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"Twas The Night Before Taper" - Deutsche's Joe LaVorgna Sees A $10 Billion Taper Shadow Tomorrow

Tyler Durden's picture





 

There seem to be two camps at Deutsche Bank these days: one, lead by the observant and somewhat contrarian Jim Reid, who recently asked the all important question about 2014 ("what if there is a recession?"), who accurately observed that something "structurally changed" since the great financial crisis (pretty clear what), and who even dared to suggest that the Fed will never taper, especially with the economy so late in the cycle already. And then there is Joe LaVorgna, best known for having a losing track record to Groundhog Phil. It appears that this morning Joey emerged from his lair deep inside 60 Wall, sniffed the cold air, and saw the shadow of a $10 billion taper, which is what he predicts the Fed will do tomorrow.

LaVorgna's full winter weather forecast:

The FOMC statement will be released at 2PM EST along with updated real GDP, unemployment, inflation and fed funds forecasts. The Chairman’s press conference will commence shortly thereafter. We are looking for a $10 billion Treasuries only taper—we have been projecting this since the much stronger-than-expected October employment data (reported on November 8), which was subsequently matched by a similarly strong November employment report. Current quarter growth prospects continue to brighten with second half output poised to average over 3%. Moreover, the budget sequester was loosened, as we also had anticipated, so there is little reason for the Fed to delay tapering, in our view. The fact that the 10-year Treasury yield is at nearly the same level as it was right before the September FOMC, while the timing of the initial rate hike was pushed out at least six months from early 2015 to late 2015, tells us that the financial markets are indeed expecting a taper. There is now much less concern on behalf of monetary policymakers that a taper will engender a further tightening in financial market conditions. Indeed, since the September non-taper, equity prices are higher and credit spreads are tighter.

 

Nonetheless, the Fed will look to blunt any negative reaction to a taper, which will help appease the doves on the FOMC by strengthening the Committee’s forward guidance; tapering is not the same thing as a tightening. The Fed wants to hammer home the message that even after asset purchases are completed, monetary policy will remain extraordinarily accommodative. Fed Nominee Yellen believes this will lower term premium and help anchor longerterm rates. How will the Fed strengthen forward guidance? Words are cheap (at least relative to other measures, such as tinkering with IOER), so we believe the best way to extend guidance is to change the threshold on the unemployment rate—especially since the rate is already at the level Chairman Bernanke had previously targeted for the completion of asset purchases. Note to Fed: If unemployment insurance benefits are not renewed next month, the unemployment rate could promptly fall another three-tenths. Conceivably, the unemployment rate could be 6.5% by the March meeting. Does the Fed really want to continue to have to explain why a 6.5% threshold is not a trigger for tightening and why investors should ignore it? It seems to us that the easiest and most efficient way to strengthen forward guidance is to lower the unemployment rate threshold to 6.0% (or possibly even 5.5%). What about the fact that just “a couple of participants” supported a change in the threshold? The minutes were compiled before William English—the Secretary of the FOMC and the most senior economist at the Board of Governors—presented a paper at the annual IMF meeting in November which said that the optimal unemployment rate for the Fed was 6% or lower.

 

We do not believe the Fed is going to cut the interest paid on excess reserves for two reasons: One, this will not stimulate lending; and, two, it could cripple the short end, potentially causing major negative consequences. For example, some large money center banks warned they would begin charging depositors. What about the forecasts? The Fed will likely slightly raise its long-term GDP forecasts, trim its near-term unemployment rate forecasts and essentially maintain its inflation forecasts. We doubt the fed funds forecasts will change appreciably, since the economic forecasts should be little changed.

We have reached out to Phil for his take and will update the post when we get a full comment from the groundhog's spokesman.

* * *

Update: we are inform readers that Phil has responded.

 


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Tue, 12/17/2013 - 16:07 | Link to Comment NotApplicable
NotApplicable's picture

So... after this led balloon is floated, they'll be back in a couple of months with a "$5B Taper, fer sure, fer sure!"

