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Is The Fed Pushing Too Hard?

Tyler Durden's picture


It may seem like a rhetorical question but Citi's credit stretgy team fears that the Fed may be pushing a bit too aggressively at this stage. The chart below shows monetary policy (defined as the funds rate and the Fed's balance sheet) vs. a "market health" index comprised of economic factors, systemic risk metrics, and valuation metrics. Historically the two have tracked well, but not recently. The health index is firming, but policy is getting easier, not tighter. Is the Fed out of its depth here, or do they know something we don't?



Source: Citi

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Thu, 12/13/2012 - 16:44 | 3060741 Yen Cross
Yen Cross's picture

 Here we go with the usual b/s worthless afternoon tapebombs! Fiscal cliff crapola!

Thu, 12/13/2012 - 16:44 | 3060742 Commander Cody
Commander Cody's picture

The TBTF banks simply want more free money to play with, silly rabbit.

Thu, 12/13/2012 - 16:47 | 3060743 I Am Not a Copp...
I Am Not a Copper Top's picture

Fuck.  This.  "Market."


IF "Obama" AND "Boehner" AND "Meeting" AND "Cliff" THEN BUYBUYBUYBUYBUY


See? Anyone can program an algo!

Thu, 12/13/2012 - 16:44 | 3060747 Tsar Pointless
Tsar Pointless's picture

Somebody's pushing at just the right strength right now on the equity market "BUY BUY BUY" buttons.

Whee! Up up and a-way we go!

Thu, 12/13/2012 - 16:45 | 3060755 Everybodys All ...
Everybodys All American's picture

Boehner and Obama plan a meeting and everything is solved fiscally? These markets are so completely messed up by bs. Madoff would be an improvement on this craziness.

Thu, 12/13/2012 - 16:46 | 3060756 Cursive
Cursive's picture

Answer:  The Fed knows exactly the same as anyone who doesn't have his head up his ass.  To assume that the "health index" is signalling correct info is dumbassery.  The unprecidented amount of Fed intrusion and federal stimulus dollars have distorted the market (more than usual), so it would be wise to ignore the econometric data.

Thu, 12/13/2012 - 16:57 | 3060805 SgtShaftoe
SgtShaftoe's picture

I wish some patriotic martyr would leak the classified documents for what the Fed/Treasury's plan is when the currency fails.  Are they going to go to a geld mark, or something?  They can't really believe people are going to accept SDRs.

Thu, 12/13/2012 - 16:47 | 3060760 A Lunatic
A Lunatic's picture
Is The Fed Pushing Too Hard?


My ass hurts...........

Thu, 12/13/2012 - 16:56 | 3060775 razorthin
razorthin's picture

The ineffectiveness of pushing on a string not covered in economics PhD program.  The perils of debt monetization and currency debasement also not covered.  He was asleep during the undergraduate recitation on the fall of Rome.

Thu, 12/13/2012 - 16:58 | 3060816 NotApplicable
NotApplicable's picture

Well, it's an advanced class, titled "We need a thicker string!"

Thu, 12/13/2012 - 16:52 | 3060780 SgtShaftoe
SgtShaftoe's picture

I wish they'd push harder, and just get the whole thing over with.  I'd like to get my goat herd set up on the washington mall before the cherry trees bloom.  I can build my cabin out of the remains of the Lincoln monument, may he burn in hell for eternity.  

Thu, 12/13/2012 - 17:05 | 3060839 NotApplicable
NotApplicable's picture

For a second I thought you were positioning yourself as my goat-herding competition. Then I got to the location, and... well, good luck!

I wouldn't let my goats within 200 miles of that hole. Besides, I'm depending on the dandelions to own that place again someday.

Thu, 12/13/2012 - 17:12 | 3060859 SgtShaftoe
SgtShaftoe's picture

To be honest, I wouldn't either.  I refuse to go within a hundred miles of the place for the remainder of my life.  It just made for a good visual, like the "desolation" painting in the course of empire series: 



Thu, 12/13/2012 - 16:53 | 3060784 Ness.
Ness.'s picture

PPT to the rescue.  

Thu, 12/13/2012 - 16:52 | 3060786 Rathmullan
Rathmullan's picture

The problem is the Fed thinks it knows something "we" don't know (even beyond the notion that monetary policy can rescue a grossly over levered economy) when, in actuality, the Fed doesn't know shit. In particular, it knows nothing about fostering competition in financial intermediation. But then again, it's very creation was for the purpose of protecting an oligopolistics banking cartel (until that damned Glass-Steagall got in the way, which it (the fed) helped dismantle).

Thu, 12/13/2012 - 16:52 | 3060787 Al Huxley
Al Huxley's picture

It's so cute, the way everybody pretends the FED's buying bonds to 'stimulate the economy', and not because they have no fucking choice, as SOMEBODY has to monetize the fucking deficit.  I guess if nobody says it, then it doesn't have to be acknowledged.

