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The Fed's Farcical Forecast Fiasco

Tyler Durden's picture




 

The chart below, which summarizes 5 years of Fed "forward guidance" on that most critical of variables - the Fed Funds rate - proves two things:

i) there is nothing worse in this world than being a Fed Funds, or Eurodollar, trader, considering 5 years of forecasts have been systematically destroyed by a Fed which has failed time and time and time again to stimulate the economy enough to push it away from ZIRP (and why any hope for the first rate hike in mid-2015 are idiotic), and

ii) when it comes to central planning, the economists that now openly control the bond and stock market and increasingly more of global capital flows, have absolutely no idea what tomorrow brings perversely, since it is their actions that have made the required outcome - a self-sustaining, economic recovery - impossible.

And some amusing cover from Bank of America to justify this disaster:

in each of the last three business cycles, the market consistently mispriced the Fed, expecting rate hikes much too early. Let’s take a look at the forward curve after each FOMC meeting in the most recent period. Until the Fed announced “calendar guidance” in 2011, the markets always saw Fed rate hikes just around the corner. More recently, Fed attempts to guide the markets have flattened that curve.

So... is this Bank of America's attempt to validate curve flattening (and soon inversion) as bullish? Sure, why not.

 

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Wed, 04/23/2014 - 08:19 | 4686035 buzzsaw99
buzzsaw99's picture

The sun'll come out tomorrow,

Bet your bottom dollar that tomorrow there'll be sun...

Wed, 04/23/2014 - 08:29 | 4686051 ArkansasAngie
ArkansasAngie's picture

There will in fact be a tomorrow.

The Fed will be no more accurate tomorrow than today ... or yesterday.

Trying to boost the economy with animal spirits and liquidity just doesn't solve insolvency.

The problem isn't John and Mary Doe's bankruptcy.  It's the insolvency of the 1%'er's that is dragging us down.

Moral Hazard cannot be avoided forever

Leave no incumbent in office

Screw'em

Wed, 04/23/2014 - 08:34 | 4686068 GetZeeGold
GetZeeGold's picture

 

 

Screw'em

 

Infinity!

Wed, 04/23/2014 - 08:43 | 4686091 icanhasbailout
icanhasbailout's picture

will draw upward-sloping lines for food

Wed, 04/23/2014 - 08:48 | 4686098 GetZeeGold
GetZeeGold's picture

 

 

Beats the 650 million we paid out to Michelle's college buddy.

 

If no one objects....I say give him the job.

Wed, 04/23/2014 - 09:11 | 4686165 Serfs Up
Serfs Up's picture

Looks right to me...that chart comports with the fifth half recovery perfectly.

Wed, 04/23/2014 - 10:28 | 4686387 Buckaroo Banzai
Buckaroo Banzai's picture

The "Free Beer Tomorrow!" school of economic forecasting.

Wed, 04/23/2014 - 10:41 | 4686438 Bindar Dundat
Bindar Dundat's picture

The ZH crowd likes to cry a lot.  

 

Give these guys at the Fed a  break, they have a tough job keeping the the American society living in a manner that we have become accostomed, without your crying and bitching about fairness. 

 

Look at us , we have forgotten what it is like to work and what it is like to be self sufficient.  The only reason we are not a third world country is that the U.S. Military and the FED have allowed us to spend without the worry of having to pay anyone back.   Yet we have the nerve to complain when a group of people try to keep us warm in the winter and  well fed all year long.  This does not happen by accident you idiots!

Wed, 04/23/2014 - 10:45 | 4686451 centerline
centerline's picture

You forgot the /sarc tag.

Wed, 04/23/2014 - 11:31 | 4686660 bobcromwell
bobcromwell's picture

The Zh crowd are now bitter and broke.

Wed, 04/23/2014 - 12:53 | 4686983 Bindar Dundat
Bindar Dundat's picture

We are all getting a bit more broke and bitter but compared to the rest of the world we are golden!

 

SO stop bitching and start a fan club for the FED .............or smile at the very least and have another sip of the coolaid.

Wed, 04/23/2014 - 08:19 | 4686038 NoDebt
NoDebt's picture

What is that?  A threat?

Puhleese.

