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Welcome To Chez Shalom: Here Is The Menu For Tomorrow's FOMC Lunch
Concerned what will happen tomorrow at 2:15pm? You should be: after all the Fed is now in charge of everything, and this (in)decision will impact your life much more than who the fattest person on this season's Biggest Loser is. Here is this year's most prescient economist, Jan Hatzius, once again doing the best summary on the four possible outcomes of tomorrow's FOMC decision. In a nutshell these are: i) No substantive change in the policy statement, ii) Recognition of a weaker economic outlook, but without an explicit signal that renewed unconventional easing is under consideration, iii) An explicit signal that renewed easing is under consideration, and iv) An announcement of renewed easing. Our personal choice is entree #2, although this being Chez Shalom, no matter what, it will always end being an omakase type of affair - fiat prix tres unfixe. (Oddly enough, Chez Shalom still does not have a Zagat's entry. As everyone in America eats (or defecates) there every single day, it is about time our more industrious readers provided their feedback and rating).
From Goldman's Hatzius and Tilon
FOMC Preview: Several Options on the Menu
- The key question at the September 21 FOMC meeting is how far the committee will lean in the direction of renewed policy easing. Will it formally acknowledge a weaker growth outlook, and if it so will it go further by hinting at—or actually implementing—additional easing measures?
- In our view, the most likely outcome is a more dovish statement that explicitly reflects a dimmer economic growth outlook and nods in the direction of further easing via changes to its forward-looking guidance on policy. Though we ultimately expect the Fed to purchase at least another $1 trillion in Treasury securities, we think it probably will take more time for the FOMC to reach agreement on such a major step.
The key question at the September 21 FOMC meeting is how far the committee will lean in the direction of renewed policy easing. The tone of the statement will depend principally on how the FOMC describes the economic outlook (the growth outlook in particular), and whether it signals the possibility of (or actually announces) additional balance sheet expansion. The choices along these dimensions yield four basic choices for the statement, ranging from most “hawkish” to the most “dovish”:
1. No substantive change in the policy statement. One option is essentially to repeat the August statement, with only minor changes in wording. The justification would be that the data since the last FOMC meeting on August 10 have been roughly in line with expectations. As shown in Exhibit 1 on page 2 of last Friday’s US Economics Analyst, our US-MAP scoring system of economic indicators–which is largely based on how the economic indicators compare with the Bloomberg consensus as of just before the release—has averaged around zero over this period. Chairman Bernanke suggested in his Jackson Hole speech that further easing could be triggered by an increased threat of deflation and/or a significant weakening in the economic outlook. One might therefore argue that the committee will take the view that these risks have not increased significantly, and that it is therefore inappropriate to change the statement. Indeed, the description of the economy in the August statement—indicating that the recovery “has slowed,” “[h]ousehold spending is increasing gradually,” and “employers remain reluctant to add to payrolls”—remains accurate. This would be the most “hawkish” of the options, and would imply that the Federal Open Market Committee, or at least a significant faction of it, requires more proof to warrant additional quantitative easing (QE).
2. Recognition of a weaker economic outlook, but without an explicit signal that renewed unconventional easing is under consideration. A somewhat more “dovish” alternative would be for the committee to indicate that the economic outlook has in fact deteriorated since the last meeting. Although the monthly indicators have on average been in line with expectations, those expectations were quite low, and many economists have cut their longer-term growth and employment forecasts over this period. For example, the median forecast for real GDP growth in the second half of 2010 fell from 2.6% (annualized) in the Blue Chip Economic Indicators survey released on August 10 to 2.1% in the survey released on September 10. It is likely that both the committee and the Fed staff have revised down their forecasts as well, perhaps by a similar amount. If the committee indicates a downward revision of its forecast, this may be viewed as an implicit signal that additional easing has become more likely. The FOMC could acknowledge a weaker forecast via one or more changes to the first paragraph of its statement, perhaps indicating that recent growth is below trend or that resource utilization is not rising materially.
3. An explicit signal that renewed easing is under consideration. This could take the form of an added phrase or sentence in the forward-looking policy discussion. An example would be the following modification of the “extended period” sentence: “The Committee…continues to anticipate that economic conditions…are likely to warrant exceptionally low levels of the federal funds rate for an extended period and potentially a further expansion of the Federal Reserve’s balance sheet.” Another option would be a bald statement that the committee “is considering” additional unconventional easing.
