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Goldman's Take On The FOMC Statement

Tyler Durden's picture





 

Even Goldman is not buying the Fed's (and of course Steve Liesman's) religious and nonsensical belief that only the core CPI is relevant: "To us, the main surprise-and it is a small one-is that the FOMC continued to characterize core inflation as trending downward despite an uptick in the December CPI." We were more surprised that the Fed did not acknowledge its new role as the CIA for the QE generation, where with the push of a (printer) button, Bernanke can now incite revolutions.

From Goldman's Jan Hatzius

No Significant Surprises in a Unanimous Decision

BOTTOM LINE: The FOMC's policy statement was almost exactly as
expected-a unanimous decision with no policy changes, some modest
upgrades to the assessments of growth, and a recognition that commodity
prices have been rising. The only difference-and it is slight-is that
the committee retained the sense of deceleration in core inflation
despite an uptick in the December CPI core index.

MAIN POINTS:

1. Nobody expected any change in the key policy parameters and there were none. Changes in this paragraph were mainly cosmetic, though the rephrasing of the decision to continue the reinvestment of maturing MBS and agency debt and the additional purchase of $600bn in Treasuries underscores the likelihood that the latter will expire on schedule. Whereas in December: "The Committee will maintain its existing policy of reinvesting principal payments from its security holdings. In addition, the Committee intends to purchase $600bn…" now: "In particular, the Committee is maintaining its existing policy of reinvesting principal payments from its security holdings and intends to purchase $600bn…"

2. Changes to the assessment of economic conditions, while executed a bit differently than we anticipated, addressed each of the concerns we had expressed. In particular, the first sentence recast the inadequacy of growth as "insufficient to bring about a significant improvement in labor market conditions" as opposed to "insufficient to bring down unemployment." The "moderate" qualification to growth in household spending was removed, as expected, and the committee likewise put business spending on equipment and software and on structures on a more equal footing, while continuing to recognize that activity in this sector had slowed.

3. To us, the main surprise-and it is a small one-is that the FOMC continued to characterize core inflation as trending downward despite an uptick in the December CPI. One can argue that the tense of this statement shifted slightly more to the past-"measures of underlying inflation have been trending downward" vs. "have continued to trend downward"-but the distinction seems slight. The committee did preface this comment with a recognition that commodity prices have risen, as we had anticipated.

4. The main unknown going into this meeting was whether the decision would be unanimous or have one or two dissents. Presidents Fisher of Dallas and Plosser of Philadelphia were the main unknowns in this regard. While both dissented in 2008 (Fisher five times and Plosser twice), they both went with the majority in this instance, as seemed likely from a close reading of their recent comments. Both men have probably concluded that, while they had reservations about the $600bn purchase program and would likely have voted against it in November, there is little to be gained at the moment from objecting to it. In doing so, they can exert more leverage later on if the committee appears headed toward an extension of this program later in the spring, though at this time we do not expect that.

 


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Wed, 01/26/2011 - 16:17 | Link to Comment NOTW777
NOTW777's picture

food prices screaming

"To us, the main surprise-and it is a small one-is that the FOMC continued to characterize core inflation as trending downward despite an uptick in the December CPI."

Wed, 01/26/2011 - 16:22 | Link to Comment bob_dabolina
bob_dabolina's picture

Strong global demand as a result of a robust economic recovery and not due to monetary accomodation. There is no inflation only deflation. We are committed to a strong dollar policy.

-Ben Bernanke

Wed, 01/26/2011 - 16:17 | Link to Comment TradingJoe
TradingJoe's picture

This Looting will NOT END WELL! I recently bought farm land in Europe on the cheap, will build me a nice AgriBusiness, to me, that's the FUTURE! 

Wed, 01/26/2011 - 16:20 | Link to Comment plocequ1
plocequ1's picture

Can one freeze German Bologna? Its on sale for $2.59 lb. I want to buy 90lbs

Wed, 01/26/2011 - 16:26 | Link to Comment countryboy42
countryboy42's picture

Use a food saver(vac. bag system) I use one for all my wild game, and it keeps quite well.

Wed, 01/26/2011 - 20:15 | Link to Comment topcallingtroll
topcallingtroll's picture

yeah freezing is actually cheaper and better for you.

