What Happens Next?

Tyler Durden's picture

How much longer can the balloon be held under water?



h/t @Not_Jim_Cramer

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Jack of All Trades's picture

How much ink does Mr. Yellen have left?

PontifexMaximus's picture

She is still waiting for him....

TheCanadianAustrian's picture

This chart shows how interesting the financial section of the news has been over time.

Say What Again's picture

The last time they held the VIX down for 4 years (2002 to 2006).  Based on that, and if they can repeat history, they should be able to keep the VIX compressed for another 9 to 18 months or so.  It's very plausible that they can do this well into 2015 and maybe even into 2016.

scrappy's picture

You might be right "Say What Again"

I am usually bearish but the article linked below seems to agree with your comment and Armstrongs 2015.75 market drop call. It peaked my "interest' because that's essentially what it's about, it may work...for a while...until it doesn't.

Japan’s Extraordinary Monetary Experiment Richard Duncan


Still I see the real economy subdued Q2 though this is an election year so expect something...

Maybe the US goes all in after that predicted drop in Q3-4 2015 Q1 2016 which also matches Armstrongs chart ...

The rest of the system will need major surgery or a new body by then.

Final Call - Invasion of the Body Snatchers 2017-2020


Armstongs Model: http://armstrongeconomics.com/models/7219-2/







THX 1178's picture

If money is to be printed, then how much faith/patience do bond-holders have in Mr. Yellen and her posse?

The Axe's picture

I think the answer is YEARS

101 years and counting's picture

"he cant stay under with 3 barrels on him.  not with 3."

Eyeroller's picture

And the shark ate the guy who said that...

NotApplicable's picture

You're measuring bullshit.

"What difference does it make!"

aVileRat's picture

I'm going to say 4 to 7 months then ECB takes over. Lets circle back in December. Someone not Soros or Gross feel free to put marks in the Tyler-Taper book.

Till then, sadly, it looks like bond bulls get 1 more hurrah

Kaiser Sousa's picture

last hour ramp in all the Fraud indexes underway...

simply fucking stupid...

GotNuttin'todo's picture

Zero has been crying, "Meet Thy Maker" for 5 years now. At some point they will be right and then they will reference one of their many charts and cry out, "See, we told you so!"  I'd rather watch paint dry. But I'm dumb, so I keep reading this shit.

NoDebt's picture

That question is asked as if it couldn't possibly go lower for an even longer period of time.  I bet it will.

Stoploss's picture

VIX down, Market Down.

It's Friday.

fonzannoon's picture

That huge spike up in volatility was a huge spike down in yields, right?

Everybodys All American's picture

Yes of course which corresponds to a huge spike down in standard of living for the middle class.

Dr. Engali's picture

A lot longer than any of us can imagine. Just ask silver and gold.

seek's picture

Ain't that the truth. "As long as they can" is the answer.

However, we know that isn't forever so some day life will get exciting as years of -1z mean revert in the span of a few weeks.

ebworthen's picture

"How much longer can the balloon be held under water?"

How big are Yellen's hands - or is she the baloon?

Atomizer's picture

Who is holding the needle?

orangegeek's picture

Yellen says taper is on.  I think she is lying. 

Keyser's picture

So do the Belgians...


oklaboy's picture

till November 8th.....

Seasmoke's picture

Looks like it took 2 years to blast off 2008. So I say we are looking at late Fall 2014 for the next lift off.

polo007's picture


May 4 (Reuters) - After an extended period of relative peace among members of the U.S. Federal Reserve's interest rate policy-making committee, fireworks will erupt in coming months as they debate how to reduce the central bank's multi-trillion-dollar balance sheet, a former vice-chairman of the central bank said on Sunday.

"The Fed may get more raucous about what to do next as tapering draws to a close," Alan Blinder, a banking industry consultant and economics professor at Princeton University said in a speech to the Investment Management Consultants Association in Boston.

The cacophony is likely to "rattle the markets" beginning in late summer as traders debate how precipitously the Fed will turn from reducing its purchases of U.S. government debt and mortgage securities to actively selling it.

The Open Market Committee will announce its strategy in October or December, he said, but traders will begin focusing earlier on what will happen with rates as some members of the rate-setting panel begin openly contradicting Fed Chair Janet Yellen, he said.

