Advance Look At Bernanke's Humphrey-Hawkins Testimony - Will Jackson Hole Come Early This Year?

Tyler Durden's picture

It's that time again when almost half a year after his first 2011 presentation to Congress and Senate in the semi-annual Humphrey-Hawkins, Bernanke will update the Hill with his latest outlook on monetary policy. And while the first such testimony earlier in the year was uneventful as it occurred at a time when the flawed belief that the US economy was growing was still prevalent, there is a peculiar sense of deja vu'ness. As JPM's Michael Feroli observes: " it may be helpful to recall last July's Humphrey-Hawkins testimony
when, like now, the growth data had been seriously disappointing.
Bernanke's testimony fell flat: the Chairman sounded tone-deaf,
discussing plans for exit strategies, and markets rolled over, with
stocks off over 1% on the day." Feroli continues: "The Chairman does seem to learn from his miscues -- there haven't been
any further Maria Bartiromo incidents -- and we expect he will be more
mindful of the downward momentum of the recent data." Does this mean that the Chairman may hint at a change in monetary strategy, especially if July regional Fed updates confirm the ugly NFP data? Most say no, but not Bill Gross, who as is well known, expects the first QE3 hints to be dropped in August. Perhaps Bernanke will decide to surprise the market again and pull that forward by one month? Read the full Feroli note below.

Preview of this week's Fed communications

The minutes to the June 21-22 FOMC meeting will be released Tuesday at 2pm. The following day Bernanke will deliver the semi-annual Humphrey-Hawkins monetary policy report to the House at 10am, and will deliver presumably identical testimony to the Senate on Thursday.
Some of the importance of the minutes has been undercut by the new policy of releasing the quarterly economic projections shortly after the meeting (copied below), as well as by the color that the Chairman now provides on the outlook at the press conference following two-day meetings. Nonetheless, the minutes could provide some added insight into why the Committee marked down next year's growth outlook -- even though it believes part of the recent slowdown is due to transitory factors -- and into why it has been gradually pushing higher the inflation forecast for next year. Given the tone in Bernanke's remarks following the last meeting it does not sound as though we should expect the minutes to contain much discussion of the possibility for further monetary stimulus, though that does not mean there will be zero mention of such a discussion.
Of the two Fed communications out this week, the Humphrey-Hawkins testimony will likely be the more important one. We expect Bernanke will repeat the message from the June post -FOMC press conference that the slowdown is due in part to transitory factors and that growth will likely pick up in the second half. At that press conference the Chairman noted that there was some uncertainty about the strength of this expected rebound, and given the disappointing jobs data since then we anticipate that this caution about second half growth will be emphasized in his Congressional testimony. In this regard, it may be helpful to recall last July's Humphrey-Hawkins testimony when, like now, the growth data had been seriously disappointing. Bernanke's testimony fell flat: the Chairman sounded tone-deaf, discussing plans for exit strategies, and markets rolled over, with stocks off over 1% on the day. The Chairman does seem to learn from his miscues -- there haven't been any further Maria Bartiromo incidents -- and we expect he will be more mindful of the downward momentum of the recent data. That said, Bernanke has viewed his responsibility at the Humphrey-Hawkins testimony as conveying the sense of the Committee as a whole, and at the last FOMC meeting the Committee viewed growth as likely to pick up, and also viewed the growth and inflation data together as supportive of a Fed on hold, seeing neither an exit nor further accommodation on the visible horizon, which is the message we believe Bernanke will deliver to the Congress this week. Relative to the post-FOMC press conference, the tone may be a little more cautious but the main message should be the same.

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Archimedes's picture

Market is far to elevated, Commodies are far too elevated and Political risk far too elevated for the Bernank to say he is gonna print more....


Mr Lennon Hendrix's picture

The price of commodities are cheap considering they are priced in worthless fiat.  Production is also on the backside for oil, gold, steel, platinum, and soon silver.  Water is in short supply, and food crops are lacking due to dying honey bees and posioned and raped top soil.

TheTmfreak's picture

Nothing a heavy dosage of chemical fertilizer can't fix.....

SheepDog-One's picture

Agreed Archimedes.
They dont give a rats ass about stock levels, all that is to keep 401K holders placated a bit longer, probably just a couple weeks, until Treasury seizes that huge money pot.
People need to think past these stupid marketsand see the real big game....and eat your damn PEAS!!

coppertop's picture

Dont give a shrerw's ass about gas prices either

francis_sawyer's picture

and eat your damn PEAS!!

