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With One Week Left Until The Fed's Rate Hike, Nobody Knows If The Fed Can Actually Do It

Tyler Durden's picture




 

One month ago, when the market was getting excited about the imminent Fed rate hike, now due less than one week from today, Jefferies analysts flagged a red flag about the imminent rate liftoff: few, if anyone, know precisely how it will take place in practice.

We cited Jefferies economists Ward McCarthy and Thomas Simons who in their December 16 note wrote that "indeed the liftoff date, the Fed is running out of time to be 'well before' raising rates." They added that as per the July 29-30 minutes, FOMC participants agreed the committee should provide additional information to the public regarding details of normalization well before first steps in reducing policy accommodation.

And yet, aside from some vague reassurance that the Reverse Repo - IOER corridor "should" work, and an extensive profile by the WSJ of the person tasked with conducting the liftoff, Simon Potter, there has been no detail on the topic. To Jefferies this is a glaring problem: "The lack of any discussion of liftoff logistics is puzzling to us and a potentially significant communication snafu."

Jefferies added that the Fed has never attempted to raise fed funds rate under "IOER regime" so lack of confidence "is not unreasonable." In the note, the authors write that still unresolved issues about liftoff logistics and normalization process include:

  • Issues include how to communicate liftoff, spread between IOER and RRP, as well as spread between RRP rate and fed funds
  • FOMC members still struggling with risks associated with RRP facility, including “appropriate size” that would limit Fed’s role in financial intermediation

And then there is uncertainty “about the efficacy” as how combination of RRP and IOER rates will control fed funds rate.

The punchline according to Jefferies is that the idea that IOER will be primary tool to move fed funds rate is "wishful thinking" as IOER was initially intended to put floor under fed funds rate yet hasn’t been "an effective tool for doing so."

* * *

Earlier today, Bloomberg picked up on this major caveat to the Fed's experiment rate hike (experimental, because never before has a tightening been attempted with $2.5 trillion in excess reserves still sloshing around in the financial system), reporting that "as the Fed prepares to raise interest rates from near zero as soon as next week, bond investors are on edge. Beyond all the "is-this-the-right-move" questions that surround every increase, there’s a logistical concern: With so much cash sloshing around, will Fed officials be able to nudge rates as high as they want? Will the new-fangled tools they’ve created to engineer the move work, or instead sow the kind of confusion that can dent the Fed’s credibility and spur a broader market selloff?"

Bloomberg notes that as a result of these numerous questions, "many investors are taking no chances."

So what are they doing:

They’re piling into the safest, most liquid securities available, or those that move them as far away from the epicenter of the U.S. financial system as possible. James Camp at Eagle Asset Management is buying Treasuries and unloading debt linked to credit, such as corporate bonds. Peter Yi, director of short-term fixed income at Northern Trust Corp. is stockpiling cash. Jerome Schneider, head of short-term strategies at Pacific Investment Management Co., is diversifying into securities such as debt in foreign currencies. In a sign of the search for liquidity, U.S. money funds have cut the average maturity of their assets to the lowest since 2006.

 

Paradoxically, one of the "flights to safety" away from the short-end of the curve which is the biggest question market in the upcoming rate hike, is the long end, and many investors are buying up the belly of the curve in response, in the process further flattening the curve, and impairing bank Net Interest Margins, once again a thoroughly undesirable outcome to the Fed which needs to see a curve steepening to get validation by the market that it is doing the right thing and not engaging in policy error. After all, an inverted curve would be an undisputed signal by the market that a recession is just around the corner.

“You just stay away from this one,” said Camp, director of fixed-income at Eagle Asset, which manages $30.6 billion in St. Petersburg, Florida. “You just let this play out. It’s OK to wait and see, and see how risk markets react. I love Treasuries here.”

 

Camp boosted Treasuries holdings by 20 percent in the last six months, most recently adding seven- to 10-year maturities. He sees government debt offering shelter in case the Fed’s tightening leads investors to shun riskier assets, such as high-yield securities, and prefers longer maturities that would be less influenced by turbulence in shorter-dated obligations.

Others are stockpiling liquid and easy to dispose of shorter maturities.

Yi at Chicago-based Northern Trust, which manages $946 billion, has cash and securities maturing within five days as much as 15 percent above levels of prior years in the short-term funds he oversees. He’s focused on boosting holdings that are easy to sell in the event he faces withdrawals.

 

"We need to be prudent about any interest-rate exposure," said Pimco’s Schneider, who manages about $250 billion of short-term assets at the Newport Beach, California-based firm. "We’re looking for ways to diversify our liquidity risk in high-quality assets, and doing so with the view that rates are going higher."

The issue at hand, as discussed extensively over the past several years, is the logistical mechanics of the rate hiking corridor which the Fed will try to push up, bounded on the bottom side by the Fed's Reverse Repo operations, and on the top end by the interest the Fed pays on Excess reserves. Considering the unprecedented amounts of liquidity, it is not the ceiling of the corridor that is the concern, but rather the floor, and whether the Fed will be able to raise the rate on all paper at the same time.

