Here we are, just barely into our first earnings season without the incessantly added fuel provided by QE and the markets are stumbling. At times on Friday the indexes were hovering near the possibility of posting 2% losses going into the weekend. In today’s media mindset of “everything is awesome.” That’s near – unthinkable.
Personally I watched for the now requisite headlines to cross the airwaves at any moment announcing “Federal Reserve member _____________________(fill in the blank) says: The Fed. can, may, will, or won’t do this, that, or the other thing. Just remember: it’s not the economy that’s important. It’s us. We decide for the economy – whether it needs us or not. Never forget: We’re all Keynesian’s now so – trust in us.”
Usually without fail this is followed with what now seems mandatory: The unleashing of HFT fueled, algorithmic stop running, hunt and seek programs to wipe out all that red on the screens turning them into a sea of tranquil green by close. But alas not this time. This just seemed a little odd since every other time precisely such a scenario has unfolded. Yet this Friday? (Insert crickets here.)
Earlier during the week we had the release of the FOMC Beige Book. Here once again so as to make sure there was no misunderstandings in any presumed messaging that you may think to understand. Members both voting and non-voting gave conflicting speeches, interviews, or press releases that made sure what ever you thought you knew or understood – you don’t.
I believe this latest policy tool of dueling scenario Fed. speak in the eyes of the Ivory Tower is still being looked upon as “brilliant.” In my estimation it may quite possibly be the only one they have left. The layman’s term for this is “Baffle’m with bullsh*t.” Because if you can’t decide if they are even on the same page – how can you be sure as to what they will do? Let alone what you should.
So you better not sell – you better just buy more. After all JBTFD (just buy the dip) is today’s Fed. speak for “Mission Accomplished.” No Beige, blue, green, or kaleidoscope colored book needed. So why the deafening silence on Friday? Did CNBC™ finally go dark? There could be another reason and if accurate is very disconcerting.
Maybe it’s because all ammo (and there has been no silver bullet more powerful of late than a Central Banker press conference) is being reserved for a much larger crisis looming on the horizon. i.e. Greece and all its tenuous implications calling for an “All hands on
printing presses deck, battle stations” response.
Yes, like you I also tire when I hear another analysis of what will, won’t, or might take place when it comes to the now oversubscribed moniker of a Grexit. Nonetheless, this rolling drama that has taken on attributes worthy of gaining its own syndication for a reality TV show is in its final stages with implications far more reaching than the markets are currently prepared for.
Experts can jawbone ad nauseam how any event is small in “relativity” and sound correct. Yet, have that small event happen at the wrong time when no one’s prepared? And inconvenience can turn into catastrophe in a nanosecond. And it doesn’t take a rocket scientist to conclude after looking at any so-called “fear gauge” within the markets: This market is not prepared in the least. What’s possibly far more scarier? It appears: unconcerned.
To use the “reality show” thesis for an analogy: This is either going to end in another season ending episode (as in – to be continued.) Or, a series ending finality (as in “That’s all folks!”) If it’s the latter; contagion has the aspect of taking down the whole network (e.g., the EU) And that reality isn’t based in some scripted “reality show.” That script is quite possibly – all too real. And the bankers know it.
Over in Europe the banks are huffing and puffing believing they have the upper hand. The banks and bankers (such as Germany’s Mr. Schäuble) continually jawbone implied threats or repercussions unless Greece does X, Y, or Z according to their implicit mandates.
Yet, if one steps back and looks at the bigger picture (i.e., How Greece along with all the other distressed entities will be watching): Exactly what is the all too visible response Mr. Schäuble and his likes within the ECB are going to do as to fix the now failing (again) of their own previously failed bank? e.g., Hype Alpe Andria/Heta Asset Resolution and its calamitous effects to the likes of Duesseldorfer Hypthekenbank AG. Along with the other billions of €uro exposure to Heta that the German Bundesbank recently commented was at risk to other German banks?
Here you have a scenario playing out in my opinion just made for television. The EC, The ECB, the IMF, (aka The Troika) playing hardball calling for this, that, and the other thing while being vocalized by Mr. Schäuble harkening tones of the famous SNL skit “No soup for you!” unless exacting conditions are met, forming what can only be looked upon by the Greek government and people (whether it’s accurate or not) as – bold face hypocrisy.
Think about it: (using generalized examples for a construct) A previously rescued bank turned into a “bad bank,” once again goes belly up, needing to be rescued again for not doing what it should have done, both during, and after, its first rescue. Sound familiar?
