Fed Open Market Committee items of note....
http://www.zerohedge.com/news/2013-06-19/deer-returns-fears-bernankes-training-wheels-are-coming
Submitted by Tyler Durden on 06/19/2013 16:05 -0400
Submitted by Tyler Durden on 06/19/2013 16:21 -0400
Submitted by Tyler Durden on 06/19/2013 18:40 -0400
http://www.zerohedge.com/news/2013-06-19/deer-returns-fears-bernankes-training-wheels-are-coming
The Deer Returns On Fears Bernanke's Training Wheels Are Coming Off
One word can describe performance across all asset classes today: clobbered. Stocks tumble, Commodities slide and Bonds crash, with the 5 year suffering the biggest intraday percentage jump in yields... ever! And why? Because Bernanke confirmed what everyone thought they knew, namely that the Fed will start tapering (how else can the Fed match the reduction in gross Treasury issuance at auction without taking over the private market entirely) eventually. Or at least that's what the market read between the Chairman's lines. In reality, Bernanke himself is more dazed and confused than anyone out there and just like Europe, is making it up one day at a time.
Did the Fed's extraordinary actions increase or decrease realized vol?
leaving the S&P 500 at the lows of David Tepper Day...
Commodities were a one way street...
FX markets exploded with the USD bid (and if the bulls think carry will save the day - think again - this kind of vol means LESS carry not more)...
The Dow saw its 7th day of +/-100 p[oint days - first time since oct 11
Charts: Bloomberg and Capital Context
http://www.zerohedge.com/news/2013-06-19/socgen-taper-tantrum-post-mortem-fomc-track-september-tapering
SocGen Taper Tantrum Post-Mortem: "FOMC On Track For September Tapering"
Who though that a term we coined over a month ago would suddenly get so much airplay: why, it was none other than billionaire hedge fund investor David Tepper who said days later(and just in time to top tick the market) not to fear the taper, that it is a bullish sign. Looks like it wasn't. But at least Tepper sold everything he had to sell by now so someone is happy. As for what happens next, nobody still has any idea, although the first, and so far best, post-mortem of Bernanke's predicament comes from SocGen, whose opionion is simple enough:FOMC on track for September tapering.
From SocGen:
FOMC on track for September tapering
Today, we expected Bernanke to provide more helpful guidance on asset purchases and on eventual exit steps. We got what we wanted. Bernanke reiterated that tapering is likely to begin “later this year” and end around mid-2014, i.e. when unemployment reaches 7%. Regarding exit principles, the only new colour was that the majority of the FOMC is now against ever selling the Fed’s MBS holdings.
Tapering guidance much improved
We’ve complained in the past that the guidance on asset purchases was too vague and flat out unhelpful. The Fed made a large step today toward addressing our concern. Rather than laying out specific conditions for tapering, Bernanke suggested that if incoming data is broadly consistent with the Fed’s forecast, it will be “appropriate to moderate the monthly pace of purchases later this year.” The Fed projects that the unemployment rate will average around 7.4% in the fourth quarter (vs. 7.6%) today, which implies that the Fed sees a 7.5% level or thereabouts as consistent with tapering. After that, Bernanke suggested that the Fed will continue to reduce the pace of asset purchases through the first half of 2014, or until unemployment falls to roughly 7%. This would imply a roughly $10bn reduction in asset purchases per meeting.
The new guidance on tapering is broadly consistent with earlier hints, notably with the three conditions laid out in the minutes of the May meeting. At that time, most participants saw three criteria for tapering: continued progress on employment, improved confidence in the outlook, and reduced downside risks. It was probably not coincidental that the only changes in today’s FOMC statement alluded directly to two of those three conditions. First, in the economic assessment, the language on labor market conditions was changed from “have shown some improvement” to “further improvement”. And, the statement significantly downgraded downside risks to the economic outlook.
Back to data watching
The Fed’s economic forecasts have become an implicit benchmark against which investors should be evaluating incoming data and re-pricing the timeline on asset purchases. The Fed expects growth to average around a central tendency range of 2.3%-2.8% (or a midpoint of 2.5%) this year. Since Q1 GDP expanded by 2.4%, i.e. broadly in line with the full-year forecast, we simply need to see more of the same. Employment growth has averaged at 175,000 jobs per month so far this year vs. 80,000/month trend growth of the labor force. A mere continuation of this performance will continue to put downward pressure on the unemployment rate.
