Notes From Underground: Ben Bernanke pays homage to the BLUES MAGOOS (We Ain’t Got Nothing Yet)

Today the FED let it be known that they will MOST PROBABLY be on hold until mid-2013. The best outcome of this is that it removes the FED from the election campaign of 2012 and puts the burden on the 535 posers who pretend to represent anybody but themselves (yes, there are exceptions I know). The FED has done their “work.” Now it is time to get the fiscal house in order. The markets’ daily gyrations is representative of how uncertain the world’s capital feels: ONE DAY YOU’RE UP AND THE NEXT DAY YOU’RE DOWN. From Bernanke’s perspective, we ain’t got nothing yet.

The most fascinating thing about the FOMC STATEMENT was its tone. My initial reading led me to believe that the FED‘s view of the economy has turned so morose that when the cleaning staff came in they would have found that the FEDERAL RESERVE BOARD had drunk HEMLOCK after writing the statement. There was not one positive element in the statement and to make matters worse (or better), the vote was 7-3 with Plosser, Fisher and Kocherlakota voting against the Bernanke core, as the dissenters wanted to maintain the extended period language. The question for the markets is: WHY DID THE S&Ps RALLY SO DRAMATICALLY AFTER THE FOMC STATEMENT? The first response to the MOROSE LANGUAGE was a large selloff and the S&Ps gave up a sizeable rally and went lower, only to reverse in the last hour and make new highs.

Some will say that the rally was due to the PPT (PLUNGE PROTECTION TEAM),as the theory about the FED buying equities just want go away. More important for me will be to see if the markets are going to resolve that a zero interest rate policy for the next two years is enough to push money back to equities. It will TAKE TIME  to see if this is credible but it is something that we must watch. As I wrote last night, all Bernanke has now is the portfolio balance channel,the S&P/bond ratio becomes a very important indicator. Pour yourself a SCOTCH and read the FOMC statement … and put away the HEMLOCK.

Quick hitter: THE SWISS FRANC hit all-time highs today as it seems that anybody with money that is seeking safety is heading for Zürich. Is it possible that all the world’s wealthy elite are so terrified that they are rushing to Switzerland (the safe deposit box for the DAVOS CROWD)? It is amazing how strong the SWISS FRANC is, especially relative to such high quality currencies like the Canada.

Will the Swiss Authorities respond as the FRANC has hit levels that will HOLLOW OUT THE ECONOMY? I have traded the CHF for 34 years and have never seen the type of price action we are now experiencing. GOLD at $1780 I understand. The SWISS FRANC at $1.40[.7150 centimes] leaves me wondering just what is driving so much money into the hands of gnomes. Watch for some type of action or statement from the SNB but trade with caution as a haven can become hell.

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9 Responses to “Notes From Underground: Ben Bernanke pays homage to the BLUES MAGOOS (We Ain’t Got Nothing Yet)”

  1. charlie andrews Says:

    Ira I’m sure you remember at the beginnings of the currencies that the FF was one of the most traded until the country went socialist federalizing their banks etc. Soon the Merc delisted the FF and called the country socialist-houses on the French Riveria dropped 80%. I remember a mansion that had been worth over $2M was bought by a BOT member for $200,000. The US was just ending the Viet Nam war and as always deeply in debt then decided to inflate and as well we all had no FX experience at that time with the US$ just allowed to float so we really didn’t know the US$ fell in half. Now fast forward today-The French are growing very capitalistic declassifying laws that will now bring capital and entrepreneurs for creating growth. In the mean time the US with it’s X-man committee deciding really what lobiest provide the greatest campaign funds continue funding leaving those in most need under the bus. The US always has inflated out from extreme debt caused by wars and grew. When I graduated HS in 1956 the debt per capita was $1,900 (back then your Dad and I were overhauling Model “a’s” with a dime) and today that debt is about $43,000. I was there and here now and can guarantee you paying off today’s debt is mych easier than the mid-1950’s. This Nation was founded as a Republic-1 person–1 vote. Now they stuff Democracy down our throat which in truth means money controls which leads to an oligopoly soon to be an “ism”. Imaging an X-man committee deciding the fate of this great nation. Hopefully the Gallup pole showing 84% of the populus disagree with the recent decision will send them back from vacation with a attitude change.

