This week was all a-buzz in regards to what would, or would not, be said by various voting members of the Federal Reserve’s FOMC (Federal Open Market Committee.) It is today’s equivalent of a business/financial media reality show. Everything is scripted, orchestrated, and presented to have the appearance of spontaneity. The issue is – it fails miserably.
Want proof? Look at Friday’s market reaction as two of the most prominent and ranking “doves” (Vice Chair Fischer, and Chair Yellen) made what many declared in the press as “hawkish” tones.
That reaction? The “markets” (using the S&P 500™) went from being up 15 or so points within spitting distance of another new, all time high – to close down about 3 points. The horror!
This was attributed mostly to Mr. Fischer (supposedly) throwing cold water that a rate hike in Sept. was off the table. To paraphrase: “He believes the case for an increase rate has strengthened.” But of course, there was the Chair herself, when asked if not only a raise in Sept. was possible, but also another before year-end she said (paraphrasing) “Yes, but we won’t know until we see the data.” My response? But of course: “the data.” Today’s policy maker equivalent of “but then again.”
I have never witnessed such tea-leave reading into the parsing of words which are nothing more than a deliberate delivery of “Yes, no, maybe, of that you can be sure.” in my lifetime.
The mainstream financial/business media was all a-buzz as if they had just heard the hidden meanings contained within some lost relic of antiquity. It was near laughable if not for the implications it truly contained. i.e., The Fed. is not going to move; they are pigeon holed by their own hands; and not only do they know it; but so does Wall Street.
If Wall Street thought there was even a chance that the Fed. would indeed move in Sept., let alone, once more before the year-end? You would have seen a selloff which at the very least would be calculable using whole percentages. Never mind moves that need to be stated in the hundredths (e.g., .16%) while remaining nearly just as close to all time highs.
Now the tone seems (or being whimpered) that these very same Fed. members that relished their omnipotence over the last few years, are now openly pleading with policy makers as to help them with this monetary burden of holding up the “markets” and economy single-handedly, and enact legislation via opening up the spigots of the tax-payer purse.
The real issue for the Fed. is that print, front-run, and pocket economy now being enjoyed (and employed) by the HFT cartels can be placed squarely at their (The Fed’s) doorstep. The “markets” are now unquestionably nothing more than an algorithmic, headline reading, front-running cartel of circuit board, laser enabled traders. And they now know just how beholden this Fed. is to now making sure no market turmoil is allowed to take place.
And the panic of the Fed. to this realization is growing ever clearer, if, one pays attention.
An example of this and just how feckless the jawboning of Fed. officials has become was on display in no other laughable place of desperation than Facebook™(FB.)
Yes, the Federal Reserve, the singular most powerful monetary institution currently on the face of the Earth decided in all its wisdom what was needed for the public to help better understand both the Fed., as well as its current policies and actions was to create a FB page. Think about that for a moment. The Fed. is reaching out to give the most ill-informed, misinformed, and uncaring part of society the ability to sit back and postulate further Fed. intentions via reading an assortment of curated content.
What an utter display of tone deafness, as well as clueless. And that’s the real problem.
The Fed. creating a FB page is one of the most sheer moronic things I’ve seen by such an agency or institution. It reeks of an “Ivory Towered” environment flailing around desperately in search of any and all ideas, even those they have absolutely no understanding of. But even worse: are possibly employing them out of desperation because, as the thinking goes, “Well that’s what I hear people do these days.” It’s pathetic. But what may be worse (if there even could be) – is the possible reason for it.
The Fed. is now so backed into a corner it may have finally come to their attention what many of us have been saying for quite some time: “Not only won’t they move – they can’t!”
Currently the only ones moving these “markets” to-and-fro are the HFT’s front-running any and all orders which are placed out of necessity. And when it comes to the big players? (i.e., the Icahn’s et al) Can you say Short? e.g., they’re selling – not buying. And they’re being quite vocal about the why, which is not making the Fed. comfortable.
The headlines coming across when reported on the biggest names on Wall Street are not anything like those once enjoyed by the Fed. i.e., “Market conditions are not healthy because of X,Y, or Z.” No, now the quotes you hear coming from the television screen or other media is that the biggest names on Wall Street are shorting or calling for a market free-fall based precisely on: The Fed. and their reluctance to have moved on rates prior.” i.e., “When this all fails – It’s all The Fed’s fault!”
And that chorus is growing louder and louder by the day, and it’s not sitting well with The Fed. I’ll wager.
There’s no way the Fed. can move regardless of “the data.” They’ve waited far too long, and there’s no one to blame but themselves and their incoherent messaging.
Now it’s the Fed. that must react to the HFT’s version of “Do you feel lucky?” For as soon as there’s what it believes is a credible move on rates? Say goodbye to liquidity, as well as any semblance remaining of Fed. credibility.
Oh, and as for the political class riding in to help alleviate any of that burden? Let me just finish with what was told to the former Chair when he alluded to any such notion. To wit:
Yes, indeed. Just a friendly reminder of who works for who. Other than that, go right ahead and raise in Sept. You know – because “the data” supports it.
© 2016 Mark St.Cyr