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Hilsenrath Confirms Fed Angry At Itself For Making "Market" Too Risk-Free

Tyler Durden's picture


While the last 2 weeks have seen numerous Fed heads, most vociferously Bill Dudley, warning of 'complacency' in markets, fearsome of low volatility and worried about low risk spreads. Of course, investors don't care - don't fight the fed unless the fed tells you to sell, appears the mantra-du-jour. Fed communications are not working... and so they have left it to their mouthpiece - WSJ's Jon Hilsenrath - to explain that they are indeed concerned at just how risk-free markets have become..."Federal Reserve officials, looking out at mostly calm financial markets, are starting to wonder whether tranquility itself is something to worry about."

As WSJ's Jon Hilsenrath explains,

Federal Reserve officials, looking out at mostly calm financial markets, are starting to wonder whether tranquility itself is something to worry about.


So far this year the U.S. economy has suffered a brief economic contraction, the Fed has begun winding down a major bond-purchase program meant to spur growth, the Obama administration has clashed with Russia over its annexation of Crimea, China's economy has slowed and the Middle East has become a cauldron of civil strife.

"Markets" don't care...

Yet, looking at Wall Street stock and bond trader screens, the world looks like a model of stability.

The Dow Jones Industrial Average, up a steady if unspectacular 1% since the beginning of the year, has consolidated big gains registered last year. Yields on 10-year Treasury notes have fallen even though inflation—which typically sends bond yields up—has been inching higher from very low levels.

Other measures of risk aversion and market volatility show an especially striking sense of investor calm. The VIX, which tracks expected stock-market fluctuations based on options trading, has gone 74 straight weeks below its long-run average—a run of steadiness not seen since 2006 and 2007.

Moreover, the extra return that bond investors demand on investment-grade corporate debt over low-risk Treasury bonds, at one percentage point, hasn't been this low since July 2007. The lower this "spread," the less risk-averse are bond investors.

The Fed is worried...

The worry at the Fed is that when investors become unafraid of risk, they start taking more of it, which could lead to trouble down the road.


"This indicates a great deal of complacency," Richard Fisher, president of the Federal Reserve Bank of Dallas, said in an interview. "When you get complacency you're bound to be surprised at some point."

But it's the Fed's fault...

The Fed has given root to the sense of calm by offering investors assurances that interest rates will stay low far into the future. Its policy statement says officials expect to keep short-term rates near zero for a "considerable time" after the bond-buying program, known as quantitative easing, ends later this year.




"It is a problem of their own making. They can't have it both ways," said Martin Barnes, chief economist at BCA Research, an investment-advisory firm. "If they want to sustain zero interest rates and push up asset prices, how can they expect to have that with no excesses and no risk taking?"




"I cannot tell you for sure when this does get unwound," Mohamed El-Erian, former chief executive of the bond fund Pacific Investment Management Co., or Pimco, said in an interview of the recent period of market calm. "When it does we are going to be reminded of what happened last May and June."




"My concern is that keeping rates very low into late 2016 will continue to incentivize financial markets and investors to reach for yield in an economy operating at full capacity, posing risks to achieving sustainable growth over the longer run,"


"we are very pleased you all benefitted from the irrational surge in stock prices, and plunge in corporate bond spreads but it's got a little out of hand and we'd like you all to form an orderly queue and leave the building... do not panic"

So - how does the Fed fix this problem? We suggest QE-Next should monetize VIX futures.


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Tue, 06/03/2014 - 15:34 | 4820995 ParkAveFlasher
ParkAveFlasher's picture

I will stagnation, I will volatility.  Because Benyellen.

Tue, 06/03/2014 - 15:36 | 4821004 kliguy38
kliguy38's picture

jon hilsendipchit.......watta douchebag

Tue, 06/03/2014 - 15:41 | 4821030 Arius
Arius's picture

do not be too hard on yourself people ... you tried your best!

Tue, 06/03/2014 - 15:43 | 4821038 Headbanger
Headbanger's picture

Good.  Maybe the Fed will commit suicide finally.