4. An announcement of renewed easing. Finally, of course, the committee could simply announce that it will ease monetary policy anew. In this case, we would expect an asset purchase program focused on long-term Treasury securities that would ultimately total at least $1 trillion in size, though whether the committee is prepared to state this amount up front or begin with a smaller figure and leave open the possibility of further moves remains an open question.
How likely is each of these options? We cannot rule any of them out, but we suspect the discussion will focus around options 2 and 3, with a majority of the Committee willing to acknowledge a slightly softer growth outlook but more vigorous debate about the desirability of signaling a possible easing step. In the end, we think the FOMC will give at least a nod in the direction of further easing via changes to its forward-looking guidance on policy but stop short of actually announcing the implementation of a new program.
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In other words , Tyler recommends buying stocks while posting bad news. Hey, Works for me..
Please explain where you got the impression that we recommend doing anything at all based on this post?
It's right there. in very tiny invisible font, but I found it. Very clever Tyler.
Btw Tyler you didn't add this in yet. http://www.cnbc.com/id/39271495
I hope he was being sarcastic (bad news does seem to be irrelevant to the stock market). You did give a whole menu of options, not exactly a recommendation. I wonder if the Bernanskter will follow up on the "The Recession is Over" meme and try to power through this with bigger, louder, denial.
Did you all not notice this is Goldman's presumption on what will happen?
Thanks. My post did treat it like TD wrote it.
I was less referring to you and more the original...I figured you probably got it.
I usually don't ever read that deeply into ZH articles and discover buy / sell signals. Some people might just not me.
Bernanskter will never follow up on "The Recession is Over" meme, it would be like grading your own work. His follow up will be pumping more digital fiatcons into the equities market.
I didn't get the idea that you were recommending anything. FYI, New Yorker Magazine and Atlantic Monthly releasing two articles in the last two days regarding the benefits of inflation.
http://www.newyorker.com/talk/financial/2010/09/27/100927ta_talk_surowiecki
http://www.theatlantic.com/business/archive/2010/09/why-cant-we-have-higher-inflation/63285/
I'm conventional enough to pick up the conventional wisdom around here- stay out of the market. Those aren't Tyler's words, but that is the conventional wisdom. I've never read an article where any buy advise was given in an article Tyler submitted (that wasn't tongue in cheek.)
I believe that Tyler recommended readers should send in their Zagat ratings for Chez Shalom.
Perhaps you read that as an endorsement to buy CMG. If so i think you may be lost, you are looking for Cramerica (www.profitingwithfeces.com). Good Luck.
End the Fed - m'fers.
Whatever is going to happen,
It has already been leaked, and the PigMen are now frontrunning it.
Way too many lagging sectors took off today.
One of the biggest breadth surges in the last two weeks.
And some sectors like the REITs broke out to new highs.
I have been on this site for awhile now and used to think Robo was a good read, now I think he is as usefull as a Wall Street Analyst. After a stock rallies 40%, here come the upgrades. Just like them you can always count on Robo to show up when the market surges.
Oh ya and when Gold goes down $4, he'll post "Gold is getting killed", as well as post charts to his liking.
I'll say it agian Robo, stick to posting girl pictures.
When the market goes down, you won't see this guy agian until it rallies.
"I have been on this site for awhile now and used to think Robo was a good read, now I think he is as usefull as a Wall Street Analyst." I have to second that.. and he should stick to his strengths: hot chick pics and tongue-in-cheek commentary. I guess I'm not the only one who noticed him putting on his Wall Street pom-poms the past few months.
I couldn't care less what people think of a poster who's basically an anon to me, but suffice to say, he never exactly tells you to trade his picks. IMO, he posts stocks at or near 52s.. Yes ive noticed a slightly bullish bias to his posts, but i suppose it fits well with the 10000 gold bugs here and Tyler's gloomy postings.
But hey, i cant get doom&gloom anywhere else, so i come here:)
Who knows...maybe housing starts tomorrow at 8:30. It's just stunning the dismalness of this sector and yet it's breaking out above the April high.
How a post is interpreted from one reader to the next is subjective.
