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The Fed's Dudley: Higher Rates Are Coming… There is No "Fed Equity Market Put"
The Fed’s reputation is on borrowed time.
Much of the so called “economic recovery” that began in 2009 has been based on the Fed’s credibility as a Central Bank to rein in the collapse.
However, at this point even the financial media has begun to realize that the Fed has elevated asset prices (stocks, homes, etc.) and nothing else. Incomes have not moved in line with stocks nor has GDP growth nor has the employment picture.
Put another way, everyone now realizes that the Fed has boosted stocks and don’t little else. This has lead some to accuse the Fed of targeting the markets rather than boosting the economy (see the recent wave of legislation meant to increase Congressional oversight of the Fed being introduced in Congress).
The Fed isn’t doing itself any favors in terms of defending its track record.
Enter Bill Dudley: former Goldman Sachs bank turned NY Fed President.
Dudley made a speech yesterday regarding the Fed’s policies. Early on he states that when the Fed starts raising rates, it will gauge the market’s reaction closely to see how the financial system adjusts,
First, when lift-off occurs, the pace of monetary policy normalization will depend, in part, on how financial market conditions react to the initial and subsequent tightening moves. If the reaction is relatively large—think of the response of financial market conditions during the so-called “taper tantrum” during the spring and summer of 2013—then this would likely prompt a slower and more cautious approach….
A few minutes later, he claims the Fed doesn’t care about stocks or bond yields or other items… the very same “conditions” he claimed the Fed will pay close attention to just a few moments before…
Let me be clear, there is no Fed equity market put. To put it another way, we do not care about the level of equity prices, or bond yields or credit spreads per se. Instead, we focus on how financial market conditions influence the transmission of monetary policy to the real economy
http://www.newyorkfed.org/newsevents/speeches/2014/dud141201.html
Suffice to say, Dudley is aware that the Fed is now considered to be a stock market prop and nothing else. The fact he is trying to explicitly dissuade the markets of this belief says a lot about the Fed’s thinking on this topic (read: we need to distance ourselves from the markets).
Between this and Fed #2 Stanley Fischer’s statement that the Fed’s primary concern is on when and how to raise interest rates, stocks are on borrowed time. Not only will rates be rising in the next 12 months, but even the biggest stock cheerleader at the Fed (Dudley) is now trying to break the belief that the Fed is an “equity market put”
Stocks are on borrowed time. The next round of the Financial Crisis is approaching.
If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.
You can pick up a FREE copy at:
http://www.phoenixcapitalmarketing.com/roundtwo.html
Best Regards
Graham Summers
Phoenix Capital Research
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Let me be clear, no tax reforms This is known as the performative lie. Best done by Clinton with a triple performative.
I want to say one thing to the American people. I want you to listen to me. I'm going to say this again. I did not have sexual relations with that woman, Miss Lewinsky.
Language of Truth and Lies: Performatives: http://youtu.be/BSHCdalj3Fo
this time I wont come in your mouth I promise
No seriously trust me.......
oh you have such pretty eyes.......
Japan had two big attempts on their way to zero.
Hi tailed the second the market dumped.
Expect the same.
They cant sell cars or homes at 3%
How do you think it will go at 6%?
Guess Dudley hadn't been spending much time with Bullard.
Back in Feb 2008: Bernanke: "There will absolutely be no bailouts!"
Back in Oct 2008: Bernanke: "We bailout everyone and buy all there worthless assets at face value".
Fed Speak has zero creditablity. Only real action matters.
more top voices to say things like greenspan --only gold!-- and pretend the great singularity is weak.
Better yet:
Tuco: When you have to shoot, shoot. Don't talk. --From The Good, The Bad and the Ugly
https://www.youtube.com/watch?v=sTcBgs2huRo
If your going to raise rates, raise them! Don't Talk!
ALL FED members know that the global central bank ZIRP + QE polices have resulted in:
1. HUGE carry trades and record-high leverage boosted financial asset prices, and that these trades will unwind abruptly and deeply if they increase interest rates AT ALL, which will also adversely affect the economy and create backlash for politicians in office.
2. Record-low interest expense on record-high government debts, and that an increase in government interest expense will be bad for politicians.
So why would any central banker want to increase interest rates ???
What is the actual real pressure on central bankers to increase interest rates (I do not see any, eg demonstrations or riots by retirees trying to live off fixed-income assets) ???
