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On Janet "Pump-And-Regulate, Baby" Yellen's Acting Skills

Tyler Durden's picture




 

Via Scotiabank's Guy Haselmann,

Please be advised that today’s note is an attempt at light tongue in cheek fun.   My hope is that it does not come off as disrespectful in any way...
 
And The Oscar Goes To...

Yellen and the FOMC’s experimental policies came under attack this week from a multitude of directions.   The question and answer exchanges during her testimony had elements worthy of Hollywood and Oscar-winning performances.    Suspenseful attacks spread beyond Humphrey Hawkins to the Institutional Investor Alpha forum where legendary investor Stan Druckenmiller bashed the Fed with his own riveting performance. 

Grand experiments often have great unintended consequences which eventually manifest.  It appears that lawmakers are beginning to recognize and worry about surfacing potential problems.  Last October, I said the Fed’s open-ended QE-infinity experiment reminded me of the scene in the Gene Wilder movie ‘Young Frankenstein’ when Igor dropped the ‘genius brain’ and simply got another one.  When the monster went berserk, the doctor asked whose brain he fetched and Igor answered “Abby-someone”.  Dr. Frankenstein then asked, “Abby who?” with Igor replying, “Abby Normal’s”.

The Q&A exchange this week reminded me of a scene from a Jack Nicholson movie.  Tweaking the exact words, it went like this.  “Dr. Yellen, I am a huge fan of your work, how do you understand the economy so well?”   “Well, I start with my model and I remove reason and accountability.”   This may sound harsh, but this exactly what Stan Druckenmiller was arguing -- that maintaining depression-like policies five years after the crisis when the Fed is now only a spitting distance way from achieving its dual mandate is (either) baffling judgment or a poor risk/reward decision. 

In another scene from the same movie, Yellen, I mean Jack, walks into to a full room of people waiting to see a psychiatrist, turns to them and says, “What if this is as good as it gets?”   Yellen basically told Congress that the FOMC has done as much as possible and the peak of the cycle has been reached.  Several lawmakers momentarily looked up from their Angry Bird I-Phone app, but appeared not to hear her statement.

Unfortunately, she missed the opportunity at this moment to advise Congress on the limitations of monetary policy and the Fed’s lack of proper tools in addressing specific labor market ailments.  Like the Wizard of Oz, Janet should have lifted the curtain herself instead of trying to appear ‘great and powerful’.

The most shocking moment came shortly thereafter, when Oscar-winner Yellen screamed to Hensarling after a question, “Because you can’t handle the truth!”  She then launched into an explanation about how the plan all along has been to intentionally create asset inflation (as opposed to asset bubbles).  Such a proclamation means that Yellen must be an expert on market valuation metrics and can responsibly recognize the difference between asset inflation and asset bubbles.   To be fair however, she admits that should (another) boom /bust mistake be made, she has great confidence (this time) that the FOMC has the ability to clean up the fallout through macro-prudential and regulatory tools.

Regrettably, not making the transcript was her barely audible whisper of “pump and regulate, baby”.

Fed history is riddled with examples of how ‘too-low-for-too-long’ Fed policies have created booms that caused busts.   The crazy irony now is that current policy is specifically trying to create the boom with the belief that rules, promises, and a gradual change of any policy will be enough to massage a soft landing.   Equally disturbing is the fact that the FOMC appears to believe that it has no choice but to keep policy exceptionally easy, because with rates at zero, it has no bullets left should the economy falter.  It reminds me of that movie when Sargent Foley (Louis Gossett) was trying to get Mayo (Richard Gere) to quit boot camp and a broken Mayo cries out, “I’ve got nowhere else to go”.

“I’m forever blowing bubbles / Pretty bubbles in the air / They fly so high, nearly reach the sky / Then like my dreams they fade and die.” – Cockney Rejects
 
ADDENDUMFed credibility will likely come under further pressure which changes the return profile of risk assets.

