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Did The Fed Just Whisper "Fire" In A Crowded Market?

Tyler Durden's picture




 

Authored by Mark St.Cyr,

This past Friday saw what many like myself can only describe as a blatant example of just what’s wrong with both the economy – as well as the markets.

At precisely 15 minutes before the closing bell on Wall Street the now Chair of the Federal Reserve, Janet Yellen gave a press conference detailing further insights into upcoming monetary policy. I guess two days worth of FOMC discussions, along with a press conference detailing all that was discussed immediately after, followed by a question and answer session about all those “insights and decisions” wasn’t enough. For the markets remained red for the week while losing all its post FOMC pop which in itself is an ominous sign.

At first blush some might contend, “Well, that’s a good thing they decided to communicate even more. Best to have any and all the information available as soon as possible. After all: more information is always better for the markets – no?”

Yes it is, however, when it exposes just how cozy (as well as frightened) monetary policy setting has moved from the appearance of setting beneficial policies that help ensure a free and open capitalistic system – to one hell-bent on serving a newer more dominant form of crony styled capitalism rampant within our markets. Where winners and losers are decided solely on their ability to manipulate their bottom line earnings “beat” via access to resources made possible only via the Fed.’s current zero bound stance. (i.e., ZIRP) I don’t believe that was their original intent.

If you were one of the few (i.e., not one of the Wall Street “In crowd”) that watched and listened to that presser on Friday. You were left dumbfounded on just how illogical, as well as contradictory nearly every example given was as to what one should now infer about what the Fed. is going to do next – and when.

So convoluted was both the rationale as well as examples given, I concluded: there was no other intent for this presser other than to signal the “In Crowd” – You better get the heck out of Dodge because we’ve painted ourselves so deep into a corner this is probably the last time you’ll have a chance as to “paint the tape” in any upcoming quarters. For we might actually have to do what we implied (e.g., raise rates) regardless – just to keep up the appearance that we’ll do what we say. Even if so doing means – creating turmoil. So don’t say “we didn’t warn you.” (i.e., We’ve changed the meaning of “data” so many times now even we can’t figure out what it means or, what we should do any longer!)

Certainly total conjecture on my part. However, if you listened to the rational and explanations given about “data” and “the economy” – nothing made sense. Everything was conflicting not only in the examples but also the tenor and tone. Here are a few examples of what I mean: (I’m paraphrasing)

“The economy has improved considerably, that’s why we need to continue the extraordinary measures we’ve been implementing.” Huh?

 

Or better yet: “We see continuing improvement in the labor force and expect even further improvement.” (as they seemingly disregard the only sector that provided all that month over month, year over year boost in honest job formations, e.g., oil related sectors in States which has now dramatically fallen off a cliff with massive layoffs already announced, as well as the possibly of accelerating further as the price of oil drops ever more.)

 

And last but surely not least, “We see continued growth in upcoming quarters of GDP.” (As long as you don’t pay any attention to the latest Atlanta Fed.’s report that’s downgraded its GDP forecast from just over 2% which by itself was pitiful, to now just 0.2% faster than one can say “everything was is awesome!”)

The timing of this reprise in conjunction with the latest FOMC’s conference just a week ago was quite instructive in my opinion. I mean, think about it: Fifteen minutes before the closing of the markets on the very day of the quarter ending? Isn’t it just funny how the timing of this presser coincided with allowing for the opportunity as to “paint the tape” if needed? Along with the additional 15 minutes of the later closing futures market as to hedge for Monday’s opening? Again, “if needed” as in – just in case what you heard went against your current positions. The serendipity of that coincidence is an amazingly funny thing – no? I firmly believe this presser was nothing more than a contorted effort by the Fed. to signal what many like myself have been anticipating since the ending of QE just a few months ago: They’ve lost control.

I theorize the Fed. was trying to accomplish two things.

One: State for the record publicly as many C.Y.A. statements as possible regardless of how contradictory.

 

And two: Warn (i.e., signal “The In Crowd”) that because they’ve painted themselves into such a tight corner that messaging and more is now a useless exercise. The only way they’re going to be able to adjust going forward or, further intervene within the markets is: If and when a calamity is upon us. Or better said – If, and when the markets fall apart. And “when” just might be a whole lot closer to reality – than “if.”

