Bernanke's prepared remarks, which said nothing the market did not already know, have already been disseminated, and now it is time for the House Financial Services Committee to open their mouths and confirm to everyone they have no idea they are now irrelevant (everyone already knew they have zero understanding of monetary policy and that in fact, Bernanke is begging Congress to raise spending so he has more QE purchasing power as all Ben does to the Hill is monetize their deficit) and the sole person who calls the shots is an unelected Princeton historian, with his finger on the print button. So, without further ado, here is Ben Bernanke at the "Delivering Beta" conference, live from room 2128 in the Rayburn House Office Building.
In a somewhat unsurprising speech, Bernanke lays out the same old data-dependent, we-might-Taper-but-only-if-things-are-great (and they're not), just-enough-for-everyone to hope for the punchbowl to never be taken away on the basis of dreaming of more dismal data to come:
- *BERNANKE SAYS PACE OF BOND PURCHASES NOT `ON A PRESET COURSE'
- *BERNANKE SAYS FED MAY TAPER QE IN 2013, HALT IT AROUND MID-2014
- *BERNANKE SAYS FOMC BELIEVES RISKS TO ECONOMY EASED SINCE FALL
- *BERNANKE SEES HIGHLY ACCOMMODATIVE POLICY IN FORESEEABLE FUTURE
While the market is skittish on this (maybe on his ongoing recognition that the bubble is right back where it was), we suspect the post-speech Q&A will be the key as he will have had over two hours to see the market's reaction and therefore walk it back if he needs to.
Pre:S&P 500 1671.75, 10Y 2.5207, EURJPY 130.99, USD 82.58, WTI 105.8, Gold 1287.33
Bernanke today testifies on monetary policy before the House Financial Services Committee (formerly the Humphrey-Hawkins). The testimony will be released at 8:30 am NY with Q&A after his testimony. Tomorrow he testifies before the Senate Banking Committee but the prepared remarks are the same for both days. Indeed it’s likely that the Q&A will be where all the fun starts. As DB says, he will likely try to pull off the trick of continuing to prepare the groundwork for tapering but try to give bond markets something to help them fight off the pressure of higher yields. With no post-meeting press conference planned for the July 30th/31st FOMC, and Bernanke not scheduled to speak publicly until he appears at the Global Education Forum event on August 7th, this week’s testimony may well be the only remarks we hear directly from the chairman for some weeks.
Fed Chairman Ben Bernanke will deliver his final semi-annual monetary policy report to Congress tomorrow (July 17), followed by questions from lawmakers. Goldman expects him to strike a similar tone to his comments at last week's NBER conference - "moar of the same." The prepared testimony (released unprecedentedly early at 0830ET) is likely to be uneventful, but here are the five key questions which he would probably cover mostly during the more interesting Q&A part of the testimony.
"Perhaps the success that central bankers had in preventing the collapse of the financial system after the crisis secured them the public's trust to go further into the deeper waters of quantitative easing. Could success at rescuing the banks have also mislead some central bankers into thinking they had the Midas touch? So a combination of public confidence, tinged with central-banker hubris could explain the foray into quantitative easing. Yet this too seems only a partial explanation. For few amongst the lay public were happy that the bankers were rescued, and many on Main Street did not understand why the financial system had to be saved when their own employers were laying off workers or closing down." - Raghuram Rajan
History shows us that panic follows a loss of trust. The financial house of cards we've built today is ripe for a panic-causing event.
QE and hopes/beliefs in its perpetual nature continues to be the key market catalyst. Tracking estimates for Q2 GDP continue to drop below 1%. This is setting up a scenario where GDP for the previous 3 quarters will likely average 1%. If we didn't think that job creation is going to sustain its current pace of growth, we would say this market is heading towards the “Bearmageddon Scenario”. QE3 has fallen short on job creation and GDP growth. The only inflation it has managed to create is in the prices of financial assets- and yet the consensus view of Central Bankers and the market expectation is to do more of the same policies that have not worked. This is Central Banker hubris, believing they can fine tune an economy to specific inflation and unemployment levels only serves as a distraction to markets.
There are over 4 times as many leveraged bulls as leveraged bears.
Fear not US: with a Q2 GDP of under 1% now all but assured, and with all economic data reporting now a global bizarro day farce, you will have a chance to take the torch from Europe in the ugliest girl category, and push the S&P to a new record intraday high today following what should be assured epic misses in the Industrial Production print (exp. +0.3%), Cap Utilization and the NAHB housing market index which is set to tumble now that any retail demand for housing was promptly killed following the recent spike in rates. In addition to a relatively lite economic docket, we get the all systematically important hedge fund, Goldman Sachs, reporting which is expected to announce a 21% q/q drop in revenues, led by lower gains in Investment Lending (i.e. prop), offset by 12% drop in operating expenses. Of course, nothing fundamental actually matters as markets continue to be on ultra low-volume, "drift higher" autopilot until tomorrow's Ben Bernanke semi-annual muppet show in Congress, when he is expected to refill the hopium trough once more and finally send the S&P above 1700 on central planning.
Ben Bernanke blames fiscal policies out of Washington. However, it is starting to look more and more like Fed policy is equally to blame for the lackluster U.S. GDP growth.
Bernanke's comments washed out some late dollar longs and they may be reluctant to re-establish ahead of the Chairman's testimony before Congress at the end of next week. The underlying bullish case for the dollar remains intact.
Much has ben written lately about the fact that the Federal Reserve is beginning to realize that they are caught in a "liquidity trap." However, what exactly is a "liquidity trap?" And perhaps more importantly how did we end up in it - and how do we get out?
- Summers Said to Show Interest in Fed Chairmanship After Bernanke (BBG)
- Obama Tells Chinese He’s Disappointed Over Snowden Case (BBG)
- Texas Threat to Abortion Clinics Dodged at Flea Markets (BBG)
- A Peek at Trucking Data, and Then the Stock Surged (WSJ)
- China cuts growth target… or does it? (FT) - yes, it does, net of goal seeked Random () of course
- China Official Suggests Tolerance for Lower Growth (WSJ)
- Disney Says Wristband Boosts Sales in Disney World Test (BBG) - next up: implanted RFID chips
- Spain Prepares Cuts in Renewable-Energy Subsidies (WSJ)
- Bernanke Departure With Duke Heralds Cascade of Fed Appointments (BBG)
One minute we hear that Quantitative Easing is going completely, then it’s going a bit and withdrawing in side-steps and little paces and then it’s going to carry on. Where do we stand?
Gold surged 3.3% or nearly $50 from $1,248/oz to $1,298/oz after Federal Reserve Chairman Ben Bernanke admitted that the U.S. economy continues to need a highly accommodative monetary policy and will do for the “foreseeable future”.
Gold climbed for a fourth day to the highest level in more than two weeks due to safe haven buying after Bernanke also admitted, what many more realistic analysts have been saying for some time, that the 7.6% unemployment rate probably "overstates the health of the labor market."