Then a $3B taper...

Then a $2B taper...

Tue, 12/17/2013 - 16:19 | Link to Comment Headbanger
Headbanger's picture

Might as well make it $20 billion and get the pain over with early.

One silver lining could be lower gas prices but I doubt it.

So it all sucks.

Tue, 12/17/2013 - 16:37 | Link to Comment Deo vindice
Deo vindice's picture

"There seem to be two camps at Deutsche Bank these days: one, lead by the observant and somewhat contrarian Jim Reid"

It's "led". Lead is present tense. Led is past tense.

Tue, 12/17/2013 - 16:39 | Link to Comment Headbanger
Headbanger's picture

No, it is "led balloon" as in:

http://www.ledzeppelin.com/

Tue, 12/17/2013 - 17:00 | Link to Comment fonestar
fonestar's picture

Who gives a crap what these soothsayers and card readers "see"?  They must be pretty important in their world (or at least in their own minds).

Tue, 12/17/2013 - 18:27 | Link to Comment johngaltfla
johngaltfla's picture

If Joe said it, it's wrong. After all, he did state in teeth of the 2008 recession that there was no way the economy was in a recession.

 

He's correct 24 out of about 24 billion predictions so there is a chance he's as right and accurate as the BLS.

Tue, 12/17/2013 - 19:37 | Link to Comment sgorem
sgorem's picture

@ 'star, you're correct. it really doesn't matter with all the talk of a taper, or not. $10 billion or $10 gazillion, the fucking fed, along with it's minions have debased, defiled, disgorged, dismembered & disentigrated the the economy so badly now, it's like putting lipstick on a decomposing pig carcass. fuck you bernanke, you lying unscrupulous piece of shit.

Tue, 12/17/2013 - 17:24 | Link to Comment Exponere Mendaces
Exponere Mendaces's picture

This is how its going to go - zero taper, and some bullshit in there that is a catalyst for the market to rally its ass off before X-Mas in the states.

Later, they'll spread some more rumors about possibly "looking at" tapering, you know, when it is convenient to fuck the market up.

Rinse and repeat, for a zillion times before something actually happens, just like the EU announcements about the fucking Euro and Greece.

 

Tue, 12/17/2013 - 20:03 | Link to Comment HungryPorkChop
HungryPorkChop's picture

They wouldn't dare do anything that would impact the holiday buying season as they need those good consumer spending numbers to keep the stock markets pumped up til' the very last minute. 

Tue, 12/17/2013 - 16:07 | Link to Comment Fiat Burner
Fiat Burner's picture

The Token Taper

Tue, 12/17/2013 - 16:52 | Link to Comment rqb1
rqb1's picture

QE has been front loaded this month.  No pomo days after Christmas, and if I remember tomorrow is the first non money printing orgy day of the month. 

Tue, 12/17/2013 - 16:10 | Link to Comment Doubleth1nker
Doubleth1nker's picture

At least we know the groundhog isn't talking his book and didn't get the Fed taper/no taper memo.

Tue, 12/17/2013 - 16:08 | Link to Comment frankTHE COIN
frankTHE COIN's picture

Bad Luck SchlipRock has spoken.

Tue, 12/17/2013 - 16:11 | Link to Comment dryam
dryam's picture
Should be titled....Deutsche's Deuchebag Joe LaVorgna
Tue, 12/17/2013 - 16:19 | Link to Comment SheepDog-One
SheepDog-One's picture

'Joey Baloney' is his bankster gangster name.

Tue, 12/17/2013 - 18:24 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

If Joe LaVagorna smells taper, expect burrows of large rodents to spontaneously erupt in gushers of clownbux.

Tue, 12/17/2013 - 16:37 | Link to Comment Mad Mohel
Mad Mohel's picture

Joe LaVorgna should stick to giving tips about the trifecta.