Tue, 06/03/2014 - 15:47 | 4821049 wallstreetapost...
wallstreetaposteriori's picture

Its time to '87 this market...  #realityisabitch

Tue, 06/03/2014 - 18:29 | 4821418 Oracle of Kypseli
Oracle of Kypseli's picture

He has no credibility this guy.

BTW: "Rehash Lint" and 'Renal Shhit" are both anagrams of his name

Tue, 06/03/2014 - 15:48 | 4821051 Relentless101
Relentless101's picture

Spineless bastards would never have dignity. No matter. People will soon realize their true colors. Better hit home depot. I'm getting low on nails...

Tue, 06/03/2014 - 15:57 | 4821078 Headbanger
Headbanger's picture

OK... But STAY AWAY from the DeWalt isle there! 

Cause you don't want to get any ideas about using this thing:


Tue, 06/03/2014 - 17:01 | 4821248 Aknownymouse
Aknownymouse's picture

I bet they stop all QE in june meeting. Here. Vix > 20 instantly.

Tue, 06/03/2014 - 15:35 | 4820997 venturen
venturen's picture

THEY HAND OUT $4 TRILLION to the Friends of OBAMA and WALL STREET  and they are mad..... WTF!

Tue, 06/03/2014 - 15:59 | 4821086 NYPoke
NYPoke's picture

$4 Trillion don't buy what it used to.

Tue, 06/03/2014 - 16:28 | 4821177 RaceToTheBottom
RaceToTheBottom's picture

Actually they are saying that it does.  You just have to substitute pink slime for the steaks that you used to eat.

Tue, 06/03/2014 - 17:48 | 4821334 NYPoke
NYPoke's picture

Which is still a step up from Solient Green...which is scheduled for QE4.

Tue, 06/03/2014 - 16:30 | 4821180 NidStyles
NidStyles's picture

Of course they are mad, they couldn't get the masses to buy into the Krugman theory to give them MOAR. Then they brought out this Picketty fellow as their new spokeperson, and that flopped rather dramatically... 

Tue, 06/03/2014 - 17:03 | 4821252 Sudden Debt
Sudden Debt's picture

Not mad... just Ooopsy like

But they can fix it. Just let silver and gold tripple in a few weeks AND THAT WILL TEACH THEM!!!! WHOEHAHAHAHAHAHAHAHA!!!!

Tue, 06/03/2014 - 15:34 | 4820999 AccreditedEYE
AccreditedEYE's picture

They can't pull out now! They pushed grandma and grandpa out into risky investments... No way they pull the rug out. They are trapped.

Tue, 06/03/2014 - 15:42 | 4821036 Al Huxley
Al Huxley's picture

Yeah, they'd never fuck grandma and grandpa over, they care too much.  That's their problem, always thinking about others, never taking enough time for themselves.

Tue, 06/03/2014 - 15:57 | 4821080 AccreditedEYE
AccreditedEYE's picture

Remind them that the market is supposed to climb a wall of worry. Fixed.

Tue, 06/03/2014 - 15:37 | 4821001 JustObserving
JustObserving's picture

He forgot to report the Fed constantly popping Champagne corks to celebrate its control of gold and silver.

To call the Fed criminal is to insult all of the run-of-the-mill criminals

Tue, 06/03/2014 - 15:43 | 4821040 earnyermoney
earnyermoney's picture

Interesting link from jesse's site.


Seems the banksters are angry at the Chinese for violating the "rules".

Tue, 06/03/2014 - 15:50 | 4821056 Obama_4_Dictator
Obama_4_Dictator's picture

We chinesee, We play joke, we don't want your federal reserve notes.....

Tue, 06/03/2014 - 16:42 | 4821212 linniepar
linniepar's picture

Me American,  me so smart, me put tungsten in Chinese gold heart.

Tue, 06/03/2014 - 15:56 | 4821077 Kaiser Sousa
Kaiser Sousa's picture

dont trip...

paper Silver and Gold is all they got...stay the course and ignore the paper charade...

Tue, 06/03/2014 - 15:36 | 4821003 DarthVaderMentor
DarthVaderMentor's picture

It was a beautiful, gorgeous sunny day at Pearl Harbor as the Japanese warplanes came rolling in.........