Wed, 01/26/2011 - 16:27 | Link to Comment Dr. Porkchop
Dr. Porkchop's picture

Can you jerky it?

Wed, 01/26/2011 - 20:12 | Link to Comment topcallingtroll
topcallingtroll's picture

yes to both.  cut it into small strips,  jerk it, salt it heavily even more, and dry it... store in a cool dry place.

Wed, 01/26/2011 - 16:18 | Link to Comment HarryWanger
HarryWanger's picture

The MAIN POINTS outlined above are exactly what I wrote in response to why there was not a major bounce in the market in the last post. It was exactly as expected and the slow positive moves in the indices will continue. Again, that's a positive sign in a bull market -small moves on a slow and steady basis.

Wed, 01/26/2011 - 16:24 | Link to Comment DavidC
DavidC's picture

2,000 points on the Dow since the end of November with absolutely nothing to speak of in terms of pauses for thought or corrections counts as "a positive sign in a bull market - small moves on a slow and steady basis"?!

Come on!
DavidC

Wed, 01/26/2011 - 16:29 | Link to Comment SheepDog-One
SheepDog-One's picture

'Slow, steady moves'.... LOL Harry you truly are a crackhead, seeing as how it was only a couple months ago the BS DOW was under 10,000, and obviously way overvalued THEN! Put down the pipe Harry!

Wed, 01/26/2011 - 16:25 | Link to Comment 101 years and c...
101 years and counting's picture

Just think, it only costs $25-30 billion in weekly money printing to keep the ponzi alive.  All to be paid for by your great grandchildren.  I just hope your profits in the market are so great they can be passed down for generations...so they can afford the taxes.

Wed, 01/26/2011 - 16:37 | Link to Comment Internet Tough Guy
Internet Tough Guy's picture

No grandchildren are paying anything back; this ponzi isn't going to be around that long.

I think this is the last year.

Wed, 01/26/2011 - 20:08 | Link to Comment topcallingtroll
topcallingtroll's picture

That has been my strategy exactly.

Wed, 01/26/2011 - 16:29 | Link to Comment Johnny Lawrence
Johnny Lawrence's picture

This time is different!

Wed, 01/26/2011 - 16:41 | Link to Comment earnyermoney
earnyermoney's picture

That was after you predicted a ramp into the close. LAY.

Wed, 01/26/2011 - 17:04 | Link to Comment InconvenientCou...
InconvenientCounterParty's picture

No bounce?

Check commodites. Better than make-up sex.

Wed, 01/26/2011 - 20:14 | Link to Comment topcallingtroll
topcallingtroll's picture

Hey Harry.  The troll likes you....but don't take that the wrong way.  we need a few contrary voices around here.  It's not like I'm gay or nothin.

Wed, 01/26/2011 - 16:19 | Link to Comment DavidC
DavidC's picture

Those guys at Goldman's must be s-o-o clever, having only just twigged the CPI and inflation.

I wish I was as clever as that.
DavidC

Wed, 01/26/2011 - 16:24 | Link to Comment Jim in MN
Jim in MN's picture

Let's be clear: As long as no one hires or pays any regular Americans, the banks can have all the free money they can imagine.

Are we clear?  K then. 

Wed, 01/26/2011 - 16:28 | Link to Comment NOTW777
NOTW777's picture

erin burnett and cramer were just celebrating that there is no wage inflation.

regular people starve while bankers celebrate

Wed, 01/26/2011 - 20:07 | Link to Comment topcallingtroll
topcallingtroll's picture

If the average american is spending 14 percent of income on food we are hardly starving.  If people would just learn how to make their own bread and make a big pot of pento beans like granny then they could get by with five percent of income on food.  We are hardly starving.

Wed, 01/26/2011 - 16:35 | Link to Comment A Man without Q...
A Man without Qualities's picture

Christ, I hadn't thought of it that way.  The less people they hire, the lower rates and the weaker the currency will be and they can demand tax cuts, etc etc, in the knowledge that they will never have to pay for any of the debt.  As I recall, German manufacturers were strongly supportive of money printing in Weimar as well.

Wed, 01/26/2011 - 16:26 | Link to Comment SheepDog-One
SheepDog-One's picture

Im shocked as well, SHOCKED I tells ya just as Goldman is that the FOMC seems to be fudging the numbers for butt-boy minions like Liesman so he can go forth and proclaim all is well!