Tue, 12/17/2013 - 16:13 | Link to Comment El Vaquero
El Vaquero's picture

The Fed cannot taper and it cannot not taper.  What to do, what to do...

 

Fuck you Yellenanke!

Tue, 12/17/2013 - 16:20 | Link to Comment kralizec
kralizec's picture

Fuck Bernanke, Stop Fuckin' Yellen!  Resist We Much!

Tue, 12/17/2013 - 16:29 | Link to Comment Spungo
Spungo's picture

What happens if they stop all QE but don't tell anyone? "Oh yeah we're still monetizing debt. Don't worry about it."

Tue, 12/17/2013 - 16:35 | Link to Comment El Vaquero
El Vaquero's picture

Well, the banks and the Treasury would know about it.  Treasuries would have to be sold to someone, so yields would go up.  Banks wouldn't be getting those nice Fed digital dollars for their shit MBSs and whatever that entails for shadowbanking.  They couldn't stop without people noticing. 

Tue, 12/17/2013 - 22:51 | Link to Comment BringOnTheAsteroid
BringOnTheAsteroid's picture

Hang on, why do treasuries need to be sold to someone. Why can't the Fed just say the treausries have been sold and still just give money to the banks and congress. In fact can't the Fed just cut over all the data feeds to the stock exchanges and set the prices of stocks at will and just feed fake volume numbers into the system. Can't Congree just cut over from all the statistical feeds from all the various agencies and just set the numbers at whatever they like (I know, this is what is already happening but the fake numbers are coming from agencies). Cannot the entire system just become one gigantic matrix with all the data feeds ever c onceived of coming from a central planning super computer.

Tue, 12/17/2013 - 19:50 | Link to Comment BringOnTheAsteroid
BringOnTheAsteroid's picture

Hahahahaha, that's pretty much what;s it come down to. 

Tue, 12/17/2013 - 16:12 | Link to Comment max2205
max2205's picture

They should stop qe and get the 3 year rate up to 5%....party over bitchezzz....lets let CONgress show us what they got

Tue, 12/17/2013 - 16:15 | Link to Comment jcaz
jcaz's picture

Umm, because the 6.5% unemployment number is Barry's wet delusion?   Even Benny knows we'll never hit it, thus no tapering warranted....

But oh yeah, if we ever DID hit that number, then oh sure, taper-up, kids.....

What a waste of noise....

Tue, 12/17/2013 - 16:13 | Link to Comment kill switch
kill switch's picture

Taper-up $170 Billion

JY

Tue, 12/17/2013 - 16:16 | Link to Comment Lordflin
Lordflin's picture

Well... no opinion on taper... well, some... unlikely would be my guess. But it is a guess, as no one can predict a manipulated market unless an insider...

On the subject of no predictions, expect a morning smackdown of PMs ahead of any anouncement...

Tue, 12/17/2013 - 16:17 | Link to Comment FieldingMellish
FieldingMellish's picture

Peter Schiff has been the only correct caller on taper so far, what's his take?

Tue, 12/17/2013 - 16:27 | Link to Comment Dr. Richard Head
Dr. Richard Head's picture

The last time we went through this he-taper/she-taper game Schiff was pretty adament that there would be no taper, but MOAR taper.  I would assume his position has continued as such, but have seen nothing from him to confirm.  I did, however, see a funny video of him going to WalMart shoppers and asking them to pay a 15% service fee on all WalMart goods in order to support the higher wages.  Quite delicious exposing the cognitive dissonance of the peoples.

Tue, 12/17/2013 - 16:30 | Link to Comment FieldingMellish
FieldingMellish's picture

Yeah, I saw that one. Loved the old man at the end. "nobody wants to pay higher prices." Perfect.

Tue, 12/17/2013 - 16:45 | Link to Comment Heffer
Heffer's picture

Instead of higher prices for the consumer maybe a couple million less from the billions that the Walton clan make off the backs of every american.