In previous tightening cycles, there were far less reserves sloshing around in the financial system. That made it a lot easier for policy makers to hit their desired rate.

As Bloomberg summarizes this, "policy makers need new methods to drain that money and push rates higher in an interbank lending market, known as fed funds, that has become harder to influence now that cash-heavy banks rely on it infrequently.

And while many are willing to put their trust in the Fed's rate plumbing mechanics, "others are watching how the Fed handles the mechanics of the move. Camp at Eagle Asset and strategists at TD Securities say policy makers will need to more than triple the size of its daily reverse-repo program -- where they drain money from the financial system by temporarily lending out securities -- to at least $1 trillion. Expanding the program, which officials began in September 2013, would help anchor the fed funds rate. Yet the Fed may balk at the move because officials have signaled they’re wary of playing too big a role in money markets."

Furthermore, as has also been discussed previously, for the first time in a monetary policy move, the Fed will tap an expanded pool of counterparties, including investment companies such as BlackRock Advisors LLC, Federated Investors Inc. and Fidelity Investments as participants in the reverse repo program. It used to just deal with primary dealers, a group that currently numbers 22.

Bloomberg's closing quote is troubling for a Fed which in recent months has stretched its credibility with the capital markets:

“This is new territory for investors,” said Yi at Northern Trust. “We are all hoping it works, but can’t rule out a possibility that it’s not perfect. Our expectation is that it is probably going to be initially pretty sloppy.”

Alas, the Fed can hardly afford to be sloppy in illiquid capital markets in which one false move can result in an immediate flash crash in one or more asset classes.

* * *

But even assuming the Fed will be flawless in executing a rate hike experiment that has never been tried before, another just as important question is what the impact on market liquidity this purported 25 bps rate hike will have. Luckily, we roughly know what the answer is, as reported last week in "But It's Just A 0.25% Rate Hike, What's The Big Deal?" - Here Is The Stunning Answer, in which we cited the work, and calculation, Wedbush's Scott Skyrm:

 

Where will General Collateral trade when the fed funds target range is moved 25 basis points higher to .25% to .50%? In the most simple method, GC has averaged about .15% for the past month, which implies a GC rate around .40% after the Fed move.

 

 

However, given the unprecedented amount of liquidity in the financial system, there's a belief the Fed will have problems moving overnight rates higher.

 

We have two quantifiable events over the past few years where the Fed moved Repo rates higher or lower: quarter-end and the QE programs. Given there are so many moving parts, consider these to be very rough estimates: Beginning in 2015, when funding pressure began each quarter-end, the market, on average, took approximately $255B additional collateral from the Fed and, on average, GC rates averaged 20.5 basis points higher.

 

In 2013 on my website, I calculated that QE2 moved Repo rates, on average, 2.7 basis points for every $100B in QE. So, one very rough estimate moved GC 8 basis points and the other 2.7 basis points per hundred billion. In order to move GC 25 basis points higher, in a very rough estimate, the Fed needs to drain between $310B and $800B in liquidity.

So according to Skyrm, to push rates by a paltry 25 bps, the smallest possible increment, what the Fed will have to do is drain up to a whopping $800 billion in liquidity!

As we put that in context last week, QE2 - which pushed the S&P higher from November 2010 until June 2011 - was "only" $600 billion. In other words, to "prove" to itself that it is in control and the economy is viable, the Fed will effectively conduct, via reverse repo, an overnight QE2, only in reverse.

* * *

To conclude: we are less than one week away from a historic monetary experiment in two parts: the first one, which will attempt the (almost literally) Sisyphean task of pushing up the rate of interest on over $2.5 trillion in excess liquidity, and the second one, to assure the market that it has correctly priced in the overnight evaporation of up to $800 billion in liquidity in current asset prices.

If one or both of these fail to deliver, than the embarrassing disappointment that marked the ECB's December announcement and its dramatic impact on asset prices and FX levels, will be a walk in the park compared to "disappointment" that the Fed will unleash once the market realizes that while in theory the Fed can and is ready to hike, it simply can't do so in practice. And if that implies that trillions in excess reserves be drained first before the RR-IOER corridor can work then watch out below...

 

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Thu, 12/10/2015 - 16:58 | 6906584 JRobby
JRobby's picture

No Can Do

Thu, 12/10/2015 - 17:02 | 6906604 samjam7
samjam7's picture

Agreed, imagine the thin liquidity over Christmas - New Year combined with the drain in liquidity from the Fed. BOOM makes for a perfect burning Christmas tree at Wallstreet!

Thu, 12/10/2015 - 17:14 | 6906675 Sudden Debt
Sudden Debt's picture

Good point, retail is already having a hard time and this little extra would just nuke them.

Thu, 12/10/2015 - 17:21 | 6906708 Veriton
Veriton's picture

We're being set-up for a rate hike AND a government shutdown on refugee funding: http://redefininggod.com/2015/12/vladimir-putin-and-911/

Thu, 12/10/2015 - 17:40 | 6906790 Soul Glow
Soul Glow's picture

Dec 16th will come and the Fed will leave policy unchanged and say they will probably hike next month.  Same as always.

