Archive - Mar 2014 - Story

Much has been said about Yellen's Freudian slip involving the "6 month" considerable period language, which as we pointed out earlier, is said to have been the catalyst that sent stocks sharply lower just after 3 pm when it was uttered. However, in reality all this statement suggests is a rate hike some time in mid-2015, half a year after when QE is said to have ended, which if one listens to the market experts, is what is supposed to be priced in (of course, what the experts won't tell you is that the market wants its cake and endless liquidity injections by the Fed too). However, one thing that was far more unexpected and certainly remained unexplained by Yellen, is the curious case of the Fed dots, or the estimations by the individual committee members, of where they see rates at the end of 2016. What was surprising here was the sharp upward jump from 1.75% as of December to 2.25% currently.What is even more inexplicable, is that the Fed hiked its rate forecast even as it lowered its GDP projections for the next two years. Why? Not even Janet Yellen could answer that.

Rather than deal forthrightly with the reality that unrealistic promises made to their employees cannot be honored, local government has pursued a strategy of legalizing looting. The gradual erosion of civil liberties, legal rights and government ethics are connected: our rights don't just vanish into thin air, they are expropriated by government: Federal, state and local. Though much is written about the loss of civil liberties at the Federal level, many of the most blatantly illegal power grabs are occurring in local government. When local government looting is legalized, the entire system is illegal. Here are three recent examples of blatantly illegal looting by local governments.

With the story of the day undoubtedly Yellen's first (bungled) press conference, it was easy to forget that the second coming of the Cold War is raging in the Ukraine. For those curious what they may have missed, here is a summary of the major events that took place in the troubled country this afternoon. Highlights from AP, AFP, Reuters, WSJ, Bloomberg, RIA and Interfax.

"If we look only at the stock market, then we're in denial," warns Ron Paul in this brief 'uncomfortable-for-the-anchor' CNBC interview, adding that "it's an illusion." While the stock market has performed well, Paul explains that the economy-at-large continues to struggle noting that it's due to the Fed: "I don't think any one individual knows how to plan the economy by manipulating interest rates' [they] are so important that if you give this power to one small group - there will be distortion." That's why socialism fails, slams the Fed critic, "it's the invisible hand that we lack, not the wisdom of a few people. Few people can't be wise enough to dictate the market," and the Fed's history shows their track "record is pretty bad."

Much has been said about Yellen's less than stellar first press conference so we will let her own words do most of the talking. First, from the transcript of her prepared remarks and the following Q&A, here are some highlights.

It’s been a couple months since we last updated readers on the epic disaster that is Obamacare. We now have some details on the average premium increase for non-Obamacare health plans following the implementation of the law, and the results are not pretty. According to a cost report from eHealthInsurance, premiums have increased by between 39%-56%; and furthermore, the demographic issue is a huge ticking time bomb as the 'mix' is not at all what was expected.

Concerns about Fed "over-optimism" admissions and shortening the time from taper to rate-hike sparked a major algo-surging risk-off dump in US equities... but that 1% dip was bought with hands and feet as reassuring figures emerged on screens to pat traders heads gently. Stocks bounced but then faded into the close as Yellen's first press conference saw the worst market performance since Bernanke's May Taper hint. Bonds had a bad day... massive bear-flattening occurred on the release with 5s30s -12bps (5Y +16.5bps, 30Y +4.5bps) to 19-month lows. The USD was smashed 0.75% higher - its biggest gain in 7-months. Gold (and silver) dropped (down 4% on the week) as copper short-squeezed up to key resistance after early significant weakness.

From Jan Hatzius, who needs to coach Yellen much better next time around. Incidentally, this is Goldman's take on the statement and not on Yellen's disastrous press conference: "BOTTOM LINE: The March Summary of Economic Projections (SEP) indicated a more hawkish path of the policy rate than that seen in the December SEP. The statement included a move toward qualitative guidance, but was roughly neutral on net in our view."

"Miss me yet?"

Wondering why stocks aren't soaring - despite the efforts of every asset-getherer and TV talking head to explain how the Fed is as dovish (if not more dovish) than ever? Perhaps the answer lies in the following table... when the fed admits to being "over-optimistic" and focuses the market on a 6-month period after taper before rates will rise, maybe there just aren't enough people at 33 Liberty to push the green buttons...

One just can't make this up:

• YELLEN SAYS WEATHER HAS WEAKENED ECONOMY IN FIRST QUARTER
• YELLEN SAYS MOST ON FOMC SEE WEATHER WEAKNESS DISSIPATING

Luckily, the Fed is far better at forecasting the weather than it is at micromanaging central planning of a $17 trillion economy.

In case you misunderstood and judged the market's reaction to Janet Yellen's first FOMC statement, the ultimate Fed mouthpiece is out with a few clarifying words (well 712 words posted in under 4 minutes). The Wall Street Journal's Jon Hilsenrath clarifies "The Fed stressed it has not changed its plan to keep interest rates low long after the bond-buying program ends," and added further that "the Fed said explicitly for the first time that it likely would keep short-term rates lower than normal, even after inflation and employment return to their longer-run trends." While noting a bigger consensus of members around a 2015 rate 'liftoff', Hilsenrath is careful to point out that the Fed also blamed the weather for not having a clue.

Confused why the market is confused by the latest FOMC jibberish, whose "new and improved" forward guidance is a total disaster, which was to be expected now that the old has been scrapped and is dead and buried? It's simple: there were 877 words in the FOMC statement, which is an all time record. Even the Fed is having problems explaining to itself what it means. And yes, that includes the first instance of the scapegoating word "weather."

Drum roll please... A shift from quantitative thresholds to hand-waving along with lower growth expectations and lower unemployment expectations (and more Fed members seeing rate hikes in 2015) - plenty of confusion in there for everyone... Over to you Janet...

While the talking heads are desparate to maintain the myth that this statement is dovish, the fact is, the flow of free money from the Fed is slowing and confusion of the outlooks for growth (and more Fed member see rate hikes in 2015) means Yellen's dovishness is being questioned aggressively by the bond and stock markets. The S&P 500 fell 12 points. Treasuries are getting clubbed with major short-dated selling (and bear-flattening). The dollar is surging and gold is down modestly.