• Knave Dave
    05/23/2016 - 18:16
    This past Thursday marked the one-year anniversary of the US stock market’s death when stocks saw their last high. Market bulls have spent a year looking like the walking dead. They’ve...

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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Thu, 01/09/2014 - 16:48 | 4316790 Leonardo Fibonacci2
Leonardo Fibonacci2's picture

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

Thu, 01/09/2014 - 16:53 | 4316818 Soul Glow
Soul Glow's picture

Price fixing is so vogue.

Thu, 01/09/2014 - 16:54 | 4316825 Manthong
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.

Thu, 01/09/2014 - 17:03 | 4316875 knukles
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.

Thu, 01/09/2014 - 17:12 | 4316914 NotApplicable
NotApplicable's picture

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

Thu, 01/09/2014 - 17:24 | 4316946 nope-1004
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.

Thu, 01/09/2014 - 17:43 | 4317020 flacon
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....

Thu, 01/09/2014 - 18:25 | 4317186 EscapingProgress
EscapingProgress's picture

Salty lemonade...yucky.

Thu, 01/09/2014 - 18:33 | 4317219 Panafrican Funk...
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.

Thu, 01/09/2014 - 20:02 | 4317460 disabledvet
disabledvet's picture

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

Thu, 01/09/2014 - 17:17 | 4316923 TruthInSunshine
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.

Thu, 01/09/2014 - 18:05 | 4317117 Carpenter1
Carpenter1's picture


Thu, 01/09/2014 - 16:57 | 4316845 yogibear
yogibear's picture

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

Thu, 01/09/2014 - 16:58 | 4316854 frankTHE COIN
frankTHE COIN's picture

Bernanke Electric Shock Collars for a mere 3 Bitcoins.

Thu, 01/09/2014 - 17:07 | 4316900 yogibear
yogibear's picture

Thought I heard Yellen bark.

Thu, 01/09/2014 - 18:20 | 4317172 thunderkiss
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.

Thu, 01/09/2014 - 16:50 | 4316800 Ham-bone
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 collapsed...in 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 moar...no debate, no QE tapers or QE wind downs...no exit from hyper-monetization.  End.  Stop.  Period.

Gold, silver, commodity prices falling in this situation are ludicrous...as 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.

Thu, 01/09/2014 - 17:05 | 4316882 knukles
knukles's picture

Ah, the Sophistry of Propaganda.

Thu, 01/09/2014 - 20:07 | 4317476 disabledvet
disabledvet's picture

"say hello to the Law of Large Numbers." http://astro.unl.edu/naap/pos/pos_background2.html 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.

Thu, 01/09/2014 - 17:33 | 4316972 wee-weed up
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!

Thu, 01/09/2014 - 17:35 | 4316990 Ham-bone
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...

Thu, 01/09/2014 - 17:41 | 4317017 Sean7k
Sean7k's picture

Stop that! No one should have mental images like that. Sick, sick,sick...

Thu, 01/09/2014 - 17:38 | 4317003 Sean7k
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?

Thu, 01/09/2014 - 17:47 | 4317041 Ham-bone
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 classes...so they can only pump fast or pump faster to avoid the unleverage monster.

Thu, 01/09/2014 - 17:59 | 4317095 Sean7k
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.

Thu, 01/09/2014 - 18:10 | 4317136 Ham-bone
Ham-bone's picture

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

Thu, 01/09/2014 - 18:45 | 4317251 Sean7k
Sean7k's picture

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

Thu, 01/09/2014 - 16:51 | 4316803 Cursive
Cursive's picture

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

Thu, 01/09/2014 - 18:10 | 4317137 Temporalist
Temporalist's picture

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

Thu, 01/09/2014 - 16:51 | 4316807 Al Huxley
Al Huxley's picture

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

Thu, 01/09/2014 - 16:51 | 4316808 Major Major Major
Major Major Major's picture

The price is wrong, bitches!

Thu, 01/09/2014 - 16:52 | 4316812 vote_libertaria...
vote_libertarian_party's picture

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

Thu, 01/09/2014 - 17:07 | 4316894 knukles
knukles's picture

Applying a Heisenberg type framework...



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

Thu, 01/09/2014 - 17:23 | 4316942 El Vaquero
El Vaquero's picture

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

Thu, 01/09/2014 - 17:37 | 4317001 Colonel Klink
Colonel Klink's picture

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

Thu, 01/09/2014 - 16:52 | 4316816 NoWayJose
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????

Thu, 01/09/2014 - 16:54 | 4316820 FieldingMellish
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...

Thu, 01/09/2014 - 17:03 | 4316874 Cursive
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."

Thu, 01/09/2014 - 17:05 | 4316887 Pareto
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.

Thu, 01/09/2014 - 21:46 | 4317876 disabledvet
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 less...one 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? sure...gold 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...

Thu, 01/09/2014 - 16:53 | 4316821 Spungo
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.

Thu, 01/09/2014 - 16:56 | 4316841 101 years and c...
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.

Thu, 01/09/2014 - 16:57 | 4316843 HUGE_Gamma
HUGE_Gamma's picture

Im impressed by the photoshop skillz

Thu, 01/09/2014 - 17:00 | 4316846 tony wilson
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.

Thu, 01/09/2014 - 16:58 | 4316853 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

But WEALTH EFFECT can never be bad!

Thu, 01/09/2014 - 17:30 | 4316902 B.J. Worthy
B.J. Worthy's picture

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

Thu, 01/09/2014 - 17:08 | 4316903 knukles
knukles's picture

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

Thu, 01/09/2014 - 16:59 | 4316857 Rainman
Rainman's picture

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

Thu, 01/09/2014 - 17:19 | 4316931 Al Huxley
Al Huxley's picture

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

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