The Hilsenrath "Tapering" Article Is Out

Tyler Durden's picture

Yesterday, the rumor turned out to be a joke. Today, there was no rumor, but as we warned four hours ago, it was only a matter of time. Less than four hours later, the time has come, and Jon Hilsenrath's "Fed Maps Exit from Stimulus", conveniently appearing after the close, has just been released.

From Hilsy, and one of his final attempts to remain relevant, pointing out what everyone already knew:

Federal Reserve officials have mapped out a strategy for winding down an unprecedented $85 billion-a-month bond-buying program meant to spur the economy—an effort to preserve flexibility and manage highly unpredictable market expectations.

Don't expect an imminent announcement.

Officials say they plan to reduce the amount of bonds they buy in careful and potentially halting steps, varying their purchases as their confidence about the job market and inflation evolves. The timing on when to start is still being debated.

The whisper sellside consensus is that it will be the September FOMC meeting, just after the Jackson Hole meeting at which Bernanke will be absent, that the first details of the flow "slowdown" will be revealed. But there is certainly no consensus.

The Fed's strategy for how and when to wind down the program is of intense interest in financial markets. While the strategy being debated leaves the Fed plenty of flexibility, it might not be the clear and steady path markets expect based on past experience.


Officials are focusing on clarifying the strategy so markets don't overreact about their next moves. For example, officials want to avoid creating expectations that their retreat will be a steady, uniform process like their approach from 2003 to 2006, when they raised short-term interest rates in a series of quarter-percentage-point increments over 17 straight policy meetings.

That the market will obviously "overreact" is a given: for reasons why, read this. As for the rest of the WSJ piece, it is fluff.

Regarding bets when the unwind begins, a look at the change in the VIX forward curves gives us some idea:


If correct, put the date September 17-18 in your calendars.

* * *

For those who missed it earlier, here again is the preview of the market's "Taper" Tantrum:


From Scotiabank, on why a "tapering" may be imminent, if only for purely optical and "transitory" reasons:

The bullets below list reasons why the Fed would want to “leak” hints of a tapering now.

  • On Monday morning of this week, the RBNZ (New Zealand) and BoK (Korea) intervened in the currency market to try to dull the strength of their currencies. Soon afterward, Sweden and Chile announced they might have to intervene as well. Poland cuts rates to weaken the Zloty.
    • These actions and comments show that the external ramifications of QE will no longer be tolerated passively. These moves represent a tacit protest against QE. It could be argued that if QE policies do not subside soon, other governments are now willing to retaliate with counter-measures (currency wars, “a race to the bottom”, protectionism).
  • When FOMC members discuss the “costs” of their policies, they are partially referring to the potential for asset bubbles and distortions to price discovery. The Fed has had its foot on the accelerator so long that easing off should provide information from how markets react.
  • In the past 10 days, the yield on the Barclays High Yield Index has collapsed from 5.37% to 4.97%. A 4-handle on Junk bonds is truly remarkable. High Grade spreads have also been tightening materially.
  • Credit Default Swap (CDS) premiums have been declining rapidly and plummeted the past two weeks to all-time low levels. Certainly, marginal buyers have continued to be chased into the market from fears of missing the up-trade and promises of the Fed “put” protecting the downside, but the collapse in CDS premiums represent bear capitulation and the futile results of hedging risk.
  • Equities are higher by almost 15% YTD (46% on an annualized basis). The FOMC wants asset inflation (the Pigou Effect), but trading has become decidedly one way. The S&P 500 has rallied 13 out of the last 14 days. There was increasing talk of equities “melting up” and finally stated publicly by Stan Druckenmiller.
  • NYSE Margin Debt has matched the highest levels in history (July 2007).
  • Tobin’s Q ratio is the best predictor of market corrections (of 20%+). James Tobin won a noble prize for it. He hypothesized that the combined market value of all the companies on the stock market should be about equal to their replacement costs. The Q ratio is calculated as the market value of a company divided by the replacement value of the firm's assets. The ratio is approaching levels similar to 1907, 1929, 1937, 1969, 2001/2, and 2008.
  • The Fed has been accused of ‘enabling’ fiscal stalemate. There is an article in the WSJ today about how improving Federal finances lessens the urgency for Republicans and Democrats to negotiate. Stable and rising asset market prices have the same effect. As negotiations begin, providing a warning shot that the Fed cannot do the heavy lifting forever, may be a wise move.
    • After all, the debt ceiling limit gets hit next week on May 18th, at which point the Treasury will have to invoke extraordinary measures to prevent default (something they can do until September).
  • Congressional and market criticism has been increasing.
  • The Treasury will probably be cutting issuance in Q3 due to an improving position. This effectively means if the Fed continues to buy at the current pace, it would be buying an even greater percentage of visible supply.
  • It is possible that Bernanke made a suggestion about ‘tapering’ in his Chicago speech today, when he used the words “reaching for yield”. The dollar and the bond market are just beginning to notice and react. The other markets will likely soon follow.