This in turn is putting other German banks at risk and causing the ECB itself to call for more “detailed exposure information” from the effected parties. But (and it’s a very big but) the implied willingness for the EU, ECB, or IMF to jump in with its own version of “what ever it takes” while simultaneously demanding Greece to pay up, and shut up? Add to this the perplexing quandary this leaves in not just Greece; but other EU countries when reports are the ECB is having a hard time placing all its newly printed €60 billion monthly QE program. i.e., Need help spending all that money? Why aren’t you spending here with us?
Remember, all this is made possible by money printed ex nihilo to keep everyone (i.e., those chosen to be worthy within the EZ) content and happy. All the while Greece is bludgeoned into submitting to sell, raid, pilfer, what ever it takes of its hard assets to be loaned “money” made via a keystroke to pay back money – that was also generated via – a keystroke.
Yes, I understand how money and such works in the economy of today. Regardless of any of that, is the fact; no matter how one thinks or believes, or, has been taught what should and shouldn’t take place. (i.e., what you’ll be taught as gospel in the Ivy League business schools only to find out in the real world its meaningless if not outright foolish) People, businesses, countries, and more (especially desperate one’s) will do things almost cavalierly what others will contemplate or regard as unthinkable when backed into a corner.
With the above all too real example made prevalent by the Central Banks around the globe. What they’ve created is a premise, that will be exploited, in which monetary moral authority coming from a Central Bank is no longer contemplated within the constructs of debt policy. (regardless if it was sound or not to begin with) i.e., If today a Central Bank can print whatever money it wants via a keystroke out of thin air – then why can’t it print whatever I need? It’s not tied to anything more than – a decision. And the realization of this premise is gaining ground and rushing towards critical mass to any (and all) party feeling financially “oppressed.” Regardless if brought to bear by their own actions or inaction.
So all arguments as to why this, that, or the other thing are irrelevant. For it’s proven ipso facto: if you can save this or that entity via a keystroke – why not us? If I were Greece along with the next inline country to implode financially within the EU – that would be my never-ending argument of defense. Rightly, or wrongly.
Once this Pandora’s Box is opened publicly (as in an accusatory declaration of fact by one party to another) there’s no turning back. And, if you’ve been paying attention to the increasing conflicting reports coming out of the invested parties; there’s anything but an atmosphere of conciliation let alone respect for the other.
All “weapons” are on the table – by both sides. Just who’ll blink is the only unknown. Because no matter which one does – chaos will follow. The only response from the central banks will be in what measured degrees are needed (as well as will work) to deal with it.
This is why it’s quite possible the reason as to why we didn’t hear the now requisite Fed. official taking to airwaves, spouting monetary platitudes, regardless if they were a voting member or not. They may have concluded they’ll need all the “ammo” or “bag of tricks” they can muster if things really begin to show distress with implied global contagion . Rather, than merely running ahead to answer this weeks version of a 1+% decline; and fuel the headline seeking algo-ignition to “front run” any and all HFT fueled stop running programs.
After all, maybe it’s just me, but isn’t it just a little too coincidental that the former master of monetary mumbo-jumbo Ben Bernanke, is hired nearly to the day by what is reported to be the working HFT arm of the Federal Reserve: Citadel™. Precisely at a time when communiques spilling out of the Fed. are leaving everyone scratching their heads as to what it all means, and what they might do, except for, just maybe – the former head who honed this style of policy delivery to an art form?
What better person to suddenly “bring on your team” as to help your company
front run discern what the Fed. is, or is not going to do next? Again, “precisely” at the same time, almost to the day, both the markets as well as Greece and more are showing real signs of distress with possible calamitous effects? Funny how serendipitous that whole coincidence thing can get – no?
As always, who knows what will or won’t happen next. It’s all conjecture or speculation on my part. However just a couple of other signs that may add further context to this discussion also happened on Friday with little fanfare as well as reporting by the main stream press.
Mr. Schäuble has been reported to state: “Greece free to seek Russian aid, may not get much.” Only to have it later announced that Russia indeed has made a €5 Billion deal with Greece. And right on the heels of it Alexis Tsipiris announced he was meeting over the weekend with every sound money and fiscally responsible antithetical spokesperson and adviser – Paul Krugman.
I hope Mr. Schäuble can enjoy the irony of such an example of Schadenfreude the rest of us can see.
© 2015 Mark St.Cyr