Goodbye Greenspan/Bernanke Put, Welcome Bernanke/Yellen Collar

Tyler Durden's picture

"Remember the Greenspan/Bernanke put?" BNP's Julia Coronoado asks, well "welcome to the Bernanke/Yellen collar." As some expected, Coronada notes that there was substantial discussion in the December FOMC minutes about concerns about financial stability stemming from QE, and the role it plays alongside progress on their dual mandates in making monetary policy decisions.

As we noted, a number of participants stated concerns over small-cap multiples and cov-lite loans - and that shift to comprehending the costs of QE - as opposed to simply the 'apparent' benefits implies a regime change in the reaction function from a put under the market to a collar around the market - capping what was, until this point, thought an endless upside by many.

Via BNP's Julia Coronado,

The staff conducted a survey of the 17 FOMC participants over the inter-meeting period on the marginal costs and benefits of QE. The results suggested that "a majority of participants judged that the marginal efficacy of purchases was likely declining as purchases continue."


Among their financial market concerns, "several participants commented on the rise in forward price-to earnings ratios for some small-cap stocks, the increased level of equity repurchases, or the rise in margin credit."


In general "participants were most concerned about the marginal costs of additional asset purchases...pointing out that a highly accommodative stance of monetary policy could provide an incentive for excessive risk taking" and that "the risks to financial stability could be somewhat larger in the case of asset purchases than in the case of interest rate policy".


The Committee is not so concerned that they are not patient and data dependent, but in December the data were going in the right direction and "many commented that progress [in the labor market] to date has been meaningful, and some expressed the view that the criterion of substantial improvement in the outlook was...likely to be met in the coming year if the economy evolved as expected."


The baseline case seems to be tapering in measured steps completing QE around year-end if growth is in the vicinity of 3%, hiring continues or accelerates, inflation doesn't decline further, and financial markets stay reasonably well behaved.

Simply put - the Fed will react to falling asset values that destabilize economy, "and" asset values that rise too far and too fast or are fueled by leverage that may put economy at risk.

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Leonardo Fibonacci2's picture

woof woof!!.......... ahhhh fuck you biatch!

Manthong's picture

Well, when the 10 year hits 4%, she will be wearing market cuffs.

I still think that’s a white Kevlar helmet she is wearing.

knukles's picture

A private bank owned by the privately owned bankers responsible to nobody manipulating markets as they see fit for their own benefit.

Lordie, Lordie, Lordie, the time of the Anti-Christ has arrived.

NotApplicable's picture

"Financial Stability" = "One More Day of the Ponzi"

nope-1004's picture

I don't get why anyone would "analyze" Fed minutes.  Anything that is given to the public is obviously a bunch of lies.  Why waste your time analyzing bullshit?

All you have to do is look at the evidence.  QE is forever until dollar demise.  There is no other way to foot the bill for the USG deficit and Treasury purchases.

This pig is going down eventually.

flacon's picture

Well, they need to give a "little" QE - pump the markets, reduce QE - tank the markets, give a "lot" of QE - pump the markets, reduce QE - tank the markets, give "hyper QE" - markets to infinity. ...... ... and the oceans will turn to lemonade like the Soviets promised....

Panafrican Funktron Robot's picture

Meanwhile, Scotia Moccata just took a massive hit to their registered gold stocks today, a whopping 63K hit.  The grand total registered stocks for all Comex depositories is now down to a mere 416K ounces; priced at the current $1227/oz, that's about $510 mln in nominal registered stock left.  Consider:

Open interest:  389K contracts, representing 100 oz each.  That's 38,900K ounces.  There is exactly 1 registered oz for every 100 oz's of open interest.

Volume today:  163K contracts, representing 100 oz each.  That's 16,300K ounces.  There is exactly 2.6 registered oz. for every 100 oz's of volume traded.

Now here is something that will really cook your noodle:

Notice the severe lack of physical settlement notices since the close of last year.  This is an exceptionally long period of time.  I think the depositories here (esp. HSBC and JPM) must have "given word" that phys is no longer a settlement option.

disabledvet's picture

the Queen Mum has now asked for her gold back too...

