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Janet - We Call Your Bluff On Rates (And This Chart Is The Tell)
Submitted by Thad Beversdorf via FirstRebuttal.com,
At Janet Yellen’s latest speech in Rhode Island, she states,
“… If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy”.
Wow! Either some poor intern has really mucked up some serious reports for dear Janet or this is just more of the Fed’s Hawk/Dove public sideshow still attempting to negate rational expectations by creating confusion around monetary policy actions.
I know where my bets are going but I feel like I need to have a quick chat with dear Janet. So here goes...
Well Ms. Yellen, I call your bluff and let me show you your tell in the following chart.
You see, I get that you find yourself in a terrible conundrum. You understand as well as anyone that managing the trickle-less down recovery and the resulting tenacious dislocation between the market and the economy is becoming unmanageably expensive; about $13T to date. And while the hint of a rate hike over the past year has sent the dollar up some +15%, some suggesting a sign of strength for the American economy, it really is not helping the situation now is it??
We all like to pretend that we are at full employment but deep down we know all those who moved out of the unemployment line moved into the welfare/disability/social security line rather than into employment. This is clear by way of the labour participation rate dropping an equivalent amount by those falling off the unemployment radar. And what is full employment anyway, right Janet? Why, I can remember not too long ago, that 6.5% was our targeted full employment but let’s not split hairs over benchmarks. 6.5% or 5.5% or whatever we decide full employment is going to be it really doesn’t matter but for perception, that I know we agree on.
And that’s kinda the thing isn’t it Janet? The 6 years of funding a trickle-less down recovery, hoping and praying that the market/economy dislocation (which is inherent in such a strategy) is reconciled by a rising economy rather than a crashing market this time around is beginning to wear thin as a viable strategy. I feel your pain. I’ve bled a fair bit of premium betting on a reconciliation of the dislocation as you have bled a fair bit currency, neither of us getting it right so far. Forgive me this cheap shot, but I earned the premium I’ve bled and so it seems just a bit more real to me than to you I’m sure. Nonetheless I can imagine things must be getting a little stressful there over at the Fed.
But going forward what is it that we are to do Janet? We’ve lowered oil to offset rising food prices and to stimulate consumption but still demand is anemic at best. And like a rising river in the face of being up shit creek without a paddle, we now see signs of supply side inflation creeping in as well. This doesn’t bode well for real incomes and thus the perception of a stable consumer. Consumer debt is back to peak and overflowing levels. There just isn’t much more consumer debt to be distributed in order to keep selling all those cars and guitar lessons. What are we to do Janet, when uncontrollable forces just refuse to fall into place??
Well Ms. Yellen I am, like you, still betting on the reconciliation, however, I expect we remain on opposite sides of this trade. Now I know, I know I should never fight the Fed. I get it. But I tell you what, sometimes the sun even shines on a dog’s ass once in a while. And so I call your bluff Ms. Yellen. As Kenny Rogers once sang so sweetly, “I can see you’re out of Aces”.
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This got me so fired up. Preach brother preach!
What the author doesn't realize is Yellen thinks she can win with a hand all red cards.
The Fed raises rates soon no matter what.
Well Trickle me Elmo, but I'm not seeing how giving a bunch of money to the wealthy to speculate in is helping the economy... Neither do I see how the wealthy becoming excessively more wealthy will help them retain their wealth if nobody can afford anything... Continuing lying to yourself, if that makes you feel better, but nobody is amused or buying any of this BS called monetary policy or economics...
That is the vehicle for civil unrest. ARM holders and all.
Define "soon."
Last month you predicted a rate hike in June.
Do you still stand by that?...
Raising rates would be the biggest vote of confidence to the economy they could give. Marginal home buyers would shift their plans forward to beat the rise.
Then it all implodes, because monetary policy and fiscal policy are two completely separate things.
