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What Was The Fed Thinking The Last Time Stocks Were Here?

Tyler Durden's picture





 

Sometimes it is useful to reflect back more than a nanosecond to check one's anchoring bias. With US equities back at 2007 levels, we thought it may be instructive to look at what the Fed was thinking - and what the FOMC was looking at - to be better able to judge their 'forecasts' now. To wit Q4 2007, FOMC... "Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance." The reflexivity of the use of market-based measures to preempt their actions is very clear from the presentation materials, as, just like now, there was falling current year EPS expectations but a phoenix-like resurrection due in 2008 based on analyst's expectations. Furthermore, the expectations for rate changes from Q4 2007 to Q4 2008 was remarkably modest (even as they had all the data on subprime delinquencies soaring and monolines collapsing) - and of course, turned out to be absolutely and utterly incorrect. And yet, we listen intently to every forecast word they utter?

From Oct 2007 FOMC:

"Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction.  Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time."

From Mr. Dudley's Presentation Materials at the December FOMC:
Earnings are down but have no fear - they will rise again next year..

And the market is not expecting rate cuts so things can't be that bad - or the efficient market would have priced it in?

And then finally, the 3 versions of the December 2007 FOMC statement - where the Fed seems to congratulate itself on noticing the weakness, and the proclaims that its actions will save the day (even though there are some 'downside risks'.

Remind us again, why we pay any attention to the forecasts of this motley crew?

 


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Fri, 01/18/2013 - 15:20 | Link to Comment AccreditedEYE
AccreditedEYE's picture

Who needs to pay attention to forecasts?? Just buy that dip baby! I guarantee you, every single comparision that's being used to the past is counted on to keep the market moving higher highs while people scratch their heads and say "how the hell is this possible?"  Just BTFD

Fri, 01/18/2013 - 15:21 | Link to Comment Lohn Jocke
Lohn Jocke's picture

My local strip clubs only give out change in 2 dollar bills. I wonder how that gets weighed in the modern inflation calculation.

Fri, 01/18/2013 - 16:08 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Could mean that you give out 1/2 as many "tips" to the dancers on stage?

Fri, 01/18/2013 - 16:23 | Link to Comment ACP
ACP's picture

Someone actually thought fundamentals matter in Bernanke's market?

You got Te'o'd!

Fri, 01/18/2013 - 15:20 | Link to Comment Dr. Engali
Dr. Engali's picture

Fed thinking...that's funny Friday humor.

Fri, 01/18/2013 - 15:21 | Link to Comment 100pcDredge
100pcDredge's picture

It seems The Fed is one of those rare creatures which don't have to think - in order to survive, for example.

Fri, 01/18/2013 - 15:45 | Link to Comment max2205
max2205's picture

the next 20% plus drop wll be from above 1600 SPY for sure

Fri, 01/18/2013 - 15:50 | Link to Comment max2205
max2205's picture

However there is thiproblem of SPY TLT pair stuck in themiddle of a 4 year range and nearing topside resistance.

https://stockcharts.com/h-sc/ui?s=SPY:TLT&p=W&yr=4&mn=11&dy=0&id=p36371332343&a=288473177

use it for what it's worth

Fri, 01/18/2013 - 16:05 | Link to Comment uncle_vito
uncle_vito's picture

Wow.   Lots of lines.

Fri, 01/18/2013 - 15:27 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

"Remind us again, why we pay any attention to the forecasts of this motley crew?"

Because as long as the music plays the financial professionals (and financial professional watchers) must dance.....or find actual productive employment elsewhere. :)

Fri, 01/18/2013 - 15:28 | Link to Comment ApollyonDestroy
ApollyonDestroy's picture

After hearing and reading it a quadrillion times we can now finally understand the collapse is imminent! Yay!

Fri, 01/18/2013 - 15:30 | Link to Comment fonzannoon
fonzannoon's picture

what is the point in releasing this? For us to think they are stupid and blind? This way we don't think they are evil and twisted?

Fri, 01/18/2013 - 15:33 | Link to Comment blu
blu's picture

1) they are required to release it, 2) they are quite confident nobody is watching or that if anyone are watching everyone is invested in not upsetting the apple cart. On the latter point they are largely correct.

Fri, 01/18/2013 - 15:37 | Link to Comment FoeHammer
FoeHammer's picture

That's the genious of power. It can obtained without regard to intellegence or moral character. It is based soley on manipulating the perspectives of those who are under control.

 

After all, does it matter that the powerful banksters are stupid or evil? Maybe if we were studying their personalities to exploit weakness.

 

 

Fri, 01/18/2013 - 15:32 | Link to Comment blu
blu's picture

"Economic forecasting" is about as scientific as augury. There is simply no rational reason to believe they can correctly forecast anything.

Fri, 01/18/2013 - 15:35 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Fucking halarious.  This is what losing control looks like.  Real growth is impossible without an increase in real inputs and the amount of available energy.

This realease does not help the Fed's credebility at all.  More evidence that the real owners are long gone and the interns have been left behind for sacrafice.

Fri, 01/18/2013 - 15:41 | Link to Comment Winston Churchill
Winston Churchill's picture

Just keeping the livestock calm before the slaughtering, or else the meat is tainted.

Basic animal husbandry.

