Is This The Chart Making Bernanke Nervous?

Tyler Durden's picture


With the Fed nervous to even let a little MEP 'Twist' expire (tightening), we can't help but be a little nervous of their unbridled and passionate belief that if inflation should rear its ugly (or virtuous, perhaps, in their satanic eyes) head, they will be able to manage and tighten to control it. To wit, we note that one of the Fed's most-watched indicators of inflation - the 5Y5Y forward inflation breakeven - has just reached its highest level in 17 months and is near its peak since the financial crisis lows in 2009 at over 3.08%. We have six little words for Bernanke, Yellen, et al. "Be Careful What You Wish For." And by the way, the last few times, the 5Y5Y reached these levels marked a short-term top in the S&P 500.

17 month highs in inflation expectations...


These local peaks in inflation expectations have marked local highs in the S&P 500 also...


Charts: Bloomberg

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Wed, 12/12/2012 - 12:13 | 3056011 AGuy
AGuy's picture

"neighbor said: "Do you know who I think will be a really good candidate after Obama? Hillary!!!"

I doubt She will run, she would be in her 70's if elected. I suspect she is going to retire. I have some doubts we will even see an election in 2016. US debt will be over $20 Trillion by 2016. Somethings likely to give before the 2016 election.

Wed, 12/12/2012 - 12:25 | 3056067 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

"Thunder Thighs" loves power and will always seek it!


Wed, 12/12/2012 - 13:36 | 3056355 Sigep0612
Sigep0612's picture

Naw....the Fed will keep printing.   CNBC and Jim Cramer will still be touting the economic recovery.  A majority of the American public will still believe that Starbucks and IPhones are much more imporant than debt.  JPM will continue to skew Gold and Silver.  Greece, Italy and Spain will continue to receive bailouts.   What;s going to change..?

The biggest fly in the ointment will be ObamacCare.  Now that could be the real wild card.   If people, both working and non working,  begin to see that they're being charged for something that they out.  Obama will not be able to defy gravity after that.

If ObamaCare doesn't do it...the next stop will be when interest on the national debt exceeds tax revenue.  That occurs sometime around 2022.  And Americans are calling China stupid for importing/buying over 500 tons of gold this year.  


Wed, 12/12/2012 - 12:42 | 3056139 A82EBA
A82EBA's picture

Hamburger is $5/lb at walmart for mid-level lean/fat mix

Wed, 12/12/2012 - 11:55 | 3055945 homersimpson
homersimpson's picture

Or when the homeless beggar turns down your $1 bills and demands gold..

Wed, 12/12/2012 - 12:08 | 3055991 AGuy
AGuy's picture

"Or when the homeless beggar turns down your $1 bills"

The Treasury is already one step ahead: The are going to stop printing $1 FRNs next year! Some coins may also be eliminated.

Wed, 12/12/2012 - 12:16 | 3056019 1fortheroad
1fortheroad's picture

They arent asking for gold here, but a min 5$ donation.


The inflation is killing the poor.

Good beans at a all time high, the beans with rocks,insects and rat turds are still somewhat cheap.

Wed, 12/12/2012 - 11:38 | 3055876 reload
reload's picture

Tighten !! hahaha

Carney paving the way for nominal GDP targetting

central bankers do not care about inflation, even if it suits them to pretend they do.


Wed, 12/12/2012 - 11:48 | 3055912 Diogenes
Diogenes's picture

Inflation is all they care about. Everything Bernanke has done in the last 5 years has been to create inflation, to combat the deflation of the last inflation bubble they blew, which was blown to save us from the collapse of the previous inflation bubble, which was blown to save us from the one before that, etc etc etc back to the Reagan administration.

Wed, 12/12/2012 - 11:57 | 3055946 TruthInSunshine
TruthInSunshine's picture

Do you mean Bernanke's sole strategy is to try and keep inflating asset bubbles (that are destined to pop loudly just as all fractional reserve fiat juiced asset bubbles preceding them have, without a single historical exception, hence the term "bubble"), in an attempt to kick the can further down the road, in order to hide the fact that the structural economy and all normal market forces that would exist in anything remotely resembling capitalism have been decimated?

Say it isn't so!!!

Wed, 12/12/2012 - 17:47 | 3057422 Assetman
Assetman's picture

Most of the prior accomodative moves (before QE 3) was done with the purpose of "creating inflation" to combat the growing forces of deflation.  (see the OP chart, which is really great).

With QE3 and today's move, the Fed is creating inflation to meet a different mandate.  How do we know this?  Becuse the FOMC gave their blessing on MOAR QE when the 5yr/5yr inflation expectation measure was at a peak-- as opposed to a trough.  With these recent rounds, nominal inflation targeting is the underyling method -- and "full" employment has become the primary mandate. Price stability means essentially nada at this stage-- until it becomes unstable.

The scary thing is, not only has the FOMC piled on MOAR QE to create MOAR inflation, they are now doing so at an accelerating rate-- as the unsterilized nature of the new round of Treasury purchases will likely add fuel to the flames.