The Fed built up its balance sheet over the last five-and-a-half years as it bought securities to lower interest rates in attempts to stimulate the weak economy.

But hawkish members of the Federal Open Market Committee who worry about inflation, such as Federal Reserve Bank of Dallas President Richard Fisher and Philadelphia Fed Bank President Charles Plosser, are likely to call for aggressive sales and contradict plans by Yellen and other doves in the majority who want to keep rates low as long as unemployment continues at high levels, Blinder told the group of stockbrokers and investment advisers.

Blinder, a supporter of Yellen who served on President Bill Clinton's Council of Economic Advisers in the mid-90s, said the "perils of a big balance sheet are not so horrible."

The Fed held only about $900 million on its balance sheet before Lehman Brothers' collapse in 2008 triggered the financial crisis, but will "never go back there" from its current level of about $4.25 trillion, Blinder said.

A balance sheet of $1.5 to $2 trillion will likely be the new normal, he said.

He congratulated Yellen on artfully backing away from former Fed Chairman Ben Bernanke's assertion that rates can begin rising once the U.S. unemployment rate hits about 6.5 percent.

The Federal Funds rate that determines short-term interest rate will not rise anytime soon, Blinder said, noting guidance from Yellen that she is watching several indicators of the economy.

The housing market, consumer spending and other parts of the U.S. economy are still recovering very slowly, said Blinder, adding that it will be six to 12 months after the Fed completely stops purchasing securities before rates start to rise.

cro_maat's picture


The FED will buy more bonds, stuff them in Belgium when needed, lie out their ass and protect the banks at all costs.

The rest is theater camoflaged as sheep cud.

FieldingMellish's picture

As long as they want it to.

I Write Code's picture

I dunno.  I've been watching the McClellan Oscillator charts recently, and it shows that since coming into office Yellen has been trying to tamp things down as never before, unfortunately right when the index is forming a tapering triangle - IT'S GONNA BLOW!  The only question is which way, and I guess down is NOT ALLOWED.


Or IOW, hyperinflation could be here before labor day.

TheRideNeverEnds's picture

If the last time this happened is any indication, another few years and few hundred points of upside on the S&P.

Ungaro's picture

Russia is shooting off ICBMs, the Ukraine is imploding and the largest economies of the world (China, the US and Europe) are running on borrowed time and money -- but the market is going up and Yellen sees no bubble. It is dangerous to be rational in an insane world, it might get you locked up.

Spungo's picture

I'm surprised Bernanke's pencil dick didn't pop the bubble.

NOTaREALmerican's picture

When the bullshit runs out.  

Bernoulli's picture

Will reverse when enough people stop believing.

I don't think it matters what the FED does.

Spungo's picture

What I want to see is a record breaking stock market crash but the VIX stays below 20. 

GotNuttin'todo's picture

As the saying goes, slightly paraphrased, "A lot longer than any of us can stay liquid"

messymerry's picture

Warning:  The following is complete and utter BS.  Proceed with plenty of skepticism.  As some of you more "seasoned" ZH readers might remember, Johnny Carson always put on his turban when he prognosticated.  I've got mine on right now.  Ahhhhhhhh Hmmmmmm,,,  it will happen before 2014 expires.  

NBS (No But Seriously), it will happen sooner than anticipated.  Mark my words.

Johnny Carson's cover signing out...


AdvancingTime's picture

There is a major flaw in the concept  Modern Monetary Theory. What do you do when it becomes apparent the economic efficiency of credit is beginning to collapse? This means as more money is poured into the system lower rates are no longer effective in driving the economy forward. As the extra GDP growth generated by each batch of loans drops and momentum ends this becomes the equivalent of pushing on a string and is a sign of exhaustion.

What I'm seeing is an "almost surreal" feeling of indifference towards reality. Companies have ushered savings from interest paid on their debt into the earning column and a major reason inflation remains low is they are sitting on a hoard of cash this has lowered the velocity of money. The artificially low FED controlled interest rates are a one-time tailwind that is mainly behind us, when rates stop going lower or reverse they will become a major headwind. More on this subject in the article below.