Thu, 12/10/2015 - 18:16 | 6906937 Sonic the porcupine
Sonic the porcupine's picture

I think this is most likely.

Thu, 12/10/2015 - 18:32 | 6907000 back to basics
back to basics's picture

They will hike, not because they want to, but because they have to otherwise they become a laughing stock and totally lose control of this giant Ponzi.

0.25 "lift off" on the way.

Thu, 12/10/2015 - 18:43 | 6907041 The Pope
The Pope's picture

SHOCKER ENDING!!! ~ QE 18

 

In other news, Halloween (part 18) due out in theatres next month (just in time for the 2016 'Black Friday' holiday PRE sales ad campaigns)!

 

Happy Hannukah! BUY BYE BYE!... Enjoy your kosher fruitcake.

Thu, 12/10/2015 - 18:56 | 6907106 Tall Tom
Tall Tom's picture

Uh...They have already lost control. They never had control in the first place.

 

It just becomes obvious to the Muppets and the Zombies if they do not raise rates.

 

And it will kill off some of the Zombies when they do raise rates.

 

Raising rates serves two puproses. It keeps the Muppets from becoming aware, while killing off the Zombies so that there are less of them to contend with when it all falls apart.

 

Win...Win.

 

Until they lose..

Thu, 12/10/2015 - 17:53 | 6906827 Sudden Debt
Sudden Debt's picture

Public service employees get a extra 2 week fully paid vacation?!

 

Thu, 12/10/2015 - 18:06 | 6906889 Arnold
Arnold's picture

Schools in western PA are thinking about not coming back from Xmas break, rather than 'borrow' to keep the lights on until the state legislature passes a budget.

Good ,insightful article.

I wisht Ida studied chaos theory harder as a ute.

Thu, 12/10/2015 - 18:12 | 6906921 moonmac
moonmac's picture

And they'll say how terrible it is because they have to wait a few weeks to get paid for it!

Thu, 12/10/2015 - 17:51 | 6906829 roisaber
roisaber's picture

I read that blog. I like that blog. But I don't get that blog. Like, here's the thing. The Powers that Be already have 90% of the wriggling masses in their back pocket. So why bother? Why bother with all this BRICS-NWO tomfoolery, when they could just put the US under the mandate of the UN tomorrow and accomplish the same things? Why do they need the 8% of people engaged in alternative media to approve? They do shit we don't approve of 2,000 times a day and our opinions don't matter then. The conspiracy scenario presented by that website has a lot of moving parts, and I find it hard to believe that the PTB can keep that many cogs moving against each other harmoniously when it's easier to just present it as a fait accompli without all the terrorism.

Thu, 12/10/2015 - 18:32 | 6907002 Implied Violins
Implied Violins's picture

Some in the esoteric circle say that we, the proles, need to CONSENT to their rule, or the whole gig is up. If they were to go whole-hog on the evil with no recourse, they KNOW they'd be yesterday's lunchmeat if we said 'no' and rose up in anger as one. Hence, incremental advances. But I think they have overplayed their hand, and payback is going to be a bitch.

Thu, 12/10/2015 - 18:35 | 6907015 Tall Tom
Tall Tom's picture

Raise those rates Yellen.

 

Take the advice from Nike...

 

Just Do It.

 

Pleeeeeze. I want to see this whole damned thing crater into the nothingness which it is. There are over 300 Million deserving souls, Yellen.

 

Do it.

 

Be Satan and raise those damned rates you fucking, muff diving, mutant, whore, Bull Dyke from Hell.

Thu, 12/10/2015 - 17:12 | 6906667 Crabshacker
Crabshacker's picture

I fuckin' double dog dare you to pull the trigger....Bitch!!

Thu, 12/10/2015 - 17:32 | 6906753 ebworthen
ebworthen's picture

Sure they can.  0.25% hike that sends the stock market reeling, crashing, puking into the New Year.

Then they can say "OMG!  Look how important we are!  We must put rates back to zero and implement QE4!"

Thu, 12/10/2015 - 18:34 | 6907011 Joe Sichs Pach
Joe Sichs Pach's picture

With all this being unprecedented as it is, why can't they move an "unprecedented" 0.10% or 0.05% just to say the did/can?  

 

I agree in that it can't happen but I'm not certain that will prevent it from happening.  

Thu, 12/10/2015 - 19:20 | 6907024 Tall Tom
Tall Tom's picture

The first time they do it gives a signal that they will continue. It is not the amount. It is the act. The trend will have been broken. (That is not bad or good. It is just a fact.)

 

It is only because of the "excess liquidity", that cheap currency, that the Stawk Market prices are HYPERINFLATED.

 

The Stawk Market prices are not based upon production or valuation.

 

What revenues does Farcebook produce? Why does it have a price that is nowhere marked to its true value?

 

The underlying fundamentals for the valuation of stawks have vanished.

 

There is NO MARKET without the FED intervention.