So you're saying the eCONomy isn't getting better?
https://www.youtube.com/watch?v=NDFtoo4xdFU
and begin the process of normalizing monetary policy
"No rate normalization during my lifetime." Bernanke
So who is lying? My bet is on Yellen lying to keep the dollar strong, and US interest rates low, and US bubbles in bond and stock markets and real estate from bursting.
Agreed.
This bullshit is all so short term-ist. Any actions now to keep these bubbles inflated is just going to fuck our children and grandchildren.
I think at this point they have to pick which bubble is going to burst before it all implodes. The only way I think they can buy time is to pop Housing Bubble 2.0. Housing dropping 30% solves a lot of the problems in the consumer economy. Lowering Joe6pac's fixed housing costs along with the likely double dip in energy prices is a defacto wage increase. You need only look to the mini run we had around 2010-11 with the home buyer credits. prices were down but sales and economic activity on Main St were actually pretty good.
Housing Bubble 2.0 has cleared the banks balance sheets of distressed SFH about as well as it could be. Popping it only hurts the come lately flippers and knife catchers. I don't think Hanet and Co have a problem throwing them on the pyre to extend the strock/bond run. Blackstone and thet're ilk have already securitized their rental portfolios. Me thinks the smart money knows what's coming and has already channeled those losses to the dumber specuvestors.
There is no housing bubble 2.0. There is a very small in most places housing dead cat bounce. The balance sheets of the banks have never been cleared as they were never impaired by housing, as housing has been marked to unicorn for a long time. They were impaired by a variety of non performing loans, not just housing . What has happened is that the banks have converted their reserves for underperforming loans to profits and have very small reserves relative to the magnitude of the problem. Pop the housing bubble and it will be bank bailout 2.0.....
A 30% plus increase in many (most?) major metros while there has been ZERO increase in wages isn't a minor bounce, it's another bubble. You contradict yourself saying the banks were never impaired by housing yet were impaired by non performing loans, which were backed by housing (really???). Why the fuck do you think Bernanke created the special lending window to institutional RE investors just for buying SFH's in bulk???
The 2009/10 housing credits we're working TO WELL. Distressed inventory was being cleared out but not anywhere near the Mark-to-Unicorn-and-Rainbows prices the loan holders wanted. hence we were given the gift of Housing Bubble 2.0. A massive run up in prices based on the most miniscule volume imaginable. More like a Undead Tiger Bounce that ripped the throat out of the consumer economy. Higher rents and mortgage prices are destroying the purchasing power of all but the most entrenched who are NOT spending there windfall on Main St. Housing Bubble 2.0 has to be popped and the FED knows it...
Prosperity is right around the corner, being beat to death by reality.....
Election year coming up, running out of time for a crash, so it wiull be print, print, print.
Optimist, the crash will come a couple of months before the elections and Obutthead will declare martial law and suspend the elections......
Election year coming up, running out of time for a crash, so it will be print, print, print.
You act like the FED is omnipotent and actually in control. The 2008 election sure didn't prevent the crash. If anything a Ctrl-P FED combined with Obamacare will only accelerate the shitstorm. These guys have no fucking idea what they're doing or what is going on in the real economy.
Fed managaing policy gamma for the US economy.
Fed very long the policy option, but US is way too short the gamma.
Gamma damps with higher ivol, so Fed boosts policy ivol in the form of policy dissonance (conflicing regional governor statements).
Gamma is highest with near-expiry options, so Fed continues to extend option tenor with wait/see verbiage.
Basically, Fed thinks a rate hike sees a massive short-gamma shock in US economy, so they're trying to tame the beast.
Of course the economy and markets can not support a hike in rates, but if their goal isn't market stability but political cover to be able to implement some truly crazy policies, say like banning cash and pushing rates seriously negative, a crisis may be exactly what they want.
Of course thats exactly what they want.
Their track record managing crises is hardly inspiring, so they are risking everything
on a turn of the cards.Faith is a fickle beast, hard to regain,once lost.
So, they ban cash and open the window for a new street currency/currencies the Fed can't control?
Hi Zerohedge,
I have been reading yours (among other prominent ones) for years. It seems you are not looking in the right direction.