Fed tapering would catch the market off-sides. At some level, FOMC members must realize they have created a moral hazard dilemma and conditions of over-promising what they can deliver. Tapering would symbolically put a dent in market sentiment and the implicit ‘put’. The many investors that have been drifting into riskier assets in a scramble for yield would begin to prudently re-focus on the downside risks to these assets.

It is possible a steep decline in financial assets would ensue with the lowest part of the capital structure being hurt the most. The Fed has chased investors all in the same direction; into risk-seeking securities. Few care about “right-tail” events, but should investors decide to pare risk in reaction to a hint of ‘tapering’, the overshoot to the downside may surprise many. The combination of too many sellers, too few buyers, and dreadful (and declining) liquidity means a down-side overshoot is highly likely. It would provide the Fed with their answer as to whether they have been creating market bubbles.

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ShortTheUS's picture

And here I thought Jon only wrote bullish articles. Looks like the Rath of Hilsen cuts both ways.

hedgeless_horseman's picture



Speaking of assholes and tapered, do you know why shit is tapered?  

So your asshole doesn't go, "SLAM!"

New_Meat's picture

saw a video about that, once apon a time.  'course, don't look at that stuff anymore. - Ned

hedgeless_horseman's picture



Here is the video discussing the asshole and tapering.

When you clip it off tightening too fast and too hard there is always a big splash, shit flying everywhere.

Pinto Currency's picture


I maintain that there is a serious gold and silver market event about to happen and this is so much talk which will fail to contain the metals.

The Shanghai Gold Exchnange has been delivering 200 tons /month for 20 months and the physical pull from LBMA is relentless.

Scroll down to see the enormous gold draw on Shanghai over the past two years:

LBMA / Comex collapsing:


One thing is certain today, the bullion banks are on the long side of all of this selling.  We are seeing cracks appearing in the fractional reserve LBMA and COMEX price setting mechanisms.  It’s really thanks to the most recent paper market discount that we are evidencing this accelerated migration of bullion from the West to the East...

 ...And even though this activity (intervention) bought a little more time for these guys, the immediate and unanticipated but accelerated bullion demand (all over the world), actually ended up digging an even deeper hole for the Fed, the Bank for International Settlements (BIS), and the agent bullion banks.  They have actually shot themselves in the foot.

By simply tracking the movements in the international wholesale market, it’s clear that a major supply problem is brewing.  Where has this bullion gone?  It is clearly Fed and Bank for International Settlements borrowed bullion.  What they are doing is seeking to avert a fractional reserve delivery default.  These are in the price setting centers of London and the COMEX.  And it is further extenuated by arbitragers who are moving bullion out of the COMEX and reselling it at higher, real global prices. 

So you have a perfect storm here.  This (Western gold) bullion is not coming back.  It’s being re-melted, cast into kilobars, and it’s ending up directly in Eastern hemisphere central bank and sovereign vaults.  And all of this time the bullion banks are calling for lower prices, and the mainstream media is touting a bear market.  The bullion banks are fully aware of this threat, and they are exiting these mismatched short positions.


LBMA had 40 tons gold purchased today:

Say What Again's picture

Things that make you go Hmmmm.

With less than 10 minutes to go in the post-market session on a Friday evening, SPY is experiencing a quiet but significant sell-off.