If it's not too much to ask, I'd like them "whirrled"


LudwigVon's picture

I too would like whirrled peas --> Remove tax on metals, remove legal tender laws.

chistletoe's picture


Market is far to elevated, Commodies are far too elevated and Political risk far too elevated for the Bernank to say he is gonna print more....



That is quite true.


Also, if the Treasury holds even one single small auction without the promise of POMO,

it will fail.  That's probably not a good idea either.


Interesting predicament, eh?

francis_sawyer's picture

don't worry... as soon as the 'Bernank-a-prompter' steps up to the mike an opens his flap, it's goo for a quick 100 pips down...

After that, you're on your own

Boston's picture

The S&P is off only ~3% from its recent highs.  That's WAY too early for Bernanke to hit the panic button.  He needs to save it for big pain.  We're not there.....yet.


Mactheknife's picture

Sounds to me like Feroli is giving the Bernank a friendly little reminder of who he really works for as in "we expect".

slaughterer's picture

The above analysis is too naive, as it is too early to expect QE3 hints.  I would expect BB to roll out any QE3 hints after the debt ceiling deal tanks the market with its $2-4 trillion in market-unfriendly austerity measures.  The time-line also has to coincide with the 2012 elections--to get O a re-election by re-capitalizing his constituency through momo portfolios.  Late 2011, early 2012 would be better for that.  Plus, BB still acts late.  No change in that.   

LetThemEatRand's picture

While what you say should be correct, I suspect the market is actually going to go up after an announced debt deal because "they" will make it go up.  The bankers are now all but telling the public "give us another $2T or we blow this place up."  If there's a deal, they reweard the masses with a nice run up in their 401K's (which will be crushed sometime later when they have something else to gain).  If there's no deal on the debt ceiling (highly unlikely), they crash the market right away and hard, so that all the current opponents line up and say uncle. 

slaughterer's picture

If the debt ceiling deal amounts to a small amount of austerity measures, the rating agencies will downgrade the US debt within 5 minutes of the announcement.   Market will certainly go down on that.  It really looks like a LOSE-LOSE situation:

Option 1: a "big deal" with large tax increases, and cuts in SS and other entitlements.  Result: Market goes down because there is less money for consumption.


Option 2: Little deal with insignificant cuts.  The ratings agencies swoop in and downgrade US debt immediately, as the entire debt complex has not found a solution at all.  Result: market goes down.  




The only WIN will be when BB initiates some more easing.

LetThemEatRand's picture

I couldn't agree more that's how it should play out.  But I'm a conspiracy theorist and I think the bankers want their debt ceiling raised and they are going to find a way to have the market rally when it is.  Absolutely the opposite of what should happen if fundamentals meant anything at all.  But if fundamentals meant anything at all, we would not have had a 5% run up last week on Greece BS.

francis_sawyer's picture

Option 1 = catfood

Option 2 = catfood

TooBearish's picture

Le Bernank more likely to be false flagged by congressmen who will lobby him on the dangers of not passing the debt ceiling - act III in the Kaboki Theater Drama

Mae Kadoodie's picture

Time to eat your peas Ben.

Brian's picture

BB needs the market to drop so that funds can flow into bonds, while strengthening the dollar and lowering inflation temporarily.

That won't happen if he hints at QE3.  

QE3 hints start *After* the debt ceiling issue gets resolved, and the "new downturn" can be blamed on Republicans, such that they have "forced" the fed back to the position of needing to do one last round of money printing (before the next "last" round, and the one after that.....)


slaughterer's picture

+1 Brian.  Goes along with what I said above.  What you say about the political blame game is also correct.   

redpill's picture

Yep, the Fed will be characterized as riding in on a white horse to save the day, as gross and backwards as that is.

slaughterer's picture

"to save the day" means "to destroy the dollar."  I think QE3 is just the thing to get gold over $2,000.

RockyRacoon's picture

Most people don't know what QE is, does, or comes from, let alone which Party to blame if they find out that "it" is being implemented.   Now, taxes, that's another matter.   Everybody understands that -- especially the ones who do/don't pay them.   That's a populist position you can get your teeth into.

Franken_Stein's picture


When you look at the 3 year S&P chart you will notice that the Fed induced stock rallye can be recognized by the 2 unfinished rounding tops,

the first from March 2009 - August 2010, which was QE1, then came Jackson Hole in August 2010 with the announcement of QE2,

and then the next albeit smaller rounding top from August 2010 until today.


