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Grant On Bernanke's Continuing "Grand Manipulation"

Tyler Durden's picture


In preparation for what we are about to receive from the Charmain of the Fed, may we be truly grateful, Jim Grant offered CNBC's Maria B the forthright advice last night "prepare for platitudes but watch what they are doing not what they are saying". The ever outspoken Grant notes that the Fed's balance sheet has been contracting (unlike Maria's mainstream perspective); for the past three months the Fed's balance sheet has contracted at an annualized rate of 10% - even as Fed-head after Fed-head talk up QE and so on. So unless they continue buying securities - since the short-dated positions will continue to roll off - the Fed's balance sheet will continue to contract and therefore the stimulative effect will fall. Grant does expect QE3 since it is the fun-drug that we have been using for 4 or 5 years and that Bernanke will need little pushing to continue the Grand Manipulation. He ends on a rather interesting note that the Wisconsin win and the potential for an Obama loss in November may be more of a positive driver for stocks since markets begin to revert to a free market once again - we suspect this is not the case given the donors/beneficiaries under Romney's wing. But rest assured - the bespectacled bear ends on the chilling note that 'the long-term implications are bad' for the ongoing manipulation that is now the status quo.


and from Goldman, if there was any doubt of Grant's comments on the implicit tightening - or inverse flow - as they present the embedded tightening opportunity cost for the Fed it does nothing.

The bottom line here is that if the Fed does nothing then there is an implicit 5-10bps of rate-hike tightening per quarter implicit in the balance sheet roll-down (50bps in next 3 years) - so when considering the Fed's actions, discount the effect of this automatic tightening before buying the S&P at 2000...


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Thu, 06/07/2012 - 09:24 | 2503179 fonzannoon
fonzannoon's picture

Thanks for this ZH. I was looking for it.

Thu, 06/07/2012 - 09:41 | 2503271 Precious
Precious's picture

Did you know?  Bernanke provided the inspiration for the crack manufacturer on "Breaking Bad".

Thu, 06/07/2012 - 09:47 | 2503309 Ookspay
Ookspay's picture

Ben will print, timmy will give it to europa and we will all be paying the tab soooon. This crack binge will last about a week.

Thu, 06/07/2012 - 10:02 | 2503389 Sudden Debt
Sudden Debt's picture

you make it sound so negative....



Believe me, the person who'll receive it will feel a lot better!

I'll send it to.... Jhon Doe!

in.... Springfield!

on... Elmstreet!

number... 13!


Thu, 06/07/2012 - 10:33 | 2503606 I am more equal...
I am more equal than others's picture

I'm looking to move to a country or place than is immune to this stuff and is operated by sane, well-thought people.  Any suggestions?  Or should I open a unicorn ranch instead?

Thu, 06/07/2012 - 11:44 | 2504002 Carl Spackler
Carl Spackler's picture

...operated by sane, well-thought people...

Wisconsin is open for business and has a sane leader who just overcame the forces of labor corruption.

Thank you, Scott Walker.

Thu, 06/07/2012 - 15:41 | 2505083 hoos bin pharteen
hoos bin pharteen's picture

Singapore, bitchez!

Thu, 06/07/2012 - 19:21 | 2505663 Joseph Jones
Joseph Jones's picture

I'm not a Singapore "expert", but have learned quite a bit over the past 2+ years working on a new product with a lifetime Singapore resident. 

IIRC, Singapore requires a state-issued "license" to purchase residential real estate...and the tinest (by USA standards) condo (maybe around 1k sf) costs about $750k USD.

You can drive across the sovereign state in about 30 minutes. 

Thu, 06/07/2012 - 09:24 | 2503181 SHEEPFUKKER

Jim Grant man crush. 

Thu, 06/07/2012 - 09:53 | 2503340 Precious
Precious's picture

Dear God.  If possible in our lifetime, please stop subjecting us to Buffett's hoary platitudes.

Thu, 06/07/2012 - 13:25 | 2504512 Ookspay
Ookspay's picture

GOD: Dear Precious, I gave you gun powder and projectiles, the rest is up to you. Fuck, do I have to do everything!

Thu, 06/07/2012 - 12:23 | 2504227 narnia
narnia's picture

Mr. Grant has not thought out the consequence of the shifting of risk-on and risk-off assets.  

The movement to physical assets & rights to physical assets will not keep pace with the destruction of credit the lies in its wake.  