BaBaBouy's picture

Why Doesn't The Sacks Man Discuss How Much GOLD Ben Shalom Is Printing Each Week ???

Is It 10 Tonnes, 20  Tonnes, 50  Tonnes ???

After All, The Infinite Abbundance Of Paper GOLD Is The Crazy-Glue That Holds The US Fin System Together???

Zer0head's picture

Hilsenrath something else for you and your miserable rag to report on

May 9, 2013

Dad who died during arrest 'begged for his life'; witness videos seized

Blood stains are still visible on the sidewalk at the corner of Flower Street and Palm Drive, where a Bakersfield man struggled with as many as nine officers and later died this week.

David Sal Silva, 33 and the father of four young children, died early Wednesday morning after deputies say he fought with them and CHP officers who'd responded to a report of a possibly intoxicated man outside Kern Medical Center.

The Kern County, California Sheriff's Office says Silva resisted, a canine was deployed, more law enforcement arrived, batons were used and the man later had trouble breathing. He was taken to KMC, where he died. An autopsy was slated for Thursday, but no results have been released.

Some witnesses apparently took cellphone video of the incident but deputies moved quickly to seize the phones. The Sheriff's Office, after releasing a statement Wednesday and naming its officers Thursday, declined all further comment.

People who say they witnessed the incident as well as Silva's family members described a scene in which deputies essentially were beating a helpless man to death. They were indignant that cellphone video had been taken away by deputies.

At about midnight, Ruben Ceballos, 19,was awakened by screams and loud banging noises outside his home. He said he ran to the left side of his house to find out who was causing the ruckus.

"When I got outside I saw two officers beating a man with batons and they were hitting his head so every time they would swing, I could hear the blows to his head," Ceballos said.

Silva was on the ground screaming for help, but officers continued to beat him, Ceballos said.

After several minutes, Ceballos said, Silva stopped screaming and was no longer responsive.

"When I arrived to the home of one of the witnesses that had video footage, she was with her family sitting down on the couch, surrounded by three deputies," Tello said.

Tello said the witness was not allowed to go anywhere with her phone and was being quarantined inside her home.

When Tello tried to talk to the witness in private and with the phone, one of the deputies stopped him and told him he couldn't take the phone anywhere because it was evidence to the investigation, the attorney said.

"This was not a crime scene where the evidence was going to be destroyed," Tello said. "These were concerned citizens who were basically doing a civic duty of preserving the evidence, not destroying it as they (sheriff deputies) tried to make it seem."

A search warrant wasn't presented to either of the witnesses until after Tello arrived, he said, adding that one phone was seized before the warrant was produced.

Tello said the phone of the first witness was taken after the deputies told him he was either going to give up the phone the easy way or the hard way.

"They basically told him they were either going to keep him at this house all night until they could find a judge to sign a search warrant or he could just turn over his phone," he said.

The witness gave up his phone two hours before he had to get to work and was told by deputies that he could collect his phone the next day after they had extracted the evidence they needed, Tello said.

However, the witness never got his phone back, Tello said, and was told it could take years before he does because the investigation could take a long time.


Silva left behind four children, ranging from ages 2 to 10 years old. As of Thursday afternoon, his mother said, they hadn't figured out how to tell the children their father is dead. Merri Silva remembers her son as a happy person who loved his kids.




Seize Mars's picture

Arresting officers names?

Zer0head's picture

local officers named but  CHP hasn't released the names of its officers at the scene.


but in other news

California’s highest-paid state troopers make far more than those in other states, with overtime and lump-sum payouts that inflate earnings, data compiled by Bloomberg show. They also enjoy a retirement benefit that allows them to leave after 30 years with annual pensions totaling 90 percent of their salaries, a standard that became the model for police departments throughout the state.

44 California patrol officers earned more than $200,000 while more than 5,000 California troopers made at least $100,000 in 2011

Boosting of pay and benefits was intended to attract candidates to the California Highway Patrol.

brettd's picture


10 million unemployed and they're RAISING pay?  

Stupid government.  Strike that.

Currupt government.