All one has to do is be willing to look at the “true” data with eyes open and a rational open mind to see what’s taking place. Everything (and I do mean everything) as to what the Fed. said should be taking place via their intervention 6 years ago not only is not. Rather: it’s coming unglued, as well as beginning to run off the rails. Nearly every report released since the ending of QE that was previously always indicating “awesomeness” is now indicating borderline if not outright pathetic-ness.

We are entering our first (yes 1st!) earnings period since QE was halted just a few months ago and what are we beginning to see and hear? All those projections and assurances made by the so-called “smart crowd” that “this time is different” are suddenly changing their tune to “Well you know we’ve had so much improvement surely a pause is warranted.” Sure it is. And they call us “idiots.”

The unemployment rate is and has been an absolute joke having more in common with fairy-tales than anything factual. GDP has gone from poor to worse. And remember when you were told that 5% GDP print wasn’t an outlier but “indicative of the recovery” by the so-called “smart crowd?” How’s that meme working out?

The Dollar is still screaming higher making imports cheaper, and our exports non-competitive. Remember we were told by this very same crowd “we were going to export our way to prosperity soon?” I know, I can barely type as I chuckle also.

Reduction in oil prices were going to put “more money in consumers pockets to spend helping to boost the economy.” Problem is all that “free” healthcare now costs far more than the potential “gas savings.” But hey, don’t complain. For without having to now spend more on healthcare – retail spending would be far, far worse. And this is just a handful of the boatloads of fundamentally flawed data reports we were besieged with by the so-called “smart crowd” ad nauseam as to continue their narrative of “everything is awesome!”

However for the rest of us that have questioned such reports over the years  we’ve been branded as: uninformed – data deniers. Personally I just might go out and get a t-shirt made stating just that. On the front I’ll have: “I’m a data denier – and proud of it!” And on the back it’ll read: “I believe in critical thinking – That’s why you wont see me on CNBC™.”

It’s not just here in the U.S. where the once burgeoning commodity sectors like oil and gas, as well as others such as steel, and more are now getting bludgeoned. The entire shale industry for one is beginning to buckle under the weight of falling prices. Canada is now beginning too feel the effects. And these ripples are far from over – they’re just beginning. Remember oil and such helped insulate Canada from a downturn in housing such as we had here. By the most recent reports that all seems to have now changed. And the implications for our friends to the north could be dramatic.

How about China? That once rejoiced “savior” of the economic world is itself having a harder, and harder time trying to dismiss (as well as cover up) clearly visible signs of economic weakness. Here’s where I’d also like to bring attention to one economic fact squarely staring the world down with implications just as far-reaching as the latest oil carnage. And: with possibility the same effect to the repricing of everything everywhere. This ominous scenario alone seems lost across the financial media.

How can one not derive the implications on the market forces associated with the decision of the Saudi’s to continue pumping at record levels and at lower prices as to help preserve their market share with the added benefit of simultaneously crushing as many as possible competitors: and not see that pretty soon China is going to do, in effect – the very same thing with everything it exports? Once it begins just like with oil – It will crush pricing power (on everything from trinkets to commodities) globally in my opinion.

This is the world the Fed. has wrought with leaving the punchbowl out far too long after everyone at the party was clearly inebriated. Instead of wisely pulling the bowl back and away (at the least in 2012 or there about) while everyone was passed out. They decided it would not only be better to remain – but continued refilling it as the one’s with an affinity for risk gulped more and more down their gullet acquiring shares in any sector they thought provided yield.

And if you’re in Asia? Sectors be damned! It’s a straight Kamikaze spree into the Nikkei™ or better yet, Shanghai Composite™. There you don’t discern. You just buy, buy, buy in way that would make Cramer envious. All while using multiples of margin never before seen in the history of that market. What could possibly go wrong? And I haven’t even mentioned Greece, or The EU.

Again this is what I believe the Fed. has finally come to terms with. The realization that control is no longer an option. It’s been a mirage that’s held up far longer than originally anticipated. The monster has now grown far too big and dangerous while possibly exposing to their dismay – the only way they might have a shot of regaining some stability for future control is to let it fall apart: as they stand by and watch hoping to “thread the needle” for further intervention just in time. Along with trying to have some C.Y.A. assurance to the “In Crowd” that “Hey – we tried to warn you!” if it indeed does exactly that.