It must be blatently obvious that the market is being manipulated so I read RobotTrader as pointing out the extensive interventions as a substantial risk to being short.
RobotTrader is simply trading price. Period.
"The Federal Reserve is THE banking system of the United States formed in 1913 by the Federal Reserve Act. Recently, under orders from the President, they have "lost" 9 trillion dollars so you can be certain they are a government agency doing an exemplary job within the confines and constraints of their job description."
lolfed.com
Bankster power!!
yayyy
/sarcasm
If there is no QE, the FED is fucked and Bernie knows it. With the prices of homes falling again, the double dip is already here. Bernie will not give up until he dies - and the hyperinflation.
....... same ol' statement out of me ; what about our kids & grandkids? i'm ready, i used to be afraid, not anymore. Bring it on, I'll do what it takes, lose everything if I must, if it means these people are gone forever (Robert Rubin, that means you) .
5. A moving, heartfelt apology. After begging forgiveness for destroying the hopes, dreams and reality of hundreds of millions of people, the chairman uses a traditional seppuku sword to swiftly open his own gut like a whore's bodice.
My 5. was bigger, louder, denial. I like yours better.
5. Bernanke grows some balls and promises to purge the system of the overvalued assets and non performing loans that are still crippling the economy. In a stunning move Shalom stands up to his wall street, cry baby capitalist handlers and correctly forces them to take some write downs and give the economy a real chance of regeneration. The share market tumbles on this fantastic news.
You are funny man! Bernanke doesn't even have a pair, so he hired a guy named Sacks to do his dirty POMO work.
I agree 100% with your statement, but he will help the banks inflate away their problem and "make" more money.
5. The Fed declares the recession is over, and the "roaring" 201x's are upon us!
6. The Fed raises interest rates to cool down the economy before inflation sets in!
I gotta million of 'em (Thanks, I'll be here till Thursday, you're a beautiful audience -- mean that!)
QE has been a fact since early August.
http://www.bullandbearwise.com/SOMAHoldChart.asp
Anyone remember the last local top in the markets, about six weeks ago, when Bernanke said that the outlook was unusually uncertain but the Fed would use the proceeds from maturing MBS to buy treasuries? And the market proceeded to revert to the mean. We're not seeing the island top this time but the technicals are pretty overbought, just like then.
The unusually uncertain comments were made on July 21 and resulted in a one day lower close. The last downturn came after the last FOMC meeting on Aug 10 and I think that was when the principle payments on MBS was going to be rolled into treasuries. That was good for about a 700 point drop in INDU. Bernankespeak hasn't been well received of late. Tomorrow could be interesting.
+1 Minion. If I play at all, it will be to the short side.
http://encyclopediadramatica.com/File:Black_Monopoly.jpg
So in Zagat survey terms:
Food: 14
Decor: 25
Service:30
Cost:
Not to worry. Paid with the press of a key. On the taxpayer.
I pay zero attention to the criminals, especially "the wording" of policy statements.
The jig is up.
Tyler, isnt plocequ1 the French word for PRICK?
Heh
PS: all your CAPTCHA math are belong to us, make your time!
Heh
No need for the Fed to do anything. The crisis is over according to today's news: The U.S. recession ended in June 2009.
In other news, the Iraq war ended in May 2007.
The Afgan war ended in July 2006.
The Israeli-Palestinian conflict ended in September 1999. Today marks the 10th Anniversary of universal peace in the Middle East.
In financial news, the ECB announced the Irish bank crisis ended in May 2009.
The Japanese Prime Minister announced that Japan ended its 20 years deflationary death spiral two weeks ago, and Japan is once again the land of the rising sun.
The Greek banks and the Kabul banks announced a secret merger consummated in December 2009 that ended the financial crises in Greece and Afghanistan.
AIG said it repaid the federal government $200 billions and threw in a tip of of $50 billion to thank the taxpayers.
The Bank of England says it ended its capitalization crisis last month and is now full of farthings.
Phil LeBeau, CNBC, reported GM was never in a financial crisis, but pretended to be ailing in sympathy with its customers who are going through tough times. Phil says GM plans to energize and electrify its customers with its new Chevy Volt financed by a $8,000 gift from taxpayers and a $32,000 GMAC loan...and the kicker to close the deal, GM is offering a free house in Detroit.
tom, that was great. +1
+1000
Bravo
I bow to the better Comedian (I'm NOT worthy!)