HulkHogan's picture

Pays to be a pig. $100,000 to eat donuts and to beat the shit out of black people?!

spine001's picture

When I was still a sheeple I worked in a F500 company and partici0ated in merger and acquisitions. What they just did wi5h this announcement reminds me of the leaked information about a merger. Which was nothing 3lse than a trial balloon to see how the market would react to the news. If it went in a different way than we believed we were in time to stop and deny the "rumor".It was called "trial balloon".

Tango in the Blight's picture

When I was a kid I watched that TV show CHiPs about the California Highway Patrol. They didn't focus on those aspects of the job in that show. Although the sergeant who was their boss was a bit donut-fat IIRC.

I remember when I came to California for the first (and only) time in 1991 that I was disappointed that the girls there didn't look at all like the girls in those old shows.

OldPhart's picture

While reviewing tax returns at a local CPA outfit, I would routinely see HwyControl Officers that exceeded $250k...ten years ago.  Same for school administrators.  And, for all the bitching they do, I would see public school teachers (after ten years or so) in the $150k range.

So next time a Calif 'public servant' bitches about their pay, remember this.

yogibear's picture

Parol officers in the midwest easily make $150,000/year or more.  

Public employees with not a lot of education making more than Medical doctors that have to bust their butt and work long hours.

AldousHuxley's picture

haha...and how are Doctors NOT public employees when medicare/medicaid funds half of all medical expenses, tax write off for services rendered, residency is paid by tax dollars, hospitals are non-taxed entities?


also how much money did some dumbass celebrity make and how much education did they have?


grandaughter of Communist Mao in China is worth half a billion. get with the program. Government = monopoly power = money

General Decline's picture

"California patrol officers earned more than $200,000 "

When the time comes for them to assist in marshal law/gun confiscations, they will choose their paycheck over the constitution. Fucking prostitutess

RebelDevil's picture

If those officers aren't convicted of murder, then that would confirm that we truly live in full-blown Orwellian times with the SS/Gestapo getting away with what I call barbarian acts.

This is the real reason to own guns, to kill off pricks who think they're the SS.
Truly sicking and distrubing.

jerry_theking_lawler's picture

come to my state and try to 'take' my phone without warrant or being would be in the news alright, with an 'officer' down....and the public would cry and moan about the law enforcement getting killed.....with zero justification.....this system sucks.

kchrisc's picture

And people disagree with me that the US government, from the local on up, is at war against the American people NOW. The US government, at all levels, is currently prosecuting a civil war against the American people and is in the process of escalating it as well (NDAA, etc.)

The gun and badge thugs are just the first soldiers being used against us.

Rejection; Revolution; Retribution; Restoration



Seize Mars's picture

Yes indeed. I don't know how many times I've heard people say, "You know my brother/cousin/whatever is in the military. Those guys are true blue. If the shit ever started, they would refuse orders to hurt Americans." To which I reply, "idiot, what are these 'heroes' waiting for?" The war is on, right now, right here. In your neighborhood. Cops killing us. The govenment killing children and blaming the Bill of Rights. The Government bombing people and imposing martial law. The government bombing New York and starting a never ending world war.






It's a full spectrum attack. They are using terrorist attacks against us, they are taxing the shit out of us, they are regulating the shit out of us. They use their media against us. They want an illegal immigrant invasion to divide us. Then they want to use that as a pretext to brand us all like cattle - a national ID card. No thanks. I'm not a fucking farm animal. So-called American 'leaders' are openly hostile to the Bill of Rights? When do our 'heroes' start acting like 'heroes?' That's right. Never. They are cowards. Any soldiers who obey illegal orders is a fucking coward.

freedogger's picture

I had a cop threaten to take my phone last winter as evidence if I didn't delete pictures I took of his squad car's window covered in snow.

Anyhow, made me re-think my setup. Now all photos and video get saved to my dropbox folder. This backs it up to the cloud. I will hapilly wait for a search warrant or hand the phone over in the future knowing they won't be able to bury it.

AldousHuxley's picture

only way to beat a cop is to join the military.

