market impact. In a world of keyword algo readers, the market impact can be immense in a mere TWO SECONDS.
Last week it was the economic lightweight Jon Hilsenrath writing that traders and investors were misinterpreting the Bernanke hints at tapering and the FED’s QE program would remain in place longer than the markets were anticipating. It was thought, as usual, that the Hilsenrath piece was a planted piece by the Bernanke-led communications team.
This afternoon, the Financial Times’s Robin Harding, a Hilsenrath rival, introduced his own thoughts. Mr. Harding wrote that the FED would in fact announce that the beginning of tapering was near as the near 200,000 average job creation during the last past six months has been a much stronger indication of economic growth than previously supposed. The immediate impact was to break the S&Ps, BONDS and COMMODITIES as tapering was NOW ON AGAIN.
If the FED is behind this effort to confuse the market, the FED will pay an enormous price for a central bank with a credibility gap and a huge balance sheet is kicking the hornets nest. I think what is taking place in the world of vacous media headlines–based on algorithmic influence, is to be found in the movie DELIVERANCE. It’s not dueling banjos but dueling journalists in a battle to be relevant.
If that is not to your movie tastes then I offer the scene from ANNIE HALL when the protagonist, Alvy Singer, drags out Marshall McLuhan. I would say to Robin Harding and Jon Hilsenrath: You know nothing of economic theory and you are merely attemting to become the message for in your case both of you prove that the MEDIUM IS THE MESSAGE. Chairman Bernanke, deliver us from this madness and provide clarification so we can end this war of egos … FED CREDIBILITY DEPENDS ON IT.
***As always, the world of politics and economics collide this week. We have the G-8 meeting in Northern Ireland and, of course, the FOMC meeting Tuesday and Wednesday, with a Bernanke press conference following the FOMC interest rate announcement. The G-8 is an irrelevant group and searching for a place like an out-of-date Hollywood starlet. Russian President Putin has out maneuvered the other members of the old G-7 and the entire meeting has been neutered over the Syrian Civil War. Putin never misses an opportunity to stick his finger in the eyes of the U.S. and its allies.
The final coomuinque will be saturated with flowery language and grandiose intentions, but as for traders, MOVE ALONG AS THERE IS NOTHING OF SUBSTANCE GOING ON HERE. The FED meeting will be much more interesting and the rhetoriticians will be out in force parsing every little word.
Tomorrow, I will have more to say on what to expect from Chairman Bernanke but as of now we will have to wait from the next media release from Jon Hilsenrath as he attempts to regain his position as FED keyman. It is wasn’t causing massive volatility and unnerving the retail investors it would be humorous. The damage being done to FED credibility is not a laughing matter for a world saddled with so much central bank activity.
***More politics. There is great intrigue in Australian politics as it is rumored that present Prime Minister JULIA GILLARD is in danger of beings replaced by her predecessor, Kevin Rudd. PM Gillard is leading the Labor Party into September’s election and presently the polls reflect that LABOR would be thrashed by the Liberal-National coalition. Seeing as Gillard used backroom intrigue to remove Rudd from power, there is an effort by Gillard supporters to thwart any movement to reinstate Rudd as Labor’s standard bearer.
The impact on the markets need to be watched as some analysts believe a removal of Gillard and Rudd being head of LABOR going into the election would be a positive for Aussie markets and even the recently weakened Aussie dollar. I don’t subscribe to this view as it seems a conservative party winning election would be far more positive for Aussie stock and currency markets as PM Gillard has continually tried to raise taxes on Australia’s natural resource corporations resulting in a slowdown of capital investment. While Rudd is a known entity, Labor has an uphill battle in trying to sustain itself in a slowing economic environment.
The huge SHORT AUSSIE positions make the currency subject to volatile short-covering rallies. Aussie traders need to be nimble in this realm of great domestic and global political uncertainty.