Tue, 12/17/2013 - 16:17 | Link to Comment SheepDog-One
SheepDog-One's picture

They're seriously gonna taper by $1/month this time.

Tue, 12/17/2013 - 16:20 | Link to Comment fijisailor
fijisailor's picture

Taper propaganda.  There will be no taper only additional QE as the lies collapse.

Tue, 12/17/2013 - 16:27 | Link to Comment El Vaquero
El Vaquero's picture

Any real taper would lead to an event that would become known to historians as "The Great Un-Taper." 

Tue, 12/17/2013 - 16:23 | Link to Comment ebworthen
ebworthen's picture

Joe "The Forehead" LaBologna?

Sure Joe, you think they're going to taper right before Christmas?

C'mon, you just want folks to sell - so your handlers at Deutschbank can buy.

Stantelli just did a Santelli on "Closing Bell". 

Zinger he got off to smack down one of the equity pimping FED devotees: 

"If Ben Bernanke were the head of a corporation or a hedge fund he'd be celebrating from behind bars!"

Smiles and nodding heads from most.

Tue, 12/17/2013 - 16:20 | Link to Comment GoldenDonuts
GoldenDonuts's picture

Smack gold tonight.  Taper tomorrow and pms drop a lot more.   The big Shorts can paper over their positions at much lower prices and reverse course when they "discover" that nobody else wants treasuries at this low interest rate and have to buy back in.  Hey everybody who counts wins.   Except of course the bottom 99%.

Tue, 12/17/2013 - 16:46 | Link to Comment logicalman
logicalman's picture

Everybody who counts wins - we all know the 99% don't matter.

Tue, 12/17/2013 - 17:35 | Link to Comment quasimodo
quasimodo's picture

Newsflash, metals will get shit canned regardless of what happens tomorrow. Every time we get these mini rallies and some folks are shouting with jubilee "moonshot baby!" I just shake my head, mutter a "go f yourself" to myself and chuckle at the shenanigans I always know will happen the next day on some stupid ass, obscure tidbit in the MSM.

The other day they were trying to tie it to unrest in the Ukraine. For Pete's sake! WTF does anything in the Ukraine even remotely have to do with the price of metals?! Did someboday accidently flush an gold eagle down the toilet there?

Tue, 12/17/2013 - 16:22 | Link to Comment Crabshacker
Crabshacker's picture

BULLSHIT!!

Tue, 12/17/2013 - 18:02 | Link to Comment WTFUD
WTFUD's picture

@Crabshaker
That's sexist what about cowshit.
Taper my arse i've got the runs.

Tue, 12/17/2013 - 16:27 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

To be clear... "Taper" = "SLOW DOWN of fiat Currency* Creation Rate."

When you're on the toilet, having a #2, and you have a "taper", you don't actually stop pooping instantly.  But the fecal taper in these instances does lead to a cessation of further expelling, whereas with CBs the taper of their chit can last much longer.

*What they (CBs and TPTB) call "Money", is technically "Currency".  Since Money is backed by real assets (gold, silver), and Currency is backed by "Decree", i.e. brute force of a military + LEAs, and their ability to kill or jail people for not paying Taxes that are levied against these Debt-backed currencies.

Tue, 12/17/2013 - 16:58 | Link to Comment Bryan
Bryan's picture

It's the same definition as "spending cut" by congress, which is not truly a cut to a lower amount, it's a reduction in the amount of additional spending that will be done.  We have bastardized the English language into some new form of alien communication.

Tue, 12/17/2013 - 16:24 | Link to Comment RagnarDanneskjold
RagnarDanneskjold's picture

Every Fed meeting is going to be like Groundhog Day until they make a decision.

Tue, 12/17/2013 - 17:57 | Link to Comment YC2
YC2's picture

"put your little hand in mine ...

Tue, 12/17/2013 - 16:23 | Link to Comment ExecutionParty
ExecutionParty's picture

Que up another taper headfake from the MSM, Banks, and the FED.