 

She might as well raise it a full 2%. The affect will be the same. The signal will be that the party is over and the FED is interested in tightening.

 

According to Keynesian "Theory" (actually a planned management. It does not describe anything real.) the Central Bank raises rates to stem off INFLATION.

 

But there are major DEFLATIONARY FORCES that are currently happening. Look at Oil Prices. Look at Commodities. Those markets are in a state of collapse.

 

A rise in rates at this time serves to exacerbate the problem, the DEFLATION. There is Negative Monetary Velocity. 

 

So pleeeeeeze Auntie Janet...Raise those fuckin' rates and tank this economy so that we can have a chance to rebuild from the wreckage.

Thu, 12/10/2015 - 19:24 | 6907199 Bob
Bob's picture

Depends upon how it affects the derivative complex, I think.  If it would risk crashing it all, they won't do it.  If they're fairly confident it will not, they'll do it.  You're right, the response of Mr. Market will be their excuse for QE4, which is the real point of whichever path they choose on this lame issue.   

Gotta keep funneling the economy's non-subsistence level income to the top .01 %  Of course, it will benefit the top 10% as well, on paper, so they'll be avid cheerleaders. 

That's who all the public statements will be rousing into action. 

Thu, 12/10/2015 - 19:33 | 6907232 Yen Cross
Yen Cross's picture

 You forgot the "NOT"  usd/jpy correlation today Ebbie.[un!hinged]

  Any RETARD that thinks the Fed. lifting rates has ANYTHING to do with domestic issues, is RETARDEDx2.

 The Fed. is testing global liquidity. Debt is obscene~ly out of control, and over capacity is they're "Lucky Charm".

 Lifting rates, is planned and executed, as sure as wars are won before they're fought.

Thu, 12/10/2015 - 18:07 | 6906884 Demdere
Demdere's picture

Rock and hard place, it seems to me.

The fact that Treasuries of all countries are now bought by CBs means huge inflation is close. If they can't keep other investors buying, the Ponzi scheme will end.

https://thinkpatriot.wordpress.com/2015/11/11/dynamics-of-national-colla...

And, OTOH, raisiing the rates at all means the deficit climbs because of increased interest expense.  However, that results in less new money created, and the kleptocracy continues for a while.

So I think the rate will be raised, and base that on the fact they went to a lot of trouble setting up all the news about the great economy, the study explaining the jobless rates and low %age of the pop working, etc.

Doesn't matter. We hang them all very soon.

9/11 was a False Flag operation by the Israeli-Neocons in the US Government

Thu, 12/10/2015 - 18:58 | 6907114 Tall Tom
Tall Tom's picture

No Can Do

 

Yes We Can.

Thu, 12/10/2015 - 16:58 | 6906585 pazmaker
pazmaker's picture

They won't do it!  Look at the new jobless claims...that's the escape clause.

Thu, 12/10/2015 - 17:09 | 6906652 TurnwiseWiddershins
TurnwiseWiddershins's picture

But "the economy" added 14,536,284 jurbs last print.

Thu, 12/10/2015 - 17:19 | 6906697 Sanity Bear
Sanity Bear's picture

anything is sufficient as an escape clause because admitting that the federal debt is the bottom line and therefore rates can never be raised is verboten

Thu, 12/10/2015 - 17:31 | 6906749 giggler321
giggler321's picture

there isn't an escape clause as any back down will be as bad as not raising rates.  IMHO they'll be doing hyper QE at the same time as a tiny rise with the net effect of 0

Thu, 12/10/2015 - 16:59 | 6906588 vq1
vq1's picture

"The probability the Fed raises rates from near zero on Dec. 16 rose to 90 percent from 70 percent in the latest Reuters poll of over 90 economists, taken Dec. 4-9."

 

Soooo I guess its a sure thing. Like all the other times the probability has been that high. 

Thu, 12/10/2015 - 16:59 | 6906589 surf0766
surf0766's picture

Never never never with Dear Leader in power.

Thu, 12/10/2015 - 16:59 | 6906594 bigkahuna
bigkahuna's picture

no.

Thu, 12/10/2015 - 17:04 | 6906616 silverer
silverer's picture

Love the click pic on the headline.  It's "Sh-t or get off the pot", or "It's the plunge for you!"  LOL.  Either way, it's all "going down". 

Thu, 12/10/2015 - 17:04 | 6906617 FreeShitter
FreeShitter's picture

Nope....another false flag or some other fucking excuse will emerge right before the 16th.

Thu, 12/10/2015 - 17:14 | 6906676 Chia-Pet
Chia-Pet's picture

No, no way. Wrong.

The Fed has never done the right thing at the right time.

You expecting them to do something right, now? 

Are you new here?

4th and 10 on their 1 yard line = Throw a pass for the Feds.

Thu, 12/10/2015 - 17:42 | 6906794 Soul Glow
Soul Glow's picture

Either policy is damned.  The don't raise and their credibility contnues to erode.  They do and force a sale of $500B in securities overnight.

They'll take the easy way out and keep policy unchanged.

