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Peak Central Planning: BofA Says Fed's Dudley "Does Not Want Stocks To Decline; Wants Bond Prices To Go Down"
Yesterday we got the latest confirmation of what the Fed will never openly admit and which everyone knows. Or rather, the Fed would never openly admit previously, namely that all it cares about are stock prices, or as we first dubbed it here a year ago, the Fed is "Dow Data Dependent." The admission came courtesy of Bill Dudley who during an interview yesterday said:
- DUDLEY: FED RATE PATH WILL BE SHAPED PARTLY BY MKT REACTION
In other words, the Fed's actions will be shaped by the market, which in turn is shaped by the Fed. Or, as anyone who has used Excel will observe (apparently not the former Goldmanite head of the New York Fed), a circular reference (and one which #Ref!s out whenever there is selling and exchanges have to be closed).
That in itself was bad enough, but things got substantially more laughable when the big banks were forced to defend his words in the context of the Fed's dual mandate, because - well - simply there is no defense that doesn't point out the obvious: the Fed could care less about jobs or inflation and all it does care about is the Dow Jones.
Enter Bank of America, with what may be the peak farce not of the so-called recovery, and the following sentence in particular.
While Dudley clearly does not want stocks to decline a lot, he also wants to avoid meaningful increases... Also very apparent is that Dudley wants bond prices to go down – not a lot but clearly down.
And there it is, central planning courtesy of the US central bank, writ large. The USSR is spinning, and laughing, in its grace not only because it knows how such "planning" ends, but because it is truly ironic that decades after winning the (first) Cold War against Russia, the US has succumbed to the same methods that ultimately destroyed the "evil empire."
So to add some humor to the farce, here is the full note from BofA's Hans "Great Rotation any minute now" Mikkelsen:
While the Minutes of the March 17-18 FOMC meeting were fairly neutral relative to market expectations judged by the lack of market reaction, the more market relevant commentary from the Fed continues to originate from New York Fed President Dudley. Instead of focusing on the precise date for liftoff Dudley continues to address his views on the much more important question of the path for rate hikes after liftoff. And rather than the specific path he emphasizes its dependency on financial market conditions. At today’s Reuters Newsmaker interview in New York Dudley said, among other things, the quotes we highlight below. These comments are consistent with his speech this Monday (see: Data relief+more ZIRP=Good news). In fact Dudley detailed his views four months ago in a December 1, 2014 speech at Baruch College.
While Dudley clearly does not want stocks to decline a lot, he also wants to avoid meaningful increases. In other words, for the coming rate hiking cycle he wants a “Yellen Collar”, not a “Yellen Put”1 While prior to the financial crisis it was a Fed put, given the policy mistake represented by the 2004 rate hiking cycle – where financial market conditions did not tighten, in fact they loosened significantly contributing to the housing bubble and the financial crisis – Dudley now argues for a Fed Collar. Also very apparent is that Dudley wants bond prices to go down – not a lot but clearly down. Should the Fed start hiking rates this summer/fall - which we expect – and if Dudley’s thoughts are shared more broadly by the FOMC it would appear that we should prepare for this year not being a good one for total returns. We maintain a 0% total return forecast for high grade in 2015. “How we react after liftoff is going to depend in part on the market reaction we get.”
- “Lifting off is designed to slightly tighten financial market conditions.”
- “If financial conditions tighten a lot – bond yields go up a lot, stock prices go down a lot, credit spreads widen, then presumably we are going to slow down or even pause for a while.”
- “Conversely if the market doesn’t react at all - stock market goes up, bond market doesn’t move, then presumably we are going to want to do more.”
In other words, the Fed is there to backstop habitual gamblers and 1 year old E-Trade babies every step of the way, just don't everyone go buying everything at the same time, or Bill Dudley will be angry. Of course, this kind of "strategy" works never, as can be seen by the virtually straight line rise in the S&P since 2009, or most recently, by the 10% surge in Hong Kong stocks in just the past two days.