Tue, 06/03/2014 - 15:52 | 4821065 shovelhead
shovelhead's picture

...and nobody saw it coming...

Tue, 06/03/2014 - 15:37 | 4821008 Everybodys All ...
Everybodys All American's picture

All they have to do to pop this misperception is begin raising rates with an emergency meeting this week. Yeah that'll happen. lol.

Tue, 06/03/2014 - 15:38 | 4821009 ptoemmes
ptoemmes's picture

Meanwhile, it's around 3:30PM and I do detect a slight uptick in the market indices. And, it is Tuesday after all.

Tue, 06/03/2014 - 15:38 | 4821012 Honey Badger
Honey Badger's picture

QE was done to help banks.  Now volatility is too low and is hurting banks.  hmmm, I wonder what is in store for the "markets?"

Tue, 06/03/2014 - 15:59 | 4821085 SheepDog-One
SheepDog-One's picture

Yep, getting tough to shear a good profit from the sheeple anymore, that's all the Fed is really concerned about.

Tue, 06/03/2014 - 15:40 | 4821021 madbraz
madbraz's picture

I don't buy this BS. If Bill Dudley wanted to put breaks on the market, instead of conspiring to push it higher, the NY Fed wouldn't do 100-200 billion in reverse repos that are used by primary dealers to short treasuries, not to mention give $4 billion more in securities lending today to a primary dealer(s).

Tue, 06/03/2014 - 15:41 | 4821025 Al Huxley
Al Huxley's picture

Then why don't they buy back some of that volatility they've been selling, and spice it up a little?

Tue, 06/03/2014 - 15:41 | 4821028 kurt
kurt's picture

Hubris, look it up.

Tue, 06/03/2014 - 15:41 | 4821031 nosoeawe
nosoeawe's picture

the Fed is concerned about

1. how to further kill employment, babies, and american citizens

2. how to ease the pain during a good bankster anal raping

3. how to take better selfies with sports and hollywood stars 

4. how to tape back them ears so the wind doesn't blow the  jihadist in chief back to kenya

5. how to counterfeit and launder 350 billion via their belgium connection

a risk free market is the least of the albino midget's worries

Tue, 06/03/2014 - 15:43 | 4821032 Rainman
Rainman's picture

and then we gots Europe with the lowest bond yields since the days of Napoleon. Stay calm, citizens !

Tue, 06/03/2014 - 15:43 | 4821039 jubber
jubber's picture

Dutch bonds hit a 500y year low !

Tue, 06/03/2014 - 15:42 | 4821034 jubber
jubber's picture

Wow the S&P is back to the one is listening, Dow almost green on the day as well, ...Nikkei 15k+ from <14k less than two weeks ago, FTSEMIB <20k  on the 19th May, now up 1800 points since then, DAX up 1000 points since 15th April  party on

Tue, 06/03/2014 - 15:42 | 4821035 Dr. Engali
Dr. Engali's picture

Stupid fuckers. What are they going to do, pull the BernankenYellen put? Fuck no, because the moment they do the "market" will vaporize. No they won't just pull the plug , what these people need is an event, and that's what scares the hell out of me.

Tue, 06/03/2014 - 15:58 | 4821082 shovelhead
shovelhead's picture

What would you like...

We got jihadi's, Neo-nazi's,and some Ayatollahs on tap...

Oh and a nice Chinese brew as well.

Take your time.

Tue, 06/03/2014 - 16:03 | 4821104 SheepDog-One
SheepDog-One's picture

Something 'no one could have ever seen coming' like 9-11 of course we know they always see them coming as Snowden pointed out the gubmint knew all about that well in advance.

Tue, 06/03/2014 - 15:44 | 4821042 Bryan
Bryan's picture

The tragedy is that they MUST have known all of this back when they started the whole QE-infinity thing.  This cannot be a surprise that the market has leveled out and become calm as the heroin is continuously pumped in.

