Russ Certo: "Twister"

Tyler Durden's picture

From Gleacher's Russ Certo


I don’t know where to begin and have quite deliberately been aspiring to not bombard distribution list “noise” of the latest iteration in Greece, Munich, or Washington.  There are so many touch points to discuss that I’ll merely just attempt to address MAJOR themes as I see them.  Micro easy to fill in from here.

Zero jobs and a tar and feather emotion filled CNBC search and destroy mission on who to blame.  FHA suing 12 banks in front of a Presidential speech on job creation.  One judge in Europe can decide Germany’s support for EFSF.  European bourses down near 4% and European peripheral PIIGS spreads 15 bps to 25 bps wider.  And the ZERO jobs report.  What will the Fed or the Administrations response to optics of zero job growth?  Spare you 25 line item reports of global market developments. 

What are the implications of a zero jobs report?  I think it is fair to deduce that some percentage of the investment community will (or has) extrapolated that zero job growth and less than lubricated credit conditions and risk market framework, statistically increase the chances of Fed operation twist.  This concept was born out of Sack at the Fed and has been reinforced in popular press.  Less is more and more is less.  Less jobs mean more Fed help.

What is twist?  We know it is a prospective transformation of Fed balance sheet whereby selling shorter maturity debt to purchase and impact longer term debt.  But is twist QE3?  Who cares?  One thing is for sure that policymakers increasingly don’t want to be pinned or associated with incremental EXPLICIT policy.

Why would you want to semantically define a series of quantitative numbers of failed policies?  QE3, QE99 bottles of beer on the wall.  Does that fan 98 bottles of ineffective policy?  By virtue of having another number does that mean the underestimation framework of a previous number?

In some way the FED washed its hands during Jackson Hole speech when it LINKED monetary policy to fiscal policy or fiscal policy limitations.  Read the speech AGAIN as it is one of the most deliberate speeches I have EVER read from a Fed Chairman and not as surmised by the popular press.  Be a responsible citizen and read it yourself AGAIN.  The word “fiscal” is used 15 more times than “monetary” so what is a Chairman to do?

New bond purchases won’t be fashionable or received well.  Rates and repo are near zero and constrained by lower boundaries.  Fed’s balance sheet is at previous unacceptable levels.  There is less of a penchant for push on string monetary AND fiscal policies.  So, twists, printings and usage of FX swap lines, tweaking on interest on reserves seem to be the order of the day. 

Maybe unprecedented COORDINATION of monetary policy with fiscal policy would be stimulative.  Maybe the Fed lends credence to housing reform mandates that are traditionally under the guise of Congress or quasi-government guaranteed sponsored entities.  Maybe, the Fed twists and co-horts in effort to lend balance sheet to housing affordability goals.  Unconventional. 

In fact, QE3 SHOULD take the form of the Fed having a 3 day offsite teach in with other branches of Government.  COMMUNICATION with stakeholders in government like Congress, Treasury, Comptroller of Currency, FDIC, HUD, leaders of banks, mortgage companies and business interests.  What the market is looking for is COMMUNICATION between stewards.  This alone should encourage resolve, incentives, confidence, less uncertainly, productivity, uniformity and an EASING of collective psyche. 

Forget twists, and other policy minutia which REWARD poor decision making, leadership, and the current lack of communication and, hence, capital flight and investment valuation decisions globally in efforts to seemingly futilely preserve capital.   Hello gold and Swiss Franc!!!!!

The removal of daily debilitating geo-political uncertainty and miss-allocation or inefficient allocation of resources and intellectual capital could be a quantitative easing in and of itself.  Let’s hold that off-site with a few economics books, public speaking books, philosophy books and a calculator. 

In practical terms, the market has quantified the increased probability of a “twist” as it may be the most feasible, acceptable, political outcome of a zero jobs report and just maybe the linkage of prospective housing affordability goals optimized by pegged mortgage rates outcome of twists. 

The market, or better the 2yr/30yr, spread is already doing the work.  Since this time YESTERDAY morning, this spread has flattened by a whopping 25 basis points.  The market anticipates the Fed conclusion to the print, compresses and reaches for yield, and yearns for the efficient preservation of itself from the inefficient previous policy made bottlenecked constructs.

Zero point Zero.