At issue is, even if I’m only partly correct. What should scare the heck out of any critical thinking person is: With everything we’ve witnessed over the last 6 years, along with what is now transpiring which is scarier?

A Fed. that may be signalling they’ve lost control? Or, a Fed. that still believes “Don’t worry – we’ve got this!”

 

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Sun, 03/29/2015 - 16:18 | 5939867 Surly Bear
Surly Bear's picture

Control is an illusion.

Sun, 03/29/2015 - 16:21 | 5939870 Tao 4 the Show
Tao 4 the Show's picture

The farther off balance it goes, the more control...

A person standing on one foot next to a swimming pool who loses balance can be pushed in with one finger.

Sun, 03/29/2015 - 16:36 | 5939905 Pinto Currency
Pinto Currency's picture

 

 

The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.

Lord Acton

 

Sun, 03/29/2015 - 16:57 | 5939954 max2205
max2205's picture

Obama called the bottom, he'll call the top too.

Sun, 03/29/2015 - 17:02 | 5939966 kliguy38
kliguy38's picture

"Nobody could have seen it coming"

Sun, 03/29/2015 - 17:18 | 5939994 J S Bach
J S Bach's picture

"With everything we’ve witnessed over the last 6 years, along with what is now transpiring which is scarier?

A Fed. that may be signalling they’ve lost control? Or, a Fed. that still believes “Don’t worry – we’ve got this!”

 

What is scariest is the existence of the Fed itself.  This illegitimate usurious institution has been "scary" for 101 years and must be abolished entirely.

Sun, 03/29/2015 - 18:30 | 5940173 Manthong
Manthong's picture

Or similarly put, maybe they just whispered that word in a crowded theater of the absurd.

Sun, 03/29/2015 - 18:55 | 5940227 Muh Raf
Muh Raf's picture

"The issue which has swept down the centuries and which will have to be fought sooner or later is...." https://www.youtube.com/watch?v=bjeNDKSTWIg

Sun, 03/29/2015 - 19:15 | 5940253 philipat
philipat's picture

The BIS has already nicely covered its ass in written warnings on several occasions. Expect The Fed to roll out an (Ex?) Official some time soon to blame the weather and global security problems (All created by The US) for a downturn in the economy (Never Fed Policy) which has to put all discussions of higher rates on hold and lay the foundations for QE4Eva. Expect Bullard to follow-up later with a similar missive. This would follow a weekend of frantic conference calls with the Heads of all the TBTF's begging for the "Reaction" by the "Markets" to be a massive rally in the "Markets" not a collapse due to a complete loss of credibility for The Fed's pursual of the the same old same old when that is clearly not working. They can't increase rates so this is all they can do as a last ditch attempt at levitation to maintain any credibility they (Don't) have left and cover their rear ends?

I wouldn't entirely rule out that this might work because with the Fed, the TBTF's and HFT's controlloing so much of the "Markets", who is left to call "Fire"?

Sun, 03/29/2015 - 22:24 | 5940737 IRC162
IRC162's picture

These are numbers guys and coders too: they also made their broadcast at one quarter before close. .... Let's see,  if I were fleecing the honest in the system in broad daylight, I might tell my buddies the jig is up in broad daylight as well.  

One quarter might be the message here?  Summer q2 is the quarter 'till close/cliff? Urrbody is great but you have one quarter to cash out, winkety wink

Or am I just fuggin nuts like the rest of you lunatics? 

Sun, 03/29/2015 - 22:36 | 5940759 forwardho
forwardho's picture

If the fed wispers in a forest of creatures whose lives depend on the fantasy.

It would behoove them to pretend to have heard them.

And believe.

Sun, 03/29/2015 - 22:36 | 5940760 forwardho
forwardho's picture

If the fed wispers in a forest of creatures whose lives depend on the fantasy.

It would behoove them to pretend to have heard them.

And believe.

Mon, 03/30/2015 - 03:57 | 5940996 TheRideNeverEnds
TheRideNeverEnds's picture

only thing the FED whispered was "buy the dip."