Thu, 12/10/2015 - 19:21 | 6907150 Tall Tom
Tall Tom's picture

If they do not raise then confidence is destroyed.

 

A Ponzi Game is a CON Game, a confidence game.

 

Without confidence the game is over.

 

You are right. Both actions are damned. 

 

But politically she must as she painted herself into a corner.

 

I am hoping that she does.

Thu, 12/10/2015 - 18:23 | 6906956 Demdere
Demdere's picture

You assume that is possible. It is not. There is no technology that allows controlling open, evolving complex systems.*

The economy is open, changed by everything including sunspots and radiation storms.

It is evolving, the fundamentals change often.

It is obviously a complex system, with ??a trillion prices?, a couple hundred CBs or equivalents, a couple hundred legislators passing laws that change the terms of exchange, the ROI of investments, around the world?

Waving your hands and speaking in politically persuasive terms is not a control system.

Control systems require a sensor grid fine enough to determine the state of the system being controlled, a computation algorithm for determining what actions are needed to convert that state to the desired state, and an effector(s) that can convert the current system state to the desired state.

Given that control systems need Cause and Effect relationships, and those cannot be derived from economic data, only correlations, not a chance in hell can they run a control system.

But they wave their hands and speak well, which means the kleptocracy continues.

*Medicine is a sort-of execption.  But 30 associated sciences, 7B health records, animal models that allow experiments to extract C&E, and the evolutionary history of physiology for homeostasis all combine to make it possible.  But still far from perfect, death rate from undiagnosed diseases in major teaching hospitals is still 15% of deaths.

Thu, 12/10/2015 - 17:04 | 6906618 PoasterToaster
PoasterToaster's picture

Remember the official Fed belief that the Great Depression was exacerbated by tightening the money supply?

Thu, 12/10/2015 - 18:50 | 6907079 Arnold
Arnold's picture

TT prolly does, I'm not that old.

Thu, 12/10/2015 - 19:18 | 6907126 Tall Tom
Tall Tom's picture

Are you old enough to read about the history of the 1937-1938 Recession?

 

I did not live in the 1930's.

Thu, 12/10/2015 - 17:05 | 6906622 Soul Glow
Soul Glow's picture

Watch stocks slip below 17k and Yellen holds off.

Thu, 12/10/2015 - 17:07 | 6906632 Kaiser Sousa
Kaiser Sousa's picture

it doesnt matter what the Fuck the MoneyChangers do next week....they dye has long been cast for this bankrupt corrupt govenment and nation...

I will continue to convert all dispoasble debt coupon Federal Reserve NOTES into the ONLY 2 forms of REAL MONEY - Gold and Silver until i die......

DEATH TO THE MONEYCHANGERS.

Thu, 12/10/2015 - 17:54 | 6906850 Uchtdorf
Uchtdorf's picture

Can I get an amen?

Thu, 12/10/2015 - 19:22 | 6907191 FreeNewEnergy
FreeNewEnergy's picture

Amen, brother.

Thu, 12/10/2015 - 17:07 | 6906633 TurnwiseWiddershins
TurnwiseWiddershins's picture

Ok, so realiztically, what will actually happen once the Fed raises rates?

How will this affect stock prices?  How will it affect home prices?  On what timeframe are we talking?

Thu, 12/10/2015 - 17:20 | 6906701 Sanity Bear
Sanity Bear's picture

Unicorns will ride in on Skittle rainbows and it'll be free antidepressants for everyone

Thu, 12/10/2015 - 17:44 | 6906801 Soul Glow
Soul Glow's picture

If they raise rates they force a sale of aprox $500B in securities overnight.  It will start an avalanche.  Thus they won't raise rates, letting unicorns dance on rainbows for another few months.

Thu, 12/10/2015 - 17:11 | 6906663 Dr. Bonzo
Dr. Bonzo's picture

They can't raise. I thought we established this.

Thu, 12/10/2015 - 17:12 | 6906664 Sudden Debt
Sudden Debt's picture

Massive debt, deflation in the dollar and pull out 800 billion?

Are you kidding me?

QE4 yes.

Or maybe a rate raise for a while to give themselves a excuse to do a 3 trillion QE.

Thu, 12/10/2015 - 18:04 | 6906877 yogibear
yogibear's picture

QE4 close to 100% certain.

Just do the same thing again to make Warren Buffet, the white house and Wall Street happy.

It's all that matters to the Fed.

This time the next QE will be enormous, it will have to be in order to have a positive effect.

Like drugs, QE must be increased each time to get the same high, Eventually the addict dies.

Thu, 12/10/2015 - 18:54 | 6907093 Arnold
Arnold's picture

I could live quite comfortably on only $250  million.

I'll take it in annuity annual payments.

Thu, 12/10/2015 - 19:13 | 6907164 Tall Tom
Tall Tom's picture

The hyperinflation to follow this hyperdeflation will eat up that principle in no time at all.

 

You had best figure out that security is an illusion and always has been an illusion.

 

Your presonal survival depends on that.