Tango in the Blight's picture

If they force you to delete pictures or videos take the memory card out of your phone or camera immediately afterwards, Then use a recovery program such as PC Inspector File Recovery (freeware) to undelete them.

When you delete a file it isn't actually deleted, it is marked as free space and removed from the directory index. As long as you don't overwrite it with new data there is always a good chance you can recover it.

freedogger's picture

Good tip. If it really counts though, they will just take the phone. With the save to cloud working, I have a better chance of covering my ass.

With the state moving to increasing surveillence, at least we can watch them too.

papaclop's picture

That's why they call them pigs. They are not there to protect you. They are there to get a paycheck, try to get laid, and protect each other. Welcome to the USSA. Police state Amerika.

absente reo's picture

Very sad, and very disturbing.  Bastards.

freewolf7's picture

@pinto currency
Thanks. Great post.

outamyeffinway's picture

Oh that gold will come back. In about a hundred to a hundred-fifty years. That's how this all works.

Tapeworm's picture

40 tonnes, whoop-de-doo!

 Between October 1967-March 1968 private offtake of CB gold was in excess of 2500 tonnes, with one day alone- 14 March, 1968 showing 400 tonnes of net buying of various CB hordes.

Pinto Currency's picture


You've probably got 50 to 100 tonnes per day being pulled of the various physical exchanges.

Not record setting, but 50 tonnes is 1.6 million oz.

Annual gold mine supply is 75 million oz.

Let's see how long this can continue.

kliguy38's picture

NO one needs to panic. Hilsy also said that Benny was going to print an extra 80 tons of gold bullion each month to keep the LBMA and COMEX from defaulting. If he is successful then a hooker and blow party in September at the Fed.

Almost Solvent's picture

Living this would be so much more fun if drones had giant speakers looping a laugh track from Mork & Mindy as they flew overhead. 



Yes_Questions's picture
Nanu Nanu. Greetings.  I'm here to front run your trades.
Fredo Corleone's picture

In Seventeenth Century Edinburgh, it was customary for city dwellers to warn the passers-by below before a chamber pot was emptied out an upper-story window, by exclaiming, "Gardyloo !"

Translation: Ben Bernanke, to the markets, via the Fed's Official Scribe at the WSJ:

"Gardyloo !"

Tippoo Sultan's picture

The bearded chap below the window bears a striking resemblance to a certain Twenty First century central bank chairman.

McMolotov's picture

Those too stupid to move out of the way were the reason the term 'shithead' came into existence.

THX 1178's picture

Also, twas customary for the gentleman to walk nearest the street and m'lady to walk nearest the edifice as to protect m'lady from any smelly plummeting detritus. If I was that guy, I'd be like, "Damn, bitch, why canst we merely perambulate single file and shit down yond hazardous thoroughfare-- lest I be smacked upon mine crown with a fair weight of stinky poopies?" 


Kirk2NCC1701's picture

Not just in Edinburgh (Scotland's gayest city) did "the shit fly", but elsewhere too in the UK.

The correct expression was "Gardez l'eau", which is French for "Watch the water!", and was a courtesy shout made just before or as someone emptied the Night Pot out the window. This became 'gardez loo', and now they go to the "Loo".

How England ruled the world, I'll never know. Of course they'll say that about us one day.

knukles's picture

Oh yeah, this Exit Strategy Shit is gonna go over Real Fucking Good with the What?House.  Everything else is falling apart and now the Bernak is gonna take the punch bowl away?
The politicians are gonna do something to spur serious responsible fiscal policy, decrease regulatory burdens and spur the economy through a combination of expenditures and tax cuts?
Confidence and the Economic Spirit is Gonna Skyrocket?



small weeping sounds

I am pissed, riled and rattled with this shit.
And it ain't goin' away.

OK buttfuckers, you've had your trial balloon......


And none of this stuff makes any sense.
I Quit 

fonzannoon's picture

At some point they will announce they are tapering it. I will be all over the news. They will march out the pundits to proclaim that the announcement is proof that the fed had a strategy all along. Then some big fuckin thing will happen two weeks before they were supposed to start tapering and they will say "well....since the big fuckin thing happened...we are going to go just a bit's too bad...because we were just about to stop".