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IMA5U's picture

A twist is also a move performed by the staff at West Garden Spa to make you happy faster

Woodyg's picture

Your happy ending is as fast as 1-2-3 twist?

MillionDollarBonus_'s picture

The ball is in Obama's court now. An inspiring jobs speech could be just what gets this economy moving again.

gmrpeabody's picture

Ya, let's do the twist... like we did last summer...

Ya, let's do the twist... like we did last year...

BaBaBouy's picture

Whats Da Bummah Gonna Do Now?

Give more bucks to the Buffet's and the Goldman's

to: "Create Jobs" ???


And BUFFET can complain even more about Not Having To Pay More Taxes.


Don't Hold Your Breath For Fresh Ideas From Da Bummah ...

IMA5U's picture

you are an idiot if you are serious


i am an idiot if i thought you were serious and am wrong

Cruel Aid's picture

Oh he's serious, How about a "All we have to fear...."  FDR moment.

Seriously kidding that is.

Woodyg's picture

The guy in the White House is such an idiot he can't even figure out how to Schedule the damn speech much less what to say. Why not do a speech on JOBS on Labor Day? And get it broadcast on the radio as everyone is driving home with no other major news?

SheepDog-One's picture

It would only inspire ass hat dummies such as yourself.

Burr's 2nd Shot's picture

Excellent analysis, MDB.  I truly hope you are trading on that premise.

LoneCapitalist's picture

You really are a junk whore arent you?

swissaustrian's picture

Tyler, please stop pushing the CHF, forward contracts on USD/CHF and EUR/CHF are getting too fucking expensive.

Why would somebody buy the CHF anyway? The SNB is sitting on hundreds of billions of fx reserves + We have a real estate bubble (real estate funds showing +/- 4% intraday, wtf??) + UBS and CS (amounting for ~ 800 % of swiss GDP) are on the verge of collapse.

Buy GOLD + SILVER, bitchez.

slewie the pi-rat's picture

yep, and you are now using tyler's analysis, too!  but to currency traders, the swissie seems pretty strong, for now, and my unenlightened guess is that the SNB is not strong enuf (due to the rel size of the swiss econom?) to deal with it as the other fiats use it in their race to the bottom.

re this essay:

In fact, QE3 SHOULD take the form of the Fed having a 3 day offsite teach in with other branches of Government.

this sermonizing is, unfortunately, and meaning no disrespect to r_cert0, disinformation.

Mountainview's picture

The SNB is desperate to make the Swissy weaker...consequence: money measures are exploding...This will hit back in form of a bursting bubble (real estate?) SOONER OR LATER.

Caviar Emptor's picture

Europe markets gettin hammered. Again. Again. 

IMA5U's picture

europe is getting speed bagged like kim kardashian

Caviar Emptor's picture

Global central banks have parked more money with the Fed this month than during the Lehman crisis (!) Can you say flight to safety?

swissaustrian's picture

Gravity dragging worthless fiat $ towards the black hole

SheepDog-One's picture

And everyone thinks theyll print more? Joke is on them. -2 points lower for the dollar means implosion, everyone knows the USD cant go under 70. Theyre painted in a corner in the engine room of the Titanic.

Bringin It's picture

Re. everyone knows the USD cant go under 70

Why not SheepDogBro?  Fuel they can manage.  Weren't you around to drive 55?

It could be rationed.

Bonuses and kicking the can is what it's all about.  Bonuses because w/o them, the Praetorian Guard walks and can kicking so more bag holders can get loaded up.

Interesting that your so adamant about this particular issue.  Let's see what happens.

Edit - and you too Caviar.  Not an idealogical dispute, but different perceptions of where the power lies.

I have repect for the two of you, but think you're off on this one.  It's like you're not cynical enough yet. 

Either way, we'll know what's up before the end of the month.

SheepDog-One's picture

Or maybe youre too cynical and convinced every quarter they just roll out another couple trillion QE, and thats 'the plan'? I have no problem identifying exactly where the power lies, in Rome. This was all planned way before 2008 to implode the US into a 3rd world, no ones trying to fix anything and all thats left at this point is for them to pull the rug out stand by for false flag events real soon.

Bringin It's picture

Rome???  You can't mean Silvio.  Do you mean the peadophiles???  They already have their hands full.  OK, they have that corrupt bank, but who doesn't these days?  The peadophiles in Rome are pulling Obummer's string?  Too funny SD1.