TruthInSunshine's picture

Cliff Notes version: Bernanke blew one HELLUVA bubble in just about every asset class (especially if current asset values are weighed against what their FMV should be) using 5 years of RADICAL central fiat bank interventionism, and he literally can't wait to get the hell out of the burning building, bitchez.

Carpenter1's picture


yogibear's picture

The new face of the Fed. The dogs are howling.

frankTHE COIN's picture

Bernanke Electric Shock Collars for a mere 3 Bitcoins.

thunderkiss's picture

Dear ZH, please please don't include pictures of her in stories about the Fed.  I can't stand that fucking haircut.

Ham-bone's picture

The Fed can never slow or stop QE...the Fed has created massive Treasury supply for which there will never be organic demand absent a mega departure from risk into bond "safety"...

The fact that "foreign" holdings of US Treasury bonds are a record $5.65 T of the $12 T public outstanding debt (vs. $2 T Fed holdings)  and foreigners are not selling off their holdings tells you they have been reassured QE is forever...otherwise they would soon be facing large losses as yields rose and bond prices other words, on a QE taper of it's buying, foreigners would front run the exit.

Hard to believe people (everybody) don't understand the Fed now *must* print forever debate, no QE tapers or QE wind exit from hyper-monetization.  End.  Stop.  Period.

Gold, silver, commodity prices falling in this situation are ludicrous as if I told you there would be fewer and fewer dollars chasing ever growing # of assets and this would cause the price to rise...we have an inverse where ever more infinite dollars are chasing fixed and growing scarcer resources causing the price to...fall. 

That this would be accepted and peddled by economists, professors, etc. to the people show it's clearly time for me to check into the Loony bin.  How deep into the propaganda state are we to observe something and accept it is exactly the opposite as our observation.

knukles's picture

Ah, the Sophistry of Propaganda.

disabledvet's picture

"say hello to the Law of Large Numbers." forget "the earth revolves around the sun"...this teenager understood mathematically that "Planet Earth was not only round friggin HUGE and MOVING." go ahead..stand in front of a Planet Mr. MIT guy..see what happens.

wee-weed up's picture



Yeah, some fools are hoping the Bernanke/Yellen collar...

Will turn into the Bernanke/Yellen chastity-belt!

Dream on...

Yellen will QE like a loose skanky nymphomaniac!

She has NO choice!

Ham-bone's picture

ahhhh...Janet as an insatiable nympho who really can't say no...that is hot!!!  I'll tuck that mental image away for later...

Sean7k's picture

Here's one way to think of it:

If you blew a bubble in every asset class with more money and credit than can be imagined, until real value was completely obscured, could you not then manipulate each asset class according to your preferences? You could take air out of one balloon and transfer it to another. Without a pricing mechanism and without other markets to measure against (global economy), how would you know what anything was really worth?

Asset classes, in total real valuation, may be a FRACTION of the assumed values, allowing the CB's to manipulate all of them at will. It's only money and without an actual anchor to real collateral, wealth beomes a fantasy game defined by those with the power to dictate the terms.

The academicians are just entertainment. Genius huh?

Ham-bone's picture

I like it all except I don't think they can take down asset classes once the big bubble is pumped up due to record leverage and how it intertwines accross all they can only pump fast or pump faster to avoid the unleverage monster.

Sean7k's picture

So, how do you know what the leverage is? Since they provide all the numbers. Even Comex warns it could all be a lie.

Ham-bone's picture

I believe the sources I like and disregard those that don't support my Merica!!!

Sean7k's picture

Looks like you have it figured out. Congrats! Except that Yeller/ mental image thing.

Cursive's picture

They will be as successful at "fine tuning" the "market" as the Nixon or the Soviets were.

Temporalist's picture

Hey if there ever was one guy you'd want to run the entire global economy it's that dude Yellen.

Al Huxley's picture

Why can't these fuckers just give me some fucking money?

Major Major Major's picture

The price is wrong, bitches!

vote_libertarian_party's picture

They are just NOW noticing a bubble risk from their actions.

knukles's picture

Applying a Heisenberg type framework...



