Nomura FX: "Mr. Bernanke: You Are Trapped!"

Tyler Durden's picture

From Nomura's Brent Donnelly

Mr. Bernanke: You are trapped!

The way the data and psychology has turned down just as QE2 is ending is no coincidence – just like it was no coincidence when the same thing happened at the end of QE1. To use the Fed Chairman's preferred term these days – the impact of QE is transitory. Much like fiscal stimulus, QE has a temporary impact but as soon as the extraordinary intervention ends, the patient begins to wither again. This is the trap that Bernanke fully understands and it seems like the endless monetization prophecies of Zerohedge and The Daily Dirtnap are at risk of coming true.

Without the promise of QE3 from Bernanke yesterday, markets are sad. With no major data on the docket and nothing promised  from the Fed (Evans also seemed to shy away from hitting the panic button yesterday), we may be in for some creative destruction for a while.

I have not been able to stick with a coherent equity view over the past few days as there are two offsetting factors at play in my mind : 1) the bear case is playing out perfectly as QE ON or QE OFF continues to be the only variable determining asset prices and multiple bearish cyclical factors kick in (sell in May, end of presidential cycle, etc)… But 2) stocks appear very oversold as we are in the 6th straight down week for the S+P and the market seems fully cognizant of the deceleration in US growth at this point.

I guess things can stay oversold for longer than one might expect especially after we have just rallied 100 percent in less than two years. It is probably reckless to buy equities until we get some sort of huge blowoff day. The slow motion car crash we are  witnessing since May 2nd is remarkably orderly. Too orderly.

AM/FX usually contains a trade recommendation but right now I am flat. Bearish fundamentals + very oversold market = be  patient.

Watch for significant barrier madness in USD/JPY at 79.50. Finally, for those keeping score at home: EUR/USD was trading on a 1.19 handle on this day last year.

Comment viewing options

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

This is the trap that Bernanke fully understands and it seems like the endless monetization prophecies of Zerohedge and The Daily Dirtnap are at risk of coming true.

I wouldn't consider something with a 90% or greater chance of occurring as a 'prophecy' when it is discussed. Only the willfully blind couldn't see this coming. And that is what Ben and company are engaged in, the willful blinding of the general public.

CPL's picture

Agreed, "phophecy" requires a random guess, perhaps a dead chicken and some fire walking forthe vision to occur.  We just have to have a rudimentry understanding of 7th grade math involving percentages, time, compounding and debt is a negative number.

Fish Gone Bad's picture

A new term will come from all this: Bernanked - A term used to describe the fucking over of a country by a banker. 

Cognitive Dissonance's picture

Nice look for Pelosi on the left. Did she do something with her hair after her latest face lift?

Cognitive Dissonance's picture

Speaking as an old fart it's simply amazing what you can find on YouTube. I have gone to the well dozens of times with just a few words in the search engine and I've never been disappointed.

Random word searches are my favorite thing. :>)

merehuman's picture

i will google "old fart" curiousity compells me

Mec-sick-o's picture

You will be surprised if you ask several people to google the same "old fart" phrase.

All of you will get different answers.  Welcome to the "openness" of internet:

kumquatsunite's picture

Ha Ha! Good job.

That said, what do you want? Why is Bernanke the "whipping boy"? You do realize that without the endless, unwarranted, unneeded, simply-to-juice-the-system immigration of the last twenty years that the housing bubble couldn't/wouldn't have happened. Under the guise of "diversity" this country has been turned into a flophouse for third worlders and gutter trash from failed countries. (Read Pat Buchanan or watch Judge Judy; the foreigners you'll see don't jive with that, "they are such good people" thingy...)

Oh yeah, I'm sooo not "compassionate", with "compassionate" being interchangeable with "self-genocide" which is something no other country in the world has agreed to do. Just what was wrong with this country in, say, 1980 when the roads were open, the air was still clean, and there was plenty of water?  When we didn't cringe just because we said something jingoistically American? 