Tue, 06/03/2014 - 15:46 | 4821045 sschu
sschu's picture

Oh look, we created a bubble.  Gosh, we never wanted that so if we say we are angry and upset about it, maybe some will think it was not intentional.

The insanity never seems to end right now.

The gallows should be in some of these folks future.


Tue, 06/03/2014 - 15:49 | 4821054 buzzsaw99
buzzsaw99's picture

the fed likes bubbles, and they like complacency. what they don't like is ultra low volume in trading. that hurts their butt buddies the big banks.

Tue, 06/03/2014 - 15:55 | 4821072 SheepDog-One
SheepDog-One's picture

What's wrong, Fed? U mad @ urself bro?

Tue, 06/03/2014 - 15:56 | 4821074 QQQBall
QQQBall's picture

yes, but better than doing nothing.


Tue, 06/03/2014 - 15:56 | 4821076 undercover brother
undercover brother's picture

sad that politics and wall street have corrupted even the fed. but it's no surprise considering the fed was formed by bankers in order to protect their own banks. either they're book stupid or they're criminals. you pick.

Tue, 06/03/2014 - 16:00 | 4821089 shovelhead
shovelhead's picture


That's a tough one...


Still thinkin'....

Tue, 06/03/2014 - 16:04 | 4821107 dirtyfiles
dirtyfiles's picture

about both ?

Tue, 06/03/2014 - 16:02 | 4821094 Everybodys All ...
Everybodys All American's picture

In light of the recent Russian and Chinese deals and the lowering need for US dollars and hence US debt be coming home to roost. Hence might then also the reality of the dollar's reserve currency status coming apart actually affect these sociopaths. Sure hope so but I would not hold my breath.

Tue, 06/03/2014 - 16:04 | 4821109 SharkBit
SharkBit's picture

Here's a tip.  Stop manipulating Gold and then see just how the market really BTF Story.

Tue, 06/03/2014 - 16:08 | 4821117 Bemused Observer
Bemused Observer's picture

"How does the Fed fix this problem?"...LOL!

They DON'T (can't).

Tue, 06/03/2014 - 16:27 | 4821173 yogibear
yogibear's picture

Their going with the flow until she blows sky-high.

Tue, 06/03/2014 - 16:33 | 4821150 khakuda
khakuda's picture

The unstated policy of the Federal Reserve is to create a massive stock market and credit bubble to create inflation to debase the debt, that is why they are justifying leaving rates low.   All of their original reasons for keeping rates at zero and doing QE are gone, yet they continue.  Stocks are back to very full valuations, Spain, Italy and the like can borrow at all time record low rates, junk debt is frothy as hell, etc.  That is why the Fed keeps changing the bar for raising rates over and over again.  Krugman let the truth out a decade ago after the late 90s stock market bubble when he said, "We need a real estate bubble now to bail us out."  They are trying to create a super bubble like no one has ever seen.

That is all this is about.  Let's all look forward to record highs in equity markets and sovereign debt again in the week's ahead.

Tue, 06/03/2014 - 16:19 | 4821151 Chippewa Partners
Chippewa Partners's picture

Hank Paulson "saved" us.  More importantly, he saved the SQUID.

World saved.




Tue, 06/03/2014 - 16:23 | 4821163 yogibear
yogibear's picture

So why is William Dudley and his members at  NYSE hitting the buy buttons at the  trading desks?

More Federal Reserve BS and diversionary tactics.

So Hilsenrath is the Fed's parrot? He said she said situation.

Goes along with yesterday's stat changes. All BS. Pile it on Higher and Deeper (PhD).

Look at what they do, not what they say. Their still back-door buying US treasuries and QEing.

Tue, 06/03/2014 - 18:05 | 4821375 Nick Jihad
Nick Jihad's picture

Never underestimate people's ability to hold contradictory beliefs. And always keep in mind, that intelligence makes you more, not less, able to persuade yourself to believe stupid things.

Tue, 06/03/2014 - 16:31 | 4821184 yogibear
yogibear's picture

Dudley, Evans and Yellen will keep moving it higher until someone like Goldman decides it's time to take their chips off the table.  Then the rest follow.

Move along until the master criminals at Goldman decide to cut off the booze at the stock party.