 

"this time its different, we're super cereal about tapering this time... SUPER CEREAL"

 

http://www.youtube.com/watch?v=h05YfP_8UsU

Tue, 12/17/2013 - 16:27 | Link to Comment wagthetails
wagthetails's picture

"we will taper $10bn....starting in 2015"

Tue, 12/17/2013 - 16:28 | Link to Comment KTV Escort
KTV Escort's picture

I don't get the obsession with that word. At least Hilsenrath, of all people, had the decency to use "winding down" recently. They won't reduce before Christmas, if ever. For crying out loud.

Tue, 12/17/2013 - 16:29 | Link to Comment El Vaquero
El Vaquero's picture

Can't ruin Christmas. 

Tue, 12/17/2013 - 16:40 | Link to Comment Clowns on Acid
Clowns on Acid's picture

KTV - It's the XMAS thing... but also Year End funding issues by banks globally. Why risk causing a problem or a perceived problem.

Tue, 12/17/2013 - 16:30 | Link to Comment B.J. Worthy
B.J. Worthy's picture

No Taper. VIX-raping TPTB are speaking loud and clear this afternoon.

Tue, 12/17/2013 - 16:31 | Link to Comment stant
stant's picture

no taper . but the market goes down anyway

Tue, 12/17/2013 - 16:35 | Link to Comment Seasmoke
Seasmoke's picture

The only taper anyone is going to need is to wrap CHRISTMAS presents with. And the Tribe at the Fed doesn't even need that !#

Tue, 12/17/2013 - 16:34 | Link to Comment Uchtdorf
Uchtdorf's picture

They'll taper $10B over a future 10-year period to be named at a later date.

Tue, 12/17/2013 - 16:37 | Link to Comment Seasmoke
Seasmoke's picture

they are going to Taper 10B off the increase to 125B. For a TAPER of 115B

Tue, 12/17/2013 - 16:41 | Link to Comment FieldingMellish
FieldingMellish's picture

It will be called an "inverse" taper and it will run at an "inverse" $5b/month rate. $90b, $95b, $100b... Negative sounds so negative.

Tue, 12/17/2013 - 16:46 | Link to Comment stant
stant's picture

bingo inverse taper for a cycle inversion of the market

Tue, 12/17/2013 - 16:38 | Link to Comment Clowns on Acid
Clowns on Acid's picture
  1. To Taper (which is tightening) right before year end could create havoc with Year End funding issues for banks. Every year funding desks at banks are paranoid that they will not be liquid enough. If the Fed was going to taper they would have to wink and nod to the banks beforehand so that all funding issues were soreted out before Year End.
  2. If Bernank the Skank feels he has to get 1 Taper in before he leaves, it will be a $5B UST only Taper. Just so he could say that he did it. 
  3. The Federal budget deal is not a done deal yet. Although it looks good because they have neutered the possiblity of filibuster, and appears to have the necessary RWEP Senate votes. So if Budget deal done , then Bernak the Skank can point to fiscxal drag as the reason he continued with QE for so long. "cause y'know... he's a hero.
  4. Verdict = Small taper @ 7.5B = UST only, with lots of great things said about recovery, unemployment, the Congress working together....etc.  
Tue, 12/17/2013 - 16:40 | Link to Comment HUGE_Gamma
HUGE_Gamma's picture

they will announce a taper timetable and benchmarks for 2014

Tue, 12/17/2013 - 16:41 | Link to Comment g speed
g speed's picture

so the upshot is that the printing (debasing the currency) to the banks reserve balance sheets continues (along with mark to fantasy) and we (anyone who produces anything of value) are going to pay(with more debt for bigger gov't budgets) the banks for having that money on their reserve balance sheets?? Insanity (ours for letting them do it)-- these looting cocksuckers need to be in the dirt--plain and simple--all of um--every stinking one. 

