The Fed Weather Update
By Barry Ritholtz - September 23rd, 2009, 5:30PM
Given today’s news release:
Macro Notes
We don’t want your help because maybe we don’t need itPeter Boockvar
While yesterday's US stock market close was poor, Asia and Europe didn't follow today as debt in Greece, Spain, Portugal, etc... rallied, their CDS narrowed and stocks bounced. The Greek finance minister said January tax revenues came in above expectations and that spending was below target for the month and said "that means the deficit reduction for January is well within what we have promised." The euro is rising in turn. Also helping is the story that Trichet is headed to the European Union leaders summit a day early in order to address Greece's problems even as the Greek finance...
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September 23rd, 2009 at 3:39 pm
Perfect!! Best depiction yet!
September 23rd, 2009 at 3:39 pm
Party is over… the Fed’s taking the punchbowl away.
September 23rd, 2009 at 3:46 pm
Rates to stay low for an extended period…….
Recession is over…….
…In school, these were the easiest of multiple choice questions…only two answers….choose a or b.
But in today’s class…we get to view another question based on the first two…
..Value of the sawbuck will be……?
September 23rd, 2009 at 3:48 pm
As a weather analogy, I would liken this more to a severe storm front or tornado. It came blasting through with a fury and left damage. But now the temperature is nice and the sun is shining. It’s a mistake to think this is the eye of the hurricane. Rather, it’s the rebuilding after the storm has past.
September 23rd, 2009 at 4:13 pm
Being from Florida, I love this! Prepare yourself for the winds to shift and start coming from the other direction now. One extreme to another…. BTW – the most damage from a hurricane comes after the eye passes and the winds shift to the other direction.
September 23rd, 2009 at 4:44 pm
HarryWanger,
“But now the temperature is nice and the sun is shining. It’s a mistake to think this is the eye of the hurricane.”
Only, if a total debt load with a ratio of 375% to US GDP, or private debt with a ratio of 300% to US GDP didn’t matter for the economy. Only, if banks, consumers, and businesses are willing to load on another 7 to 10 trillion US-dollars of debt within the next few years, since without accelerating debt growth no GDP growth.
rc
September 23rd, 2009 at 4:48 pm
This pic really sums it up for me. The “eye” analogy fits perfectly , IMO.
When Obama was elected I had hopes that there would be real , bold change which would allow us to escape relatively unscathed. Now that I see that the kleptocrats will remain in control , I feel like Clooney in “The Perfect Storm” when they are again overtaken by the storm after passing thru the eye :
” She’s not gonna let us out. ”
Another quote from that movie that comes to mind — near the end , the guy down below who’s up to his chin in water :
” This is gonna be hard on my boys. “
September 23rd, 2009 at 5:35 pm
the greatest damage from a hurricane is from the storm surge- i.e flooding
September 23rd, 2009 at 5:48 pm
In “The Day After Tomorrow”, after the eye of the Super Hurricane came through there was a massive PLUNGE in temperature as a FREEZE resulted in a SUPER-CHILLED Ice Age like environment. Anyone who was BALLS OUT in the open when that happened didn’t fare well.
September 23rd, 2009 at 5:49 pm
We have never seen something like this before, with trillions of derivatives waiting to blow up. They can’t unwind them in an efficient manner, but they can delay the day of reckoning. It is like the dirty little secret that few like to acknowledge or talk about. Until this is resolved, debt is destroyed, no real recovery is possible. Wishful thinking doesn’t make it so. Government spending only delays the inevitable decline in living standards and the gradual destruction in the world economies.
September 23rd, 2009 at 5:56 pm
DIE, you horrible disgusting ugly trash-buying short-squeezing bear market rally, just DIE.
(Handsome matador inserts sword between the horns of what is actually not El Toro but a bizarre pantomime bull which turns out to be HARRY WANGER and JOHNNY RETAIL in a costume, with WANGER being the arse end. The brave Matador bows to the crowd and collects flowers tossed by young maidens… exits stage left)
September 23rd, 2009 at 6:04 pm
But LB you did not take into effect the raging bull is 20% larger.
September 23rd, 2009 at 6:11 pm
The severe storm/tornado analogy works much, much better here. Go back report by report and read the improvements in everything from industrial production, manufacturing, housing leveling off, job losses slowing rapidly. Every day we see a better report. Just wait until Thursday and Friday’s reports on home sales and durables. That should quiet quite a few critics.
Storm past, clean up well underway.