Thu, 12/13/2012 - 17:00 | 3060820 razorthin
razorthin's picture

They are monetizing the debt.  Of course.  That is an objective observation, and I'm sure it doesn't escape anyone here.  We are reacting to their blatant lie about their motive.

Thu, 12/13/2012 - 17:00 | 3060824 Al Huxley
Al Huxley's picture

I meant the MSM and the financial media, not most of the readership here.

Thu, 12/13/2012 - 17:07 | 3060847 NotApplicable
NotApplicable's picture

Well, CITI is a fedgov operation, so periodic make-work is to be expected.

Thu, 12/13/2012 - 17:40 | 3060937 Milton Waddams
Milton Waddams's picture

You're surprised the MSM won't touch the topic with a 10-foot pole?



"The simple way to say it is -- others are lending money to the federal government, you are purchasing those loans and then the interest payments being made to you -- because you're the official maker of the loan -- are then remitted back to treasury.  so maybe in laymen's terms, this is one part of the government lending another part of the government money, which would not lead to long term confidence once the american people understood the basics a little bit better."



Thu, 12/13/2012 - 17:58 | 3060974 Al Huxley
Al Huxley's picture

Making the system unnecessarily complex doesn't prevent it from being monetization.  All it does is serve the interest of the inventors of the system, in that most either get overwhelmed (or bored) trying to understand the details, or caught up in the technical minutiae, which allows said system inventors to fuck EVERYBODY over, as the majority lose sight of the obvious - if you spend more than you make, over the long term that's going to be a problem.


Someday, maybe 3 years from now, maybe 5, maybe 10, this is going to trigger another one of those collective 'oh yeah' moments in the public, and the MSM meme is going to be 'in retrospect, it should have been obvious that all that monetization of the debt was a bad thing, but who could have predicted it back in 2012?'  Much the same way they're currently doing that (or were doing it over the past year or so) regarding the housing bubble and burst - 'yes, in retrospect, all those HELOCs and over-valued, over-mortgaged homes were destined to cause trouble, but who could have known at the time?

No wonder psychopaths have such a good time in our society - any lie, no matter how ridiculous, will be accepted, as long as its told with authority and confidence.

Thu, 12/13/2012 - 17:01 | 3060825 NotApplicable
NotApplicable's picture

Worse yet, Benron says that they aren't monetizing debt, so any possible acknowledgment is met with official denial.

Baghdad Bob, FTMFW!

Thu, 12/13/2012 - 16:53 | 3060791 Jason T
Jason T's picture

someone said this yesterday I saw, it's like playing monopoly and doing your own QE .. buying up all the shit.  ain't right!

Thu, 12/13/2012 - 21:00 | 3061411 jerry_theking_lawler
jerry_theking_lawler's picture

it is a game that i would be comfortable to estimate that 95% of american children (now 25 yo and above) played.....and they can not grasp what is happening to them.


bet if we explained it on that level there could be a few more that could understand and be pulled over to our side.


in my line of work, keeping it simple (stupid) is mandatory. gotta speak to the sheeple in bah bah terms.....not alpha, beta, derivatives, MBS, etc, etc.

Thu, 12/13/2012 - 16:53 | 3060793 azzhatter
azzhatter's picture

Fuck You Bernanke. I hope you die very very soon. This unelected cocksucker is really pissing me off

Thu, 12/13/2012 - 16:56 | 3060802 Super Broccoli
Super Broccoli's picture

how can you guys continue to analyse chart based on biased-and-book-cooked numbers ! Don't look for any logic in there, the market's fake.

Thu, 12/13/2012 - 16:57 | 3060808 Tsar Pointless
Tsar Pointless's picture

I just saw on CNBC.com that Boehner is heading to the White House for a 5 p.m. meeting with Obama.

You know what that means - the cocaine and hookers have arrived!

That's why the markets are spiking. Cocaine is a hell of a drug.

Thu, 12/13/2012 - 17:09 | 3060852 NotApplicable
NotApplicable's picture

Don't forget, Obummer's got his own brewery now, so they can start out with a couple of pints to loosen things up first.

(besides, they can't sneak in the teenage boys until it gets dark)

Thu, 12/13/2012 - 16:58 | 3060815 miker
miker's picture

I think the Fed knows more than the average joe.  I think the economy is much worse off than the numbers that are published; that the numbers are being manipulated so as not to scare the public.  This is also why Obama can't allow any spending cuts; it will further kill the economy.  But this is the problem you have when the truth is hidden. 

Notice how there has been no frank discussion about the state of the economy with the fiscal cliff?  It's all about philosphies.   I think Geithner and Obama know it's much worse than being told to the public.

Just a hunch.

Thu, 12/13/2012 - 17:12 | 3060864 NotApplicable
NotApplicable's picture

The only "frank discussion" they're capable of having involves dick jokes and a retiring "member."