Fri, 01/18/2013 - 15:38 | Link to Comment PUD
PUD's picture

White House urges 'clean' debt-limit increase

Fri, 01/18/2013 - 15:41 | Link to Comment 905ozs
905ozs's picture

Meanwhile; fiat death, proper warIII breaking out, a "NWO" seemingly assured with centralized everything, a sheeple blissfully waiting to be culled.

And so we sit.

.......but we continue to discuss & live the unreality that presumes "this" will still exist in the future.

Blame the Americans for not seeing the obvious & letting Ron Paul get slapped down, ditto the rest of the World.

Blame the Us...the "knowing" for Our sanctimoniousness in action. 

Blame, most of all, that Few Elite... that have set this up and have been profiting for centuries from killing us & centralizing whatever they can.

....of course, around 1890 they understood a World BIS fiat was the key. Ww3 should clinch it...

Bahh bahh, & so we sit.

Duck,LOOK AFTER FAMILY,

Fri, 01/18/2013 - 15:41 | Link to Comment tickhound
tickhound's picture

Fed thinking is along the lines of self-preservation.

Fri, 01/18/2013 - 16:16 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Can you spell Coordinated Action ? Sure, I knew you could ...

This (brief historically but still breathing zombie like and refusing to die ) time is different.

Fri, 01/18/2013 - 16:21 | Link to Comment SheepDog-One
SheepDog-One's picture

The world is only so big, they can only 'ramrod' so much 'growth'....and for those who say 'DOW 20,000' or whatever the real world conditions if that were to happen I guarantee will make people wish they were dead instead of having to live thru it.

Fri, 01/18/2013 - 16:24 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Why cannot Congress ask Bernanke (under oath) if the Fed is actually buying the Equity Indices or indeed single names..?

The answer might impact the VIX just slightly....

Fri, 01/18/2013 - 16:55 | Link to Comment SheepDog-One
SheepDog-One's picture

What gets me is, people don't already KNOW that is whats going on? Congress would have to officially question him? Hell I think if I know it, all of Congress has to know it and everyone else too!

Fri, 01/18/2013 - 17:00 | Link to Comment Dr. Engali
Dr. Engali's picture

That's like the slave asking the master if he plans on raping his kids. He already knows the answer , why risk making it worse asking the question.

Fri, 01/18/2013 - 16:26 | Link to Comment AgAu_man
AgAu_man's picture

So... "Stay The Course."  Uhuh.

Martha, keep packing!

Fri, 01/18/2013 - 16:45 | Link to Comment francis_sawyer
francis_sawyer's picture

Last time we were here = Subprime is contained...

Fri, 01/18/2013 - 16:56 | Link to Comment fijisailor
fijisailor's picture

The difference now is that the Fed IS the market so it will fall when they say it falls.

Fri, 01/18/2013 - 16:57 | Link to Comment LongSoupLine
LongSoupLine's picture

Let me know when the forecast is for Bernanke and Dudley to be hung by their necks until their fucking head separates from their subhuman fucking bodies.

Fuck you all on the Fed.

Fri, 01/18/2013 - 17:22 | Link to Comment SmoothCoolSmoke
SmoothCoolSmoke's picture

SP is up 10% since 11/18.  There's your FC and DC cover. 

Fri, 01/18/2013 - 17:44 | Link to Comment Catullus
Catullus's picture

EPS was down but LBOs would save them. Hard 8s and 6s

Fri, 01/18/2013 - 19:17 | Link to Comment Conax
Conax's picture

Not being in equities I just look at this Dow chart once in a while, especially on Fridays to see the ramp.

http://money.cnn.com/data/markets/dow/?page=2

Today that ramp is a vertical spike, time ran out so they gave it a quick jerk.  So the curtain is open, the 'wizard' is holding open his dirty rain coat saying, "How do you like me now?"

 

Fri, 01/18/2013 - 19:29 | Link to Comment chart_gazer
chart_gazer's picture

we have never been here.  the environment is nothing like we have ever seen. none of the past anything matters! charts, fundamental, mumblefuck from anyone. nothing. here is all that matters:

fed pumping $40B/mth new money into the banks to take bad MBS from banks further bailing them out WITH NO END DATE fed pumping $45B/mth new money monetizing debt WITH NO END DATE to allow the gov to overspend $1T/year. this also generates profits for banks.

fed now doing repos, like $800M yesterday, $200M today with NO END DATE.

thats $85B+/mth to infinity.  where does it go?  look at the banks earnings.

moral of the story? BTFD

Sat, 01/19/2013 - 04:05 | Link to Comment AccreditedEYE
AccreditedEYE's picture

Yes. This sums things up nicely. BTFD

Fri, 01/18/2013 - 23:02 | Link to Comment razorthin
razorthin's picture

Sell this extension and wait for the momentum indicators to reset before reloading.  And remember - when the VIX is high, you buy.  When the VIX is low, you go.  You should be 100 miles outside of town by now.

Sat, 01/19/2013 - 14:02 | Link to Comment razorthin
razorthin's picture

I sense that more and more ZeroHedgers are drinking the central market planning koolaid.  Upside capitulation?

Sat, 01/19/2013 - 14:02 | Link to Comment razorthin
razorthin's picture

dup

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