Archive - Sep 17, 2015

Are drones coming to a police department near you? Possibly.

The probability of a rate-hike in December collapsed from 65% yesterday to just 45% today after Yellen's admission that any and everything will keep them on hold as they wait for nirvana to allow interest rates to rise again. This rippled across the Treasury curve and after Tuesaday's record-breaking spike in yields, 2Y yields collapsed 13bps today - the biggest single-day plunge since QE was unleashed in March 2009.

A new study published in the PLoS Medicine journal has found that younger people taking antidepressants are more likely to commit violent crimes.

It appears the secret to Trump's surprising success in the polls is actually simple - "know your audience."

Told You Fool!

"I am pleased the Federal Reserve under the leadership of Chair Yellen has chosen to exercise a prudent and cautious approach to safeguarding our economy by carefully weighing the full range of economic data in assessing whether to raise interest rates.  Moving to prematurely raise rates will endanger the critical economic progress we have made, and threaten any gains minorities have only begun to make on the tail end of this recovery. "

For the 3rd day in a row VXX (the VIX ETF) has been crushed lower (nearing its 10% circuit-breaker limit-down). This is the biggest 3-day drop in VXX on record...

Here comes QE4... *YELLEN: 'QUITE UNCERTAIN' HOW ECONOMIC OUTLOOK EVOLVES

With a 54-0 record without a rate hike (better than Floyd Mayweather's), and 58 Economisseds expecting no change, 3 a half-pregnant 13bps hike, and 53 expecting a 25bps hike, The Fed was always going to break someone's heart today. Bond yields and the USD were tumbling into the decision, which appeared correct as The Fed chickened out again...

• **FOMC: NO POLICY CHANGE, 0-0.25% TARGET 'REMAINS APPROPRIATE'
  
• **FOMC: GLOBAL ECON,FIN EVENTS 'MAY RESTRAIN ECON ACTIVITY'
  
• **FOMC: VOTE 9-1; LACKER DISSENTS, WANTED 25 BPS HIKE

Given the "no hike", it is clear that, as we noted, Goldman is still in charge and Hilsy is still leaker-in-chief. All eyes now on the dot-plots as The Fed desperately tries to regain some credibility, stifle uncertainty, and calmly reassure markets that "we've got your back."

Pre-FOMC: S&P Futs 2000.5, 10Y 2.26%, 2Y 77.5bps, EUR 1.1330, Gold $1118

"priced in?"

The biggest shocker in today's Fed announcement is not that the Fed did not hike: that was telegraphed far away. It is highlighted on  the chart below in red: for the first time ever, one FOMC predicts negative rates in 2015 and 2016. Was it permadove Kocherlakota: probably not, he is out next year...

After 55 consecutive meetings, we should be used to it by now but a lack of forward hawkishness and complete fold to global developments suggest Janet and her merry men (and women) are far more concerned than they have been at the state of the US economy and the world. With reporters under duress to ask the right questions, we can only hope that someone has the stones to ask Yellen when, if ever, they will admit their total impotence and just how cornered they really are...

As BofA notes, the lack of hike is an admission that Wall Street threatens to reverse the recovery on Main Street... if the Fed’s failure to hike does not lead investors to completely abandon hope on growth and scurry into gold, cash & volatility, then look for the “barbell of 1999” to reemerge.