September 23rd, 2009 at 6:12 pm
@LB
Give up lefty… Wanger thinks he’s cool…
http://www.demotivateus.com/inevitability-the-knowledge-that-no-matter-what-you-do-with-the-rest-of-your-life-youll-never-be-as-cool-as-a-bull-riding-monkey-demotivational-poster/
September 23rd, 2009 at 6:13 pm
Denninger sums up the FOMC announcement brilliantly today. His thoughts, on this topic, are spot on in my opinion. Highly recommended reading and, in time I hope, highly accurate. There is no true recovery until the bullshit ends or at least is offered up for what it is – bullshit.
http://market-ticker.denninger.net/archives/1463-Watch-That-Thesis!-FOMC-Announcement.html
September 23rd, 2009 at 6:13 pm
LB says-
“DIE, you horrible disgusting ugly trash-buying short-squeezing bear market rally, just DIE. ”
i’ll 2nd that sentiment- my head hurts- especially after seeing the ZH post of Fast Money’s interview of Simon Hobbes-
fucking embarrasing- someone please tell me why they are asking him for a stock tip- when he is giving a macro view of the US economy that is ALL negative-
http://www.zerohedge.com/article/simon-hobbes-destroys-ges-fast-money-puppets
September 23rd, 2009 at 6:14 pm
Yep. What would we do without the Fed? Gotta love the stable course she’s kept us on these, oh, one-hundred four years or so. Eh, BR?
We need an Andrew Jackson but all we got is another Hoover.
September 23rd, 2009 at 6:26 pm
mchappy-
need to correct your link-
http://market-ticker.denninger.net/
other than that- thanks for sharing- i think Denninger is a pretty astute dude
September 23rd, 2009 at 6:28 pm
Oh, and another reason to love the Fed. They’re so honest. I just love articles like this one…
Federal Reserve Admits Hiding Gold Swap Arrangements, GATA Says
Sept 23, 2009
http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20090923005709&newsLang=en
Makes one wonder just what does Fort Knox really hold? Wudn’t that the peoples’ money, er, gold? No? Ok, so exactly what doesn’t the Federal Reserve own lock stock ‘n barrel? They’ve got their hands in everyone’s pockets it seems.
September 23rd, 2009 at 6:30 pm
LB agrees with Denninger, even on the target – spx 880 ~ 200DMA, reversion to the mean.
September 23rd, 2009 at 6:39 pm
aitrader-
great link-
it is becoming very clear that the world in which the central banks operate is as dark and secretive as a
September 23rd, 2009 at 6:43 pm
and to finish my last post-
. . .is as dark and secretive as a person could imagine
September 23rd, 2009 at 6:46 pm
@HairyWanker
“Go back report by report and read the improvements in everything from industrial production, manufacturing, housing leveling off, job losses slowing rapidly. Every day we see a better report.”
You seem to be under the rather curious delusion that these ‘reports’ as you call them, are actually based on real data, or won’t be radically revised downwards next month…
September 23rd, 2009 at 7:55 pm
@leftback
“DIE, you horrible disgusting ugly trash-buying short-squeezing bear market rally, just DIE. ”
Just set the alarm clock for 6 months from now. It will be all over by then as the pass back through the rest of the hurricane will silence the noisy “it was only a scary storm crowd” … by washing them out to sea.
September 23rd, 2009 at 8:26 pm
[...] Hat Tip: Barry Ritholtz of The Big Picture [...]
September 23rd, 2009 at 8:45 pm
It’s fun reading how people are reacting to “HarryWanker”
September 23rd, 2009 at 8:48 pm
This sure seems green shooty to me…..
http://www.bloomberg.com/apps/news?pid=20601087&sid=aIZXvOhd4sZs
@Dogfish: I think the irritation stems mostly from the fact that Wanker just showed up here in August after the fact with his bold claims. He’ll disappear when he gets crushed like all the other MM-QB’s who proclaim “how easy” it is to make money just “buying the dips”. That’s what’s irritating. Unlike others here (myself included), I can GUARANTEE you he won’t stay around to face the music. I know the type. He’s like the friends of mine who only tell you about their winning sports bets. The line and emails go silent when the losing is happening……..
September 23rd, 2009 at 9:46 pm
“HarryWanger Says:
September 23rd, 2009 at 6:11 pm
The severe storm/tornado analogy works much, much better here. Go back report by report and read the improvements in everything from industrial production, manufacturing, housing leveling off, job losses slowing rapidly. Every day we see a better report. Just wait until Thursday and Friday’s reports on home sales and durables. That should quiet quite a few critics.
Storm past, clean up well underway.”
_______________
HarryWanger (Banger):
Read report after reports report improvements in housing (harry, there was no housing bubble and there needs to be no correction except buy and hold Banks in real estate). All the other statistics (from industrial production, manufacturing, housing leveling off, job losses slowing rapidly) produced by Harry Banger(Wanger) and Government Saucks (GS)……
September 23rd, 2009 at 9:59 pm
A nice reminder for those who rush to proclaim the tide has turned at the first receding wave …
http://link.businessinsider.com/view/81z.su/fdcfe28c
it’s not what I would consider a definitive statement on unemployment, as “events” are not bodies, but then it’s not exactly an inspirational bullish statement either.
But then, the economy is not the stock market, there’s nothing to say that a steady stream of layoffs cannot continue to improve “productivity” … up to a point.
