Nothing is more dangerous than a group of academics who cannot admit they MAY BE WRONG. More misery has been caused by theorists who treat the world as their laboratory. The Bernanke Fed cannot get themselves to admit they are flying blind; the computer has failed and now they have to NAVIGATE BY THE STARS, INSTRUMENTS AND INSTINCT. The FED may preach forward guidance but they have no respect for the messages that the MARKET sends to the FED. The FED‘s DUAL MANDATE has given cover to the FED to ever admit that their policies may just be … WRONG.
Today the market reacted to the FED‘s “failure to communicate” by selling the DOLLAR and buying hard assets. The FED GAVE NOTHING SO THE MARKETS TOOK EVERYTHING. As Ben Bernanke said in his press conference, even the Fed’s projections for 2016 are “stretching the bounds of credibility” (this is a direct quote from the Fed chairman). This was in response to a question by the Financial Times’s Robin Harding. The issue as of now is Fed credibility and as Keynes aptly said, “Sometimes the market is a voting machine and sometimes a weighing machine.” Today it was both. The EQUITY market held its initial thrust, an HFT rally, but on a relative basis was a dramatic underperformer to other assets. The precious metals and other commodities put on much more powerful rallies as the Fed’s credibility was called into question.
The best performing currency was the Brazilian real as Bernanke paid lip service to concern about the emerging markets. The FED chairman reiterated that the Fed’s mandate is toward U.S. monetary policy, directed at domestic needs, and, if the Fed gets it right it will ultimate benefit the emerging market economies. But the non-tapering and relief rally in the interest rate sector let the EMs breath a short-term sigh of relief. All in all the dual mandate means that the FED can never be wrong in its policies … until it is. When will that be? Only the SHADOW BANKERS know.
Tags: Ben Bernanke, Dollar, Fed, FOMC
September 18, 2013 at 5:27 pm |
I think Bernanke has decide that the s*** won’t hit the fan while on his watch.
September 18, 2013 at 6:07 pm |
I have a theory EM’s buy/sell US debt to maintain control over their currencies. Not sure that’s the case but it seems that way. I guess they were buyers, today.
September 18, 2013 at 7:17 pm |
Wish I had the report early like the gold traders.
September 18, 2013 at 7:24 pm |
“The FED‘s DUAL MANDATE ” Congress could remove that shelter-in-place option.
September 18, 2013 at 8:53 pm |
Perhaps it’s my imagination, but I hear more quivering and cracking in the Fed Chairman’s voice at each successive press conference. Today’s bout with puberty was especially evident,I believe, because even the Chairman knows how deep down the rabbit hole he’s taking us with this experiment.
Kevin
September 19, 2013 at 3:42 am |
Great piece
September 19, 2013 at 5:18 am |
what is a HFT rally?
September 19, 2013 at 8:38 am |
rob: HFT = High Frequency Trading = as the Feds statement was released trading programs catapulted the stock market within one minute.
as for the Fed: i can only say that i fear the next recession. 5 years in the recovery and were still at 85b. they will be out of tools to combat any coming crisis.
if you listen to money managers today Bernanke has many of them confused. some are starting to question the credibility of the Fed, as various members indicated tapering thorugh speeches over the last weeks.
at least we have a trigger now of when so start agressively shorting the market. as Fleckenstein lined out yesterday: with the tapering excuse now out of the way – if rates start creeping up again and pass recent highs (3% 10y), then that will be the sign that the fed is losing control of the treasury market. i´m not sure if and when this will happen. but be prepared.
tonight will be the final TV show in German Tv where the major parties debate their agendas. the AfD is not part of that. also today will come the last polls before the election. as for the AfD: it could be a nailbiter. they range from 3-5% in the polls. pollsters admit that they are the biggest unknown since some of the polled people might not openly admit to be a “Euro hater” as BILD (biggest tabloid) calls the AfD.
i still think they won´t make it. but we´ll see.
September 19, 2013 at 8:58 am |
Keep sending me your favorite write up from the Underground everyone. Yra has the time and enjoys writing up these everyday for US, take some time and reciprocate with some of your thoughts. Get your word out there and add some extra on how it impacted your world. Mario@vfund.com….
September 19, 2013 at 10:19 am |
Perhaps Bernanke should’ve increased QE……
September 19, 2013 at 12:53 pm |
Diluting the dollar to oblivion, eventually…pretty sad we can’t pull back just 15% or so…God forbid ceasing the program altogether.
September 19, 2013 at 2:17 pm |
final poll before the German election:
CDU/CSU 40 %, SPD 27 %, GRÜNE 9 %, DIE LINKE 8,5 %, FDP 5,5 %, AfD 4%
->would mean a small but still still a majority for the current coalition
September 19, 2013 at 7:21 pm |
I’m as curious to know how many of your young readers got the Fonzie reference — “I was wrrrrrrrrrrrr.” It never gets old.
September 20, 2013 at 1:54 pm |
Impulse flashback referencing Andrew Dice Clay over here, LOL
September 23, 2013 at 7:00 pm |
Everybody thanks for the responses—Green AB–thanks for the yeoman’s work on the political situation in Germany