'Hawkish' Dudley Sparks Bond, Stock Selling With Puzzling Comments

With two comments this morning that seemingly fly in the face of all common-knowledge, Fed's Dudley offered a hawkish tone that sparked selling pressure in stocks and bonds even as USDJPY spikes.

Dudley proclaimed first that an inverting yield curve is not a problem... 


Which is odd because every time the curve has flattened this dramatically, the US economy has gone into recession..

As a remidner, an inverted yield curve, which has correctly predicted the last seven recessions going back to the late 1960’s, occurs when short-term interest rates yield more than longer-term rates. Why is an inverted yield curve so crucial in determining the direction of markets and the economy? Because when bank assets (longer-duration loans) generate less income than bank liabilities (short-term deposits), the incentive to make new loans dries up along with the money supply. And when asset bubbles are starved of that monetary fuel they burst. The severity of the recession depends on the intensity of the asset bubbles in existence prior to the inversion.

And then proclaimed that easing is now a bad thing...


The response is clear... Bonds down, Stocks down, Dollar up

So flattening is bullish, tightening is bullish, and balance sheet unwinds are bullish?

“They desperately want this to be an easy, smooth, paint-drying type of process, but there’s no chance,” said Peter Boockvar, chief market analyst at The Lindsey Group.


“The whole purpose of quantitative easing was to inflame the markets higher. Why shouldn’t the reverse happen when we do quantitative tightening?”


LawsofPhysics Mon, 06/19/2017 - 08:40 Permalink

More jawboning...< yawn > same as it ever was... ...one way or another these criminal fucks will make the "prices" whatever the fuck they want them to be..."Full Faith and Credit"

spastic_colon skbull44 Mon, 06/19/2017 - 09:03 Permalink

"The whole purpose of quantitative easing was to inflame the markets higher. Why shouldn’t the reverse happen when we do quantitative tightening?”very true but the other global CB's will come to the rescue..........for now they will trot out the phony opposing views from certain fed gov's to keep the appearance that there is actual democracy in the fed.update - the selling pressure has been corrected and now futures are even higher than before dudley.  worked like a charm.

In reply to by skbull44

Paul Kersey spastic_colon Mon, 06/19/2017 - 09:25 Permalink

'nuff said:

"Dudley worked at Goldman Sachs from 1986 to 2007, holding the position of chief economist for ten years before he was hired by then-president of the New York Federal Reserve Timothy Geithner to oversee the department in charge of buying and selling government securities. According to salary figures released in 2010, Dudley is paid "more than $410,000 per year", making him one of the two highest-paid of the twelve presidents of the Federal Reserve Banks."

In reply to by spastic_colon

Crypto-World-Order (not verified) Mon, 06/19/2017 - 08:44 Permalink

Jews are always going to Jew. They must keep the sheep in this centralized ponzi at all costs.

The Count Mon, 06/19/2017 - 08:47 Permalink

If you are still in the markets best to not listen to any of the garbage being spewed out of CNBC, the FED, etc.
The charts tell you all you need to know.

lonerangerridesagain The Count Mon, 06/19/2017 - 08:53 Permalink

BIggest understatement of the year.;  The guys at shepwave have been calling for new highs in the Dow and s and p for months now.  They are cautiously bearish some of the other indexes but say that until the s and p and dow make a turn to play hte long side buy on dip.  i think they may be changing their calls soon though.   but it is funny that everyone has been trying to be bearish for so long and nothing has cracked.

In reply to by The Count

vegas Mon, 06/19/2017 - 08:58 Permalink

Selling? What fucking selling? Oh, you mean tht 10 point selling spree in the Dow30 that lasted all of a couple of minutes? Here a half hour until the open, Dow30 is set to open right up near it's  all time high. Seriously, selling spree ... are you on crack? www.traderzoogold.blogspot.com

True Contrarian (not verified) Mon, 06/19/2017 - 11:14 Permalink

As of right now, all major global equities are in the green, most are up over 1% today.The Meltup continues unabated.

spastic_colon Mon, 06/19/2017 - 08:58 Permalink

FED'S DUDLEY: FLATTENING YIELD CURVE NOT A NEGATIVE SIGNAL FOR U.S. ECONOMYbecause its great for continued buybacks and we all know the stock market is the best economic indicator /s

Batman11 Mon, 06/19/2017 - 09:02 Permalink

These people are clueless.Suggested BIS director training course.The problem is that they all use neoclassical economics and we are seeing global boom/bust capitalism just like the 1920/30s. The roaring 20s naturally progresses into a crash and the Great Depression due to debt based consumption and speculation, it is the debt built up in the boom that leads to the debt deflation of the depression.https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.pngLook at that spike of debt based speculation leading up the 1929 Wall Street Crash, we can see a similar thing leading up to 2008.Debt based speculation doesn’t provide a very good return in GDP and so you can see it by monitoring the debt to GDP ratio.Let’s look at the UK:https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.53.09.pngBefore Thatcher gets into power bank credit goes into productive investment in business and industry and there is a good return in GDP. Then the financial speculation and real estate bubbles start inflating that don’t give the same return in GDP.Get your directors to look in the right place and they will be able to see these problems building up.