Thu, 06/07/2012 - 09:27 | 2503190 Jim in MN
Jim in MN's picture

The problem is, the only economic activity they can actively stimulate is not only not helpful to Main Street/jobs/middle class/housing, but actively destructive as it is parasitical, immoral and demoralizing to the public at large.  Their 'friends' are the problem, not the solution.

Thu, 06/07/2012 - 09:28 | 2503199 the 300000000th...
the 300000000th percent's picture

He says " you have to watch what the fed is doing, not what they are saying" Yeah, some people call that lying, or deceiving.

Thu, 06/07/2012 - 09:31 | 2503214 Atomizer
Atomizer's picture

Just watch Bernanks body language today. You'll understand what he means.

Thu, 06/07/2012 - 09:55 | 2503353 Ookspay
Ookspay's picture

Ben's testimony will be like a hostage video. I hope Ron Paul rips this Fukker a new asshole!

PS: "Fight Club" is running on IFC this week, Awesome movie...

Thu, 06/07/2012 - 09:34 | 2503224 Cursive
Cursive's picture


He's basically saying that the Fed has created a Pavlovian response among speculators.  The Fed's plan would never succeed if the majority of market participants weren't so willingly buying into the notion that the Fed can save the day.  The Fed can't, but a lot of speculators have made money off of the interventionist ATM.

Thu, 06/07/2012 - 09:42 | 2503277 Bicycle Repairman
Bicycle Repairman's picture

The FED has saved the day for some people:  speculators, stock market investors, TBTF institutions and government, for example.  These are rich and powerful people.  You can accuse the FED of being undemocratic, but the Bernanke isn't as stupid as some might think.

Thu, 06/07/2012 - 09:55 | 2503354 John Law Lives
John Law Lives's picture

I haven't heard many people assert that The Bernank is "stupid".  I am sure he is reasonably intelligent.  However, I believe history will show that he made a number of terrible decisions.

Thu, 06/07/2012 - 10:23 | 2503534 Bicycle Repairman
Bicycle Repairman's picture

The aforementioned rich and powerful people will be writing the history.  The Bernanke will come out a hero.

Thu, 06/07/2012 - 09:29 | 2503202 otto skorzeny
otto skorzeny's picture

how can anyone invest is this "free" market is beyond me-it hasn't been unmanipulated since Alan Greenhebe took charge of the Fed

Thu, 06/07/2012 - 09:37 | 2503242 Manthong
Manthong's picture

Last summer and fall it was tradable.

After Twist and LTROs, all of the fundamentals and technicals were thrown out the window.

If yesterday and today do not convince you that there is no "market" anymore, nothing will.

Thu, 06/07/2012 - 09:44 | 2503287 Bicycle Repairman
Bicycle Repairman's picture

Traders are now reduced to being "FED-watchers", just like the "Kremlin-watchers" in the good old USSR.

Thu, 06/07/2012 - 12:53 | 2504346 Coldfire
Coldfire's picture

With "Fedlinology" the new Kremlinology, as scientific as Lysenkoism.

Thu, 06/07/2012 - 09:32 | 2503204 BlandJoe24
BlandJoe24's picture

So, ZH, have a little fun place your bets/share your wisdom. 

What do you think will happen today to USD, Oil, Gold, TS, and S&P if this morning Bernake hints:

1. big QE coming very soon

2. some QE sometime soon

3. QE possible if needed sometime in future, as required, we'll act then, blah, blah...

4. no QE needed, economy/market working on it's own

Thu, 06/07/2012 - 09:35 | 2503233 SilverTree
SilverTree's picture

I'd guess #3

Thu, 06/07/2012 - 09:49 | 2503325 BlandJoe24
BlandJoe24's picture

What do you think will be USD, Oil, Gold, TS, S&P reaction?

Thu, 06/07/2012 - 10:00 | 2503338 SilverTree
SilverTree's picture

They will all go up and then back down except for gold, it will go up and up and up and up and up.

Thu, 06/07/2012 - 10:02 | 2503391 Instant Wealth
Instant Wealth's picture

Up, down or sideways ... ummh ... probably.

Thu, 06/07/2012 - 10:16 | 2503478 BlandJoe24
BlandJoe24's picture

nice + 1

but is that really what you think? :-)

Thu, 06/07/2012 - 09:39 | 2503253 Bill D. Cat
Bill D. Cat's picture

Should be 4 , but I'll go with 3 . He's going to dare a nice little crash .

Thu, 06/07/2012 - 09:43 | 2503282 Cursive
Cursive's picture


The majority of the market participants will hear what he says as #3, but he definitely won't be that direct about it.