 

as the e-minis fucking explode higher into perpituity just know you could have been on this free money train.  

Sun, 03/29/2015 - 17:25 | 5940007 Creepy A. Cracker
Creepy A. Cracker's picture

"Obama called the bottom, he'll call the top too."

Obama has someone put their top in his bottom on a regular basis.  Or so Harry Reid has said,

Sun, 03/29/2015 - 19:31 | 5940299 drstrangelove73
drstrangelove73's picture

Power corrupts,and absolute power corrupts absolutely.

Vide supra

Sun, 03/29/2015 - 17:22 | 5939999 Harbanger
Harbanger's picture

Some numbers to think about when wondering why the USD hasnt crashed with all the Feds money printing,

Total Global debt, 223 Trillion

Total US debt, 18 Trillion.

Maybe the worlds other central banks are printng even faster.

Sun, 03/29/2015 - 18:36 | 5940191 Terminus C
Terminus C's picture

Your total US debt number is... understated at best.

Sun, 03/29/2015 - 18:57 | 5940233 Mr. Bones
Mr. Bones's picture

"Control is an illusion, you infantile egomaniac. Nobody knows what's gonna happen next: not on a freeway, not in an airplane, not inside our own bodies and certainly not on a racetrack with 40 other infantile egomaniacs."

-Days of Thunder

Sun, 03/29/2015 - 22:31 | 5940745 forwardho
forwardho's picture

That's perfect.

So is the Market!

Sun, 03/29/2015 - 23:02 | 5940821 blowing winter
blowing winter's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.jobs-review.com

Sun, 03/29/2015 - 16:22 | 5939877 Caveman93
Caveman93's picture

Go ahead. Raise rates. I fucking dare you!

Sun, 03/29/2015 - 16:55 | 5939951 LasVegasDave
LasVegasDave's picture

What's next; counterfeiting/printing $100 billion a day and negative 5% interest  rates?

Sun, 03/29/2015 - 17:53 | 5940081 ThroxxOfVron
ThroxxOfVron's picture

"What's next; counterfeiting/printing $100 billion a day and negative 5% interest  rates? "

 

That is the very likely the Hillary/Bush Duopoly 2016 Depression Plan.  90% will be gifted to the Oligarchs and 10% will be grudginly ladled on 'disenfranchised minorities'.  

The middle class will be crushed with onerous taxation and turned away from whatever jobs and government contracts are available in the name of advancing the Social Fairness and Race Grievance agendas.

Sun, 03/29/2015 - 16:22 | 5939878 A Lunatic
A Lunatic's picture

Do not worry. There is a very healthy Police State backing up the FED.......

Sun, 03/29/2015 - 16:25 | 5939890 chunga
chunga's picture
Martial Law-Style Training in Fort Lauderdale

https://www.youtube.com/watch?v=cx3G4_Hx8_U

tinfoil? yeah probably maybe

Sun, 03/29/2015 - 16:42 | 5939919 e_goldstein
e_goldstein's picture

Special forces invading the Southwest this summer.

Not a big concern. If the rattlesnakes don't get them, the heat probably will.

Sun, 03/29/2015 - 22:30 | 5940742 forwardho
forwardho's picture

What a suprise, links been pulled.

Sun, 03/29/2015 - 16:22 | 5939880 stant
stant's picture

Bitch slapped by a invisable hand.market always rules the game in the end

Sun, 03/29/2015 - 16:25 | 5939888 nevadan
nevadan's picture

And after the crash who will accumulate all the pieces?  The same ones that made all the money on the way up.  The same old "in crowd".  Surprised?

Sun, 03/29/2015 - 16:26 | 5939891 Mister Delicious
Sun, 03/29/2015 - 16:26 | 5939892 yellencrash
yellencrash's picture

Like.

Sun, 03/29/2015 - 16:30 | 5939898 Carpenter1
Carpenter1's picture

Party over. Let the hangover begin.

Sun, 03/29/2015 - 16:33 | 5939902 q99x2
q99x2's picture

This better not interfere with the government paying me to read Moby Dick.

Sun, 03/29/2015 - 16:35 | 5939906 NoDebt
NoDebt's picture

"I don’t believe that was their original intent."