Just when is enough "diversity" diverse? What kind of a priori decision was made about that and who made it? And is it not enough now that there are 160 languages in the Los Angeles school system; now that California is a barrio; now that Washington State has been sold to China; now that one-half of the physicians in the United some odd way that had to be deliberately jury-rigged...are foreigners. Combine foreign docs (non-native English speaking, not steeped in a Christian western culture and who have an undeniable hatred of America and whites and Oboma's death panels, and your days are numbered. Ah sure, kumquats, read the Oboma care bill and shudder in fear if you be: white (the government been stuffed with foreigners to hide the immigrats from Americans so we don't "feel" the real numbers), disabled (you go first!), or over fifty (Oboma hate the older ones...they remember how this country is supposed to be!) Or, interestingly enough, a black American. An add on television just a few moments ago had about fourteen people in it, one-half of them were Chinese; no blacks; no hispanics. The Chinese are looking for their "satellite state" until they can invade. These people are their initial invasion force. They are grooming you via advertising.

Destroy the memories of the older ones, the memories of how it should be; the memories of American as a great country for a great people has been pounded into the ground; the coast is clear for Communism to reign!

Cognitive Dissonance's picture

You are supposed to end with <rant off>.

BTW I think you missed a few stereotypes, but great effort none the less.

kridkrid's picture

Not only stereotype laced, but the narrative to usher in the next phase in our fascist transformation.  The theme I'm seeing more of today... mob violence... the need for a strong police state... but the ant-immigrant thing will be easy to blend in, soon enough.

merehuman's picture

you imply its the foreigners who created the derivatives(trillions) and robbed the people to save the insolvent banks..too funny , thanks for your opinion

Weisbrot's picture


cant be her, she's wearing white


Cognitive Dissonance's picture

Actually she's wearing semen beige from all those thousands of hours whoring around the Congressional club.

anti Oligarchy's picture

My smile for the day from ZH - this site has the best base of users.

That Peak Oil Guy's picture

Who needs prophesy when you have history:

"At that time the opponents of paper had prophesied that, once on the downward path of inflation, the nation could not be restrained and that more issues would follow."

"France was now fully committed to a policy of inflation; and, if there had been any question of this before, all doubts were removed now by various acts very significant as showing the exceeding difficulty of stopping a nation once in the full tide of a depreciating currency."

"The first inflation bills were passed with great difficulty, after very sturdy resistance and by a majority of a few score out of nearly a thousand votes; but we observe now that new inflation measures were passed more and more easily and we shall have occasion to see the working of this same law in a more striking degree as this history develops itself."

"The great majority of Frenchmen now became desperate optimists, declaring that inflation is prosperity. Throughout France there came temporary good feeling. The nation was becoming inebriated with paper money. The good feeling was that of a drunkard just after his draught; and it is to be noted as a simple historical fact, corresponding to a physiological fact, that, as draughts of paper money came faster the successive periods of good feeling grew shorter."

From Fiat Money Inflation in France.


binomial's picture

Fantastic reference -  Thanks!




GeneH3's picture

Fiat Money in France is a great monograph. It not only catalogues the inflation but also the lengths to which a government will go to enforce wage and price controls (hint: it starts with a "g" and ends with decapitation).

kumquatsunite's picture

Come'on. Ag and Au are not sacrosanct. There is absolutely nothing about them that can'be be watered down: add another metal to, purportedly, strength the Ag or Au; make the piece smaller but say it stands for the same amount...what's the difference. The looming problem if this were implemented is two-fold. One, gold has some real problems in the not too distant future (won't go into them but I don't care to own gold)...let's just say it is all "fool's gold". And as to silver, very heavy if you care to buy, say, a couch. In the old days most of the exchanges were via bartering such as a chicken for a bushel of peaches. Thus, silver was used only for very limited purchases. It's pretty clear that those who have squirreled some of this stuff away are hot for this idea, the rest of us, not so much. Frankly, in a digital world, the real gold and silver is: land which is not overburdened with humans (see: China, India), fresh air (all that weather manipulation, that's a bad bad thing), and food...which actually means fresh water because without fresh water...nothing lives. Nothing lives, and that means your children, your grandchildren. 