The move today SHOULD move the 5yr/5yr Treasury above and beyond the 3.0% or so threshold that has heald for the past 3 years or so.  If not-- there are either larger deflationary forces at play here-- or the someone in the halls of the US government is lying.  Of course, I was equally conviced that QE3 earlier this year would pop inflation expectations much higher-- and it never really happened to a great degree.

What I want to know... is that if the FOMC is looking to control forward inflation expectations that translates into the 2.5% stated threshold, what is the equivalent 5y/5yr rate?

Given recent PCI data, my guess on the 5yr/5yr is roughtly around 4.0%-- about 100 bps away from the current 5yr/5yr.

Wed, 12/12/2012 - 11:38 | 3055879 astoriajoe
astoriajoe's picture

eating is overrated.

Wed, 12/12/2012 - 11:40 | 3055889 kliguy38
kliguy38's picture

it is untill the sheeple can't afford to get into the buffet line at golden corral

Wed, 12/12/2012 - 11:43 | 3055898 Glass Seagull
Glass Seagull's picture



Starving = the new eating

Wed, 12/12/2012 - 11:45 | 3055906 Dr. Richard Head
Dr. Richard Head's picture

In Soviet Amerika starvings eats you.

Wed, 12/12/2012 - 11:42 | 3055899 giovanni_f
giovanni_f's picture

right. You can't even "eat" gold.

Wed, 12/12/2012 - 11:53 | 3055939 inevitablecollapse
inevitablecollapse's picture

well that, my friend would depend on what one is eating

Wed, 12/12/2012 - 11:40 | 3055885 realtick
Wed, 12/12/2012 - 11:52 | 3055931 DeadFred
DeadFred's picture

It can bounce off the trend line again and again yet it only needs to drop though once.

Wed, 12/12/2012 - 11:41 | 3055886 SheepDog-One
SheepDog-One's picture

Shalom Bernank....what, him worry?

Wed, 12/12/2012 - 11:41 | 3055890 Tsar Pointless
Tsar Pointless's picture

If Ben Bernanke - and the rest of the Wall Street/D.C. white-collar criminals, for that matter - lived amongst us then, yes, he'd be nervous about this.

But, seeing as he doesn't, I'm sure he's not nervous in the least.

This era is actually making me long for the 1980s. At least, back then, we put white-collar crooks in jail. Today, they either get elected, appointed as CEO of a corporation, or both.

Wed, 12/12/2012 - 13:22 | 3056295 jayman21
jayman21's picture

or treasury...or all

Wed, 12/12/2012 - 11:41 | 3055892 Ancona
Ancona's picture

So, I wonder how long before this lagging indicator explodes in to world wide food riots? Any guesses?

Wed, 12/12/2012 - 11:55 | 3055947 DeadFred
DeadFred's picture

Forget about food. My jaw dropped open at the price of lumber yesterday. Up 50- 80% in a year. Bad time to remodel. Maybe we can blame it on Sandy.

Wed, 12/12/2012 - 12:21 | 3056044 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Sandy Berger has nothing to do with it.  He is a good loyal globalist and is not into weather modification!


Wed, 12/12/2012 - 12:21 | 3056050 PowerzThatB
PowerzThatB's picture

Federal Gold Match ammo in .308 went from $21.89 to $37.95 in the past 2 weeks. All other bulk ammo has been picked clean. Lead was the winner last month!

Wed, 12/12/2012 - 11:42 | 3055895 buzzsaw99
buzzsaw99's picture

the bernank is a pig [/apology to pigs]

Wed, 12/12/2012 - 11:42 | 3055896 Boilermaker
Boilermaker's picture

Yea, I'm sure he's quivering in his boots.


Wed, 12/12/2012 - 11:45 | 3055903 Dr. Richard Head
Dr. Richard Head's picture

15 minutes and all will be OK.  Go back to looking at anne Hathaway's vagina, as all is in the hands of Big Boy Benny.

Wed, 12/12/2012 - 11:50 | 3055920 ApollyonDestroy
ApollyonDestroy's picture


Wed, 12/12/2012 - 11:51 | 3055928 Dr. Richard Head
Dr. Richard Head's picture

Google it.  I am sure it is out there. TMZ, Egotastic, Superficial. something like that. 

Wed, 12/12/2012 - 11:44 | 3055904 Zigs
Zigs's picture

Wifey tells me prices are exploding at the supermarket, just in the past couple of weeks.  Good thing fuel is down, huh?

Wed, 12/12/2012 - 11:47 | 3055913 Tsar Pointless
Tsar Pointless's picture

Yeah. A dozen of store-brand eggs are $2.00 now here (Western PA).