I do.  They knew after maybe a year or two at the most they were blowing the big one (a BUBBLE, what did you think I meant?).  But not just any bubble.  THE bubble.  They knew they couldn't turn back AT THE LATEST after QE1 ended and everything immediately started reversing.  By the time they started QE2, they HAD TO KNOW there was no turning back.  They'd have to be blind not to see it.  Timing it out was the best they could do from that point forward.

The next downturn will be the widowmaker, and they damned well know it.

 

Sun, 03/29/2015 - 17:59 | 5940062 RaceToTheBottom
RaceToTheBottom's picture

Macro Economics has long become Bubble-nomics.  From at least as far back as the sellout Greenspam, they have all known there is no macro economics, only bubbles.  

Removing Accounting information systems has been done to extend the pretend....

Mon, 03/30/2015 - 11:14 | 5941950 bobdog54
bobdog54's picture

Krugman's column today was totally a last ditch effort to keep the mindless mindless...

Sun, 03/29/2015 - 16:38 | 5939912 _ConanTheLibert...
_ConanTheLibertarian_'s picture

How many times has Zero Hedge shouted fire already? What's up with the rehashing this week?

Sun, 03/29/2015 - 16:48 | 5939930 Uber Vandal
Uber Vandal's picture

It's the smoke that tends to get you, before the fire does.

Sun, 03/29/2015 - 16:59 | 5939958 Winston Churchill
Winston Churchill's picture

The boy that cried 'wolf' too often, still got eaten by the wolf in the end.

Complacency will kill you.

Sun, 03/29/2015 - 20:28 | 5940458 TooBearish
TooBearish's picture

THis No Hedge site has morpehed into a perma bear, gold touting google ad selling machine - but every once and a while a Tyler lets lose with a post that is old school Zero Hedge - incisive, distinct and stand alone unique anlayisis.  The unfortunate thing is the frequency of these posts is fewer and farther between.... peace!

Sun, 03/29/2015 - 16:41 | 5939916 Its_the_economy...
Its_the_economy_stupid's picture

Is this the best that "financial" people can write these days? It is getting really bad on this site in this last year. It is all I can do to tease a line of thought out of this scribble.

Sun, 03/29/2015 - 16:52 | 5939922 Its_the_economy...
Its_the_economy_stupid's picture

I'm beginning to think that a liberal arts education does in fact have value.

Sun, 03/29/2015 - 16:57 | 5939953 SMC
SMC's picture

The Fed never was in control of the economy, the best they could do is hand out some fresh fiat candy to Just Us.

Sun, 03/29/2015 - 17:36 | 5940047 kchrisc
kchrisc's picture

Muggers and burglars steal and leave.
Grifters scheme and manipulate, control, in an effort to sustain their ponzies, and afford them escape.

The banksters need to repay us.

 

Banksters: Grifters with a board of directors.

Sun, 03/29/2015 - 17:03 | 5939963 ebworthen
ebworthen's picture

With a compliant CONgress and Mass Media they can blow another $11+ Trillion, raise/lower rates, and jawbone for another decade to juice Wall Street and punish plebeians.

The real question is when the rest of the world loses faith in the Dollar.

Sun, 03/29/2015 - 17:27 | 5940015 kchrisc
kchrisc's picture

The Fed is being, and assisting, setting themselves up as the fall guy, patsy, for when the Zionists pull the plug on the dollar. Not that the Fed is not guilty, but the Zionists do not want us looking any deeper than the Fed for the demise of the dollar, or the cause of our misery.

Zion will then seek to replace the dollar, and associated fiat debts, with SDRs that will then enable them to continue their roughshod ride over the American people. Later they will come back and take possession of what is left worth stealing that they haven't already stolen, and leave the rest to China and Russia.

It's a new big club, and we Americans will be serving the food and drinks, and cleaning the bathrooms.

The banksters need to repay us.

 

Is the dollar up on "strength" or "exit?"

 

Sun, 03/29/2015 - 17:35 | 5940045 phoolish
phoolish's picture

When you measure "growth" (GDP) by how much debt you create, it is easy to create growth w/ a printing press.