Wed, 04/23/2014 - 08:21 | 4686040 B2u
B2u's picture

It is the FED?  Just like the sun revolves around the earth, although the earth seems flat to me.

Wed, 04/23/2014 - 10:52 | 4686479 101 years and c...
101 years and counting's picture

the fed cant stop printing money for more than 1 month without stocks cratering. how the fuck the clueless ape PhD's going to raise rates if they canteven stop printing???

Wed, 04/23/2014 - 08:22 | 4686041 q99x2
q99x2's picture

It is ok because Belgium is pumping money into the US Treasury like they did into the Congo before Heart of Darkness was written and long before Apocalypse Now was written.

Watch your hands.

Wed, 04/23/2014 - 08:39 | 4686083 GetZeeGold
GetZeeGold's picture

 

 

It is ok because Belgium is pumping money into the US Treasury

 

Uh-huh.....sure they are.

Wed, 04/23/2014 - 08:43 | 4686089 headhunt
headhunt's picture

Thank God for Belgium's seemingly bottomless pockets.

Their GDP must be phenomenal.

Wed, 04/23/2014 - 10:51 | 4686469 BurningFuld
BurningFuld's picture

Hey they won the New Jersey State lottery 25 times in a row.

It could happen!

Wed, 04/23/2014 - 08:46 | 4686096 negative rates
negative rates's picture

Everybody look at your hands.

Wed, 04/23/2014 - 09:14 | 4686171 GetZeeGold
GetZeeGold's picture

 

 

Can't.....to scared!

Wed, 04/23/2014 - 10:32 | 4686406 Buckaroo Banzai
Buckaroo Banzai's picture

We can dance, we can dance,
Everybody's taking a chance...

Wed, 04/23/2014 - 08:26 | 4686043 PlusTic
PlusTic's picture

these dippshitts are doing everything they can to create the illusion of growth, even going as far as convincing the bond mkt (flattening curve) that things are good...all in the face of the reality of stagnation...A FARCE!

Wed, 04/23/2014 - 08:31 | 4686056 ArkansasAngie
ArkansasAngie's picture

They are the bond market

Wed, 04/23/2014 - 11:05 | 4686546 KickIce
KickIce's picture

They're the market, period.  Take out government spending on stuff like iphones (both by .gov and FSA), military by so called private businesses and big pharm and we're 3rd world in a heartbeat.  The Patriot Act has probably "created" more jobs with Homeland Security, TSA and FEMA than all the stimulus plans combined.  Bastards have got more mileage on a reserve currency based in fiat than...

Wed, 04/23/2014 - 08:36 | 4686071 Unknown Poster
Unknown Poster's picture

It seems strange that a number as consistanly wrong and massaged as future GDP would be widely used by companies to help guide their strategies. For instance, GDP growth implies more energy use. More energy use leads to higher oil prices unless more supply is brought online. Therfore...and it's all just smoke and mirrors.

 

Wed, 04/23/2014 - 08:58 | 4686133 ArkansasAngie
ArkansasAngie's picture

Have you noticed that "bank" revenue is taking hits from untaper due to lower transactions with the Fed?

Then, of course, there's ZIRP which makes the "banks" money.

and ... And ... AND ... 

This is a farce.  By postponing recognition of insolvency, the Fed is bailing out the shatheads at our expense.

These forecasts of recovery are nothing but a delaying tactic.

The yahoos making the decisions are not going to have a V-8 moment.  They are not going to suddenly say gee ... maybe we should stop supporting Zombies so that organic growth can take place on Main Street.

Social wedge issues be damned.  Unelect'em!

I find it interesting that "unelect" is not a recognized word.

Wed, 04/23/2014 - 09:14 | 4686174 Unknown Poster
Unknown Poster's picture

I'm amazed that when I go to the grocery store or the gas station they have what I want. The main street economy still has to be forward looking.

Wed, 04/23/2014 - 16:03 | 4687764 TheReplacement
TheReplacement's picture

Unelect is not a word.  Hang is a word.  Shoot, burn, disembowel, decapitate, draw and quarter also are words.  Just sayin's all.

 

Wed, 04/23/2014 - 09:01 | 4686111 MFL8240
MFL8240's picture

Get rid of these bastards they are in office to enrich their friends at the banks the rest of this is nothing more than a joke!