Wed, 12/12/2012 - 11:49 | 3055919 Dr. Richard Head
Dr. Richard Head's picture

No shit.  My normal grocery shopping trip that I take every two weeks has exploded from about $350 every two weeks to over $500.  Now I purchase the same quantity and type of goods.  This week I did get a Christmas ham and some shrimp cocktail, but the rest was a normal jaunt.  It would be safe to say that the normal goods purchased at $350 are now costing over $400, so it is safe to say that there is a good 13% inflation that I saw spike in just two weeks.  I should probably pull my receipts and take a look, but fucking prices are sky rocketing.  Trouble is the sheep cannot think back a whole two weeks, let alone prices paid.  Even if they could, they would blame the inflation on those fucking speculators, if they even know what a speculators is.

Wed, 12/12/2012 - 12:01 | 3055974 Tsar Pointless
Tsar Pointless's picture

Our area's largest chain grocery store (Giant Eagle, if you're familiar) announced a month ago that it would be putting what it terms a "Price Lock" on a bevy of staple items until after the New Year begins.

Then, I think we all know what is going to take place upon such time as those "locks" become unlocked.

Wed, 12/12/2012 - 12:22 | 3056045 SmoothCoolSmoke
SmoothCoolSmoke's picture

Giant Eagle? You from Pittsburgh?

Wed, 12/12/2012 - 12:49 | 3056170 Tsar Pointless
Tsar Pointless's picture

Yes, unfortunately.

Wed, 12/12/2012 - 12:28 | 3056085 AGuy
AGuy's picture

" I did get a Christmas ham and some shrimp cocktail,"

I highly recommend avoid consumption of Shrimp. Its all contaminated. From the Nuclear fallout from Japan, Chinese Coal burning (heavy metals) in the Pacific, to the BP Oil spill (Oil +  chemical dispersants) in te Gulf, to the heavy garbage and sewage dumping in the Altantic. Shrimp are bottom feeders which is where all the crap ends up. Not worth messing with your long term health for a cocktail!

Another issue is the ever decreasing portion sizes. Most of the Supermarkets have even cut down on the sizes of meat cuts (either much smaller size, or half the normal thickness). 5 Lb bags of Sugar are now 4 lb bags. Most package containers are considerably smaller than they were a few years ago.

FWIW: Some of the blame on higher food prices is due to the really bad drought. I doubt we will see a reverse in this trend, since we are in a long term drought that will last for years, perhaps as long as a decade.


Wed, 12/12/2012 - 11:46 | 3055907 Jason T
Jason T's picture

built out a huge garden last year... this year i will spend more time planting ..and weeding.. and grow a ton a food!  chicken coop getting rebuilt.. last one got broken into.

Wed, 12/12/2012 - 11:51 | 3055922 Dr. Richard Head
Dr. Richard Head's picture

Yeah, I am eyeing that greenhouse a little more closely this year.  Perhaps I should build it finally.

Wed, 12/12/2012 - 11:59 | 3055962 Albertarocks
Albertarocks's picture

Built it and they will come.  The hungry homeless I mean.

Wed, 12/12/2012 - 11:51 | 3055923 jjsilver
jjsilver's picture

Time for them to pull the rug out from under the market and bring out the deflation trumpeters on all their media outlets

Wed, 12/12/2012 - 11:51 | 3055925 SheepDog-One
SheepDog-One's picture

Can't be....Bloomberg declares 'Bawnds show no sign of 'inflation' (nevermind it's Bernank buying them all now with your money) so Bernank critics need to STFU!'

Bernanke Critics Can’t Fight Bonds Showing No Inflation - Bloomberg

Wed, 12/12/2012 - 11:52 | 3055930 asteroids
asteroids's picture

The FED has many clients. They are all drug addicts. They want free money so they can enjoy the next fleeting high. The bankers and the White House have no choice but to hold Ben's nuts in a vice to make sure he hits the Cntrl P button.

Wed, 12/12/2012 - 11:53 | 3055940 WhiteNight123129
WhiteNight123129's picture

now check the divergence with the treasuries yield almost all time low. Sodium + Water = Kaboom

Wed, 12/12/2012 - 11:58 | 3055960 Shizzmoney
Shizzmoney's picture

I root for currency collapse.  It's the only thing, IMO, that will wake people up.

Wed, 12/12/2012 - 12:39 | 3056123 AGuy
AGuy's picture

"I root for currency collapse. It's the only thing, IMO, that will wake people up."

Well then Bernanke and O'bama are your men! Instead of Batman and Robin, the Dynamic Duo, we have Ben and Barry, the Destructive Duo! . Ben and Barry battle villians like "Lady Liberty" and "Common Cents"

 Ben and Barry are a one-two punch to knock out the dollar. Assuming they don't end up starting WW3 first.


Wed, 12/12/2012 - 13:30 | 3056317 treasurefish
treasurefish's picture

Then, you'll probably enjoy this Head and Shoulder pattern:

Wed, 12/12/2012 - 12:01 | 3055966 PUD
PUD's picture

Beef prices to rise 20% next year. I'm in the shoe business and we expect price increases across the board from rising leather/hide prices that will follow. Print bastards print!! (oh, forgot, "I will not monetize the debt)

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