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This Is What Happened This Time Last Year After Ben Bernanke Spoke To Congress

Tyler Durden's picture




 

Yesterday the market was confused: first it slid after there was no firm commitment by Bernanke to pursue more easing, then jumped after Bernanke did the usual song and dance, repeating all the possibilities before the Fed, as he always does. As DB summarizes, "The turnaround seemed to come at a time when Bernanke started walking through the “range of possibilities” during the Q&A session. On possible options the Chairman said that there are different types of purchase programmes that could include Treasuries or Treasuries and MBS. Outright purchases aside, the discount window, more communications on the Fed’s future plans and lowering the interest rate on excess reserves were also mentioned." But that the market is confused under the New Central Planning normal, especially with the invisible sell finger dumping out load after load of VIX vol, is nothing new. What is more interesting is what happened this time last year after just the same event took place. DB's Jim Reid reminds us. If past is prologue, watch out.

When we look back at the same event a year ago the overall theme of his speech was more or less the same with one major difference. In that despite one of the weakest recoveries on record inflation was rising rapidly this time last year thanks to one of the strongest post-recession commodities rallies in history. Indeed CPI was running at 3.6% this time last year versus 1.7% currently. In terms of market reaction the S&P 500 also had a bigger reaction to Bernanke’s event last year with an intraday high of +1.36% after the Chairman said that “the possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might re-emerge implying a need for  additional policy support.” A week after Bernanke spoke last year we saw the highs for H2 2012 (1345) before moving aggressively lower into the low 1100s through August- October as Europe’s problems intensified and the US debt ceiling problems came to a head. One year on and the biggest H2 risks are probably similar. US data is weakening, Europe’s problems could easily come to a head again and the fiscal cliff could become a major issue, albeit slightly later in the year. We also now have a China slowdown to contend with. So the parallels are there.

One more thing: last year, corporations still were reporting better than expected revenues and profits: note that of the 17 companies reporting yesterday, only 3 missed EPS, but 8 missed the top line. How long until the market realizes the step-wise top and botton line growth is just not coming in Q3 and Q4? Unless, of course, every market plunge is now also "priced in" in perpetuity.

 

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Wed, 07/18/2012 - 07:16 | 2627406 Boilermaker
Boilermaker's picture

If past is prologue

It isn't.  They are making it up as they go.

 

 

 

Wed, 07/18/2012 - 07:23 | 2627420 Frastric
Frastric's picture

Yeah what Bernanke should say is there will be no more QE, the markets plummet and that gives Bernanke the excuse for more QE. So he lies but no will care.

Why doesn't Bernanke do this?

Wed, 07/18/2012 - 07:30 | 2627433 Manthong
Manthong's picture

I guess the good news is that the world is only a couple two or three trillion dollars further in debt than this time last year. 

Wed, 07/18/2012 - 08:48 | 2627534 Thomas
Thomas's picture

The market turned around for the reason it always turns around when somebody of prominence is speaking: They do not want the optical problem of it dropping so they prop it. Deeper analyses than this are not needed.

Wed, 07/18/2012 - 08:48 | 2627535 BLOTTO
BLOTTO's picture

You wanna know what the plan is?

 

*looks around*

 

Their is no plan... THATS! the plan.

 

 

Wed, 07/18/2012 - 10:38 | 2627971 blunderdog
blunderdog's picture

"The beauty of this plan is its simplicity.  When things get too complex, everything can go wrong."  --W. Sobchak

Wed, 07/18/2012 - 07:17 | 2627407 Dr. Engali
Dr. Engali's picture

So sell and wait until S&P 1200 for the fed to start buying.

Wed, 07/18/2012 - 07:18 | 2627409 Lohn Jocke
Lohn Jocke's picture

GOP dug their heels in on the budget for a little bit, saw the market panic, and sang to themselves: I've got a golden ticket...

 

The problem with bullshitting yourself with optimism in this market is that it appears you develop a tolerance over time.

Wed, 07/18/2012 - 07:18 | 2627410 buzzsaw99
buzzsaw99's picture

It was funny watching some of the playas nervously watching bond rates go down monday then the very next day everything was green so they threw caution to the wind. Short bus riders.

http://www.youtube.com/watch?v=IwwuZr6H1LQ

Wed, 07/18/2012 - 07:19 | 2627411 Judge Arrow
Judge Arrow's picture

Ground Hog Ben is back again, doo dah, doo dah....

Wed, 07/18/2012 - 07:20 | 2627414 fonzannoon
fonzannoon's picture

Again with the earnings. They don't matter. Also what is different this time is Liesman and the MSM are all pounding the table saying more QE is necessary. They even threw the towel in on recovery hopes completely. So this market is not going to sell off whatever the data is as long as it believes the next hit is on the way.

