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Goldman's Yellen Spech Post Mortem: "Nothing To See Here, Move Along"

Tyler Durden's picture




 

Goldman Sachs listened (and read) Janet Yellen's remarks at The IMF and see them "generally in line." Despite waffling on for minutes about risk management and monitoring, no one at The Fed has mentioned the total carnage in the repo market, spike in fails-to-deliver, and record reverse repo window-dressing that just occurred. The use of the term "reach for yield" twice and "bubble" 5 times, and admission that the Fed should never have popped the housing bubble, leaves us less sanguine than Goldman and wondering if this was Janet's subtle and nervous 'irrational exuberance" moment.

 

 

Goldman thinks...

BOTTOM LINE: Fed Chair Janet Yellen spoke this morning on the role of financial stability concerns in monetary policy. Her remarks were mostly in line with her previous commentary on the issue.

 

MAIN POINTS:

 

1. Chair Yellen’s speech today focused on the role of financial stability concerns in monetary policy. Yellen argued that regulatory and supervisory measures are better suited to address financial stability concerns, and that monetary policy has limitations as a tool for promoting financial stability. As a result, Yellen concluded, she does not “presently see a need for monetary policy to deviate from a primary focus on attaining price stability and maximum employment, in order to address financial stability concerns.”

 

2. Overall, Yellen argued, household debt growth has been moderate in recent years and leverage in the financial system has declined. However, she cautioned that she does see pockets of increased risk taking, such as in the leveraged loan market, which require continued monitoring. She also said that the Fed could consider other tools for promoting financial stability—“including adjustments to the stance of monetary policy”—as conditions change in the future.

 

3. Yellen also addressed the argument that the housing bubble could have been prevented by tighter monetary policy in the mid-2000s. She argued that monetary policy would have been an insufficient response and a “very blunt tool” for addressing rising house prices and leverage, while macroprudential policies would have been more direct and effective.

And we note Jante said...

terms and conditions in the leveraged-loan market, which provides credit to lower-rated companies, have eased significantly, reportedly as a result of a “reach for yield” in the face of persistently low interest rates.

...

Policymakers failed to anticipate that the reversal of the house price bubble would trigger the most significant financial crisis in the United States since the Great Depression because that reversal interacted with critical vulnerabilities in the financial system and in government regulation

...

efforts to promote financial stability through adjustments in interest rates would increase the volatility of inflation and employment

*  *  *

So Goldman loves it - but she warned of more vol and potential bubbles?

 

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Wed, 07/02/2014 - 12:29 | 4918082 HUGE_Gamma
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September ZN 10y futures.. keep shorting it

Wed, 07/02/2014 - 12:35 | 4918109 Thought Processor
Thought Processor's picture

 

 

These are not the droids you are looking for.

Wed, 07/02/2014 - 13:15 | 4918279 Stoploss
Stoploss's picture

The FED:

https://www.youtube.com/watch?v=XGAVTwhsyOs

 

Always chasing rainbows.....

Wed, 07/02/2014 - 12:45 | 4918148 asking4it2k
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The FED has a plan to get everyone out of savings and into stocks. Why do you think we still have ZIRP 5 years after the crash?

 The FED wont let the stock market bubble pop. They will just do QE4 and the market will keep going higher.

Wed, 07/02/2014 - 14:18 | 4918557 JLee2027
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I remember when the market and media hung on every word of Greenspan and somewhat for Bernanke although he lost credibility after 2008.

Now, with Yellen, it's mostly all ignored as noise. No one gives a crap what she says, it's like a death watch. 

Wed, 07/02/2014 - 12:30 | 4918092 AccreditedEYE
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People, stop wasting your time. The tune will never change: rates will stay low, risk will be bought and the 2 class divide will grow huge.

Wed, 07/02/2014 - 14:53 | 4918736 WarHorse
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".... and the 2 class divide will grow huge"

 

HUGER

Wed, 07/02/2014 - 12:32 | 4918095 gjp
gjp's picture

"the Fed should never have attempted to pop the housing bubble" wtf, seriously, they never admitted there was a housing bubble, and they certainly never tried to pop it.  They've never tried to pop a bubble since the Greenspan era, only mop up, and start the next one.