I would venture the Fed has an S&P/DOW number in mind as a threshold of pain alarm. That, or some sort of gauge on the rate of downside escalation to ascertain when the appropriate intervention mechanism/s can be implemented. After all, there's been quite a bit of on-the-job experience since 2008, no...?
Higher rates will come eventually........................when a completely new monetary system is in use.
WTF would you expect from a former Goldman Sach douchebag....
it comes to the point where corporations have to use their cash to defend their stock valuation and then we have the moment of truth. if they dont use their cash (marias cash on the sidelines) or the cash isnt real, and theres a good point that its not real cash, if corporations dont dig into the piggy bank and use their reserves the money would vaporize anyway while stock values collapse. use it or lose it. once the capital to earnings ratios start to narrow those valuations gets pressed anway. this is all about wall street and the runaway train with the financial engineers at the throttle. either the cash on the sidelines is a fraud, or they don't use the money, thinking the Fed will bail them out with more QE. none of these corporations have much pricing power and wall street is addicted to greed, and that will take some time to break them of the habit.
Good thoughtful post. The Market virtually never falls during December; but I'm ready and I'm going to short the S&P500; or the DOW; haven't decided yet for sure, when I like a nice high price spike; after mid-January I hope. Where is this cash on t he sidelines parked? Is it really liquid? Will t he first stages of a reversal make it expensive and difficult to obtain as liquid funds ? There's plenty of opportunity for these over-complicated and over leveraged participants to find themselves in free fall.
Of course there's no "FED put". The Jewish Mafia in New York gets that benefit.
The whole thing reminds me of the Blazing Saddles scene....'nobody move, or the nigger gets it!' (Gun held to all OUR heads)
Does the Fed manufacturing crises?
http://failedevolution.blogspot.gr/2014/11/us-debt-held-by-fed-further-i...
I enjoy reading the fed men comments, they nearly always say the opposite of what you should believe and for those slow to grasp the intent of the real doublespeak criminals ( like moi) it's like getting a tongue kiss from a sweetie.
I don't know about you, but when i hear a statement prefaced by the phrase "let me be clear", I assume that the speaker is lying. And if the speaker is not Obama, it can only mean that the speaker wants you to know that they are about to tell a lie.
There is no way the Fed can raise rates, even if wants to. I'd LOVE to be proved wrong on it, however.
DavidC
Dont worry it will increase in planned manner ......when opposit is required....
the fed can raise rates BUT they will have to restrict credit. in other words the window of the candy store is full, but none of it is for sale. such a move would create an instant recession, (or not considering bank lending is still anemic) . bond yields will rise, and somebody has to pay the interest, but if they can figure out a way to restrict supply, (and still monetize government spending) demand for these new higher yielding notes will offset higher interest payments with a premium paid to own the bonds. you cant just print all the bonds you want, but you need to print bonds to monetize, so its a tough call. it might be corporates will take up the slack, since corporate america is sitting on a pile of (socalled cash) they could afford to pay higher interest rates for new issuance. its not all likely that the corporate sector would want to do that, but they need to constantly raise money to buy their own stock to levitate the market. so the corporate option to slow new issues, means they might not be able to defend their stocks valuation, which means they would be willing to take up the slack in bond issuance. but still the government has a bad spending habit, so it really only works if the somebody gets in office who will trim government spending, and who is that?
Yeah; who is that ? David Stockman's book; "the triumph of Politics"; tells us how and why Reagan failed to downsize govt. Because no Congress Crittur would go along with cutting anything; on the contrary they all wanted, and got, more Pork. If it's not worse now, then my name is Tinkerbelle.
Reagan was supposed to die. He knew it, too.
I wonder, would this speech have ever been made if Reagan had not been elected?
https://www.youtube.com/watch?v=efYg0vQyPGA
Get a look at Mel Gibson's face. Worried he might be next after those statements he made?
'raise rates in 12 months'
As if the Fed will even exist in 12 months....
The USA needs a new currency...one with better styling.
Everything is always 12 months, 2 or 3 years out or more so they never have to do anything right now.
They always 'warn' about what could happen, and are careful that the 'warning' is not imminent, so the markets are not affected.
So, when TSHTF, they can say they were on record 'warning' us it could happen (but of course no one could have anticipated the TIMING).
You had me at "don't little else".
Is I'm little?
Illiteracy, and the in-ability to think straight that it implies, is the new normal. God help us all.