Wed, 04/23/2014 - 08:57 | 4686128 LawsofPhysics
LawsofPhysics's picture

Give us all your real wealth now, take these paper promises and keep paying us...

What items/products of real value do any of these paper-pushing fuckers actually create for society?

Turn them all into soylent green already.

Wed, 04/23/2014 - 09:05 | 4686149 ArkansasAngie
ArkansasAngie's picture

As an angel investor I am constantly being sold ... and then we'll borrow money.  Startups don't need debt, they need capital.  I don't invest in such "opportunities".

Finacialization is BS.  It distorts determination of economic value.  It misallocates funds.  It starves communities of the fruits of their labors.

Screw'em

 

Wed, 04/23/2014 - 10:46 | 4686457 LawsofPhysics
LawsofPhysics's picture

Yes, unfortunately, the same people who have benefitted from "financialization" now own your government.

Voting them out accomplishes nothing when the person you "elect" is fully owned by the same money source.

History is very clear on this, once a select group of people have obtained this kind of power and control, it is never given up without bloodshed, period.

Notice how none of our "leadership" talks about shutting down K-street or really addressing insider trading or passing a law that makes them have to use the ACA like everyone else.  Basically, every single "represetative" is actively promoting one set of laws for themselves and another set of laws for you. 

Wed, 04/23/2014 - 11:18 | 4686602 ArkansasAngie
ArkansasAngie's picture

They have to be removed.  If you don't vote them out, how do you propose to remove them?  

I'd really rather skip the Mad Max solution.

So ... I'm going to vote and vote and vote and do my part in trying to convince others to unelect'em.

Am I delusional ... better hope I'm not.

Wed, 04/23/2014 - 12:32 | 4686888 LawsofPhysics
LawsofPhysics's picture

"Am I delusional" -  We have been "voting" this way for quite some time, how have things changed recently?

Are the same people still in charge?  Are we really to believe that the Bush Family has a monopoly on political "smarts"?

What about the Clinton Family.  Do you really believe good politicians can only come from one fucking bloodline?

Wake the fuck up and smell your own fucking monarchy!!!  Based on the evidence I would say you are delusional.  the good news is that you clearly are not the only one.

Wed, 04/23/2014 - 16:05 | 4687776 TheReplacement
TheReplacement's picture

Actually, that is bad news.

Wed, 04/23/2014 - 16:06 | 4687785 TheReplacement
TheReplacement's picture

Only the threat of violence holds them back.  Maybe the great awakening will happen and the masses will all vote for their real best interests but until that happens, arm yourself.

Wed, 04/23/2014 - 09:01 | 4686137 AdvancingTime
AdvancingTime's picture

Few people ready understand the economy and this includes the Fed. The study of economics is often baffling and confusing. Many economic theories exist but many are laced full of holes and conundrums. Much of how people react to a policy may have to do with timing and perception instead of reality. Economics is full of loops that feed back upon themselves and unexpected pitfalls based on expectations.

All this can become quite abstract. Economist predict events that never tend to unfold as expected or planned. Many of the "modern monetary theories" in use today have not been proven over time, but reflect an attitude that we can control  economic cycles better than in the past. We shall soon see if that is indeed true. More on this subject in the article below.

http://brucewilds.blogspot.com/2014/03/few-people-really-understand-econ...

Wed, 04/23/2014 - 09:06 | 4686156 ArkansasAngie
ArkansasAngie's picture

The Fed consists of pychopaths and people who believe their own bull shit

Wed, 04/23/2014 - 16:17 | 4687828 TheReplacement
TheReplacement's picture

The problem you have is that you seem to believe it is complicated and that we need economists to study the economy and tell us what to do.  It is not.  We do not.  They cannot.

They used to make it complicated in order to justify their positions and salaries.  Then they made it complicated to simply enrich themselves at everyone's expense.  Once they were rich enough they did it to have power.  Now it might be dawning on them that they have created a uncontrollable distortions that get worse with every complicated attempt to put a leash on them.  Today economists who really understand see that all they can do at this point is suppress the distortions and pray while controlling the news about what is actually happening.