Our central scenario
We maintain our call for a September tapering. Prior to today’s meeting, we had assumed that asset purchases would come to a full stop by the January meeting. While Bernanke’s guidance suggested that buying will continue until mid-2014, our own forecast trajectory hits the 7% level of unemployment a bit earlier, before the end of Q1. We therefore still see the risks skewed toward a shorter tapering cycle than consensus currently assumes. After that, there is likely to be a long pause in Fed policy. Rates are still on track to remain at zero until 2015, and in fact Bernanke hinted that at some point the Fed could lower the 6.5% threshold for rate hikes. We assume that MBS runoff and reserve draining operations will begin about 6 months before the liftoff in rates, i.e. in late 2014. MBS asset sales now look unlikely, but it is not clear at this stage whether the Fed will reduce its Treasury holdings through sales or redemptions, or simply maintain a large balance sheet and allow the economy to grow into
http://www.zerohedge.com/news/2013-06-19/hey-mr-market-qe-monkey-your-back-has-you-throat
"Hey Mr. Market, That QE Monkey On Your Back Has You By The Throat"
Submitted by Charles Hugh-Smith ofOfTwoMinds blog,
Mr. Market has one little problem: the Fed monkey on his back has a death-grip on his throat: "One hell of a price for you to get your kicks."
One of the enduring analogies of the Federal Reserve's quantitative easing (QE) program is that the stock market is now addicted to this constant injection of free money. The aptness of this analogy has never been more apparent than now, as the market plummets on the mere rumor that the Fed will cut back its monthly injection of financial smack. (The analogy typically refers to crack cocaine, due to the state of delusional euphoria QE induces in the stock market. But the zombified state of the heroin addict is arguably the more accurate analogy of the U.S. stock market.)
You know the key self-delusion of all addiction: "I can stop any time I want." This eerily echoes the language of Fed Chairman Ben Bernanke, who routinely declares he can stop QE any time he chooses.
But Ben, the pusher of QE money, knows his addict--the stock market--will die if the smack is cut back too abruptly. Like all pushers, Ben has his own delusion: that he can actually control the addiction he has nurtured.
You're dreaming, Ben--your pushing QE has backed you into a corner. The addict (the stock market) is now so dependent and fragile that the slightest decrease in QE smack will send it to the emergency room, and quite possibly the morgue.
But like all highs based on addictive substances, the stock market high cannot be sustained without an increase in the drug. But there is a diminishing-return dynamic to ever higher doses of QE smack--the higher doses are no longer generating the same highs. The addict (the stock market) has become desensitized to the QE free money injections, and higher doses no longer generate the desired state of bullish euphoria.
The more Ben talks about eventually decreasing the injection of financial smack, the more panicky the addict becomes. The more he increases QE, the less effect it has. The Fed is backed into a corner: increasing QE has no positive effect but decreasing it unleashes a catastrophic breakdown in the stock market.
You may recall the Keynesian parrot, who repeats the same demand for more free Federal money to be squandered on the cartels, grifters, embezzlers, toadies and lackeys of the Status Quo.
Here is the Keynesian parrot with the Fed QE monkey on his back: you may notice the Keynesian parrot is none too pleased with the Fed monkey's death-grip on this throat.
Unfortunately for the stock market, it's in a double-bind: the Fed monkey is choking it, but if the monkey falls off its back then the market goes into cold-turkey collapse.
The other delusion of the pusher and the addict is that the endgame of addiction can be avoided. We all know the endgame of addiction; the 1970s rock band Lynyrd Skynyrd captured it very succinctly in their song Ooh That Smell:
One little problem that confronts you
Got a monkey on your back
Just one more fix, Lord, might do the trick
One hell of a price for you to get your kicks
Got a monkey on your back
Just one more fix, Lord, might do the trick
One hell of a price for you to get your kicks
Ooh, that smell
Can't you smell that smell?
Ooh, that smell
The smell of death surrounds you
Can't you smell that smell?
Ooh, that smell
The smell of death surrounds you
The Junkie in the Pool and False Idols: Faith in Wall Street and The Fed Has Eroded(August 10, 2011)
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