At some point, people with money have got to start spending money … and that’s gotta be a lotta people with confidence that they’re not going to be laid off. Gonna take a lotta magic dust to fool that many people.
September 23rd, 2009 at 10:51 pm
Time to hit the reset button in a debt jubilee…….
http://www.nytimes.com/2009/09/24/us/24debt.html?hp
September 23rd, 2009 at 11:31 pm
@Mannwich
I would agree that a debt jubilee is one way to deleverage in a hurry, but how does one accomplish this without creating some massive moral hazard and pretty much destroying the network of trust that has to form the skeleton of any market economy? If lenders have no assurances that they will be repaid, how are they expected to ever make loans again?
I support a debt jubilee, but I think it has to be a fairly complicated thing, with those who are forgiven forever marked and forced to pay a “jubilee premium” on the rate paid on all future debt. Or some other similar scheme whereby the virtuous are allowed to feel rewarded and the not-so-virtuous feel punished. That’s almost as important as eliminating the debt, IMHO. Gotta make sure there is a functioning economy afterwards.
A bit of re-regulating wouldn’t hurt either, for exactly the same reasons.
September 23rd, 2009 at 11:42 pm
@constant: It’s likely coming one way or another at some point. The question is when and how we handle it. I’m not optimistic.
September 23rd, 2009 at 11:55 pm
This picture captures my sentiments exactly. Enjoy the calm while it lasts but use this time to batten down the hatches!
September 24th, 2009 at 12:14 am
Market reversed and sold off today on good (benign) news from the Fed. Are we seeing signs of a shift in sentiment? Is the long predicted correction just ahead?
September 24th, 2009 at 12:28 am
HA HA. Thats funny and is so true. BEN is making a complete fool of us.
Another piece of news:
AK47 goes bankrupt
Can you imagine that defense firm goes bankrupt
Fresbee
September 24th, 2009 at 1:03 am
Currently the daily TLB has to close below 1049.34, the weekly a close below 1030.98 and the monthly a close below 735.09 to reverse the current trend. A higher daily close will place the reversal at 1052.63 and moves higher with each higher close. Be patient and wait for the reversals.
September 24th, 2009 at 1:58 am
You folks that are preaching correction (and I am one of your crowd btw) need to remember that this rally was sparked by a specious news tidbit: the famous “leaked” Citibank memo about record Q2 profits. The correction or reversion to the mean or crash or whatever it may be called needs a similar event to kick it off. The market is hovering cliffside with nothin but air beneath. But it needs something to push it into the abyss.
Keep a keen eye for bear-sized news bits that could flip the mood of the crowd and you might catch the top of the peak
September 24th, 2009 at 5:27 am
trend change, hmmmmmmm, AmenRa gave the numbers, sands shifting, cash firmed up but in a pipe bottom, crude has a defined 3rd higher low from 75 and it was gapped down and sold all day, the same as copper, now this is the first co-ordinated break of all three, it really depends on the re-test reaction and strength…………brokers close books end of month, fundies october……….so performance anxiety coming to an end perhaps………….commodity re-inflation just crushes profits again………goldman sachs has a special waver thru december that allows them massive leverage not allowed per there new bank convinenets which they must wind down, unless they get a new extension ……….for the sake of world wide economies a pullback to 850 would take the heat off of commodities which are the killers, oil has gone up almost 100%, copper 180%……….while generally sales have stabilized, no one can budget jack shyte with such bizzare moves in commodities, which means no investment or jobs………..so my prayers is we pull back, and take out the crazy volatility, some flat calm markets for 2010 with sector rotations would be nice…….good luck too all
September 24th, 2009 at 6:46 am
The picture reminds me of ‘the day after tommorow’ in which a huge storm brings supercold air from the upper reaches of the atmosphere down to ground level. In the film, as the eye of the storm passes over, air at -200C is sucked down into the eye, instantly flash freezing all and sundry.
Regarding jubilee, simply removing liabilities from debt turns the debt money into high powered money. That is hyperinflationary. The correct way to implement a jubilee is via negative nominal rates, as advocated by willem buiter and mankiw. Contrary to what most believe, negative nominal rates are not hyperinflationary, or even inflationary at all.
September 24th, 2009 at 7:06 am
We are now going after China about paper. I see more protectionism on the horizon. Amazing how events at this stage no longer require tea leaves to see. Larry, Curly, and Moe…….Fed, Treasury, and White House.
September 24th, 2009 at 8:37 am
Bruce,
personally, I wouldn’t be defaming the Stooges in such fashion..
aitrader makes a good point: “…need to remember that this rally was sparked by a specious news tidbit: the famous “leaked” Citibank memo about record Q2 profits..”
Curly may have told some Whoppers, but.. )
September 24th, 2009 at 2:23 pm
[...] “Look sunshine! I think the storm is past!” [...]
September 27th, 2009 at 8:05 am
[...] tip: The Big Picture, September 23, [...]