Wednesday, June 17, 2015


Janet was wonderful today.  Greenspan, if he watched, must have been smiling like a proud parent.  She spoke for an hour at her press conference and said absolutely nothing which I am sure drove the bond guys nuts although I haven't gotten my usual blast from Mad Max which is a regular occurrence after a Janet chat.

Look guys, she doesn't want to tighten...I've been telling you that for a year and she and her Landsmen will keep finding excuses to keep putting it off.  Today was the new one involving Greece and Europe testing the waters of the theory that a Fed tightening might exacerbate the all ready troubled situation.  That is of course rubbish; whatever domestic monetary effect the mess Over There might have has already been priced in long ago, but the fact remains that guys like Max don't give a toss for all of the macro gobbly-gook: they just want to know when.  How much really doesn't matter because they just want to see direction and timing and when you get right down to it with the Fed Funds rate at zero there is only one way it can go and incremental moves at this level are meaningless unless she conjures up the spirit of Tall Paul c.1979 and that ain't gonna happen.  Actually, when one gets right down to it you have to wonder if the Funds rate means anything at all with excess reserves up the ying-yang at the Fed and the reinvestment rate way above zero.  Now if they stopped paying interest...nah, don't even think about it.  This is getting to be a Mug's game but the bond guys love to play it.  Of course, if the levels are not correct (whatever that means) being the result of every central bank in the world mucking about in the markets and we have a real surprise other than interest rate movements (terrorist event?) with the liquidity that isn't out there it's going to look like Apocalypse Now, so it might be a good idea to get things moving early on towards normalization (whatever that means).  But what do I know.

Well, I'll tell ya.  I know a couple of things that Janet doesn't.  Like when she was asked today about Starr, she kida of sluffed off the question with a "Well, if we can't do it it can get done under Dodd/Frank."  Ah, wrong Janet.  It can't get done under Dodd/Frank and if that is your attitude, should the need arise, there will be no solution.  Better think that one over and correct the record with some form of nonsense like, "People will all work together to achieve...blah, blah."  But more importantly, isn't it a bit troubling when the Chairperson of the Fed isn't really sure who is going to do what to who next time a Lehman or an AIG pops up?  Or is that just me being silly again?

Finally, on the subject of Starr, The WSJ had two really good op ed pieces today, both on course but on different tacks.  Worth a read.

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