Q:  Is the glass half full or half empty?
A:  What glass?

El Vaquero's picture

I know it's half empty, but I have no idea where it went. 

Colonel Klink's picture

In that same vein, the Fed is cooking all their math in an RV.

NoWayJose's picture

'The Fed will react to falling asset values that destablize the economy'????  How - they can't lower interest rates any more, and how much QE is enough without itself destablizing the economy????

FieldingMellish's picture

Why is the Fed targeting asset prices? I thought its mandate was employment (FAIL!) and stable inflation (FAIL!)? Unless... that is not their real mandate...

Cursive's picture


Not "stable inflation," but "price stability."  Price stability is widely interpreted to include prices for commodity and asset prices.  I mean, it's all bullshit, but that's what they say and they are really disingenous about how they measure "inflation."

Pareto's picture

Its the new and improved Phillips curve!  Since nobody can actually demonstrate that the Phillips Curve actually exists or applies to any economy anywhere in the world - ever - why not make up a new one.  So, its now a 3 dimensional Phillips Curve, targeting the employment - inflation tradeoff, as well as asset prices!  Its a beautiful thing.  So long as "Its What They Do, Not What They Say" (Michael Salemi, 2008) - aka Don't fight the FED remains the mantra on Wall Street, they can pump POMO and use the change in asset prices as a measurement of a Kaldor/Hicks kind of tradeoff for both employment and inflation and never really have to worry about real results since in a Kaldor/Hicks paradigm, compensation (results) can remain hypothetical and thus, never need to actually materialize.  Like counting how many fairies can dance on the head of a pin.  Awesome.

disabledvet's picture

the only thing scarier than Wall Street collapsing is Wall Street going to the Moon. "this can only be modeled in Washington DC" the risk is so great. (and i mean in the financial sense of the term...not actually going to the moon...which apparently can now be done as a commercial enterprise now actually. by two companies no that is totally private actually.) In other words the Oracle of Omaha says "there's only enough gold in the world to sit inside a swimming pool"...saying to me "your gold to debt ratio had better be rock solid on all fronts too." When you have a gold standard banks are VERY careful about taking on debt...wouldn't this make Governments happy? I sure would think it would make for happy politicians, yes? In other words "the program gets budgeted so at least we have an idea where the money goes" not because we actually have the money. Have we conjured up a simply beyond imagination equity rally only to at the same time create a "debt monster" too? makes absolute sense to me...but cash flow can't just be "conjured up" either. And you want the securities business inside the bank? What am I investing in again? An AIG...even today...or Met Life or Morgan Stanley could throw off hundreds of billions in free cash flow...but if all that "flow" gets sucked into the "vortex" (that was the term used in Europe) then basically we're right back at square one...namely a cash crunch. this does not strike me as theoretical either. probably just rambling again...

Spungo's picture

The name's Poochie D and I rock the telly. I'm half Joe Camel and a third Fonzarelli. I'm the kung fu hippie from gangsta city. I'm a rappin' surfer, you the fool I pity.

101 years and counting's picture

fomc chair best job ever. instead of getting fired (or imprisoned for being so fucking stupid), you get to print money.  thats why yellen was picked.  no way she lives the entire 4 years.  and she'll get all the blame for the disaster ben created.  just die, you fucking cow.

HUGE_Gamma's picture

Im impressed by the photoshop skillz

tony wilson's picture

that dere yellen  jewish terror ist  fella is real ugly.

i appy poly gise upfront if he not a jewish fella.


and youse ajitaters dontes go callin me anti semenetick and a german nazi cos i tell i hated adoff hilter and he was a german nazi.

i mainly hated him cos he was half jewish.

Dollar Bill Hiccup's picture

But WEALTH EFFECT can never be bad!

B.J. Worthy's picture

It's only bad when Republicans are in charge, because trickle-down is TOTALLY not the same thing.

knukles's picture

Last trickle down I had was about ten years ago.
Some time during my last drunk.

Rainman's picture

The Fed hasn't yet read the obituary ...Goldilocks is dead.

Al Huxley's picture

They know, but they're doing a 'Weekend at Bernie's' thing with her.