You MUST read my blog. 52 posts. The possibility of PLAN B as out lined in my post is not out of question.
http://just-a-thought-from-thinair.blogspot.com/
You got it bass akwards. Try this instead. There are 10 people, and only 6 are required to provide the needs and wants of the 10. What do you do with the other 4? That is the world we live in. The oversupply of labor (for a variety of reasons) is driving down wages, lack of wages is in turn driving down prices. Europe realized this and tried the 35 hour week, which only made them non-competitive. Some countries retire at 55 again non competitive. Whats the answer?
Print?
what they are doing now, is extend and pretend. Continue to print, continue to have the bots manipulate the markets, and hope. Bonds may call their bluff.... Either we are in for an Epic bond rally in the next week or we are in for the start of the correction.
The answer is a normalization of east-west living standards. Not too surprisingly this is what you are getting now and will keep on getting till equilibrium is reached. The problem is that the middle class is the one getting hammered and they will continue to be increasingly discontent. Hence greater surveillance and policing.
Stewie, the normalization will be on the terms of the EAST, an oligarchy and a proletariat. Outside of a few chinese cities there is no middle class. The middle class in Japan is being annihilated there as they are here. There is no discontent in the middle class, grumbling yes, white college educated males taking to the streets, I dont see it nor will I.
I hope you're wrong :o(
You shouldn't have to do anything with those 4...you should have adjusted your system so that all 10 can still participate, albeit at fewer hours. Just because 6 can provide all the needs, it doesn't mean it has to be the same 6 all the time. Get everyone doing their part...be creative here! Have 2 people split a job, each working half the required hours. Or have some jobs circulate, with people each working a few weeks before handing it off to the other guy, etc.
Everyone still works, but the increasing productivity means everyone can work fewer hours. If anyone is old enough to recall, this was the 'selling point' of automation. When machines started doing people's work, we were assured that it wouldn't mean unemployment, oh no. It would mean more leisure for everyone...
Yeah, right. Keep that in mind, younger ZH readers, when your current crop of bullshit artists (today's tech crowd) paints YOU a rosy picture of the future...They TELL you about all the wonders and benefits, then when you let 'em in, you find you've been had.
No, Elon Musk is NOT going to be flying you all to Mars. The technology will NOT be used for your benefit, of that you can be certain. Even if Elon is a good guy who means what he says, anything he develops that has promise WILL be taken over by those who will then turn it on YOU.
The only way your idea works is if its globally planned and controlled. Which again to might be the plan.
It doesn't have to be global...why does everything have to be global? Your trade with other countries doesn't depend on how you organize your labor force, it depends on what you PRODUCE with that labor force.
If others prefer to stick with the old way of having 40 percent of your economy unemployed on a permanent basis, fine. Good for them. There's no reason WE have to.
"Forgive me this cheap shot, but I earned the premium I’ve bled and so it seems just a bit more real to me than to you I’m sure. Nonetheless I can imagine things must be getting a little stressful there over at the Fed."
Oh please. The fed is playing every market and moves them with their money and fed speak at will. They are kicking his ass because they have unlimited funds to play in whatever direction they want (and no one will ever see it) and then move the markets at will. Until some event occurs that overwhelms their abilty to do so, this will continue.
This is a pissed off loser that is mad he willl never beat the fed no matter how hard he tries.
The only problem that need to be solved is the following.. let me know if anyone has the answer for this
There are ten people and resources to feed only nine. What happens to the tenth and why? O' Humanity, Why are you running and for what?
Soon as the Q99X2 got here he moved into the welfare line. It has been getting better every year since. Now I'd rather fight than ever have to work again.
The market is raising the rates for her anyhow.
And the "Markets" are priced in her currency. Hell of a how do you do?
OBAMA: ‘I’M THE CLOSEST THING TO A JEW’ TO EVER BE PRESIDENT
http://www.breitbart.com/big-government/2015/06/02/obama-im-the-closest-...
What the fuck?