The only reason we may not see QE is the growing political disfavor of deficit spending. The working masses are weary of Govt bailouts that appear to only benefit Wall Street and masses do not see counterparty risks. Announcing another round of QE will hurt the chances for maintaining power and continuing the failing Keynesian policy. I think we get more QE without a clear announcement tomorrow.
I think the QE is beyond anything traceable on any books. I think investigative journalists can find clues to some of it, and other aspects of it are unfindable. With the advent of the computer, algos, etc. the possibilities are unthinkable to most of us. This is not conspiracy nut job talk. It is putting 2 and 2 together. They have lied to us, many times. They print, loan, swap, buy back, blah, blah. That is the stuff they do above board. What of the shadow banking system, the one that does not go through any centralized clearing house? The possibilities for injecting cash must be endless. This thing is so far gone. These meetings are Kabuki theater. They have robbed us blind and they are still going to try for a soft(er) landing. It's called "cooling out the mark."
The truth is buried in some uncommented software code somewhere!
Are you describing an extreme bdsm scene, Miss?
Not just makin' bacon, that's for sure. More like a snuff flick, actually.
Yea, snuff is more to the point but there is an element of perversion in it that takes the words 'control' and 'manipulation' into a surreal realm.
MsCreant,
I agree, the American populace has had it with QE.
So, they are doing it now, buy monetizing the debt, and all the off book crap John Q never see's nor understands.
For sure there WILL not be any QE announced until after Nov's elections.
That may be the hope DosZap, but the reality is that QE is being rammed down and the 'public' holes are being stuffed, while its thinking is being snuffed, as the process is carried out.
The public is bound and hopelessly confused by its ignorance in the already underway social re-engineering. The public is not even smart enough to know what it does not know.
Sorry, the public is so fucked.
" I think we get more QE without a clear announcement tomorrow."
Yes; I think Bernanke mealy-mouths it and if he does and the market spikes a bit, may be time to go short.
QE4EVA*
*just not tmrw
Q343VA B1TCH3Z!
http://img413.imageshack.us/img413/2302/weekendatbernankes.png
nice
Ouch! Too much truth.
Once seen, it cannot be unseen! Kudos!
Should be "Weekend at Sam's"
Option 1: Bar closed
It's for the best
Those fuckin', fucked up motherfuckers at Chez Shalom are for damn sure fuckin' widely regarded as fucking having the premier fuckin' shit soup sandwich on the whole fuckin' planet. Absolfuckin'lutely incomparable in temperature, texture & presentation to any other fuckin' product currently on the market (and it's for fuckin' sure made in fuckin' America you fuckin' fucks). Those fucked up lines are going out the fuckin' door 24/7/365 and there seems to be a fucking insatiable appetite for this particular fuckin' triumph of good old fuckin' American know how worldwide. My fuckin' wheelin' and dealin' super informed sources at some of the most fucking leading money center institutions are highly fuckin' impressed with the fucking awesome growth opportunities that abound in this unique space & style. And remember, I am the only fuckin' change you need to believe in and to tip your bartender...
- Love Rahm
- Love Fucking Rahm
:)
Your review can't be topped.
Satan applauds this.
Hey you horny old beastie boy, wad uaaaaahp!?! Youse a bizzy fucker round these parts, ain't cha'?
Ya, I noticed old Bez'bub gnawing on it all night...
Not unlike Ratatouille (movie not stewed veggies) Chez Shalom provokes a longing for the innocence of youth. It's grotesquely rich dishes oozing with the filth of a billion taxpayers encumbers one completely. The lighthearted fare we once enjoyed absent of Fed and Fiat is no more. Longingly many of us will nevertheless return to the trough and suckle the souring teet of Chef Bernanke searching in vain for the false bosom that nurtured us so cruelly during our ignorant years. I gladly pay the generational debt as Chez Shalom is the only joint in town serving melt ups with crippling consistency. No shoes, no shorts, no service.
*****
WOW! Great Review.
Ha! Let me reconsider.
You cotton lovin' smoothie... I am reminded that this particular endeavor needs the widest possible support across all demo's .. So, might I suggest being a bit more "inclusive"....
