Inflation Expectations 2010 And 2011: Compare And Contrast

Tyler Durden's picture

With all the rhetoric about the "self sustaining" recovery, some may forget that back in early 2010 we went through exactly the same song and dance. As we pointed out recently, comparing speeches by James Bullard showed absolutely no difference from the end of March 2011 and 2010. And keep in mind that in early 2010 we had precisely the same "jump" in economic data as we are supposedly experiencing now. Well, we all know what happened in 2010. But to confirm just how short institutional and investor memories are we present the Fed Funds futures for December 2010 (Z0) and December 2011 (Z1) as of today and as of a year ago. Basically, investors were pricing in a nearly 50% higher Fed Funds rate back in 2010: according to the FFZ0 the expected Fed Funds rate a year ago looking out to December 2010 was about 60 bps (and the December 2011 expectation was at about 2%). Compare that to the expectation of roughly 40 bps in the FF rate for December 2011 as of now. So basically when the market expected a much stronger response by the Fed a year ago, what we got instead was... QE2 5 short months later. So is it fair to say that despite all the Fed jawboning back then, absolutely the opposite happened. But that's ok - this time is really different. Dudley promises...

Current +9 months Fed Funds rate expectations for December:

+9 month December 2010 Fed Funds rate expectations back in April 2010:

And expectations for the December 2011 FF a year ago. Can one say rejected?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
scythian empire's picture

If the chart fits, you must BTFD!

Rikki-Tikki-Tavi's picture

given it seems to be a replay of 2010 - can I wait until July/August?

TruthInSunshine's picture

The Passion of The Munson

25-Year-Old Broker Lee Munson Is Swaggering Relic of the Boom   By George Gurley April 1, 2001 | 8:00 p.m

One night Mr. Munson was sitting at a bar in Las Vegas, playing craps. "I realized that L.A. is the worst art market for fucking pussies and sissies and people who had no taste," he said. "I said, 'I'm going to go to the big time, baby. Who's the big pimp?' And somebody at the bar said, ' You are!' And I'm like, ' Yeah, I'm moving to New York , baby!'"

A week later he was in Manhattan.

'I Want to Bleed on You'

Bellevue was filling up. Mr. Munson was talking about Microsoft.

"If you're pissed off at Microsoft for having a monopoly and controlling the world, and Bill Gates is the Antichrist, stop whining," he said. "Why don't you buy the stock, make a million dollars, then go build a bomb and blow 'em up? But you know, people aren't man enough to do that. When I make money, I put it in Wall Street's face, man. Put it in their fucking face.

"I consider myself a capitalist," he said. "Purebred. And you know what, I think the world is sick . And communism is so concerned about the world and helping your fellow brother. Fuck you, my fellow brother sucks . Why do I want to help him ? He's a scumbag."

He was standing now, his hands outstretched.

"If I ripped my skin out, you know what would flow out?" he asked. "Bloody cash, baby. Money! Rip it out, it's gold!"

Mr. Munson held his arms up higher, crucifixion-style.

"I want to be like Jesus," he said. "You know why? 'Cause I'm rich with blood and I want to bleed on you, because you'll be wealthy if I bleed on you. Or maybe if you're a bitch, I'll fucking squirt you with a little bit of silver."

The next day I called Mr. Munson's wife, Alison Bamert. They were married three and a half years ago by an Elvis impersonator in Las Vegas. They live with a cat in a large one-bedroom on Ninth Avenue and 30th Street. Sometimes Mr. Munson comes home drunk, and his wife yells at him and then gets him up for work at 6 a.m.

"Lee really rocks and he's totally interesting, but you have to keep in mind that he shouldn't always be taken, like, completely literally, " she said. "You can look at what's coming out of his mouth as just like an interesting, sociological, quirky thing. He's very interested in playing mind games with people and seeing what reaction he gets. And if you don't realize that, that can really turn people off.

"You know," she said, "he calls me on the phone and he'll be like, 'I've just lost my mind.' And I'm like, 'Well, that's a bit of a dramatic thing to say–you know, words really do have a lot of impact and you need to be ….' Sometimes he's not fully conscious of the weight of his blunt language."

On a Friday after work, Mr. Munson met me at the Plaza Hotel. The host at the Oak Bar was sorry to say that Mr. Munson could not be photographed on the premises. We walked to a bar nearby called Whiskey Park. After a few photos, a striking blond hostess told us we had to stop.