As for how this all ends, just ask one man who has seen it all: Julian Robertson, who earlier this week said:
I think [the Fed is] not crazy enough just to let this thing boil over into complete explosion. I am looking at a bubble that is almost sure to pop at some time and I don't know when it's going to happen, but I know it's going to happen. The bigger this bubble gets, the bigger the burst. I don't think it's at all ridiculous to think of a selloff like we saw in 2008."
Unfortunately, Julian, the Fed is crazy enough, and as shoudl be obvious by now, the Fed has no choice but to let it all boil over into a "complete explosion." Because as Dudley proves beyond a doubt, the Fed is now too terrified to try anything else, period.
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Doublespeak at its best
(headexplodes)
Naysayers being suicided off tall buildings in 3...2...1..
Does Not Want Stocks To Decline
Never......eva!
Strike Liftoff, replace with Fuckoff
Those "folks" at the Fed are fucking incompetent. We're on the Crazy Train.
Umm ahahh aggagaahagagrhrghgdhgfgtrhrgsghhfrghdgahghrghfghhagrhh
Well.......are you going to go for it?
https://www.youtube.com/watch?v=fv3aWID7BSI
" or even pause for a while " ........... lol, god I love their euphemisms sometimes
the bottom long ago was 666. 3 times 666 is 1998, and we passed that. so I dont know what to guess is the peak. 2664?
with QE ^ it will be 6666.
The Fed has clearly lost all credibility. At this point even a 0.25% single rate hike - just (In their own mind) to attempt to show that they are "Ahead of the curve" - will crash the economy.
And when that happens, all fingers will point at The Fed. Rightly so. If they had not been so full of their own omnipotence, several years back they could have acted on the basis that "We can only do so much with Monetary policy" and kicked the can back into Congress for fiscal reforms. It is now way too late for that and the politicians will, of course, be amongst those pointing the finger at The Fed.
Reminds me of when they insisted during the housing bubble, that there could never be a national housing collapse.
Clinton wanted to smoke pot [but not inhale]
Aaaah yes... The best & brightest!
Brownies
It just hit me this morning but QE4 isn't about stimulus in the sense of increasing the economy but will be used to devalue the dollar to maintain parity with all other currencies. QE4 will be done, hedge accordingly.
Ta dah!
It's all about beggar thy neighbor currency wars a la Europe in the 70's. Round robin devaluations which in the aggregate, did fuck all nothing but eventually raise prices as everybody followed suit. Difference now? We're in a Liquidity Trap, so might just as well have a circle jerk. The excess liquidity for the moment is simply flowing to financial assets (via the banks awash with the liquidity).....
.
.
Oh to be a Washington politician on the take.
Dudley wants cake to hold, and look at.
Dudley wants to eat cake.
Mental health professionals describe Dudley as "conflicted".
Doublespeak is easy with a forked tongue
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.globe-report.com
I often wish to eat my cake and have it, too
---
"In other words, the Fed's actions will be shaped by the market, which in turn is shaped by the Fed. Or, as anyone who has used Excel will observe (apparently not the former Goldmanite head of the New York Fed), a circular reference (and one which #Ref!s out whenever there is selling and exchanges have to be closed)."
actually, that's Excel's fault, in a way. circular references are quite common, both in nature and human behaviour. and markets are a reflection of human behaviour, even algos are programmed by humans
as I often write, the US Stock Market is something like the Holy Grail of world finance. it can't be subject to "benign neglect". not according to the policies being so long denied but finally surfacing, this time from "the horse's mouth"
kudos to ZH's Tyler Durden(s) for being so persistent in this, and being again proven right
Dudley wants bond prices to go down, without yields going up.
He wants the stock market to drop without a rate increase.
He wants to print money with deflationary results.
Conclusion: Dudley wants to be a college professor.
Dudley wants a wife who likes to go camping.
He wants a wife who doesn't care if he puts his career first.
He wants a wife who can get dressed in five minutes.
Conclusion: Dudley wants a man, but he doesn't know it.
What about fishing? The his guy wife can smell right.