  • If the economy strengthens from here there will be cries that the Fed is being reckless and is behind the curve.
  • Alternatively, if the economy softens, markets will question the effectiveness of the experimental Fed polices.

Regardless, economic fundamentals are unlikely to improve enough to justify current credit and equity market valuations.  Under each of the scenarios of future FOMC decisions - tightening into economic strength, tightening into (and despite) some economic softness, or staying on hold longer than expected - the backend of the Treasury market will likely perform very well.  I cannot say the same for the uncertainties confronting the front end of the curve under the various scenarios

 

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Fri, 07/18/2014 - 19:19 | 4975739 Cattender
Cattender's picture

This Recovery is Fucking HUGE thank you Uncle Ben! we can only hope that this new Lady is half as good as you..

Fri, 07/18/2014 - 19:26 | 4975752 NOTaREALmerican
NOTaREALmerican's picture

For best performance as a wise often bearded economists:   Janet Yellen as the Fed Chairman in "______________________".

Fri, 07/18/2014 - 20:32 | 4975957 SafelyGraze
SafelyGraze's picture

"I got nowhere else to go"

I always forget whether that was "officer and a gentleman" or "urban cowboy"

they had something in common

what was it

oh. right.

https://www.youtube.com/watch?v=f_xjQNnIcdQ&t=30s

 

Sat, 07/19/2014 - 01:29 | 4976452 Otto Zitte
Otto Zitte's picture

.

Sat, 07/19/2014 - 01:28 | 4976466 Otto Zitte
Otto Zitte's picture

...just got a complete mysql query echoed on page. 

Sat, 07/19/2014 - 01:26 | 4976467 Otto Zitte
Otto Zitte's picture

The dark farce is strong tonight.

Sat, 07/19/2014 - 01:22 | 4976468 Otto Zitte
Otto Zitte's picture

Star Wars, as Yoda before Darth Biden sold out the tribe.

Fri, 07/18/2014 - 20:03 | 4975873 Town Crier
Town Crier's picture

At least she wears her hair on the correct half of her head.

Fri, 07/18/2014 - 19:22 | 4975747 NOTaREALmerican
NOTaREALmerican's picture

I'm yellin' for Yellen!

Fri, 07/18/2014 - 19:23 | 4975749 TeamDepends
TeamDepends's picture

Forgive them, for they are douschebags.

Fri, 07/18/2014 - 19:26 | 4975750 TeamDepends
TeamDepends's picture

Oops, new system and Happy Hour.

Fri, 07/18/2014 - 19:26 | 4975754 Chuck Knoblauch
Chuck Knoblauch's picture

The truth will out.

Inflation armageddon is here.

Fri, 07/18/2014 - 19:30 | 4975763 NOTaREALmerican
NOTaREALmerican's picture

Where?

Fri, 07/18/2014 - 19:42 | 4975809 Chuck Knoblauch
Chuck Knoblauch's picture

Got popcorn for the bunker?

Fri, 07/18/2014 - 19:58 | 4975855 Eyeroller
Eyeroller's picture

My popcorn went stale years ago.  Hard as a rock now.  I've kept it throw at the zombies when the Yellen apocalypse ensues.

Fri, 07/18/2014 - 19:31 | 4975764 nosoeawe
nosoeawe's picture

BBQ my house when the cloven hooved albino midget goes to hell. ditto when pelosi the cunt, barbara the boshivek and/or mcstain are taken by their father of lies and thrown into the lake of burning fiat USDs.

After the BBQ, we'll further celebrate the great event by defecating on the cunts grave

 

Fri, 07/18/2014 - 19:34 | 4975781 Mr Pink
Mr Pink's picture

After that we can REALLY give these maggots what they deserve!

Fri, 07/18/2014 - 20:03 | 4975874 Jstanley011
Jstanley011's picture

At least we're not bitter....

