The Federal Reserve giveth and they taketh away and they giveth again, and taketh some more. Remember when the markets were ruled by sales and profits? Me either… As Dave Fry points out, the key turning point came on Wednesday, when usually bearish Lacker said he didn’t see the Fed as “anywhere near cutting balance sheet size” and “maybe markets got a little bit ahead of us on QE." He is also “fine with FOMC tapering QE now” or at any time evidently, but he’s a team player.
Thursday we got a troika of Fed governors beginning with uber-dove and former Goldman Sachs honcho William Dudley. He restated Bernanke’s view that QE tapering may begin in late 2013 and/or early 2014. He was followed by Fed governor Jerome Powell who stated, “Market adjustments since May have been larger than would be justified by and reasonable reassessment of the path of policy," adding, “
The reaction of the forward and futures markets for short-term rates appears out of keeping with my assessment of the FOMC’s intentions, given its forecasts.” In other words, the markets were just wrong. Lastly, Fed governor Lacker stated, “…as the Chairman made clear, there is no 'predetermined' pace of reductions in the asset purchases, nor is the stopping point fixed.” The bottom line is Fed governors have been united in their efforts to jawbone financial markets higher. It’s no coincidence that POMO today was unusually large at over $5 billion.
Another important point Dave made was a quote by Terex CEO, Ron DeFeo, who said “I am hesitant because I really don’t believe the U.S. economy is in a strong growth mode.” TEX makes the machines that actually build things and, if this guy isn't seeing the economy improving – it's not really improving!
As I noted earlier this morning in Member Chat, Draghi shoveled another pile of BS on us this week and it did it's trick but, as with the last 5 times he talked up the markets – no actual action is taken and, in fact, the EU is going the OPPOSITE direction – releasing a $1.25Tn 7-year budget that CUTS spending for the first time in their history.
IN PROGRESS
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