"as I often write, the US Stock Market is something like the Holy Grail of world finance. it can't be subject to "benign neglect". not according to the policies being so long denied but finally surfacing, this time from "the horse's mouth"
kudos to ZH's Tyler Durden(s) for being so persistent in this, and being again proven right"
Where to begin.....something written from the horse's ass, to take your head outta Durden's ass.
"the Fed's actions will be shaped by the market, which in turn is shaped by the Fed."
We all clear on this?
What a captured cunt.
Sorry for the ad hominems, but ya know it comes with your job description, right?
I don't mind the ad homs, but could you translate a bit what you mean? I'll try to make myself clearer, first:
in europe, nearly all policy, particularly monetary, is for the european Holy Grail: sovereign debt markets
in doubt, even banks have to become tools of the state and protect the Holy Grail
in the US... there is the Mighty US Stock Market. Too Big To Fail. To Important To Be Neglected
which leads me to find it funny that this FED fellow is kind of balancing the need of protecting Stocks while protecting the USTs
better?
Yeah,,, there is no way anything can go wrong with this plan
William Dudley is a real problem for this country.
With strong ties to Goldman Sachs you know where his loyalty lies.
He's one evil lying dude.
As always the FED will lose control and it will be the largest wipeout ever seen as we have the highest debt to GDP ever seen. Prepare for it in advance as best you can
No, they won't lose control, but they might pull the plug deliberately. If a Republican scapegoat gets elected President in say 2020 or 2024 (can't happen in 2016), Yellen will tell her GS buddies "its time", puts her hand on the cord, and counts down toward zero.
This isn’t a Top Signal. Go leveraged long 4x… put the house on the line, you’ll get a bailout.
One more day. Today, we only have to make it one more day. Tomorrow, we will only have to make it one more day. This is how the ponzi works.
You are prolly not old enough to recall, but over an extremely long period of time, the average ponzi only lasts 12045 days, if it lasts longer than that, the consequences compound daily to the extent of financial exhaustion at any moment, which is where the states are now. The stakes are high, the end is nearer than you have time to prepare for, think of all the things you would do, if you had only one more day.
It just disappeared, all on it's own! I wonder if any Jews were involved. Go back to work Goy, you have another billion to pay off now.
http://news.yahoo.com/1-billion-disappears-moldova-looks-answers-0531201...
What Jews? They all left for Israel---among them Avigdor Lieberman. Moldova's loss was Israel's gain.
Romanians (and Moldovans) have been scammers since Roman times, at least, no Jews needed. They may have invented fake brand-name products. Most of the amphorae found whose manufacturer seals are agreed to be fake have been found in what is now Romania.
How do I know this? I married an Orthodox Romanian. The tales she spins of their shiftiness would curl your hair.
They Corzined some "folks"
How can bond prices even go down? Are we going straight up NIRP now?
Strategic default, by firms whose management have been isolated by stock buybacks financed with debt. You clean the firm out then stiff your creditors, leaving employees and bondholders to clean up the mess.
Ask any Greek oligarch. It worked swell there.
"Brilliant" people.
If they say "A", it means not-"A".
If they say "B", it means not-"B".
"...the Fed is now too terrified to try anything else, period!.
Not only the Fed but yes, 100%, petrified.
DavidC
Now the rubes are into near-zero yield bonds, issued to finance stock buybacks for your pals, now's the time to pounce, eh, Bill?
It sounds to me like the Fed is now trying to cut corners in its circular references.
Dudley's ate up.
Hahahaha with guys like this who needs enemies?!
"Please, I want it up the pooper, but not too deep"
Would you like a dr. appointment to go with that order?, or should we just scalp you and put a band aid on the wound.
Where is the Feds mandate to buy equities and prop up the stock market?
Same place Obama got his mandate on global warming.
All that is required is that it be in their minds, after that they can do anything they want to make it real.
Same mandate that keeps Gold & Silver at bargain prices. Time wins out eventually.
Even with manipulation, gold/silver were going to go down because of deflation. Look at the 1929 situation for reference. And there wasn't all this paper PMs that everyone wants to blame it on.