I didn't know a "THING" was allowd to be President.
That whole thing is wrong on so many levels, and can't be explained by drug use or a failed education system.
You dont think he can relate to the Caitlyn.... come on, you wouldnt refer to yourself as an IT would you?
They are working a plan. They are not incompetent. They are just not doing what they claim. That is all. It has always been the case, all the way back to the founding. It isn't hidden. You just have to look. http://www.thetruthaboutthelaw.com/the-first-amendment-was-dead-on-arrival/
The linked website is total horse poo. If you are going to bash the US government and the Constitution that's fine, but try to use facts and logic...........not convoluted BS.
$13.42 for 2 pounds of ground beef.
Nuff said.
Vote with your wallet- switch to pork, poultry, seafood instead.
If everyone did so, beef prices would drop down overnight.
Just bought 3 boneless pork chops totalling 2.5 pounds for $9 last night. I dont fuck around with beef at these prices.
Too bad the jar of JIF peanut butter and the jar of strawberry preservers in my cart cost me $9.50.
LOL...not really...that is like saying dropping gasoline demand pushing oil prices down...or that Gold demand pushes prices up. Natural Gas prices are record low...what about your electric rate(Solar and Wind are used to drive up the price...utilities love useless renewables so they can raise prices....even as inputs drop in price? Manipulation! Ever see a liberal talk about beef...it is bad for you and the environment..etc. Pork and Chicken, then vegetarianism are just way points to eating Solyant Green! Welcome to the world of mirrors MANIPULATION is everywhere!
Beef is perishable.
That's why your point is invalid.
Rather than let it rot on the shelf, they will discount it.
As demand lessens, so does price, when it comes to perishables.
Always.
that supply and demand thingy only works in unrigged markets, which this isnt. Corn at a low, fuel at a low, beef demand at a low, and prices at a high....
You're missing the point- or deliberately obfuscating it.
Corn can be converted to ethanol, or canned, or frozen- Hence its price can be rigged.
Fuel can be stored- Hence its price can be rigged.
Beef, once slaughtered, has a limited shelf life. If beef supply exceeds demand, the only choice is to discount. It can be sold at the supermarket, butcher, TV dinner or dogfood markets- but it will, indeed, be discounted if consumers switch to alternatives.
Don't buy ground beef! Buy cheap cuts and grind them yourself at home, it isn't hard at all.
When you buy commercially ground meat, you are taking a big risk...that pound of meat you buy contains meat from hundreds of animals. It's all thrown in and mixed together. ONE bad animal, and you have tons of contaminated meat getting recalled.
Do you really trust our food inspectors these days?
Yeah, but after they hedonic some folks, and have them buying ground squirrel, you see a price decrease in your burgers.
$2.99 / lb. freshly ground. Weekly tuesday special, Freshmarket.
My deep freezer is packed.
Pressure canned ground beef is on the shelves.
Another not too swift article. Tyler you are really slipping
Strong dollar equals lower trade deficit.
Strong dollar provides more discretionary income for the sheeple.
A 10% weaking of the dollar is not all of a sudden going to creat jobs in the US for a variety of reasons 1) Regulations 2) our price of labor is still far to high compared to china 3) lack of a skilled workforce.
No if DXY drops from here US Macro will do a complete face plant.... THink about $4 gas and what its affects would be.
Wrong,
A strong dollar WORSENS the trade deficit.
what melodramatic bullshit.
William Shatner would be proud.
Thought I heard Jerry Seinfeld. Whatever.
So if the macro doesn't turn around she'll loosen the taps again. I don't see the supply-side inflation creeping in that you do.
The Fed raises rates 25 bps as a "test" to see if this ship will tank. That is the highest they can go without a death spiral...in the short-term.
"........when Uncontrollable Forces just refuse to fall into place......"
Markets will not collapse.
They will evaporate.
Save your shorts for the next incarnation.
based on liquidity they have already evaporated. The downstroke will come when Joe 6 pack parks his 401k en mass.