Wed, 07/18/2012 - 07:24 | 2627422 buzzsaw99
buzzsaw99's picture

So this market is not going to sell off whatever the data...

 

We shall see. Shit is bleak and the hopium wears off after awhile. Junkie needs another quick fix or else.

Wed, 07/18/2012 - 07:27 | 2627428 Dr. Engali
Dr. Engali's picture

Agreed. The margin calls will be coming soon. Who will be next to fall?

Wed, 07/18/2012 - 07:30 | 2627434 fonzannoon
fonzannoon's picture

Dr. Engali I agree with your outlook although I think the gameplan from here on out is to get people to think your way and lure them in and then short cover rally them to death. You burn people enough times and they will stop betting against the house.

Wed, 07/18/2012 - 07:41 | 2627445 Dr. Engali
Dr. Engali's picture

That may be. The problem with that is the shorts are becoming more and more timid. Everytime the market down ticks there are fewer shorts who climb on board because they keep getting squeezed out. The majority of money is on the long side begging for the Bernank to give them a fix. Ben's problem is he needs a down draft in the market. If it happens to get out of control he is going to have to print a lot more than what is currently needed.

Wed, 07/18/2012 - 09:06 | 2627613 Shizzmoney
Shizzmoney's picture

Despite all of our wishes to see the DJIA jettison off 200, 300, 400 point losses everyday for the lulz......it's more likely the DJIA "antes off" in small increments b/c a) business is still moving (albeit slowly) and b) the whole point of Centrally Planned markets is that they tend to be riskaverse, benign, low variance constructs.  This in turn, allow central banks and corporations to hide how bad things really are (and collect their share).....until SHTF.

That is until reality hits, or a out-of-the-ordinary event happens.  EVen the greastest of Dams can't withstand the most powerful of eartquakes.

Wed, 07/18/2012 - 07:21 | 2627415 overmedicatedun...
overmedicatedundersexed's picture

the stimulation of opium requires higher doses more frequently to keep the high..otherwise withdrawal sets in.

the frequency of ben effect is too long so economic joneses comes on much quicker, we are very near the cliff..

Wed, 07/18/2012 - 07:29 | 2627429 malikai
malikai's picture

Opiates are CNS depressants and sedatives. Hardly what you'd want to "stimulate" the economy. Also, no WS douche would be caught dead with an opiate, unless he just got fired from Goldman.

Rather, the Central Bank drug of choice is closer to Crack, which has some very interesting side effects, particularly notable are the jitters, irregular and irrational behaviour, and crack babies. All of which we see. All this not to mention coke being the Bankster drug of choice.

Wed, 07/18/2012 - 08:13 | 2627486 overmedicatedun...
overmedicatedundersexed's picture

malikai, you are right in the science I was using the "Street" slang for effect. I also find it appropriate to list a depressant as a high, ever read Animal farm?

Wed, 07/18/2012 - 07:28 | 2627430 fonzannoon
fonzannoon's picture

Don't forget they did not end Twist, it's going to go on until the fed is stuffed with 30yr treasuries only. That would a tremendous time for rates to rise. Something tells me the fed knows that though...

Wed, 07/18/2012 - 07:35 | 2627436 ParkAveFlasher
ParkAveFlasher's picture

i'm not closing the beaches, bitchez!

Wed, 07/18/2012 - 07:39 | 2627440 SmoothCoolSmoke
SmoothCoolSmoke's picture

IMO the next "spin" from the MSS is that no QE will be good for stocks.  Kudlow has already started to beat that drum.

Wed, 07/18/2012 - 09:07 | 2627616 Shizzmoney
Shizzmoney's picture

QE *will* be good for stocks. 

But bad for everything else, including ordinary people.

Bernanke and the Fed only care about stocks and controlling inflationary effects on all currencies, not just the USD. 

Wed, 07/18/2012 - 07:43 | 2627451 1eyedman
1eyedman's picture

so now we will see the half life of the fed's remaining tool...jawboning.

Wed, 07/18/2012 - 07:45 | 2627453 Snakeeyes
Snakeeyes's picture

Each time he speaks, he wears his welcome out even more.

http://confoundedinterest.wordpress.com/2012/07/17/market-reactions-to-b...

Wed, 07/18/2012 - 08:52 | 2627554 Inthemix96
Inthemix96's picture

Wouldnt it be nice if just once, one of the spineless cunts would say to benny boy, 'her son, tell it straight, no bull',

And benank says, 'lads, we are fucked, we are well and trully fucked cos' we dont know what to do other than print fucking funny money for our mates', 'infact thats all we fucking do, print fucking funny money for our mates and charge you suckers interest for it'

Litlle jumped up shit stain of a cunt

Wed, 07/18/2012 - 09:02 | 2627590 ssp2s
ssp2s's picture

The day's turnaround came when the Senator from NY gave the greenlight for more QE.

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