Deflation takes money from the weaker hands. Last year a co worker lost his job and had to sell most of his PMs and other stuff to get by until he found another job. Those items sold at fire sale prices because of his situation. He had a mortgage to pay, a wife and kid to feed. He had no choice. That is what will happen on a broad base and will keep a downward pressure on PM prices.
Not if the king dollar takes a big dump. That did not happen in 1929.
Jacksons Ghost Where is the Feds mandate to buy equities and prop up the stock market?
---
No mandate necessary. The FRB has been buying stocks for decades.
http://business.time.com/2013/04/26/why-are-central-banks-suddenly-buyin...
http://www.forbes.com/sites/investor/2013/01/30/how-the-fed-is-helping-t...
http://seekingalpha.com/article/2811335-is-the-fed-buying-stocks
You must have heard of the plunge protection team that is over 20 years old.
the Dudley fights every day for long-term interest rates to rise, look no further than the reverse repo sham and all NY FED papers that try to glorify the repo market and rehypothecation schemes as if they were part of a functional economic system - it is just an ubber-leverage gambling scheme that keeps this risk game afloat (for now). the man is dangerous.
central bankers were "allowed" to "intervene" in currency markets to "defend" their currency. now, with this kind of turd around, they think they are allowed to "intervene" in government bond and stock markets - based on i don't know what. they think they are untouchable.
if you think for a second that algos and HFT is a game played by the players only, think again. it most likely was developed/supported by the casino masters, as it is the ultimate weapon in intervention/manipulation.
There's a very good way to achieve this: QE4.
QE4 usually accompanied by higher yields and higher stock market.
QE4 has a 99.999% chance of occuring.
the price is wrong bitchez [/happy gilmore]
Most everyone is missing the point. The FED is criminal. Ultra-self-serving criminal. ZIRP is looting the savings of the entire nation, and the FED owners and the TBTFs are systematically gaining ownership of everything, including I fear a lien on future taxpayer earnings when their bond holdings go south and Congress gives them some sort of perpetual bail-out.
Free markets for Free Men...
so what might we call this??
Calling Free Market Fed Cheering Larry Kudlow, come in Larry.....over...come in Larry...over
those fed maggots are in their glory for the moment. they just talk and move prices around. the fun times are about to be over, and the real work of buying everything that isn't nailed down just to keep prices from plummeting are about to begin. that may knock some of the smugly off their faces.
Only thing that would knock the smerk off their faces would be an old fashioned currency crisis.
And it's just a matter of time.
Up my FAFSA
AKA: Nowhere to run.
bonds go down, yields (and rates) go up
rates go up and USD rockets
USD rockets and SPX revenue and earnings tank faster
....but there's a hole in my bucket...
The USSR is spinning, and laughing, in its grace not only because it knows how such "planning" ends, but because it is truly ironic that decades after winning the (first) Cold War against Russia, the US has succumbed to the same methods that ultimately destroyed the "evil empire."
BINGO
Dudley would make a great example for the others were he to be set on fire in the public square.
USD lost it's buying power once it lost the gold backing. But, hey, it was good for liquidity, I guess.
Since there is a risk that stocks will soon start going downm what with the Fed tiptoeing around the idea of rate hikes 'any day now', let's take the next (il)logical step.
Nowadays the fiat USD is kinda propped up by UST, let's just agree that the Fed knows best and it can print the Reserve Note based solely on future growth projections. Naturally, said projections will be supplied by reputable TBTF institutions from Wall St. I already see the headlines in MSM - A major breakthrough in financial regulation, a creative approach to future growth and, for the pop'n'moms - Tomorrow begins today.
Do not mistake what the Fed says with what they are completely constrained by mathematics to do...there won't be rate hikes for years.
Fire when ready, Dudley!
People in hell want ice-water, y'know.
I want to be six inches taller but I don't want to buy any new clothes, right.
Yellen is waiting yahoo's bombs dropped into iran/yemen.
dudley is a total ass clown