Goldman's Post-Mortem Of Yellen's Second Day Of Congressional Testimony

Tyler Durden's picture

Missed today's follow up Janet Yellen testimony before the Senate Banking Committee? Don't worry: you didn't miss much, all the bases were covered including winter weather during the winter, the Fed's complete cluelessness about what "full employment" means (because the definition changed thoroughly from December 2012 when it was 6.5%), what the "quantitative" definition of quantitive easing is (Yellen has no idea), why the Fed isn't subject to a haircut on its MBS holdings while all the other banks have to suffer under the intolerable Basel III 15% haircut (something to do with illiquidity of MBS, and specifically - something to do with the fact that the Fed has soaked up more than all net issuance of MBS in the past year, but don't worry - the Fed is on top of it), and, of course, Bitcoin.

For everything else, here is Goldman's post-mortem of Yellen's Day Two testimony.

BOTTOM LINE: There were few surprises from day two of Chair Yellen's semi-annual monetary policy testimony before the Senate Banking Committee (originally scheduled for February 13 but delayed due to snow). At the margin, she indicated a bit more concern about the soft recent data, though not to the degree of signaling an end to the QE tapering process.


1. Regarding the recent string of weaker economic data, Chair Yellen briefly deviated from her prepared text during her introductory remarks, and noted that "…a number of data releases have pointed to softer spending than many analysts had expected. Part of that softness may reflect adverse weather conditions, but at this point it is difficult to discern how much." Responding to a question from Senator Schumer on whether that Fed would cease tapering in light of the recent data, Yellen indicated that "if there's a significant change in the outlook, certainly we would be open to reconsidering, but I wouldn't want to jump to conclusions."

2. Yellen did not clearly indicate a preference for any specific change to the forward guidance. At different points in time during the Q&A, Yellen suggested several indicators to supplement the unemployment rate in assessing the amount of slack remaining in the labor market, including the number of individuals working part-time for economic reasons, the broader "U-6" measure of unemployment, the long-term unemployment rate, wage inflation, and labor market flows. She declined to provide any quantitative information on her view of what constitutes full employment.

3. On the potential approach to managing the Fed's expanded balance sheet during monetary policy exit, Yellen stated that "there is no need to bring down the size of our portfolio to tighten monetary policy. We have a range of tools that we can use to raise the level of short-term interest rates at the time the Committee deems appropriate." This was consistent with past statements from Chairman Bernanke and represents a change from the June 2011 exit strategy principles. We forecast portfolio reinvestments at least until the time the Fed starts increasing the funds rate.

4. When asked about potential imbalances in financial markets due to the stance of monetary policy, Yellen stated that "at this stage I don't see concerns." However, consistent with past statements from Federal Reserve officials, she did highlight "pockets of concern," including underwriting standards in leveraged lending and farmland prices.

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Iam Yue2's picture

Post-Mortem? I heard Jan Hatzius had written it for her.

flacon's picture

They are trying to push S&P to "New All Time High". 

NYPoke's picture

They aren't doing a very good job today.

TheRideNeverEnds's picture

How do you mean?  if we close here it will be a new closing high, not that it matters.  


New highs from here are a given considering the fact that we are 100% guarnteed to close out 2014 over 2000, one hundred percent stone cold lock that we will close this year over two thousand in the S&P.   Just follow the FED balance sheet.


The question is will we close 2014 above 2500?  Of course the one unknown is when and by how much will they increase QE, if they do it before the end of Q2 the 2500 level definitely comes into play this year.    


Ignore everything else, it is all just noise, the FED IS the market. 

Max Damage's picture

The softness is because QE is welfare for banksters and therefore never works in the real economy. Not difficult, but I am sure these thieves know that already

ebworthen's picture

I think that first paragraph outdid the GS summary by a mile.

Toolshed's picture

I am unclear on why anyone would still listen to anything emanating from the cavernous rectum known as goldman sachs.

Mercuryquicksilver's picture

GS commenting on the GS puppet reading the GS script.

gjp's picture


She's concerned about farmland prices?

Prices are far too high for such worthless, easy-to-fake, easy-to-replace, frivolous things like farmland.

