It is time to end the SCAM of “journalists” receiving embargoed FOMC and data releases 60 minutes before the market so they can prepare their stories. In a financial world where volatility is measured in nanoseconds the SEC and CFTC are doing a major disservice to the world of CAPITAL FORMATION by letting the algo headline readers create nanosecond pandemonium through key-word reading algos. I would argue that some “journalists” write the headlines specifically for that purpose.
Today’s release of the FOMC minutes was a perfect example. The markets reacted to a litany of headlines that when placed in the context of the actual minutes resulted in a reversal of sentiment and probably the reversal of fortunes for many investors. (I am not raising this issue because I lost money for I was patient and used the market response as an opportunity to put on some profitable trades.) One specific trade was, of course, the yield curves, which at first acted to FLATTEN as this headline appeared: “MANY FOMC OFFICIALS EXPECTED FED RATE LIFTOFF LATER THIS YEAR.” When the market came to understand that the minutes were far more “dovish” than the headlines posited, the 5/30 and 2/10 reversed dramatically and wound up steepening by the close. Even the EQUITY market, which rallied on the first headline, “Prudent to wait for clarity on outlook,” then broke on the “liftoff” citing before rallying for the rest of the day as the dovish nature of the minutes was realized.
After taking 15 minutes to read and absorb the full body of the minutes I can suggest that the most important comment from the FOMC seemed to be this: “Similarly, the number of workers on part-time schedules for economic reasons was still elevated.” (This is the PTER principle I have previously discussed.) Following this was, “A NUMBER OF PARTICIPANTS NOTED THAT ELIMINATING SLACK ALONG SUCH BROADER DIMENSIONS MIGHT REQUIRE A TEMPORARY DECLINE IN THE UNEMPLOYMENT RATE BELOW ITS LONGER-RUN NORMAL LEVEL, AND THAT THIS DEVELOPMENT COULD SPEED THE RETURN OF INFLATION TO 2 PERCENT.”
This signifies that a NUMBER, not a few or some participants, but a NUMBER would prefer running HOTTER FOR LONGER. When I read this and then turn back to the speeches of Chair Yellen and SF Fed President John Williams I am forced to wonder who was in that NUMBER of participants for the post-FOMC hawkish tone of the speeches does not resonate with the FOMC minutes and the Williams speech that followed the weak unemployment data. All the Fed communication does not achieve quality transparency for the markets but just adds to the confusion. For the FED, LESS WOULD BE MORE.