Wednesday, May 18, 2016


The Fed released the April minutes today.  Speaking in a remarkably clear fashion the Central Bank indicated that if the positive aspects of the first quarter's economic numbers continued in the second quarter there would be a rate rise in June.  The DOW tumbled at first but closed relatively unchanged whilst the short end of the curve saw yields increase sharply but the 10 year remained relatively unchanged--the move had already happened in the past few sessions.

Yes, I got this one wrong, but as the Yogi-Man said, "it ain't over 'til it's over."  It seems unlikely that the Fed can step away from this but stranger things have happened.  Problem is it would no longer be merely a case of confidence being lost but one of extreme embarrassment which makes it personal...the supposed smartest people in the room misread the data (it would have to be the data) and they couldn't stand that.  We have often said that Janet had painted herself into a bit of a corner; well she did it again but this time with non-drying paint.  Then again, if not the data it was perhaps the vision of what was occurring (or not occurring) in places like Japan and Europe with the negative interest rate experiment from which they decided to distance themselves as quickly as possible.  It also greatly lessens the threat of nasty public fight with the Japanese over currencies as the result of a tightening will probably achieve exactly what the Japanese wish: a cheaper Yen...and a cheaper Yuan, lest we forget.  The pols are going to be watching this one verrrry closely.  A weakening sign in the economy will bring forth a chorus of cries from Democrats for the Fed to forgo its near-promise and hold the course.  We'll see.  I think the bluntness of the statement took everyone by surprise to an extent.  It will be interesting to review the commentary once people have had the opportunity to digest what the have just heard--which we shall do tomorrow.

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