Where once Alan Greenspan was vilified for dropping interest rates too low for too long and thereby inflating a credit bubble (before his bouncing baby bubble forced him to try to head things off at the pass, eventually jacking the Funds Rate back up to 6%), today these very scary clowns talk boldly about buying stocks and other risk assets in order to keep the pretense of a normal economy and stock market intact. I mean guys, this stuff is supposed to be the product of tin foil and gamma rays, not reality!
Meanwhile, every month or so we are treated to a massively stupid ritual of ‘will they or won’t they?’ as the committee chaired by this woman talking crazy talk is taken seriously by many as it makes its profound decisions (like doing nothing, for instance).
What the hell is monetary policy tightening anyway when you’ve got a backup plan to buy the whole damned stock market and some corporate bonds to boot? It’s a joke. I can understand why perma bears are perma bears. This thing is so fake it’s… not laughable… it’s surreal. It’s Wonderland. And the whole financial services industry laps it up and plays it straight, as if it is providing a very sensible and buttoned down service to its clients.
Newsflash: If you’re depending on one of the 95% of advisers out there operating on conventional metrics you are playing little more than a game of ‘gee, I hope the Fed’s latest plans to rig the stock market will work’ because that is the game that the financial services industry is playing. That is not my bias speaking; it is Janet Yellen speaking.
The Federal Reserve could get benefits from buying assets other than long-term U.S. debt if in a future downturn it could not buy any more government bonds, Fed Chair Janet Yellen said on Thursday.
Referring to asset purchase stimulus programs in a video conference with a minority bankers meeting in Kansas City, Yellen said: “If we found, I think as other countries did, that they could reach the limits in terms of purchasing safe assets like longer-term government bonds, it could be useful to be able to intervene directly in assets where the prices have a more direct link to spending decisions.”
She’s literally saying that if we run out of safe assets we can purchase unsafe assets (i.e. risk assets) when things go off the rails. She is also saying that she would hope to leverage that risk into goosing consumer confidence if they show any signs of backing off. Ladies and Gentlemen, these are the “tools” of the next phase of Federal Reserve experimentation. I thought that Operation Twist, with its stated goal of “sanitizing” inflation signals by manipulating the Treasury bond market was ballsy; Bernanke after all, made Greenspan look like child’s play. Yellen? She’s simply guiding us deeper down the Rabbit Hole.
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Below is the opening segment of the September 25 edition of Notes From the Rabbit Hole, NFTRH 414…
The Bank of Japan gave us a glimpse as to just how far down the rabbit hole we may have to follow global policy makers as we try to make sense of ever more complex and shall we say, innovative ‘tools’ being used in the effort to engineer individual economies and asset markets within the global financial system. BoJ announced it would conduct “JGB purchase operations” in order to “prevent the yield curve from deviating substantially from the current levels”.
The market initially interpreted this to mean BoJ stood in support of a rising yield curve, which would for example, help the banks (ref. MTU and SMFG, which exploded higher off of the support levels we had projected), but by the end of the week the Japanese Yield Curve had eased substantially and there seemed to be confusion about what the policy’s intent, or would-be effects, actually were. I wonder if the BoJ even fully knows what it is doing now. Lots of moving parts in a complex system.
Why the tough talk out of one side of her mouth and ‘other policy tools’ language out of the other (ref. Yellen Lays Out Tools… )? Oh, I don’t know. Maybe it has some thing to do with this…
The stock market has merrily followed money supply aggregates upward since 2009. When money supply decelerates the market corrects. When money supply ramps upward the market ramps upward. Money supply has been rolling over since 2014, which was not coincidentally when the first tremors began for the stock market in its recently completed top (that wasn’t). From SlopeCharts…
It’s distressing to me how much raw, unchecked power an old, dumpy, nasal-voiced, unscrupulous human female has over the rest of us (and I’m not talking about Clinton; that doesn’t happen until the election; I’m speaking, of course, of Yellen). As we all sit anxiously awaiting whatever the old biddy has to say about the “Fed Toolbox” (Jesus H. Christ, man……..) the market is absolutely stuck, since the anti-Christ apparently is the only one in charge of all our financial fates. God, I hate that horrid little woman.
The ES is doing absolutely nothing right now. Its range is pretty wide, and if by chance the market doesn’t like what the old bat says, next week we could sink into the lower range. I’m not counting on anything, though. Whenever this disgusting creature gets ready to talk, I get nervous.
As a reminder, this Wednesday is one of the year’s eight FOMC days in which, yet again, we sit up and wonder whether (a) the Fed will inch interest rates up a miniscule amount, thanks to the oh-so-fantastic global economy or (b) the Fed will do absolutely nothing, telling us for the 972nd time that they are data-dependent. Good Lord, how can you even stand the suspense?
Meanwhile, the only thing happening on my screen that is even a little interesting is that our friend crude oil continues its gentle, consistent downtrend, and quite remarkably, for the 7th day in a row, its low and high are both lower than the previous day.