Fri, 07/18/2014 - 19:31 | 4975767 Atomizer
Atomizer's picture

Mr Capitan Kangaroo (Yellen) asks Mr Moose to stop droppings ping pong balls on her head. 

Fri, 07/18/2014 - 19:34 | 4975776 khakuda
khakuda's picture

This isn't at all disrespectful. It is well past time people started criticizing the Fed publicly. Wait until the news starts coming out about all the seniors that have been eating the seed corn over the past six years to pay the bills and are destitute. Or worse, the ones that have loaded up to the gills on equities late in the rally because "there was no alternative." When the time comes that the market decides to decline and they get wiped out, who pays their bills then?

Irresponsible is too kind a word.

Fri, 07/18/2014 - 19:46 | 4975815 Atomizer
Atomizer's picture

Maxine Waters will not endorse post, but I agree 100%. Cannot wait for them to label us as financial terrorist by exposing corruption. 

That's right, It'll be a false positive statement to confuse lower IQ viewers. 

Fri, 07/18/2014 - 19:34 | 4975783 Paracelsus
Paracelsus's picture

  You forgot the part where Sgt.Foley says" I think you'll just steal one of those fancy F-16's and fly it to Roosha".....

Never could stand Richard Gere,although my Ex thought he was the Bee's Knees. Still he is miles ahead of Tom Cruise for talent.Too bad he went off at the Oscars (was it the Dalai Lama?).They have long memories in LA....

The FED will never get that toxic MBS shit off its books in a million years.Can't sell it.Can't raise interest rates or people will walk away,and the stuff will start stinking on their books.

Print.That's all they can do is print.Debasing the currency.What a unique solution.If the average household followed these policies,you would be breaking a thousand laws....

Fri, 07/18/2014 - 19:38 | 4975796 buzzsaw99
buzzsaw99's picture

it isn't loose policy that will cause the biggest problems. if she thinks she can taper down to nothing and let the bond market actually work she is out of her mind. the economy has been on life support for the past five years with zirp and deficit spending financed by qe. take any one of those legs away for real and shit is going to crater big time. bernanke knew that. yellen doesn't seem to get it yet but she will with night terrors at 2 a.m. one of these nights.

Fri, 07/18/2014 - 19:40 | 4975806 orangegeek
orangegeek's picture

thanks for fist-fucking the markets yellen

 

have a good weekend

Fri, 07/18/2014 - 19:44 | 4975813 RaceToTheBottom
RaceToTheBottom's picture

I loved the Movie "Old Yellen"

Fri, 07/18/2014 - 19:51 | 4975836 Atomizer
Atomizer's picture

Didn't that poor mut get shot in the end. Forget. Must Google it.

Fri, 07/18/2014 - 19:55 | 4975846 buzzsaw99
buzzsaw99's picture

had rabies it got from the wolves of wall street. got shot in the end. the analogy is perfect.

Fri, 07/18/2014 - 20:10 | 4975890 Atomizer
Atomizer's picture

Damn you buzzsaw, you're a movie spoiler. I could had gone to redbox or downloaded from Netflix. You bastard. 

I always enjoy your posts. Keep at it. Just being a sarcastic dick weed. Winks. 

Fri, 07/18/2014 - 19:49 | 4975830 Nutflush60
Nutflush60's picture

The whole game I believe is a conspirancy by the major central bank players to keep rates low so governments can finance their debt. No way this can work if not everyone is on board. It still will fail at some point.

Fri, 07/18/2014 - 19:59 | 4975859 Eyeroller
Eyeroller's picture

WHEN?