Economics for dummies:  Supply and demand at the individual level ultimately controls everything else.  You can cheat, you can lie, you can print, but in the end you cannot control human nature.  The more you try the more likely you will end up on the wrong side of a grisly execution... but that's more a matter for lawofphysics and gravity.

Wed, 04/23/2014 - 09:33 | 4686214 detached.amusement
detached.amusement's picture

jeez I thought it was the CBO's projections for the economy from all of .gov's efforts at first.

Wed, 04/23/2014 - 09:44 | 4686247 scubapro
scubapro's picture

 

 

flattening the curve yes.   monetizing the long end, AND as items 'mature' reinvesting it....short term items mature all the time which then gets invested back into the long end.  the fed is flattening the curve all by itself.  despite what liesman said about the yeild curve a week ago, an inverted yeild curve predicts recession 90% of the time.    in this 'environment' the 1 yr will not go above the 30 yr.   but we will probably see the 5 yr yld go higher than the 10 yr, and that IS an inversion.  

the fuse is lit.  each month less qe is flowing to equity mkts which lessens their ability to prop it up...diminishing returns and all that.    retail is trained to accept 10% down on nasdaq and 5% on spx.   when they go down 20% and 10% retail wont be able to react except to sell at the bottom of the first leg down and regret it when it bounces, perfect set up bagholders

Wed, 04/23/2014 - 10:00 | 4686291 Dre4dwolf
Dre4dwolf's picture

Its a zero-sum game at this point.

Wed, 04/23/2014 - 10:05 | 4686303 Shizzmoney
Shizzmoney's picture

it's ZERO SUM now; when it goes to NEGATIVE SUM - then THATS WHEN THE FUN BEGINS!

Wed, 04/23/2014 - 10:40 | 4686437 Falconsixone
Falconsixone's picture

HA! Great graphic. That's the running Jackass tail graph where the shit flies out. 

Wed, 04/23/2014 - 10:47 | 4686461 onewayticket2
onewayticket2's picture

looks oddly similar to the tail artwork on Malaysia Airlines.

Wed, 04/23/2014 - 10:50 | 4686467 elwind45
elwind45's picture

Can you explain putting the Fed in different areas of the golf cart and its impact on rates? Because rates go up than the fed makes adjustments and not before? My fear is short rates rise to compete with better value further out on curve and the growth reset is bogged down by stronger dollar and demographics

Wed, 04/23/2014 - 10:54 | 4686489 TruthTalker
TruthTalker's picture

This is all anyone needs to know We Will Kill The Dollar - what more is there?

The Global Elite : We are just going to Kill the Dollar (Jun 25, 2013) https://www.youtube.com/watch?v=mRqu3WzE0io
Wed, 04/23/2014 - 10:56 | 4686502 gcjohns1971
gcjohns1971's picture

Predicting where you currently are on that curve lets you know how soon "Tapering QE" will transition to "Expanding QE".

Wed, 04/23/2014 - 11:04 | 4686541 gcjohns1971
gcjohns1971's picture

FWIW,

Looking at the 'Threshhold Guidance" curve I'd say "Tapering" turns to "Expanding" no later than the end of October because the projected curve will then be nearly 500 BP from the actual trend line.

 

BTW... Is it my imagination? 

Or is there a detectable downward slope on the trend-line?

What happens when that trendline reaches nominal zero?  Real rates are sharply negative... 

But I am asking what happens when the Fed must have NOMINAL negative rates in order to delay the crack-up boom?  Will that result in a loss of confidence in the dollar, and a wholesale move to material goods - ergo hyperinflation?

Wed, 04/23/2014 - 11:11 | 4686569 Seize Mars
Seize Mars's picture

..."there is nothing worse in this world than being a Fed Funds, or Eurodollar, trader..."

Wiping a tear from my eye...LOL

Wed, 04/23/2014 - 13:11 | 4687041 The Magus
The Magus's picture

I tried reading this entry four times. What it means, I have NO idea.

What kind of education do Zero Hedge writers obtain? I assume it's an advanced degree in 'Convoluted Byzantine Jargon-Infested Pseudo English'.

Sigh....

Fri, 04/25/2014 - 13:26 | 4696050 MeelionDollerBogus
MeelionDollerBogus's picture

Gartman? Long Fed in Yen terms?

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