Tue, 06/03/2014 - 16:39 | 4821199 khakuda
khakuda's picture

And right now, Blankfein is on the phone to the Fed telling them to shut up.

"Janet, you will keep interest rates at zero and shut up.  By the way, God told me to tell you that, just saying."

Tue, 06/03/2014 - 16:42 | 4821211 headhunt
headhunt's picture

The Feds worry is not about you or me, they started an anti-gravity, perpetual motion machine and they do not know how to stop it without blowing it up and taking everyone (including them) with it. Eventually it is going to spin off into space out of their control, they have to stop it before it is out of their reach. They need a crisis, preferably one which takes a lot of our annoying rights away.

Citizens, rights... so damn bothersome.

Tue, 06/03/2014 - 17:05 | 4821256 Tall Tom
Tall Tom's picture

Perpetual Motion Machine --Klattu


The FED needs a refund.

Tue, 06/03/2014 - 16:50 | 4821234 Bemused Observer
Bemused Observer's picture

This perpetual "risk-free" environment isn't just bad for the markets. It also gives us folks who have so much money and aren't afraid to use or lose it that we end up with such "brilliant" ideas like drones delivering consumer packages, and Elon Musk's latest 'prediction' that we'll see driverless cars on the roads within a year. (He's probably 'investing' in this right now...)
I can pop Mr. Musk's bubble with two liability. How much will he 'invest' to figure THAT little problem out?
It's all well and good to be a forward thinker. But the risk of losing everything because of a bad decision tends to put a little discipline into the thing.

Tue, 06/03/2014 - 17:54 | 4821346 ramacers
ramacers's picture


Tue, 06/03/2014 - 18:15 | 4821398 Radical Marijuana
Radical Marijuana's picture

Another benchmark record for an article manifesting absurd hypocrisy!

As long as the foundation of the entire system is enforced fraud, nothing else can happen but continued record breaking leaps of collective social insanities. The perpetual paradox is that the more "successful" the systems of enforced frauds are, the worse they become!

Tue, 06/03/2014 - 18:21 | 4821415 29.5 hours
29.5 hours's picture



We seem to be on a permanent plateau of all-time highs...



Tue, 06/03/2014 - 18:27 | 4821428 Tic tock
Tic tock's picture

Right, the risk is in UST, and without the rates going up this will kill the dollar? and the PDs, that's a large chunk of change to believe in.

They should just kill off the Deriviatives market, fire the Primary Dealers, re-organise the FED and issue a Citizens Dividend. 

Tue, 06/03/2014 - 18:42 | 4821459 Cheduba
Cheduba's picture

If the Federal Reserve is so mad at itself, why not just spare us all the misery and shut down?  Yes, I know you're reading this Federal Reserve, so just shut down!  Please!

Tue, 06/03/2014 - 19:30 | 4821557 BullyBearish
BullyBearish's picture

"We must continue...continue to train the "investors" BTFD/ATH...because exactly where we want sellers,..guarantee market the face of higher energy...higher food...higher everything but we begin to raise must continue to go up...we'll make sure of it and act like we don't know why"

Wed, 06/04/2014 - 00:26 | 4822244 NoWayJose
NoWayJose's picture

The Fed is mostly worried that tranquility is causing such a drop in market volume that the big banks are unable to make money on trading or investments. Afterall, why sell in a one way market? Why seek investment advice? Add in the lack of loan origination fees on mortgages, and banks cannot make any money by being a 'bank' anymore. If this continues, the Fed will have to bail out the banks even MOAR!

Wed, 06/04/2014 - 01:49 | 4822333 Paulson Bazooka
Paulson Bazooka's picture

It's quiet out there.

Yeah, too quiet.

Wed, 06/04/2014 - 01:51 | 4822334 Muppet
Muppet's picture

To the FED: FUCK YOU MOTHER FUCKERS.   PLEASE.... Allow wisdom to prevail.  Allow Honesty to prevail.  Allow Savers to prevail.   You are killing the best of us!   Please hear those seeking conservatism and integrity.   Why make the honest suffer so?????

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