Sat, 07/19/2014 - 03:47 | 4976524 Nutflush60
Nutflush60's picture

Loan growth at banks really picked up this quarter. Inflation will start to accelerate. Of course, the government could then just rig the CPI

Sat, 07/19/2014 - 03:48 | 4976525 Nutflush60
Nutflush60's picture

Loan growth at banks really picked up this quarter. Inflation will start to accelerate. Of course, the government could then just rig the CPI

Sat, 07/19/2014 - 03:47 | 4976526 Nutflush60
Nutflush60's picture

Loan growth at banks really picked up this quarter. Inflation will start to accelerate. Of course, the government could then just rig the CPI

Sat, 07/19/2014 - 03:47 | 4976527 Nutflush60
Nutflush60's picture

Loan growth at banks really picked up this quarter. Inflation will start to accelerate. Of course, the government could then just rig the CPI

Sat, 07/19/2014 - 03:47 | 4976528 Nutflush60
Nutflush60's picture

Loan growth at banks really picked up this quarter. Inflation will start to accelerate. Of course, the government could then just rig the CPI

Sat, 07/19/2014 - 03:48 | 4976529 Nutflush60
Nutflush60's picture

Loan growth at banks really picked up this quarter. Inflation will start to accelerate. Of course, the government could then just rig the CPI

Sat, 07/19/2014 - 03:47 | 4976530 Nutflush60
Nutflush60's picture

Loan growth at banks really picked up this quarter. Inflation will start to accelerate. Of course, the government could then just rig the CPI

Sat, 07/19/2014 - 03:47 | 4976531 Nutflush60
Nutflush60's picture

Loan growth at banks really picked up this quarter. Inflation will start to accelerate. Of course, the government could then just rig the CPI

Fri, 07/18/2014 - 19:51 | 4975834 ceilidh_trail
ceilidh_trail's picture

O/T- I just saw Robotrader on the teeeveee! His name is "Erik" and he trades stocks, rides his motorbikes, and it looks like he does live in his mom's basement! The number on his racing jacket is "69". He is up $4700- probably more than he made last year...

Fri, 07/18/2014 - 20:12 | 4975892 Jstanley011
Jstanley011's picture

Disrespectful? Forcing the woman to perp walk during primetime, in an orange jumpsuit, through the gates of the Big House, right along side Benny Boy and GreenSpam, for aiding and abetting the bankster frauds that looted the country. That would show her the respect she deserves. And throw away the key.

Fri, 07/18/2014 - 20:12 | 4975896 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Listen up, the God damned 'ECONOMY' will _NOT_ come back and the

absurd 'ECONOMIC FUNDAMENTALS' will _NOT_ come back either. Marx

postulated violent revolution before things can possibly move onto greener pastures economically. Violent revolution with the masses rising up against the oppressor ruling class will leave many millions of people yearning for a long dirt nap after all is said and done. None of us will see so-called 'better times' in our lifetimes. The race to the bottom means just that, folks. And when the West hits bottom en masse we will likely go all the way because we are not half assed at destroying anything. Take a look at Detroit if you think I'm wrong or off-the-mark. Take a look at Capitalism if you think I am wrong.

Fri, 07/18/2014 - 20:13 | 4975899 Jstanley011
Jstanley011's picture

All true, except that Marx was a dumbass.

Fri, 07/18/2014 - 20:52 | 4976020 hidingfromhelis
hidingfromhelis's picture

Would feudalism and serfdom be the tools she's referring to?

To be fair however, she admits that should (another) boom /bust mistake be made, she has great confidence (this time) that the FOMC has the ability to clean up the fallout through macro-prudential and regulatory tools.

Fri, 07/18/2014 - 21:49 | 4976178 medium giraffe
medium giraffe's picture

 

 

The road was long but i ran it, Janet
There's a fire in my heart and you fan it, Janet
If there's one fool for you then I am it, Janet
Now I've one thing to say and that's
Dammit, Janet, I love you...

Fri, 07/18/2014 - 22:05 | 4976221 disabledvet
disabledvet's picture

Blame Ben Bernanke.

Sat, 07/19/2014 - 00:01 | 4976399 JoJoJo
JoJoJo's picture

Senator Chuck Schumer to Yellen "I hope you are not considering tapering and allowing interest rates to rise." 

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