How The Weather Punk'd The Fed
While every soon-to-be-retired boomer and his or her long-only asset-manager stock-broker commission-leecher lies awake at night in the forlorn hope that Ben "I'm-all-in" Bernanke finds another pile of printing presses to make use of in his game of Global No-Limit Texas Central-Banking; the economy, judging by 'selective' macro data and today's Beige Book, is limping along quite happily with no need for QE3 anytime soon (and that spells trouble for a market that is entirely dependent on the spice flow of liquidity and not just the stock of central bank assets). The sad truth is, as we first pointed out back in early February, that the economy is significantly less upwardly mobile than it 'optically' appears (or the market signals it to be) thanks to the extreme weather that has occurred and so while the spin-masters will attempt to make every headline look like we are in self-sustaining recovery mode, the Fed knows full well the reality is far different (hence Bernanke's recent comments) and yet they have not admitted to this animal-spirits-shattering reality (yet). Perhaps this shockingly simple 'chart-that's-worth-a-thousand-words' will force their hand as the correlation between regions showing extreme positivity within today's Beige book and the regions with the extremest weather disconnects is, well, extreme itself.
So perhaps it is left to the market to show the Fed the direction in which they should lean - as we have discussed time and again - QE3 will not occur until we have seen a significant enough correction of expectations that its impact can be expected to be positive (as we have pointed out the fading impact on the real economy and yet strangely similar nominal market impact). Or will the Fed at once shatter our illusion and offer up the $2 trillion QE3 to gods of nominal bullishness in this ever-so-independent election year
(h/t John Lohman)