Tue, 12/17/2013 - 16:45 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

Speaking of Fables for Children & Adults, in the old X-Mass cartoon Jack Frost, the villain Kubla Krauss says:

"A Kaputnik saved is a Kaputnik earned!"

6 MOAR weeks of QE!

Tue, 12/17/2013 - 16:56 | Link to Comment Oldballplayer
Oldballplayer's picture

Yes...the taper, weak it is with this one.

Tue, 12/17/2013 - 17:09 | Link to Comment Yen Cross
Yen Cross's picture

    I could give a rats ass about the taper. I want to see the FOMC statement/guidance.

Tue, 12/17/2013 - 18:41 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Yen + - I can give that to you now...blah blah blah.. unemployment , data dependent, hope we can begin taper, data dependent, taper not tightening, Congress is now cool with budget, blah, blah...interest rates low for forseeable future.

What did I miss ?

Tue, 12/17/2013 - 20:06 | Link to Comment Yen Cross
Yen Cross's picture

    Sadly, I'd say you probably have it pretty well covered. Any uncertainty will be taken as a negative by the markets though.

Tue, 12/17/2013 - 17:13 | Link to Comment syntaxterror
syntaxterror's picture

Can we taper the use of "taper"?

Tue, 12/17/2013 - 17:15 | Link to Comment Save_America1st
Save_America1st's picture

I think eventually they'll end up at 100B per month...maybe even more.  If they couldn't have even cut it back 1 or 2 or 3 Billion a few months ago knowing it would cause Wall Street to cry, then there's obviously no way they're going to do anything but increase QE at some point.  So even if he comes out tomorrow and cuts it back a little I'm sure Larry Yellen will eventually ramp it up to 100B and beyond once she's in control of the CTRL-P machine.

Tue, 12/17/2013 - 17:49 | Link to Comment PontifexMaximus
PontifexMaximus's picture

Does DB still pay this non valeur? Still too much money to spend, or in the language of Goethe: " Perlen vor die Schweine werfen". But probably, Mr. LaVorgna is on the payroll of DB NY ( or US) , so it's just business as usual, zee tschermens kom up for it!

Tue, 12/17/2013 - 17:49 | Link to Comment Greenskeeper_Carl
Greenskeeper_Carl's picture

any taper will be replaced with the great untapering, increasing purchases north of 100b/month within 6 months of this taper. The unemployment number is whateve they say it is, and the fed knows these numbers are bogus, so they cant really say 'hey look its under 7% we can go back to nromal now'- employment prospects in this country are worse than ever before. The only thing they cn point ot and say 'look at this marvelous recovery' is the stock market, so its gains must be protected. we should have just let all these corrupt institutions burn up in 2008, now we have covered the problem with a mountain or worthless paper while allowing  TBTF to get TBTF-er. The only thing that will continue to hold our dollar and financial institutions together, IMO, is that Japan and the eurozone are in worse shape than we are, and will come unglued sooner, which will make the dollar appear to be a safe haven.

Tue, 12/17/2013 - 18:50 | Link to Comment Bunga Bunga
Bunga Bunga's picture

Dog and pony show.

Tue, 12/17/2013 - 18:59 | Link to Comment honestann
honestann's picture

fed announcement:  We absolutely, definitely decided to taper.

Someday.

Maybe.

But we could change our mind, if we must.  And we will.

Tue, 12/17/2013 - 20:37 | Link to Comment MollyHacker
MollyHacker's picture

QE is a bank balance sheet swap so a taper means what, I'll skip the desert. Wreak up the holiday party season with a punch to the stock market and see how many small rafts can be capsized although a '10bln taper' may accelerate talk for defunding the ACA.

Tue, 12/17/2013 - 20:34 | Link to Comment Seeking Aphids
Seeking Aphids's picture

15 Billion and a reduction in the overnight lending rate for reserve funds...............that's my guess and I am sticking to it...........and guess what, it is worth every other guess by all the 'experts' out there..........

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