The Annotated Annotated Fed

Tyler Durden's picture

We have gotten to a point where not only do we need annotated explanations of Fed speak, but annotations of the annotations, in this case of the Fed's deemed oracle, who for many years, has been the WSJ's Jon Hilsenrath (for some particular nuances of the "editorial" relationship between the New York Fed and the WSJ read here). Today's article in need of "between the lines" interpretation is Hilsenrath's "Bernanke to Open Up as Fed Embarks on Era of Glasnost" which can be read here. Luckily, Gleacher's Russ Certo comes to our aid, in attempting to predict what the general population can expect both next Wednesday during the Fed's first ever press conference, as well as for as long as Bernanke still is given authority to debase the US dollar.

From Gleacher's head of rates, Russ Certo:

This is a very thoughtful article about the Fed and its embarkation of, I suppose, a new communications strategy.  As a reminder, Chairman Bernanke is holding his first press conference next Wednesday.

In the past month alone, 16 different Fed policy makers have given more than 40 formal addresses, in addition to television, newspaper and newswire interviews. They espouse different views, not only on when to reverse the Fed's easy-money policies, but HOW.  The Chairman's commentary on Wednesday will be an important event, more than is being billed. 

I just read this piece which is comprehensive and insightful AND IT LEANS MARGINALLY HAWKISH.  For instance, there is citations like the following:   "A tightening cycle is the hardest thing for a central bank to do," Mr. Bullard said in an interview earlier this month. "It's tumultuous times for monetary policy, and that's why you're hearing more from the Fed."

I think there is asymmetry in the market right now.  With the moves in commodities, S&P earnings (on fire), SILVER and what the metals markets are telling you, and the Chairman's low approval rating, would suggest Ben is achieving his goals.  In a sense the less popular a central bank chairman is, the more he has likely achieved his objectives and the citizenry is ready to tar and feather given rising good and gas prices, just in time for the summer driving season.

DO NOT underestimate central bank policies as they apply to foreign exchange markets.  The USD is WEAK and illustrates almost no leadership given continued and rising sovereign funding costs.  The S&P chicanery isn't helping but this is precisely the time that a central bank can be motived to give lip service to the pace, maybe not the ultimate direction, of the FX trend.  Chronic USD weakness here, although maybe the ultimate longer term objective to devalue our debt obligations, may be an important consideration for tongue and cheek tightening themes to be espoused in the all important press conference.  Asymmetry to the front end of Treasury market.

Russ