The lies are overwhelming, I think I'm drowning ...

Wed, 07/02/2014 - 12:35 | 4918110 NOTaREALmerican
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I think the Fed is saying it's not their job to limit "animal spirits", only to provide the environment to encourage "animal spirits".     We're a society that worship "animal spirits" so the Fed is just doing what society wants.

The higher-evolved humans with more "animal spirits" would definite agree.  

Wed, 07/02/2014 - 12:36 | 4918114 Bear
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The Wolf of Wall Street

Wed, 07/02/2014 - 12:41 | 4918130 RevRex
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.

Wed, 07/02/2014 - 12:48 | 4918135 NOTaREALmerican
NOTaREALmerican's picture

Definitely,  AND the Wolf of House-Flipper Street and the Wolf of Minimum-Payment Street.

The Fed enables all those with "animal spirits" to try to succeed.  

Wed, 07/02/2014 - 17:57 | 4919356 NihilistZero
NihilistZero's picture

"Policymakers failed to anticipate that the reversal of the house price bubble would trigger the most significant financial crisis in the United States since the Great Depression..." 

So if prices have reverted to "bubble" levels in the absence of wage growth a mere 7 years later logic would suggest we are in yet another bubble.  Who writes these speeches???  Anyone with half a brain knows its all bullshit.

 

 

Wed, 07/02/2014 - 12:47 | 4918159 asking4it2k
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Greenspan and Bernanke both didnt see the housing bubble. Just like they dont see inflation rising.

Wed, 07/02/2014 - 12:32 | 4918096 NOTaREALmerican
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The smart-n-savvy people keep winning, that's all that matters. 

Wed, 07/02/2014 - 12:34 | 4918105 LawsofPhysics
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Control the currency and you control the "market".  Absolute power corrupts, absolutely.

These people and institutions do not indict themselves

same as it ever was.

Wed, 07/02/2014 - 12:35 | 4918107 CPL
CPL's picture

Time to turn up the weird another notch I think.

Wed, 07/02/2014 - 12:35 | 4918108 Bear
Bear's picture

She keeps talking what shoulda, coulda ... what is needed is a repeal of Glass-Steagall or just shut down the fed altogether

Wed, 07/02/2014 - 12:36 | 4918112 ebworthen
ebworthen's picture

The Heroin pusher/dealer is never responsible for the happiness or depression of their clients - nor for their addiction.

"Try this syringe" or "switch veins" or "how about freebasing?" are offered as helpful hints.

Janet - I'm tired of buying Wall Street Heroin.

Wed, 07/02/2014 - 12:38 | 4918121 moneybots
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  "Yellen also addressed the argument that the housing bubble could have been prevented by tighter monetary policy in the mid-2000s. She argued that monetary policy would have been an insufficient response and a “very blunt tool” for addressing rising house prices and leverage, while macroprudential policies would have been more direct and effective."

 

The FED intent was to create a housing bubble, so it doesn't matter what the FED could have done to prevent one.  In 2005, Greenspan praised bankers for getting people into houses they couldn't afford. 

 


Wed, 07/02/2014 - 12:43 | 4918141 NOTaREALmerican
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Well, "couldn't afford" is somewhat easy to say in hindsite.  But the reality is, society worships people with "animal spirits" who throw caution to the wind and live on the edge.    The Fed is just encouraging Americans to be great.    

Wed, 07/02/2014 - 12:39 | 4918126 Ragmar
Ragmar's picture

Her most revealing line, but not the first time she said this.

“At this point, it should be clear that I think efforts to build resilience in the financial system are critical to minimizing the chance of financial instability and the potential damage from it. This focus on resilience differs from much of the public discussion, which often concerns whether some particular asset class is experiencing a “bubble” and whether policymakers should attempt to pop the bubble. Because a resilient financial system can withstand unexpected developments, identification of bubbles is less critical. 

In other words, the banking system can handle the fall out of risk asset repricing.

Wed, 07/02/2014 - 17:41 | 4919307 RaceToTheBottom
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Yes, she was worked hard to reduce TBTF......  OOOPS, not so much

Wed, 07/02/2014 - 12:40 | 4918128 Squid Viscous
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disgusting smell of geviltefish, she should have had a clorets...