Bay of Pigs's picture

No quick way to answer all those blatant errors. 

merehuman's picture

i junked you  for your ignorance and short sightedness. You need do more research and suffer a bit so you may gain true understanding and get to know yourself. You, are a mere human who thinks he has a soul.

try being a soul and have your human better educated. thank you for reading.

augie's picture

Late president and professor of history at Cornell University.

I think that guy knew what he was talking about.

Danks18's picture

"It is probably reckless to buy equities until we get some sort of huge blowoff day. The slow motion car crash we are  witnessing since May 2nd is remarkably orderly. Too orderly."

That is the only way that the BTFD crowd will stop.  The Pavlovian response is being unlearned.

hampsterwheel's picture

seems like July will be the month to go long Silver and Gold by my calculations..


GetZeeGold's picture


July will be the time to already be in the metals.

P.S. If he really is trapped. Send in the dogs to finish him off. It's the way we hunt down south Dixieway.


Caviar Emptor's picture

 the impact of QE is transitory....

and not! Bernanke is feeling trapped because more QE also would mean higher global asset prices and raw material prices across the globe at a time when the real economy is sagging big time, unable to get traction, stuck in a depression that actually worsens with QE. 

GetZeeGold's picture


Throw some QE bucks at taking down commods...which no one we can wheel out QE3 to support equities....which nobody believes either.

What to do?


Note to self's picture

The slow motion car crash seems to be tightly controlled - major indexes decline in nearly identical percentages each day.  Almost as if it were algorithmically governed . . . . 

Mec-sick-o's picture

Yup, just enough to trigger some support levels and turn traders' chartology a nightmare daily whack.

Cdad's picture

Bearish fundamentals + very oversold market = be  patient.

True, in the broadest sense.  However, if one is not making an index bet, there are plenty of stocks out there for which patience has already been extended to the size, scope, and magnitude of the pyramids of Giza.

Plenty of things to sell now and for the rest of June.  Retail leadership stocks, for example...those which are major components of the XRT.

SheepDog-One's picture

Whats the 'fair value' for all this crap. Im just being generous and saying S&P 600, DOW 5,000. I dont see any justification for anything higher for any of it.

Cdad's picture

Can't answer your question, Dog.  I have given up trying to value or time the turn in the bogus indexes due to the ridiculous HFT issue, and because of the manipulation of the index or sector ETF funds.

One needs to seek out individual issues to sell now...such as the patently absurd king of $30 t-shirts and assless chaps...aka Abercrombie and Fitch.  Just now, the CEO did a whoopsies on the coming quarter after completing "Operation Billionaire."

SheepDog-One's picture

So get rid of assless jeans stocks and $12 rice burrito stocks...CHECK!

Cdad's picture

Correct Dog.  And there are others.  The GROSS misallocation of funds into the consumer discretionary sector is essence, Wall Street's ultimate denial of the deteriorating economy.  

Some have already corrected, some have already corrected and are beginning their next leg down, and some of them are wearing hockey helmets and standing in the center of the room clapping for themselves.  The last group is my very most favorite.

And now comes confession time...that always FUBAR moment when criminal syndicate Wall Street capital misallocators express concerns about their previously dumbass expectations.

Next up, misallocators will be suddenly "surprised" about the rising costs of streaming movies, America's second favorite dinner menu item after iPads, of course.

Never has the "smart money" been in such a grand and glorious position to reveal itself as "herd money" instead.  Sell when the ETF manipulation is high, marked by a high RSI and the vomiting of said target shares into curiously tall volume spikes.  

As for Abercrombie...a good time to sell it is any time it is above its 100 day be followed by any time it is above its 200 day sma.


TruthInSunshine's picture

We're in a secular bear market.

The RoboMomos of this earth won't/can't utter that fact, but it's fact nonetheless.