Also notice that every time after an initial steep rise, a saturation effect set in,

with the first derivative positive but getting ever smaller until the top, where it becomes 0.


We have reached that flat top in the S&P since January 2011 now and constantly trade in a range beween 1250 - 1350.

We might fall down to 1280, where ther is the MA200 line, and then Benny might announce QE3, or Tyler's 10 year bond yield cap for that matter.


slaughterer's picture

1280 really needs to break before BB hits the panic button.  By the time he gets QE3 through FOMC, S&P would probably be in the 1200 zone, esp. with a little help from Eurozone and GDP downgrades.

SheepDog-One's picture

Market levels are all irrelevant, the entire operation WAS to monetize the debt, and thats done now. Next step? Seize all 401K's, $3 trillion or so, into the control of Treasury then we really have game over. Coming within weeks.

slaughterer's picture

SD-1: don't you think there is still a whole lot of debt left to monetize?   Think of all the Treasury auctions Timmy will have to roll out to make good the pension funds he has been stealing from over the last weeks. 

francis_sawyer's picture

I think he's referring more to the 'defecit' but said 'debt'

Esso's picture

Good heavens, what is the"Maria Bartiromo incident"?

slaughterer's picture

Same question as Esso.  Any answers?

coppertop's picture

an all too frequerntv response to a face covered with ragu 

DeadFred's picture

BB talked with reporter Maria at a dinner and let out info on interest rates that caused a drop in the market when she passed it on. To his defence one can only only imagine what she was wearing and it is known fact of neuroscience that cleavage has a mind addling effect on most males. Google 'maria bartiromo images' and you will be completely sympathetic toward the poor Bernank.

Robslob's picture

Stick saving the S&P is quickly becoming political suicide for the Fed and Ben knows it...saving his last master (the government) will become his last job prior to departure for greener pastures at Goldman.

Market is on it's own...all about keeping the government afloat now.

SheepDog-One's picture

The new normal, Bernank has learned not to speak, and everyone will now just shut up!

Franken_Stein's picture


Also note how there was a head-and-shoulders pattern in the flat top of the QE1 rounding top.

The same is happening now.

We are in the process of finishing the down leg of the second shoulder.


If Ben wants to create a little panic and assuming that he knows how bugged with HFT algos the market is,

he will probably know that all it takes is to trigger some technical indicators like breaking an important MA line or for example breaking the neck line of said HS formation.


He will try to let monetary policy, chart theory and debt ceiling kabuki theatre fall together in one place at one point in time.


Temporalist's picture

JP Morgan downgraded 2nd half US GDP from 4% to 3.5% say Bloomberg.

No links yet.

slaughterer's picture

Morgan Stanley also, on the back of the China trade figures this weekend.  Actually, 3.5% is too generous, as well all know. 

SilverIsKing's picture

The markets will not begin to move up upon an announcement of QE3 but rather will begin moving well ahead of any announcement as insiders load their respective boats.

When we see an unexplained ramp job, that'll be the sign that QE3 is coming soon.

Also, they can't let the markets get too ugly ahead of a QE announcement since that disaster will kill off any remaining credibility the goons have with the sheeple.

Transitory Disinflation's picture

Now that is Physcological Warfare at it's finest.

rubearish10's picture

Nope! Inflation (fake CPI that is), too much above "target" and besides, he expects a better 2h. So, no hints, no inference until we clear SPX 900.

drivenZ's picture

the market is far to frothy at these levels but there's no panic. atleast not in equities. I dont consider today even remotely panic.  and if earnings are even mildly ok, equities will ride things out for the time being. No more QE unless we see a 10% drop.

They are still rolling maturities.


The 2-2.75 trillion deficit deal will come through at the 11th hour. The debt ceiling will be raised. everyone will be happy, no one will care about the EU, fuck em, Groupon will be to the moon.  And US equities will happily coast, until they can't. 3 more months? 6 more months? who knows



caerus's picture

On the bright's slurpee day!

francis_sawyer's picture

Yeah... But don't wheeze the jew-uice...

SeverinSlade's picture

Have to agree.  Unemployment needs to be near 10% and the DOW/NASDAQ/S&P need to drop at least 10-20+ percent until Bernanke would have adequate support for further easing.

Right now more and more Wall Street douchebags and Washington scum are talking about and "considering" QE3, but there is still a lot of opposition.  The Fed needs to be the hero and not the villain.

Hedgetard55's picture

"Help us, Obi Wan Bernanke!"

jmcadg's picture

Option C: Do an ECB and pretend rating agencies are so last year and make it up as you go along.