Rahm Emanuel and David Axelrod work for the Vatican???

You're getting a major credibility downgrade unless you can a) elaborate or b) return the real SD1 to his avitar.

Rogier's picture

Could anyone please explain why 'Operation Twist' which doesn't extend the Fed balance sheet helps stock prices go up?

SheepDog-One's picture

Simply apply Underpants Gnome business model.


Step 1- Steal underpants

Step 2- ???

Step 3- PROFIT!!

disabledvet's picture

True in the USA. Not europe.

Corn1945's picture

I know we are talking about Central Planners who always have to "do something" but I really don't understand how more money printing is going to create jobs.

If anything, more money printing will make things worse.

Woodyg's picture

Especially since the 'more money' only goes to the top .001% - who then use it to buy up governments around the world - as is plainly seen in the USA governing model.

buzzsaw99's picture

unemployment is the fig leaf they use to cover their crimes.

Bringin It's picture

buzzsaw cuts to the chase.

Dr. Engali's picture

Look at that Dax. Getting creamed again. Maybe they should bail out a few more countries.

swissaustrian's picture

Everybody was overweighting the DAX in their Europe exposure, now we see the reverse trade. Additionally the DAX contains a lot of cyclical stocks (manufacturing, automotive, chemicals etc.), no surprise that they get hammered on the prospect of a new recession.

adr's picture

Or maybe we sould just close the fed, shut down the stock markets, let all the giant banks fail, let all the insolvent fortune 500 corporations that exist on paper crash and burn, and value our currency on something of real worth.

Then we end welfare, SS, and all government programs letting each locality figure  out how to deal with its citizens. f Detroit can't figure out how to work without turning into Ruwanda then that is not the fault of anyone in Nebraska.

The solution is massive decentralization and the spreading of power.

LongBallsShortBrains's picture

So I guess you are one of the few who have this shit predicted accurately.

Just not in that order.

Commander Cody's picture

Just End the Fed and regain control of the country and currency.  That criminal enterprise must go down!  Hello, CONgress?

vast-dom's picture

And allow the populace to prosper? At the expense of banksters and other vampires? Oh No, they'll keep Teh Fed open, thank you.

Woodyg's picture

The Fed's 2 main mandates are Inflation and Full Employment - But in reality the ONLY mandate it follows is Save the TBTF vampire squid banking firms. So the Fed has reneged on it's Public mandates driving a nail in the US economy. Time to follow Chavez and NATIONALIZE!

As a vampire squid from long ago said ' give me control of a Nations Money and I care not who makes their laws.'. And yet we still sit here wrapped in chains wondering why we can't walk.

vast-dom's picture

before Sept20-21 mini-crash. this is getting messy QE3 can't reign in Europe unwind. it is band-aide over festering cancer pustule. ain't gonna work over time. and so one prez or another gets in republican dem what have you and the disease spreads. the only cure is death and reset, unfortunately. you can't have ZIRP ad infinitum policy and expect savings to increase with "0.0" jobs created and true UnN of 20%+. Debt forgivenenss and bankruptcy and zombie institutions will go under.


But WTF do I know?

hedgeless_horseman's picture

...with stakeholders in government like Congress, Treasury, Comptroller of Currency, FDIC, HUD, leaders of banks, mortgage companies and business interests. What the market is looking for is COMMUNICATION between stewards. This alone should encourage resolve, incentives, confidence, less uncertainly, productivity, uniformity and an EASING of collective psyche.

"Productivity" in government?  What exactly does government produce?

Erin_Burnett_footfetish_society_of_TrentonNJ's picture

Government produced education, healt-care, roads.

Where would you be without any of this - living on the mountain side.

SheepDog-One's picture

Our roads are practically impassable, the kids coming out of high school are fukin retards, and health care is an abomination.

Bringin It's picture

That's a joke right? 

I like living on the mountain side.

Long-John-Silver's picture

The Stock Market has become a game of Twister.

PulauHantu29's picture

Gold is the only thing I understood in your entire article. I'm sure it is very well written but too erudite fo rmy simple American brain. All I know is gold and silver are continuously rising while the dollar loses purchaisng power every day, in every store, gas station, etc.

So gold and silver it is!

SheepDog-One's picture


strangeglove's picture

Jubilee 7.0 Bitchez!