Sun, 03/29/2015 - 17:54 | 5940086 Cycle
Cycle's picture

If the Fed were to stop talking about raising rates, rates would rise on their own because the bond market would be asking questions about how and when its ballooned balance sheet will be deflated. If the Fed were to raise rates, the costs of turning debt over would rise and blow a hole in the bond market. So - better to talk, talk talk...for now.

Sun, 03/29/2015 - 18:39 | 5940193 Fun Facts
Fun Facts's picture

They should just cease all open market operations and don't answer the phone.

That's how they do it in this business.

For further information, contact Stanley Fischer in Tel Aviv.

Sun, 03/29/2015 - 18:56 | 5940229 Mr. Jingles
Mr. Jingles's picture

We should feed yellen to isis, it kill them from the inside out like a parasite haha

Sun, 03/29/2015 - 19:08 | 5940250 Jack Burton
Jack Burton's picture

The Fed raises rates, even a tiny fraction up, and the stampede will be epic. Remember the few times the last year that the Fed even hinted it was looking a some future rate increase? Stock fell off a cliff, until the Fed rushed out in public and swore to god they saw no reason to ever raise interest rates. The the Bulls stampeded back up again. That happened three times in recent memory. If it turned real, then the cliff will be crowded with sellers thrying to off load their manipulated equity shares before a hint of free markets took hold.

Sun, 03/29/2015 - 21:07 | 5940552 sleigher
sleigher's picture

Exactly why the only thing I am buying is gold/silver/food/ammo.  (not necessarily in that order)

Sun, 03/29/2015 - 21:22 | 5940578 cpnscarlet
cpnscarlet's picture

He didn't mention Yellen's "cash is not a good store of value" comment.

NOW THAT MEANS SOMETHING!!!!

Sun, 03/29/2015 - 22:32 | 5940750 rejected
rejected's picture

ETF

Sun, 03/29/2015 - 22:36 | 5940762 mindundermatter
mindundermatter's picture

First, some comments, then the items that concern me the most.

Comments:

As all of you know, the Fed's policies since the "official" end of the Great Recession has been reckless, irresponsible, and short sighted. Yes, they have painted themselves into the proverbial corner. I think the Fed should swallow the bitter pill and get on with the rate increases, up to 1 basis point over the next year. I agree with Kyle Bass here: https://www.youtube.com/watch?v=KtCrZLXlt3Q We kicked the proverbial can down the road, instead of taking our fish oil when we should. Now, that fish oil is rancid, and is going to be 10 times worse, now, than it would have been years ago. There isn't any way to avoid the inevitable.

Concerns:

1. Derivatives held by US Banks and the rest of the world... $250 Trillion by U.S. banks; with the rest of the world holding around $550 Trillion... but, true quantity held is anyone's best guess. For comparison purposes, the total US Deficit is around $17 Trillion. Specific concern revolves around the oil derivatives and interest rate derivatives. This, to me, is truly the Mother of all Calamities, waiting, poised to explode at some point in the future. Point, of course, unknown. But...

2. Oil prices, both their impact on US energy jobs, and oil derivatives. Cannot find exactly how much of the derivatives are tied to oil prices, due to the lack of transparency, lack of reporting requirements, etc., but have to believe it is substantial.

3. US Interest rates. As mentioned above, I believe they are going higher over the next year. This will, of course, cause the long-awaited correction within the equities markets but, again, I am again much more concerned about the derivatives that are tied to US interest rates. Same comments as those made regarding oil apply here.

We made some changes to prevent sub-prime mortgage part II, but the banks just moved more focus to derivative trading, due to the lack of regulations preventing such actions. My understanding that there were some regulations concerning regulations of the US banks derivative trading, but it doesn't fully kick in till 2019, if I remember correctly. I might have that wrong. Regardless, the derivatives in place scare the crap out of me. Most you know this, but you have got to love derivatives: Where else can I put in place a hedge, and then you can put in place a hedge, based on whether my hedge is correct, and on and on.

 

 

 

Mon, 03/30/2015 - 06:18 | 5941158 Bopper09
Bopper09's picture

One of the videos on the side of that youtube link.  Guy selling a gold coin to the clueless public

https://www.youtube.com/watch?v=ndshbH3qZ6Y

Do NOT follow this link or you will be banned from the site!