Wed, 07/02/2014 - 12:41 | 4918133 OC Sure
OC Sure's picture

Actually, in her response to the first question she alluded to the rrp market and if you understand the IMF report that ZH linked to previously by M Singh then what the counterfeiters want is to collateralize all of those wasted, juicey, excess reserves from QE as repos.

Wed, 07/02/2014 - 12:41 | 4918137 Yen Cross
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  Who's selling all the treasuries? The markets are pretty flat.

  Maybe it's the Japanese so they can fund the 10 year JGB auction later.

  03:45 GMT       JPY         10-Year JGB Auction                 0.608%

 

  U.S. 10-Year 2.617 2.565 2.617 2.548 +0.052 +2.04%

 

 

Wed, 07/02/2014 - 13:06 | 4918236 OC Sure
OC Sure's picture

Could it just be more of a lack of buying instead? That if the remaining shorts covered via the GC repos or Special repos, then the quarter end "squeeze" has run its course?

Wed, 07/02/2014 - 12:44 | 4918146 Schmuck Raker
Wed, 07/02/2014 - 12:50 | 4918172 moneybots
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Yellen concluded, she does not “presently see a need for monetary policy to deviate from a primary focus on attaining price stability and maximum employment, in order to address financial stability concerns.”

 

Price stability is ZERO inflation.  Two percent inflation destroys stability.  The FED needs to deflate in order to restore price to what it was 5 years ago. 

The FED is hiding it's true primary focus from the public.

 


 

Wed, 07/02/2014 - 12:57 | 4918202 moneybots
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Policymakers failed to anticipate that the reversal of the house price bubble would trigger the most significant financial crisis in the United States since the Great Depression

 

Policy makers are failing to inform that they are setting up the next Great Depression by blowing the global debt bubble even larger.

Wed, 07/02/2014 - 13:02 | 4918216 Bunga Bunga
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What bubble? What is she talking about? Who hired her?

Wed, 07/02/2014 - 13:21 | 4918311 pakled
pakled's picture

"no one at the The Fed has mentioned the total carnage in the repo market, spike in fails-to-deliverand record reverse repo window-dressing that just occurred."

 

No, that appears to be your job Tyler.

 

Keep it up.

Wed, 07/02/2014 - 13:32 | 4918368 orangegeek
orangegeek's picture

yellen speaks like she controls

 

yellen controls while she prints

 

after quarter end the markets have rolled over since last year sometime (maybe earlier - not looking it up now, but you can) - post REPO stress disorder

 

Mar and Apr were POMO'd 65B and 55B respectively

 

Today - POMO is 35B - REPO blew its brains out yesterday - so what's left?  the market's reaction, that's what (not yellen's control-speak)

Wed, 07/02/2014 - 13:32 | 4918370 ilovemilken
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The only way Yellen will raise interest rates if her costs of ordering Chinese Food 4 times a week increases.

Wed, 07/02/2014 - 13:35 | 4918385 DOGGONE
DOGGONE's picture

Janet Yellen applauds this massive deception by omission:

The Public Be Suckered
http://patrick.net/forum/?p=1230886

Wed, 07/02/2014 - 13:57 | 4918475 Keltner Channel Surf
Keltner Channel Surf's picture

Appears volatility dumped a bit at 11 in anticipation she might whisper sweet nothings to Lagarde, but it ended up as pointless air puffs, like Lance Stephenson blowing in Lebron's ear.

Low volume today reveals the dominant algo (as one might see bones on an X-ray) to be our friend Mr. Sawtooth, visible on 2m charts of the Russell, QQQ, etc.  Pathetic trading day thus far, as expected . . .

Wed, 07/02/2014 - 13:58 | 4918478 Seasmoke
Seasmoke's picture

How have they kept Gold from exploding thru $2000. That's what I have hard time understanding. 

Wed, 07/02/2014 - 18:42 | 4919471 Its All Good
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"Goldman Sachs listened (and read) Janet Yellen's remarks at The IMF..."

 

You mean "Goldman Sachs wrote Janet Yellen's remarks for The IMF..."

 

Fixed it for you.

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