Meanwhile, local media only writes about how local angencies are gonna lose all of their moneys if da ebil obstructionists don't stand down.

Thu, 12/13/2012 - 17:19 | 3060881 FoeHammer
FoeHammer's picture

Spot on. The canary is being gagged.


You can't have a ponzi scheme with full discolsure.

Thu, 12/13/2012 - 17:04 | 3060836 catacl1sm
catacl1sm's picture

Those fun pre-market trades from this morning got cancelled.


Thu, 12/13/2012 - 17:14 | 3060872 NotApplicable
NotApplicable's picture

Complete with a "no comment." Now that's precious! LOL

Thu, 12/13/2012 - 17:05 | 3060840 Essential Nexus
Essential Nexus's picture

Something tells me "market health" peaks just before a crash.

Thu, 12/13/2012 - 17:14 | 3060871 Gamma735
Gamma735's picture

Once you no longer believe the lies you are label a radical in order to marginalize you.  If the marginalization does not work you are labeled a terrorist.  Soon ZH readers will appear in memos as possible...  (Post edited for reasons of National Security)

Thu, 12/13/2012 - 17:21 | 3060886 Fizzywig
Fizzywig's picture

You're pushing too hard!  Go on, get it all out.

Thu, 12/13/2012 - 17:25 | 3060898 Bastiat
Bastiat's picture

No golden hemarrhoid yet, push away!

Thu, 12/13/2012 - 17:41 | 3060935 CowboyzFan
CowboyzFan's picture

The last I heard, there was something like $700 trillion in derivatives, and God knows how much in plain old shitty assets on banks's books.  I imagine much of the QE is going to buy up stuff they can't sell and/or dare not mark to market.

Thu, 12/13/2012 - 19:15 | 3061121 Just Ice
Just Ice's picture

Wrt shitty assets...

Yeah, those MBS's were money out the door for paper that was supposed to supply a nice fat stream of future income.  Now worthless, (or "impaired"), no money and sparsely a trickle to no income stream.  Fed's purchases by way of QE are replacing some of the lost $ as the institutions don't have adequate assets to absorb the losses themselves.  And some misguided souls think failure of the insolvent is now inappropriate.  So...backdoor bailouts hushed from those pesky taxpayers that got all upset about the previous Paulson disclosed and advertised bank bailout.   (As I recall, it was conveniently put in place that any ultimate Fed losses would be transferred back over to the Treasury, i.e. the taxpayers.)

Thus, under guise of "QE" taxpayers are providing additional bailouts, just without their knowledge.  Much like the end goal across the pond that German taxpayers, by way of backdoor agreements, will be supporting their own government and society along with Greek's government and that part of Greek society dependent on government and Spain's Government and society, et cetera, et cetera.

The deflating credit bubble is the saving grace counteracting (and overwhelming) Fed's printing and sheer damage it would cause.  Four decades of credit expansion culminating in tons of bubblicious bad debt all fluttering off to money heaven.

Thu, 12/13/2012 - 18:15 | 3061005 Madcow
Madcow's picture

China will not allow the Fed to print.  I know this is hard to believe - but DC is out of money and options - and must now figure out how to raise taxes dramatically AND eviscerate goverment spending.  

GovCo will direct all funds to pay creditors - and will be forced to allow Californa and the 'fly-by states' (basically everything outside of the moat surrounding Washington DC) - to collpase. 

FINALLY - it is time to short the SPX, REITs, Munis, etc.    All available engine power will be concentrated so that USTs are the last thing to collapse. 

If you live in a big metropolitain area you are taking an unreasonable risk. 

Thu, 12/13/2012 - 18:20 | 3061015 NidStyles
NidStyles's picture

The Fed doesn't push, if you look at how they calculate their fund rates they are the pullers of the economy. They honestly believe that they are the incentive makers rather than the incentive destroyers.

Thu, 12/13/2012 - 19:47 | 3061217 Pejorative Requiem
Pejorative Requiem's picture

The answer to the post question must be that the Fed is out of its' depth, since, depspite those still in awe of TPTB, there really isn't anything the Fed knows that we don't know. Tick toc.

Thu, 12/13/2012 - 21:26 | 3061437 HermesHiccups
HermesHiccups's picture



Ben Bernanke Love

Unlimited A.T.M

Kevin Warm Towel Cleanse


Fri, 12/14/2012 - 00:09 | 3061889 ReactionToClose...
ReactionToClosedMinds's picture

Is the Fed out of its depth here, or do they know something we don't?

"Everyone" said this was expected .... really?  I thought the economy was improving ... evidently not.  Good news quickly portends bad news

Fri, 12/14/2012 - 07:42 | 3062121 spanish inquisition
spanish inquisition's picture

Title reminded me of The Seeds track Pushin Too Hard http://www.youtube.com/watch?v=LfNq0kboAII

Seems to fit the article... nice reference if that was the intent.

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