  2. Gregg s Says:

    Could it be that snb or ubs blowing out of horrendous positions.short sf v euro (they tried to intervene 6 months ago. To no avail) as Dennis G has pointed out they are sitting on huge losers already! Perhaps a “blowout” type trade! Never thought I’d ever see swiss up almost 1000! Unthinkable!

  3. yra Says:

    Gregg–I disagree with that analysis.When the Swiss intervened they bought Euros and sold Swiss–now if a central bank is selling its own currency it is merely pumping money into the system.In my mind the SNB is long EUROS and I believe at much lower levels so the Euro position has turned positive.The SNB did not do swaps but merely sold a great deal of Francs adding liquidity in an effort to try to drive the currency lower–I disagree withDennis.When the Japanese intervene they add YEN unless they move to sterilize the add–so I don’t think the bank is still sitting on losses

  4. Joe Romeo Says:

    Yra, Your insight into the last few months has been uncanny. After all I have witnessed in my career,the current events leads me to believe that volitility will rise and that the trend has shifted rather dramatically. The emperor has no clothes.

  5. rohrintl Says:

    Hi Yra-
    Think you answered you own question at the top of your post: equities rallied so massively because Bernanke has now joined S&P in putting it back on the politicians. In sequence they have said they can’t just keep mindlessly providing a rating that’s not reflecting a bad path (NOT the inability to pay), and can’t keep pumping liquidity. I think even Bernanke now realizes the hugely counterproductive side effects of QE (which it is now plain was generally bad for the economy even if it boosted assets/portfolios.)

    That was an interesting turn of phrase: “we ain’t got nothing yet.” It’s also important as the answer to that question many will continue to ask: “What’s the Fed going to do?” Your assessment that their work here is done is indeed clear from the statement. Bernanke’s answer to vox populi and their representatives in Washington? “We got nuthin’; except for not worrying about a rate hike, you’re on your own.”

    And it’s about time. Maybe Charlie’s right that it’ll force a change of attitude. Hopefully the centrist pols finally ignore the lazy, highly partisan folks on fringes and accomplish something constructive. Problem is that the growth assumptions of all the fiscal reform plans are less than realistic unless the regulations get rolled back along with the spending. What’re the chances that’ll happen while Mr. O. is using the regs as an end run around Congressional rejection of the extended social justice agenda?

    Which is why it’ll likely get worse before it gets better no matter what they do in the near term. And isn’t it interesting that Mr. Bernanke’s mid-2013 commitment corresponds nicely to the classical five year horizon for major cyclical credit deleveraging to work its way through the system? …and the impact of any shift back to a more laissez-faire economic environment after the 2012 election?

    Great perpsective; keep it coming.

  6. yra Says:

    Charlie–the wisdom of the ages.The arrogance of the Washington-Wall Street nexus is a real problem.The recycling of policy makers who have been wrong the entire time–did nobody in the Obama administration read any of geithner’s speeches from the NYFRB–how many times can these brilliant thinkers get it so very wrong.John Kerry on the grand deficit team —please.The President just needs to dust off his plan from Bowles-Simpson and start the real process moving.I was never a fan of Erskine Bowles but his stock has risen as he stood by the commission’s work and never wavered and he is a true Roosevelt Democrat.I don’t know who sets White House strategy but it is scary how wrong they are—can Hillary be feeding the WHITE HORSE she stole from your barn

  7. yra Says:

    Joey –thanks for the comments and elevating the blog.We have been doing this for many years and I think we have seen that the emperor’s clothes have gone missing many times in many locations–now it seems that every one has a tailor in Shanghai.Otherwise,how is the home front.

  8. ARTHUR Says:

    Currencies. The FT has an interesting article today about the option to let the renminbi float..http://www.ft.com/intl/cms/s/0/96b91b56-c366-11e0-b163-00144feabdc0.html#axzz1UimJDJLF

  9. yra Says:

    Thanks Arthur–will get to it after my eyes freshen from glossing over—having a DALI moment lately as all the numbers on my screen are melting together

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