"This place pretty much is the last place on Earth I would want to be photographed in," Mr. Munson said, and then snarled, "Rock 'n' roll, baby ."

"Since you're 12 years old, you're a little too young to be in here anyway," she said.

Mr. Munson spat on one of the windows.

Later, listening to my interviews with Mr. Munson, I realized he had picked up my tape recorder and spoken into it when I was in the bathroom.

What he said was: "You're in the bathroom and I've taken control of your tape recorder. I don't really think you're a sissy . You're a little girly . I got a little pissed when you were hitting on my wife, but it's understandable. She's hot and you're not. But all I can say is, I'm enjoying this night. Pretty much. And if you fuck me over, I'll kill you. I don't have any problem with that. But I have to say that I hope that we become friends after this."

The next day, the market rebounded slightly.

sbenard's picture

Wait a minute! Are you saying we haven't reached QE3,000,000,000 yet? No wonder inflation isn't high enough yet!

umop episdn's picture

We have lots o' Fed officials, and we have a few 'talking bears' cartoons that are much more credible, imho. Sad.

RobotTrader's picture

Is Nic Lenoir still employed??

Where is Rosie??

tallen's picture

I reject your reality and I'm substituting my own.

FoieGras's picture

FF rate futs have nothing to do with inflation expectations. Pull up the TIPS/10y be/ chart for inflation expecations.

tmosley's picture

So you're telling me our resident delivery/shoeshine boy Spalding was WRONG!?


RobotTrader's picture

I saw a Chevy Volt yesterday for the first time.

I was doing about 40mph, and that thing passed me and took off like a rocket.

I was shocked at how hard that thing could accelerate.

Wouldn't pay $45k for one, though....

pendragon's picture

so today the euribors are down more than the eurodollars on hawkish fedspeak and strong job data! the world has gone mad

Caviar Emptor's picture

We'll soon be a country of all millionaires: that's what I call change I can believe in!

burncycl's picture

And it will take a trillion dollars to buy a loaf of bread. Blessid be the Bernak and the holy Fed.

scratch_and_sniff's picture

Its horseshit, it makes me barf. Dudley opens is fuckin stupid bake and everyone wets themselves. I could strangle the fuck...WHO COMES OUT WITH THIS SHIT ON A FRIDAY WTF???????

ghostfaceinvestah's picture

TD, can you give us an update on how much of the $600B of QE2 is left?  I am soon going to start moving to cash, and shortly after that start shorting.  I think we are near the peak, and with inflation about to hit hard soon, Benanke won't have the political cover for another round of QE immediately, he will need evidence of another double dip like last summer (along with a 30% correction) to justify more money printing.

GoinFawr's picture

Interesting possibility that's making the rounds, no doubt.

OTOH, there was no real 'political cover' last year either, and the same predictions were spread about, but that didn't stop QE2. And the pressure that has been building since then cuts both ways... fascinating times.

'Trader Dan' has a nice way of putting it:

Even if events do go your suggested route you'd better hope that enough people other than you still have faith in the USD as a 'safe haven'. Keep in mind there are more creditors who will accept gold as payment these days, so which currency(ies) are truly in 'deflation'? Ask yourself: if someone owed you money, and you had the option, would you rather get paid in something with no counterparty risk, or fiat, debt-based paper? I have little doubt many creditors are asking themselves this same question more and more every day.

Another question you might want to ask is: who gains/loses from any particlaur course of action? and go from there.


scratch_and_sniff's picture

Anyone wants to make a few quid- start shorting into this short squeeze in eur/usd. Its so blatant its not even funny. Short!! These fat fingered twats are pulling a fast one.



...they used the ISM to kick it off, but its horseshit!!

magpie's picture

Yup, can't wait to send the Portuguese Non-Government and Irish deadbeat banks some more cash.

Flight to safety, bitchez !

GoinFawr's picture

"Flight to safety, bitchez !",

Which one mags, gold or silver? Exotic Pt?

malek's picture

So is it fair to say that despite all the Fed jawboning back then [a year ago], absolutely the opposite happened.

Why am I not surprised?
Tyler et al. @ZH, keep up the fantastic work!

cabernet's picture

It took decades for management and labor to destroy the value of the GM brand. Even though they make a better car today, it will take decades to get it back. The competition in the car business is tough. It is sad to see GM management fall back into their old habits. They need to right size the company and create some scarcity value to their cars. Over production plus zero interest rate loans trashes the used car market. Without a bid for used cars, people are reluctant to pay-up.