Thu, 06/07/2012 - 09:50 | 2503328 BlandJoe24
BlandJoe24's picture

What do you think will be USD, Oil, Gold, TS, S&P reaction?

Thu, 06/07/2012 - 09:57 | 2503365 Cursive
Cursive's picture


Who knows with this corrupt casino?  If I had to guess, initial spike in all risk assets followed by selloff.  I feel very confident that all risk assets will be much lower by the end of year.

Thu, 06/07/2012 - 09:45 | 2503299 Bicycle Repairman
Bicycle Repairman's picture

I doubt Bernanke will commit to anything.  And when he begins QE 3, I think it would be an error to announce it.

Thu, 06/07/2012 - 09:50 | 2503313 SilverTree
SilverTree's picture

I agree but sooner-or-later they will have to give their apocalypse avoiding action a name...The Nothing.

Thu, 06/07/2012 - 09:48 | 2503314 Bicycle Repairman
Bicycle Repairman's picture

I doubt Bernanke will commit to anything.  And when he begins QE 3, I think it would be an error to announce it.

Thu, 06/07/2012 - 10:06 | 2503420 Winston of Oceania
Winston of Oceania's picture

I heard yesterday that "bicycle repairman" is a green job... Really WTF!

Thu, 06/07/2012 - 10:21 | 2503509 Bicycle Repairman
Bicycle Repairman's picture

If you exclude the auto-generated methane, it is a green job.  And I get carbon credits based on my income minus a deduction for the aforementioned methane.

Thu, 06/07/2012 - 09:30 | 2503205 the 300000000th...
the 300000000th percent's picture

"To find out what any company is doing, you dont listen to the CEO", yeah because they are ALWAYS full of shit

Thu, 06/07/2012 - 09:31 | 2503210 Cursive
Cursive's picture

To say that we've been doing well since 1776 is an afront to the ideals of liberty that the founding fathers espoused and fought, at great cost, to obtain.

Thu, 06/07/2012 - 09:34 | 2503227 Whoa Dammit
Whoa Dammit's picture

I was just looking at my 10 year old car, and thinking back then, when I bought it, I had a future. Actually up until about 6 years ago, when things started to go really wiggy with the McMansion based economy I had a future. Every QE is another nail in my coffin and that of anyone who wants a decent job. 

Thu, 06/07/2012 - 09:35 | 2503235 the 300000000th...
the 300000000th percent's picture

"what if all this money printing created inflation????" wow what a concept.

Thu, 06/07/2012 - 09:36 | 2503238 BandGap
BandGap's picture

Looming recession? Weaving a web of financial deceit and manipulation.

The problem is that if you "hope" this all stops, then you "hope" for a shitload of pain at the same time. No one sees the long term benefit over the short term pain.


Thu, 06/07/2012 - 09:43 | 2503283 SilverTree
SilverTree's picture

"it's just a little pinprick"

Thu, 06/07/2012 - 09:38 | 2503243 RyanW525
RyanW525's picture

That's the only think that's contracting with the "Money Honey"...take a look at her waist line recently!

Thu, 06/07/2012 - 09:42 | 2503276 Winston Churchill
Winston Churchill's picture

Obviously this Tyler is a history buff.

Love the reference to the centuries old naval blasphemy

uttered as the enemy fires its broadside at you.


Thu, 06/07/2012 - 09:44 | 2503286 Precious
Precious's picture

Why doesn't the windbag Buffett just shut the fuck up.


Thu, 06/07/2012 - 09:50 | 2503323 Bicycle Repairman
Bicycle Repairman's picture

He likes the flattery and attention he is getting.

Thu, 06/07/2012 - 09:44 | 2503291 alfred b.
alfred b.'s picture


   I gave this art. a 5 because JG mentioned the bernank and platitudes in the same breath.

Thu, 06/07/2012 - 09:47 | 2503305 insanelysane
insanelysane's picture

Like I told my kid today.  If you are on a cruise ship and it sinks.  Someone throwing you a life vest is a good thing.  However, you are just bobbing up and down in the ocean, with no food or water, and you are hoping someone is actually going to rescue you before a shark eats you.

Thu, 06/07/2012 - 10:37 | 2503627 Rich Bagg
Rich Bagg's picture

Shalom will go down in history as the greatest central banker in all the land.  He saved the financial system while maintaining inflation at only 2%.  Now the economy is slowly recovering, business profits are at an all-time high, CEO salaries are at an all-time high, housing is rapidly healing and even dumb Joe Sixpack is finding work again.

