(For those who say I just don’t get it…get this)
As we sit here currently there has been one word responsible for $Trillions in gains within the capital markets globally: capitulation.
Every mainstream financial/business media outlet along with their cadres of next in-rotation-fund-mangers, buzzer bangers and more has stated that both the Fed through the word of its Chair Mr. Powell had indeed capitulated, where everything from future rate increases, as well as the balance sheet roll-offs were now “paused.”
I seem to have been the only one to emphatically state (far more than just once) publicly, that that has not been the case to the screams and howls of the so-called “smart crowd” across said venues.
It’s always the same line: people like myself don’t know what we’re talking about. And as proof? As always “Just look at these markets!” is the go-to rationalization.
The problem? Here you go, via Bloomberg™ this morning. to wit:
“The Fed has made it clear that this is the primary tool of monetary policy and that hasn’t changed a whit. However, now that the balance sheet is getting more attention and the direction of short-term interest rates is less certain, the Fed is simply reminding people that the balance sheet is still available in circumstances where its primary tool might be insufficient.
We are nowhere close to that situation today. The balance sheet tool becomes relevant only if the economy falters badly and the Fed needs more ammunition.”Bill Dudley, Former Fed. President, N.Y. via Bloomberg
Translation: Nothing, repeat, nothing has changed. The balance sheet has not been paused, may not be paused, and only under extreme circumstances or, like I said prior, it’ll take another crash type event, at the least, just to find out if they did or will, after the fact.
I would suggest you read the entire article, because there’s a lot more contained within that should cause attention to those looking for clues.
The obvious, via my eye, is that this appears to be following the well worn modus operandi of having former or, well connected others to the Fed as to get out in-front and set out trial balloons to see the reaction.
And make no mistake about it: The “market” has just been put on notice that all that “hopium” it’s been gorging on, has been just that – hope, not deeds.
In other words – the “market’s” been warned, now will it listen?
Just remember: with as drunk on 200-proof capitulation as this market is currently? The hangover has the potential to be one mother of a real b#tch.
© 2019 Mark St.Cyr
Footnote: These “FTWSIJDGIGT” articles came into being when many of the topics I had opined on over the years were being openly criticized for “having no clue”. Yet, over the years, these insights came back around showing maybe I knew a little bit more than some were giving me credit for. It was my way of tongue-in-cheek as to not use the old “I told you so” analogy. I’m saying this purely for the benefit of those who may be new or, reading here for the first time (and there are a great many of you and thank you too all). I never wanted or, want to seem like I’m doing the “Nah, nah, nah, nah, nah” type of response to my detractors. I’d rather let the chips fall – good or bad – and let readers decide the credibility of either side. Occasionally however, there are and have been times they do need to be pointed out, which is why these now have taken on a life of their own (i.e., something of significance per se that may have a direct impact on one’s business etc., etc.) where readers, colleagues, and others have requested their continuance.