Thu, 12/10/2015 - 22:57 | 6908208 Renewable Life
Renewable Life's picture

They might raise .25 and then lower .50 in Jan/Feb with QE

Everything needs a catalyst, raise will be that for sure!!

Thu, 12/10/2015 - 17:17 | 6906689 TalkToLind
TalkToLind's picture

Fool me once, shame on you. Fool me 27 times...

Thu, 12/10/2015 - 18:24 | 6906962 Demdere
Demdere's picture

Nobody was fooled.  It was the signal to BTFD.

Thu, 12/10/2015 - 19:00 | 6907120 slimycorporated...
slimycorporatedickhead's picture

Fool me once, strike 1. Fool me 27 times?............................... strike.............3.

Thu, 12/10/2015 - 17:18 | 6906692 Goldbugger
Goldbugger's picture

The FED doesn't even know. LOL Bet they do it then back peddle and then more QE.

Thu, 12/10/2015 - 17:18 | 6906695 Danno Anderson
Danno Anderson's picture

The Banksters and the Fed are in the middle of another age old Wall Street Pump and Dump operation.  What is good for the country is of no concern.  That seems to be lost on ZH and everyone on this message board.  

What matters is how to fleece the retail crowd of the most amount of money.  Going both up and down.  The rate hike is a cinch to happen. 

We'll see. 

 

 

Thu, 12/10/2015 - 17:20 | 6906703 youngman
youngman's picture

Rumor has it that our defecit is up this quarter even though taxes revenues are higher.....we just keep spending more and more...so I think they can not raise it.....it might go up for a month or two...but they will take it right back down as the affects are found out....20 trillion and a quarter point raise is a lot of java..

Thu, 12/10/2015 - 17:21 | 6906710 Seasmoke
Seasmoke's picture

She is going to raise them. That's why she was put in the seat. For what comes next. 

Thu, 12/10/2015 - 17:28 | 6906740 bigkahuna
bigkahuna's picture

So she is going to raise rates and then have the big one?

Thu, 12/10/2015 - 18:58 | 6907115 Arnold
Arnold's picture

16 ? I don't think they make a 20 penny nailgun.

Thu, 12/10/2015 - 17:22 | 6906714 Black Forest
Black Forest's picture

Fed will unleash once the market realizes that while in theory the Fed can and is ready to hike, it simply can't do so in practice. 

I guess they know a rathole to hike in practice and to eliminate that hike in practice squared.

Thu, 12/10/2015 - 17:23 | 6906716 Phat Stax
Phat Stax's picture

Next week will be fascinating in a sick way.  I wonder if the usual 2-day melt-up will occur while they deliberate behind closed doors?  And then WTF will happen at 2PM on Wed.?  we'll see soon enuff...

Thu, 12/10/2015 - 17:45 | 6906803 3rdWorldTrillionaire
3rdWorldTrillionaire's picture

I literally just told my colleagues, expect a low volume melt-up Monday, Tuesday.

Thu, 12/10/2015 - 17:24 | 6906722 wmbz
wmbz's picture

What the hell, let's say the old dyke, Jack Yellen sticks her pin head out and sez... 0.25 rate rise!

What will happen? The whole world takes a shit? The stawk market dumps? Grannies groceries get cut off?

No worries, Jack just slams on the brakes and goes straight into ZIRP, and the moon shot launches....again!

 

 

Thu, 12/10/2015 - 17:38 | 6906782 Soul Glow
Soul Glow's picture

You think if she raises rates and shit collapses she has any credibility to go NIRP?

The dollar only has value in as much confidence people have in it.  It is a fiat instrument - its value is derived in peoples direct confidence in it.

If she acts like she doesn't know what she is doing then a stock market bond bubble is not her biggest worry, it is the underlying asset of all denominations - THE DOLLAR.

Thu, 12/10/2015 - 17:44 | 6906802 wmbz
wmbz's picture

"she has any credibility to go NIRP"

Now that is funny, "credibility" of course she has no credibility to anyone with half a brain, but they don't count.

It's all based on "faith" and I have complete faith that Banksters Inc. will keep right on doing what they do.

Thu, 12/10/2015 - 17:26 | 6906730 tommylicious
tommylicious's picture

HIKE YOU MOTHER FUCKERS!!!!!!!!!!

Thu, 12/10/2015 - 17:27 | 6906733 robertocarlos
robertocarlos's picture

The red plunger is for sinks. The black plunger is for toilets.

Thu, 12/10/2015 - 18:14 | 6906928 cheech_wizard
cheech_wizard's picture

I thought the red plunger was the stir stick in the peon's punch bowl.

Thu, 12/10/2015 - 17:34 | 6906761 RawPawg
RawPawg's picture

a question

whould it be wise to go and do a few more prep pickup's on the morning of the 16?

thanks in advance....votes on either up or down will decide my plans for that day

Thu, 12/10/2015 - 17:35 | 6906771 Soul Glow
Soul Glow's picture

The Fed will never raise rates.