Batman11 Batman11 Mon, 06/19/2017 - 09:06 Permalink

If only they had been on the training course.The early 1980s see the beginnings of financial liberalisation and the late 1980s sees the following crises, e.g. US S&L crisis; UK, Japan, Australia, Canada and Scandinavia real estate busts.More financial deregulation leads to 2008; the Euro-zone crisis; Greek, Irish and Spanish real estate crashes.2008 is just another real estate bust, leveraged up and transmitted internationally by complex financial instruments. As the global bust hits the Euro-zone it crumbles.That’s another fine mess financial liberalisation has got us into.Australia, Canada and Scandinavia are queuing up for their second real estate bust.

In reply to by Batman11

vegas Mon, 06/19/2017 - 09:04 Permalink

Clueless Twits; so not raising rates "imperils" the economy? Well, what the fuck, raise the Fed funds rate to 15% tomorrow you dumb ass! Let the party begin! What I don;t understand is how people even give these assclowns the time of day; truly, the faculty lounge experts need to go. END THE FUCKING FED. www.traderzoogold.blogspot.com

slimycorporate… Cordeezy (not verified) Mon, 06/19/2017 - 15:03 Permalink

I've said for a while now that you will know the jig is up when the fed is trying to be "hawkish" and "dovish" at the same time. They have to try to ease and tighten at the same time. Its over man!! it makes perfect sense if you look at it from the point of view of someone who is micromanaging something and doesn't really know what they are doing, aka flying by the seat of their pants at this stage of the game.

In reply to by Cordeezy (not verified)

Davilis Mon, 06/19/2017 - 09:19 Permalink

They really need the market to go down now or they will be blamed for the bubble in stocks when it rips higher. If the market won't cooperate with the recent rate hike, he is going to jawbone it in the preferred direction.

shortonoil Mon, 06/19/2017 - 09:34 Permalink

There is no one listening to the FED; they are all trying to figure out what the other guys thinks they heard. Sheep are creatures looking for a place to die.

decentraliseds… (not verified) Mon, 06/19/2017 - 10:53 Permalink

 Why waste time on this alligator when the swamp’s most critical economic and political problems revolve around the hegemony of a global corporate cartel, which is headquartered in the US because this is where their dominant military force resides. The US Constitution is therefore the “kingpin” of an all-inclusive global financial empire. These fictitious entities now own the USA and command its military infrastructure by virtue of the Federal Reserve Corporation, regulatory capture, MSM propaganda, and congressional lobbying. The Founders had to fight a bloody Revolutionary War to win our right to incorporate as a nation – the USA. But then, for whatever reason, our Founders granted the greediest businessmen among them unrestricted corporate charters with enough potential capital & power to compete with the individual states, smaller sovereign nations, and eventually to buy out the USA itself. The only way The People can regain our sovereignty as a constitutional republic now is to severely curtail the privileges of any corporation doing business here. To remain sovereign we have to stop granting corporate charters to just any “suit” that comes along without fulfilling a defined social value in return. The "Divine Right Of Kings” should not apply to fictitious entities just because they are “Too Big To Fail”. We can't afford to privatize our Treasury to transnational banks anymore. Government must be held responsible only to the electorate, not fictitious entities; and banks must be held responsible to the government if we are ever to restore sanity, much less prosperity, to the world. It was a loophole in our Constitution that allowed corporate charters to be so easily obtained that a swamp of corruption inevitably flooded our entire economic system. It is a swamp that can't be drained at this point because the Constitution doesn’t provide a drain. This 28th amendment is intended to install that drain so Congress can pull the plug ASAP. As a matter of political practicality we must rely on the Article 5 option to do this, for which the electorate will need overwhelming consensus beforehand. Seriously; an Article 5 Constitutional Convention is rapidly becoming our only sensible option. This is what I think it will take to save the world; and nobody gets hurt: 28th Amendment: Corporations are not persons in any sense of the word and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to: 1, prohibitions against any corporation; a, owning another corporation; b, becoming economically indispensable or monopolistic; or c, otherwise distorting the general economy; 2, prohibitions against any form of interference in the affairs of; a, government, b, education, c, news media; or d, healthcare, and 3, provisions for; a, the auditing of standardized, current, and transparent account books; b, the establishment of state and municipal banking; and c, civil and criminal penalties to be suffered by corporate executives for violation of the terms of a corporate charter.    

buzzsaw99 Mon, 06/19/2017 - 12:04 Permalink

i fell for that inverted yield curve bullshit when the bernanke did it.  that sweet 5.25% lasted a few months and fucked over everybody who went for it.  never again.  i'd rather hold the 10Y at 1.5% than the money market at 5% bitchez.  the fed is irrelevant.

InnVestuhrr Mon, 06/19/2017 - 17:01 Permalink

Q: Why the abrupt change in FED policy ?A: The deep state has decided that the economy and financial markets MUST crash under Trump's administration.