Notes From Underground: The Transitory Nature of Harsh Rhetoric

Between every FOMC meeting we hear from Plosser, Fisher and others that the FED needs to reign in QE2 and start reversing the huge amount of liquidity that it has added to the financial system. The airwaves are filled with the dissenting voices of the “monetary hawks” proclaiming their fidelity to edicts of responsible monetary policy. However, come the scheduled meetings, the “HAWKS” become detaloned as they fall prey to the soft coos of the “doves.” It seems that entrance into the FED’s citadel requires that one must leave individualistic thought in your home district and resolve to join the consensus.

When the FOMC statement reported a unanimous vote to stay the course, I was sure that I had misheard. But upon further review it was upheld as unanimous. Please Mr.Fisher, Mr.Plosser and the others, stop posturing and admit that your spines are the only thing that is transitory. If the FED continues down this path of benign neglect on the DOLLAR and what the markets are saying, we will soon have neither DOVE or HAWK but THE RAVEN as it responds “NEVERMORE” to the once-respected DOLLAR.

It is important to stress that the elements of haven status continue to outperform and the EURO and POUND are not even in that category. Stocks, metals, Swiss assets, Singapore assets, Canada, Aussie are havens. The EURO and British POUND are merely places of convenience outside the DOLLAR.

Today’s U.S. data releases were on the soft side as GDP came in at 1.8%–the low side of what the market anticipated.Also, being Thursday the jobless claims figure was released and came in much weaker then expected–429,000 versus a predicted 392,000.The weak data provided a reason for the BONDS and NOTES to rally as the bears in the debt markets are being stopped out.

Today’s U.S. data releases were on the soft side as GDP came in at 1.8%, the low side of what the market anticipated. Also, being Thursday, the jobless claims figure was released and came in much weaker than expected–429,000 versus an estimated 392,000. The weak data provided a reason for the BONDS and NOTES to rally as the bears in the debt markets are being stopped out.

Tomorrow is month-end and with the NOTES AND BONDS up comfortably on the month, the markets may find even more reason to rally as positions get readjusted. More importantly for the DEBT markets is the release of several important inflation indicators. First will be the CORE PCE, which the market is looking for 0.1% and at the same time the Employment Cost Index, which looks to be 0.5%. Personal spending and consumption is released followed by the Chicago PMI.

Around 8:55 a.m. CST, the University of Michigan Consumer Sentiment and Inflation Expectations is reported. I have never given the University of Michigan data much of a thought but now that Mr. Bernanke has made it so important to his thinking traders must pay attention. Sentiment is projected to register 70 while I have no read on inflation expectations except to note that the last look showed a 4.6% reading. There is much to test the BOND BEARS so it may well prove to be an interesting day in DEBTLAND. Also, be aware that the Canadian elections will take place on Monday, May 2. Just one more thing to be aware of as April comes to a close.

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5 Responses to “Notes From Underground: The Transitory Nature of Harsh Rhetoric”

  1. Fred E. Says:

    We are attempting to find the proper avian term for how little Ben should be treating our currency, hawks, doves and ravens, each of which have their adherents. Personally I would take the vulture, that scavenger of the air, who is circling over the dying Greenback,looking to feast on the carcass of our once mighty dollar, resulting in the impoverishment of those who hold what was once upon a time the ultimate store of value.

  2. yra Says:

    Fred–well stated .I should be worried as my youngest daughter’s name is YONINA–what was I thinking

  3. rohrintl Says:

    Have we forgotten the TURKEY?!! Franklin wanted to make it the national bird; now it could be the emblem for the Fed. Not really much difference.

    Interesting tho that Mr. B. can’t say he didn’t see the bubble coming this time when he’s the one creating it. The question seems to be how high commodities need to go before the economy cracks. We can jest all we want, but it’s very scary that the Fed’s new motto (re: bubbles) should be…
    “Never, ever, ever again… until the next time.” (3 insdie of 13 years!?)

    Any thoughts on that commodity price delimiter for the economy Yra? Crude 120? 140?

  4. yra Says:

    Rohr–don’t know that answer—only the shadow knows or rather the shadow banking committee

  5. eric Says:

    Couldn’t the swiss do something more devious with the peg by giving customers euros and not francs for withdrawal since “legally” it has the same fixed equivalent?

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