Mad props ! -Layne
Summer heat
My back is sticking to me to the seat
Bare feet
Tank top and shorts is all ya need
- Michael Franti
Disposable Heroes of Hiphoprisy
+ inf
Sometimes I wonder if guessing what Ben will do is relevant. Numbers do not lie and it is mathematically impossible to control this type of debt.
Ben plays a good game with his fast acting printing press and so far only few Americans understand his game. The game changer will be when the masses realize that there is no stock market and start redemptions of their IRA's and 401k's en masse.
It appears that the ongoing redemptions are more the result of needing the money rather than running for the exits because of fear.
Ben can never control the herd once it goes into motion. Having said that however, early on in 2007-08 various funds restricted redemptions. Has anyone heard any redemption restrictions lately?
If TPTB keeps ramping up the stock market, sooner or later they'll get past the break-even point for a lot of folks that will promptly pull their ripcords and bail!
Churn-side Fedlinology.
Fancy a pause myself...starting to have doubts though after hearing Obama lastnight. Unrelated, Hugh Hendry was on Hardtalk this morning if anyone wants something to watch.
Perhaps Chez Ben has a Charlie Munger moment and goes total dementia:
"I'm keeping rates and zero and buying a $trillion more in Treasuries-- not because I'm concerned about deflation, the level of unemployment, world peace, etc."
"I care about the banks. Period. QE is intended to help no one of direct consequence, except for my banking friends. It is not a handout to you, nor to anyone else seeking free money. If you have a problem with that, go to Congress and make the necessary bribes. Becuase I frankly don't give a rats ass."
"Oh... so you say you can't save enough money for retirement because CD rates are at 0.5%, and credit card interest is accruing at 24.99%? Too freakin' bad, mister... you just need to suck it up, buy Treasuries and make your g-damn interest payments on time. Who said your life was a revolving free lunch, anyway?"
"Anyone who disagrees with my line of thinking, can take a number, get in line, and wait to kiss my white elitist ass".
"The queue ends at 303,474,871".
Love and Kisses,
Ben
Nice to see your assets on display Assetman. Protect your rear. Hope you are doing well.
Yeah... I've been neck deep in work issues. I guess that can be considered a very good thing. So yeah... I'm doing pretty well, and I'm hoping the same for you and you clan, MsCreant.
BTW, I'm not too sharp at this satire thing.
That was satire? Oh I thought it was something you overheard and reported to us. Seemed so honest. Smooth as silk, that. :-)
We are reasonably well. Have some relatives starting to have difficulty. A middle twenty something. Can't tell if we should pour on the help, or if that will cripple her. She was the baby of the family. Also bright as hell with a MA degree. No direction of her own. Lost a bunch of bad jobs this year and late last. Lots of grey in this economy with this generation.
Your daughter and son may need to rethink a lot. My son is. I do not like all his conclusions. He has a 4.3 GPA and finds school kind of meaningless. He keeps at it in case he is wrong. ;-)
#2 served with...
http://www.zerohedge.com/article/fed-injects-record-5-billion-stock-market-todays-pomo
followed with The Use Of Newly Minted Resolution Authority for dessert in about 2-4 years.
The main thing to understand about Hatzius' and other Wall Street analysts' "predictions" of coming QE is that this is their employers' method of lobbying for QE. They are trying to frame the debate and prod the Fed towards QE, the sooner the better.
I'm betting on 1 the "most hawkish" scenario, which isn't actually hawkish at all. Ben has already made clear that he's ready to push for QE if the economy deteriorates. He is not going to want to send the message now that the recovery is faltering beyond what the board already conceded last month. He is definitely not going to insert some mention of possible further easing into the text of the FOMC statement. He's going to talk the economy up, cross his fingers, and see how it goes till next meeting. He said what he thinks he needed to say about QE at Jackson Hole.
BERNANKE'S FOMC
http://williambanzai7.blogspot.com/2010/09/bernankes-fomc.html
does the squid have access to Reb Shalom Bernookystein's puppeteer? that's what I want to know.
I believe every action the Fed takes is designed to destroy the financial system. Every official utterance is designed to mock us. They are evil scum.
Your post about the situation is way too optimistic and rosy.
Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
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