As the economy continues to heal and recover, the crumbs that have trickled down to the little stupid minions will start to circulate through the economy has people will be back to focusing on Kim Kardashian's sweet ass (I already am).  LIfe is good except for the losers who question Shalom.  Shalom is King.



Thu, 06/07/2012 - 09:54 | 2503317 krispkritter
krispkritter's picture

OT but Holder is expected to be grilled on Fast and Furious, on C-Span right now.  Conyers is blowing Skittle-colored smoke up his ass as I type...

This should be good for a laugh...

Thu, 06/07/2012 - 09:49 | 2503319 Jim B
Jim B's picture

Ben Bernanke, the thief, my CD gets sub 1% and inflation steals 2-4%.  Thanks Ben, you jackass! 

Thu, 06/07/2012 - 10:40 | 2503653 Rich Bagg
Rich Bagg's picture

Shalom told you to invest in the Russell 2000.  Had you done so, you would have earned 75 years worth of CD income.  You questioned Shalom and didn't follow his advice.  That's why you are mad.   Be mad at yourself, not Shalom.  Shalom tried to help you and you spit in his eye.



Thu, 06/07/2012 - 12:56 | 2504366 Coldfire
Coldfire's picture

MDB, is that you?

Thu, 06/07/2012 - 20:02 | 2505753 lotsoffun
lotsoffun's picture

sort of.  he told you he was going to prop it up.  he didn't tell you 'invest'.  he was really saying 'speculate in'.  because - i'm not an insider.  so is he going to tell me when to take my profits?'  NO.  NO.  and you can be sure as hell that he knows he's just propping up a dead cat and when his bosses feel they've made their profits - and i can't tell you when, they are going to sweep all the chips off the table.

i'm a humanist.  bernake is not.  he works for himself by working for the banks.  and that is all he cares about.  the banks want people to feel good (for the time) because they need a bonus.



Thu, 06/07/2012 - 10:39 | 2503327 RiverRoad
RiverRoad's picture

It's depressing to realize that one of the main reasons Bernanke and pals are determined to hold this market up is because they have been counting (and budgeting on) the tax receipts on all that juicy IRA money out there that the Boomers are about to start coughing up.  The higher the IRA portfolio valuation, the higher the taxes are on the RMD.  Anybody out there have any idea re how much money we're talking about here, all growing untaxed all those years?  Would love to see an article on that if the numbers are FOI.

Thu, 06/07/2012 - 09:53 | 2503344 goforgin
goforgin's picture

Q: Does this mean the Fed might announce QE 3, a third round of quantitative easing to lower rates and raise stock prices?

A: Yeah, it means QE 3 through QE N.


Excerpts from Jim Grant's AP Interview posted on ZH on May 22, 2011

I am still waiting!

Thu, 06/07/2012 - 10:04 | 2503403 jmac2013
jmac2013's picture

When Grant is talking about the collective memory of 2007, 08', 09', I get that he's talking about the ZH types.  Those outlets who incessantly promote the next "crash".  You know, all those "black swan" articles.  With all the supposed "black swans" out there, I think it's the "white swan" which might show up and surprise people.  What is all this doom and gloom trying to manipulate you into doing or keep from doing?

Thu, 06/07/2012 - 10:20 | 2503506 q99x2
q99x2's picture

Was hoping we would slip back into recession so we could get out of the depression.

Thu, 06/07/2012 - 10:31 | 2503571 shuckster
shuckster's picture

It's quite simple - people must comply with the Fed and the powers that be or be punished. Bears have been getting murdered for the last 3 years, not because they are wrong about the economy, but because they contradict that party dialogue (the ruling party that is). Bernanke's policies are intended to punish those who go against the grain, and the dials on his stock-market-controlling machine will be adjusted in order to inflict the most pain on those who are most contrary. Even Buffet doesn't have the balls to come out against the Fed. No one does (no one who matters at least) 

Thu, 06/07/2012 - 10:45 | 2503695 RiverRoad
RiverRoad's picture

Hey, ZH matters.  And they pour over every word we write especially on those dateless Sat. nights when they pretend to BE us.

Thu, 06/07/2012 - 14:27 | 2504767 JeffB
JeffB's picture

"the Fed's balance sheet will continue to contract and therefore the stimulative effect will fall."


Makes me wonder whether TPTB are ushering in their next "Regime Change" for the U.S.

Not sure how long it takes for the stimulative effect, or dampening effect of Fed policies as the case may be, to affect the economy but if they're still tapping the brakes now, that can't be positive for the POTUS' reelection bid.


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