Thu, 12/10/2015 - 17:47 | 6906813 fowlerja
fowlerja's picture

I am going to hide in the "financial bomb shelter" I created for such an event. My job is to write algos to react to such events...but since this is uncharted territory..I told my boss that results are not guaranteed. So he took out a "derivative insurance policy" to cover his ass. I think the company is a shell game company in Puerto Rico and the underwriters are something like Goldsmanner Sockittoyou. Not clear about all the details ...but I hope to be a winner in the game called "as the markets turn".  As my boss always reminds me..."it pays to be a winner".

Thu, 12/10/2015 - 17:48 | 6906818 roisaber
roisaber's picture

I just cannot imagine the Fed dumping the markets just before Christmas. People would become unglued.

Thu, 12/10/2015 - 18:42 | 6907049 wanderer9641
wanderer9641's picture

Your problem is that you think that the Fed or other powers to be have any heart or decency - please lay that mistaken thought to rest.

Thu, 12/10/2015 - 17:51 | 6906833 Vlad the Inhaler
Vlad the Inhaler's picture

Now if you're China, let's say you just send your Plunge Protection Team home for a couple days next week, tell them to get a little R&R.

Thu, 12/10/2015 - 17:53 | 6906843 yogibear
yogibear's picture

The fed is getting withdrawl symptoms already.

Moar QE! Wall Street and Krugman's wet dream comes true this time.

This time $200 billion/month.

Fed's balance sheet expands to $9 trillion in a short time.

Thu, 12/10/2015 - 18:04 | 6906883 Salsa Verde
Salsa Verde's picture

My money is on a full court press of bread and circuses (no rate hike) until Obama leaves offices or perhaps a few days before he departs.

Thu, 12/10/2015 - 18:06 | 6906888 yogibear
yogibear's picture

No rate hike and the dollar drops big time.

Thu, 12/10/2015 - 18:15 | 6906932 tarabel
tarabel's picture

 

 

A lot of interesting back and forth observations here.

Mine is that they have no choice except to raise rates. Their failure to do so last time resulted in a catastrophic collapse in credibility and much public shaming even from their adoring buttboys. The Fed essentially said "damfino" to everything, which erodes their presumed mandate of being masters of the universe. They will risk the potential economic damage in order to shore up their cratered image of managerial competence and then hope to fix it later.

Thu, 12/10/2015 - 18:29 | 6906984 moonmac
moonmac's picture

Federal Reserve Members have painted themselves into a corner with molten lava. They can jump into the fire and burn to death(hyperinflation) or they can simply starve to death(deflation) ‎or they can continue to cannibalize the young to survive another day(stagflation).

Thu, 12/10/2015 - 18:33 | 6907008 Salsa Verde
Salsa Verde's picture

Fear, they will use fear.  The US military is pretty much just another branch of the central bank anymore.  Any country or economic guild the attempts to unseat the dollar in earnest can count on getting destabilized or JDAM'd off the planet.  It doesn't matter how crooked the game is so long as it is the only game in town.

Thu, 12/10/2015 - 18:49 | 6907033 RMolineaux
RMolineaux's picture

The mere announcement will cause a lot of turmoil.  So we should expect that the Fed will hold off implementation activities until after new years.  I am disappointed that no one has suggested raising the percentages of required reserves of commercial banks at the Fed.  This could have the effect of converting a lot of excess reserves into required reserves, thereby helping to control credit creation, along with the Fed's discretion in setting the interest it pays on all reserves.  Also to be noted is the reduced volume of activity in the existing interbank federal funds market, making rates there immaterial in evaluating the effect of any attempt at raising basic rates by the Fed after Dec. 16th. 

Thu, 12/10/2015 - 18:51 | 6907081 Thomas Sowell
Thomas Sowell's picture

No raise then ADP, BLM will "print" some spectacular job gains. Media will shitstorm boomtastic a sub 5% unemployment.

Thu, 12/10/2015 - 18:54 | 6907094 Herdee
Herdee's picture

Are they bluffing the Market right up to the decision just to play everybody along?I think they'll use the China-SDR story as the big excuse.They'll keep doing this right into next year until the Market figures out that Yellen and gang are nothing but a bunch of gangsters serving their HeadChopper Saudi Bum-Buddy Obama.

Thu, 12/10/2015 - 19:05 | 6907140 Arnold
Arnold's picture

Did the Bernank write his own epitaph?

 

"The Federal Reserve will not raise rates in my lifetime"

we can only hope.

Thu, 12/10/2015 - 20:06 | 6907369 Wilcox1
Wilcox1's picture

Th B'nank knows his life is in no danger. He put Yellen in there knowing th Fed is out of it now. Your health, Ben. Mr. Market will see to that!

Thu, 12/10/2015 - 18:56 | 6907104 Rehab Willie
Rehab Willie's picture

I hope she breaks her foot when she kicks the can down the road

Thu, 12/10/2015 - 19:19 | 6907183 Yen Cross
Yen Cross's picture

 That was creative and funny... Mr. Yellen is a bit short on "GMO" calcium. lol

Thu, 12/10/2015 - 19:25 | 6907201 orangegeek
orangegeek's picture

rate hike is coming by next Fed meeting

Thu, 12/10/2015 - 19:27 | 6907212 Wilcox1
Wilcox1's picture

They can try a tactic my sister uses and just talk until everybody says ok.