Wed, 01/26/2011 - 16:29 | Link to Comment NOTW777
NOTW777's picture

nice reversals in GDXJ and GLDX

Wed, 01/26/2011 - 16:33 | Link to Comment buzzsaw99
buzzsaw99's picture

Their take on it, that's funny. They probably wrote it.

Wed, 01/26/2011 - 16:36 | Link to Comment rich_maverick
rich_maverick's picture

Governments can't do basic math.  Real working class people have to live by the following rules:

Income:

    Take Home Income (after tax): 100%

Expense:

    Food:    20%

    Healthcare: 20%

    Transportation: 10%

    Education: 20%

    Clothes:  10%

    Shelter: 30%

    Anything Else: Tap Credit...

 

Since Anything Else and Shelter make up Core Inflation...  Governments can't see what is wrong if food, healthcare, transportation and education are going up.  They figure you can just tap more credit...  That is how they solve their problems.  It's their solution to everything!  At no point is there any discussion about the fact that incomes are and have been stagnant for over a generation.

Wed, 01/26/2011 - 20:01 | Link to Comment topcallingtroll
topcallingtroll's picture

No, you are supposed to hedonic down.  Have less fun with your food and less fun with your shelter cause it ain't quite as fresh or pretty.  Still it's a lot better than what's going to happen to china if they don't raise the peg.  They may be used to eating snakes and insects, but even those are going to get expensive with a billion people chasing after them.

Wed, 01/26/2011 - 16:58 | Link to Comment Hook Line and S...
Hook Line and Sphincter's picture

Don't get lost in Goldman's net. When reality actually seeps into the majority of the client population who, when and if, react in a statistically significant fashion, Goldman will start calling their market maker moves correctly for public consumption to engender a response extinction. Without rule of law, which IS what we have, the manipulators stand on Mt Olympus. There is no limit to the unwillingness of the investor class to touch and feel the depths of Goldman's depravity.

Wed, 01/26/2011 - 16:58 | Link to Comment InconvenientCou...
InconvenientCounterParty's picture

" We were more surprised that the Fed did not acknowledge its new role as the CIA for the QE generation, where with the push of a (printer) button, Bernanke can now incite revolutions."

I'm suprised he couldn't contain the drool. He finally found the holy grail for a PhD --a sound cause-effect relationship.

Now that he has this, anything is possible. Well, except cold fusion.

Wed, 01/26/2011 - 17:04 | Link to Comment monopoly
monopoly's picture

Just insane guys. Just insane.

Wed, 01/26/2011 - 17:38 | Link to Comment satansanus
satansanus's picture

lots of fun breaking blackscholes on TBT puts over the next few days

Wed, 01/26/2011 - 20:19 | Link to Comment The Talmud Kid
The Talmud Kid's picture

steve LIESman.

Life would be so much easier if everyone on the electric jew and every jewspaper propogandist were named LIESman.

 

Wed, 01/26/2011 - 20:22 | Link to Comment topcallingtroll
topcallingtroll's picture

send me your hit list dude or I am going to think you are just a 16 year old whacking off to Mein Kampf.  You also mentioned a modern anarchist cookbook?

Wed, 01/26/2011 - 20:28 | Link to Comment The Talmud Kid
The Talmud Kid's picture

now, now.  Go back to your corned beef sandwich.

Wed, 01/26/2011 - 20:31 | Link to Comment topcallingtroll
topcallingtroll's picture

I do love  lox and bagel and I am well circumscised but don't wear a beanie and I hate corned beef.  I know you saw my email address I left before.  At least send me a few of your favorite recipes.  It's perfectly legal.

Wed, 01/26/2011 - 20:20 | Link to Comment topcallingtroll
topcallingtroll's picture

I know everyone here disses the core.  Have any of you looked at the feds reasoning for focusing on the core and the studies behind it?  Statistically there is too much noise in non-core inflation.  This really isn't an inflation yet in aggregate.  If I am in theory paying less for my office (got a rent reduction of $200!) then I can spend more on food and not notice any difference in my overall inflation rate.  Obviously individual results may vary.

Speculative forces can cause volatility in non core inflation.  It takes real inflation to wank with the core.

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