Although no one has a crystal ball, pulling up a chart of the Nikkei, beginning in...oh, I don't know...1990 or so, is one ugly chart made possible by secular bear market-san.

Cdad's picture

Brother truth,

I would not argue your point at all.  Instead, my magic charting abilities are less impressive than my ability to understand valuations...along with being able to spot ridiculous magic HFT lifting, insider millionaire creation schemes.

And considering just how hard a certain CEO of a certain fast food chain [with the ambiance of the inside of a warehouse] has been selling the crap out of his shares, I think I have another one spotted.

As well, and for the same reasons, and for the obvious "surprise" just around the corner on hidden costs and how they are about to "unexpectedly" appear in a place where streaming American dinners are served up, I think I know of another place to sell.

And I could go on, and you may well outperform me in the near term with a leveraged play against the bogus indexes during this clearly secularish bearish truth telling time...but I need to be in places where I have conviction.  This being my only point, really.

I agree...the entire market is entirely mispriced due to serial criminal syndicate Wall Street banking capital misallocation.  So enjoy the Screaming and Plunging trades, whatever they are, brought to you by the Summer of our Recovery, a wholly owned subsidiary of the Summer Doldrums.

TruthInSunshine's picture

We're in agreement, although our time frames will make one of us closer to on-time, and one of us early or late.

We agree that when the band-aid is removed, it will rip the stitches in the jugular out.

StychoKiller's picture

Make that a carotid, much more dramatic!

Goldtoothchimp09's picture

Used to be the investing class would purchase a stock if they could make back their investment via dividends in 10-12 years.  Apply that math to stocks that barely pay divide bds!  Why would anyone own stock they don't pay substantial dividends?! 

hampsterwheel's picture

I believe we are making too many assumptions here - do we really know  that Bernake wants a stronger more independent America? An economically strong America isn't good for the UN or the NWO types - better to drop us like a prom dress and swoop in aka Greece .... if that is the end game: the establishment of a single fiat currency run by the IMF/UN we are right on track and Bernake is doing an excellent job. They made money running up the market - now they're short and will make it on the way down -


I believe people's assumptions on what the Fed wants are all wrong - they want what they are doing - we sit around and scratch our heads and cannot understand the logic - when in fact it makes perfect sense when you watch what they do - not what they say - everything is going to plan - we are right where they wants us because they put us here -

SheepDog-One's picture

Too bad most wont see it till a boot heel is stomping their skull, soon.

Reptil's picture

watch what they do - not what they say -


DaveyJones's picture

Ben wants to pay back an unpayable debt with a weaker dollar. He wants to lie about that fact. He wants to time his easings and pull back just enough to let the ignorant catch a glimpse of reality, make the ignorant scream for more assistance, then play the white trash night and start the process all over again.

Unfortunately for Ben many people and many countries are on to this game and are also taking the pain that we should be feeling with high interest rates and other pleasures. China is done being our vendor financer and is busy buying hard assets. Others will say two can play this game and start to do things to ease their currencies. We've never had a show like this before. The final act will have some cannons.   

SheepDog-One's picture

Right, who of any significance or importance is Bernank fooling anymore? The bankrupt can pay off a mountain of debt, with just a little tweek here and there? Farce.

TorchFire's picture

I would tend to agree that the Fed is doing precisely what they set out to do.  They have NEVER had an interest in a strong was just that the US represented the best host for their voracious need to feed.  A sort of nation state dairy cow or blood doll. Now they may be building the machine to make the world their prey.

I only wish Bernanke was "trapped". Gnawing his leg off or dying of thirst in the trap.  ..or perhaps a choice such as the last scene of Mad Max.

i-dog's picture

"we are right where they wants us because they put us here"

Exactly! The only two things they are actually concerned about are:

  1. Ensuring that the middle class has been sucked completely dry; and,
  2. Ensuring that the control grid is fully in place, before pulling the final plunge.

My guess is that they are targetting another 12 months of these games, so QE3 is a given.