Thu, 12/10/2015 - 19:39 | 6907274 FreeNewEnergy
FreeNewEnergy's picture

Fed raises rates.

Causes market correction.

Causes recession (which won't be "official" until July 2016 at the earliest (2 consecutive quarters of declining growth... in itself an interesting oxymoron)

MOAR deflation (opposite of what they want)

Stock market cut nearly in half by summer of 2016.

Republican gets elected to WH in November (should be Trump).

Nothing gets fixed.

Thu, 12/10/2015 - 19:49 | 6907306 Village-idiot
Village-idiot's picture

I think the Fed is setting us up!

I believe they're getting ready to DROP interest rates to negative. All the talk about "will they or won't they raise interest rates" is pure flim-flam. They're lulling us into a false sense of security so we won't go out before they drop the rates and withdraw most of our cash.

Quite a few countries have already dropped their CB rate to negative. The rest will soon do the same.

This is the next step towards a cashless society and total control.

Thu, 12/10/2015 - 20:14 | 6907407 itstippy
itstippy's picture

The mechanics of a 0.25% Fed hike seem simple enough to me.  

IOER drops 0.25% (to zero).  RRP drops .05% (to zero) because it can't go negative.  Anyone loaning money to the Fed gets 0.25% less interest on their capital (to 0.0% percent).

The Fed funds goes up 0.25%.  Anyone borrowing money from the Fed pays 0.25% more interest on the capital.

Anyone who's so fucking over-leveraged that their business model can't handle a 0.25% rate hike has to restructure or fold, including the U.S. government.

Next quarter the Fed raises the funds rate another quarter tick.  They keep doing that until they're at 5%.  Then they leave it at 5% for the next 100 years.  The Fed shitcans 98% of their staff and just runs things on 5% rate autopilot.  No more fucking around endlessly trying to engineer a "Great Moderation" economy by jiggering with the damned rates.

The country and the economy get some stability and the financial world goes back to studying balance sheets & fundamentals instead of trying to frontrun the Fed's next fart.

I know, "It's not that simple."  Actually, it is.

Thu, 12/10/2015 - 20:29 | 6907477 Peak Finance
Peak Finance's picture

If you think 0.25 is not a lot to hike, think of the interest rate swaps (there are TONS of these swaps out there btw) 

If you have a swap contract for 2 points, and the Fed raises rates 0.25, this is a 12.5% haircut.

Or am I missing something?

Fri, 12/11/2015 - 15:50 | 6911461 Stick in the Mud
Stick in the Mud's picture

I think you nailed it. At today's lwo level, 0.25% is a big move. Such is the weirdness near the 0 singularity. What happens when Mr. Yellen has to say "oops" and must drop back from 0.5%, past zero, to -.025%?

 

Mon, 12/14/2015 - 14:47 | 6922459 RMolineaux
RMolineaux's picture

Interest rate swaps are a relatively new invention.  But they are now the largest single component of the derivative universe which is into the 100's of trilions (yes, with a "T").  The participants in this market are institutions which want to convert variable rate instruments into fixed rate instruments.  It is a crap-shoot game in which guesses are made about where long-term future interest rates will be.  It is akin to converting a variable rate mortgage into one at a fixed rate.  Those who make the wrong guess will lose a lot of revenue, while the counterparties get rich.  Since one side of the transaction always wins, there would be no hope of reversing the original transaction in the event of bankruptcy.  So there would be no mechanism for "closing" the bet between the buyer and the seller. 

Thu, 12/10/2015 - 21:06 | 6907626 coast
coast's picture

I dont give a shit what they do, I just want it over with...tired of month after month reading everyones predictions..6 more frigging days of this shit, I am going on vacation, see ya next week :-)

 I can see it now, Yellen says: after our meeting we all decided to raise rates, the economy is doing better and we all agree its time to raise rates, In FEBUARY 2016!!!  Sorry but this discussion has been going on forever and I am sick of it. I dont give a shit what they do, nor do I know what they will do....so there.  I have no fucking clue, and neither does anyone on this website. I dont even think THEY know what they are gonna do yet.  Yellen probably has one of those eight ball prediction toys, where ya ask a question and shake the ball and it gives you an answer..lol...I remember one of the responses on that toy was "ask again later:  lol 

Thu, 12/10/2015 - 23:33 | 6908406 onmail1
onmail1's picture

Be careful driving on the road , 

A banker might fall on your car

on in front 

from 20 stories

like a squashed tomato

Hah ha

Fri, 12/11/2015 - 02:10 | 6908931 TeraByte
TeraByte's picture

Saved by a fear of cold winter. The public sympathizes with Fed´s firm desire of an intended raise, but understands that in the circumstances and as a precaution Fed must unwillingly decline this time.

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