On the other hand, social networking eyeballs, and back-of-the-envelope pipe dreams from charlattans like Elon Musk, no bubble there in these assets of the future.

buzzsaw99's picture

amusing the squid acting like they have to parse fed statements like some outsider yutz

lasvegaspersona's picture


help me here, my Yiddish vocab does not include the word 'yutz'...a combo of putz and yahoo?

q99x2's picture

Extractl the sausage from the witche'z mouth. Hey I had to put up for years listening to an effeminent beard; lying like a Mofo. I ain't goin to listen to what the FED has to say until they appear before the court at their sentencing trial. And from Goldman Sachs...Give me a break.

lasvegaspersona's picture

The Fed's balance sheet does not have to make sense. It does not have to be strong. All that is required for the Fed to function is for the whole world to agree that everything is fine. When the ROW decides that things are not OK, the strength of the balance sheet will not matter.

When that day comes the Fed can just toss the stack of worthless MBS (along with pocket lint and 'gold certificates') into the trash can and start over....this time without the exorbitant privelege of being able to produce the reserve currency at will....or the US governement can decide another way to produce the purely symbolic, national medium of exchange.

Sufiy's picture

There is always Bull market somewhere, all these QE liquidity will be searching for the new sectors.


Lithium Stocks Surging On $5B Tesla Gigafactory Plan To Ramp Up Mass-market Electric Car

 Now we have more details on Tesla Gigafactory and Elon Musk's plans  to produce Lithium Batteries on a mass scale and dramatically reduce the cost. This plan brings catalyst to the whole electric cars and energy storage industry. As we have discussed before, Lithium materials industry is getting the boost as well. Investors are taking notice and Western Lithium is already up 300% this year.

gjp's picture

Lots of bull in this case, that's for sure.  Has anyone seen any justification at all for the claim that a giant factory in high-cost US that doubles the raw material requirements for the industry will actually drop costs by 30%?  It's an insance claim, surely he has to back it up?

I guess no claims need backing in the world that Easy Al, Banana Ben, and Plunder Women made.

TheRideNeverEnds's picture

Well the market is only up six points, its basically a down day so buy the dip! 

Dollarmedes's picture

So all Yellen has confirmed is that she knows the Potomac two-step. Nice to see she's not totally incompetent...just mostly.

swass's picture

I love how the financial industry hangs on every word as an indication the shots of smack will keep coming while to everyone else, the future looks dimmer and dimmer.

economisery's picture

Responding to a question from Senator Schumer on whether that Fed would cease tapering in light of the recent data

Haha....poor Chuckie... nervous as hell that the Dem's big-spending, deficit swelling, pork barrel policies will be jeopardized by Yellen turning off the money taps.

Tinky's picture

Fuck Chuck. Total schmuck.

Wage Slave's picture

Not to mention jeapordizing the .001% of his CON$tituency he actually gives a flying ratfuck about.

denverdolomte's picture

Correct me if I'm wrong, wasn't all QTardedity suppose to stop when unemployment reached 6.5%? Isn't Ocrumbles touting that Unemployment is at 6.6% or 6.5% at the moment? 

So who is the bigger Failure/Liar/Cheater/Scammer/you get the point here? 


Judging by this administration and banking industries recent actions, US citizens could easily revolt and the worst we would have to worry about are "harsh" warnings in the news and their testimonies that have ZERO meaning and make fuck all sense. Daily I am really not as scared of this roadshow as I once used to be as every side in completely inept. 

wakablahh's picture

When Yellen speaks, she NEVER speaks with confidence (regardless if she's right or wrong).. She replies so slow and full of umms and uhhs.  It really seems like she has no idea wtf she is doing since she can never give a straight answer to anything.. take the haircut example at the end.. Her explanations have no substance, no direction, and no clarification at all.  The fed should have someone else do the talking.. someone else more skilled at BS'ing, since Yellen can't even explain BS properly.

Max Damage's picture

Ah but the umsms and uhhs are secret code to the machines and mean BTFATH

1stepcloser's picture

As long as the algos understand her ums nothing else matters