Once again, the One & Done crowd has managed to pull the PermaBull traders into a long side bet, following the spin 2 weeks ago after the March FOMC minutes were released, and last week’s JEC testimony by Fed Chair Bernanke.
Over the weekend, Fed Chair Ben Bernanke told CNBC’s Maria Bartiroma at the White House Correspondents Dinner that "No, the market did not get it right" after his recent comments.
Once again, the One & Done play was a sucker’s trade.
What is this, the 4th or 5th time? Great Caesar’s Ghost, even a puppy learns not to pee on the carpet after he gets rapped with a rolled up newspaper twice. These traders have been getting bitch-slapped around like they are Wile E. Coyote and the Fed Chair is the RoadRunner. Its astonishing that the same suckers keep coming back for the same abuse. Get some help, get into a support group for abused spouses investors.
This does go a long way in explaining the new Fed Chair Curse — perhaps it takes a while before the Chairs learn they are not still in Academia or where ever; it took Greenspan a long time to learn to speak for 4 hours straight — and say nothing. I suspect it may take Bernanke a little longer to learn the dark art of obsfucation . . .
maria is the subject of much screaming on chat boards but my guess is she mistakenly gave traders credit for more brains then was realistic, assuming that anyone with a high school diploma and an e trade account would realize that the dovish comments from last week were not a tradeable event in light of the surging oil prices and plunging dollar. I doubt if she had any idea that her comments weren’t common wisdom.
The PermaBull Traders don’t seem to be the only ones who got sucked into the one and done hypothesis this time:
“His speech increases the odds that “One & Done” will finally occur: the Fed is now more likely to stop at 5.0% than I previously believed.”
“On the scale of hawkish/dovish past Fed Chairs, Bernanke clearly sits near “easy Al” Greenspan end of the spectrum, and far far away from the tough Paul Volcker / William McChesney Martin inflation hawks. So much for that vaunted muscularity we were going to see.
Ben Bernanke is now the Neville Chamberlain of Inflation Fighters . . .
I think Gold — and most of the commodities — just got a whole lot sexier . . . ”
——————
Its tough to stand against the entire herd.
.
.
BR responds: I think Bernanke is now backtracking . . . and that he was dovishly appeasing 2 weeks ago. As to the markets, the One & Done trade remains a suckers bet.
Of course Maria waiting until 3:15pm to make her “I just thought you’d like to know what the Fed chair told me over the weekend” comment must’ve been especially stinging for the long, loud, and lucky crowd who just returned from Jamba Juice to trade the close. I hope that fiber boost isn’t too fast acting!
The funny thing is, after all this back and forth between JEC and CNBC, they probably will stop in June when the rate gets to 5%.
There is an awful lot of tightening that still hasn’t had any impact on the market. Housing is crumbling, consumers are going to be paying up to nose for gas, and businesses will realize the profit picture isn’t going to get any better.
I still pee on the carpet. Can you recommend some help for me?
yes — try smacking yourself with a rolled up newspaper
Why is Bernanke even talking to that bimbo at a party? He should have known better than to open his mouth after a few scotches.
If that’s not what he meant then why did he say it? Is he is jacking with the markets to see the reaction? He surely didn’t think that his “pause” comment would be interpreted any other way. I recall a Sen (think it was Roberts) asking him about his subtle hint at a pause and Bernanke smiled (like wink wink). The congressional committee kept acting like they were glad a pause was in order and he never acted like they misinterpreted him…
This just shows that they are in the dark and probably don’t know what they are going to do. only problem is that this market has been lulled into Greenspan telegraphing all the moves. Now all these economists/strategists might actually have to do some research. just like the old days when economic data meant something.. and just in time for Fri’s employment numbers.
this will likely increase volatility premiums
The “one-and-done” flip flops have also smoked shorts just as often. Helicopter Ben will release one of his hounds tomorrow (perhaps Yellen. She likes to talk.) with some soothing words and this will be reversed. A million knees that jerk every time the fed passes gas is not a healthy market.
I think you are right. I think this is a total back track. I think he meant every word he said during his testimony. The Congressmen were pushing him to stop and he had likely felt the political pressure to stop before that meeting hence the “pause” commentary. Likely time for the E in PE to take a hit. Even energy is showing signs of peak earnings.
He has to have his mess. Every Fed chair gets to play in the rubber room for a while.
of course he’s backtracking. he’s got no choice.
the dollar has been puking since he took office. Greenspan has left him with a big mess and he must be shocked that after 375bps of tightening, commodities are still parabolic. now the housing bubble has busted but he still will have to tighten to defend the dollar. damned if you do/damned if you don’t
this is what happens when you hold interest rates below 0% for 2 years. you enter unchartered territory with no instructions (inflation target criteria) on how to navigate.
Are we in the ninth inning yet?
Maybe it’s a new strategy.
Greenspan kept the market in the dark by speaking in tongues. Bernanke can accomplish the same thing by contradicting himself regularly.
While his deputies do the good cop / bad cop routine, Ben plays the lovable joker. All he needs now is a bicycle horn and a squirting-flower boutonnierre.
XLF looking good for a smackdown here…
I rate the new Chairman by his influence on my trading. Right now, all I’m even interested in is VIX calls. They’re still pretty cheap, too.
I just got back from the immigration march in downtown LA (you could stand on the little hill on Broadway, between Temple and First, look back and see a river of people coming down Broadway, from Ninth all the way up to where you were near City Hall — any politician who can harness that force will have it made), and was greeted by this.
Personally, I couldn’t be happier, since by dumb luck I sold a bunch of stuff last week. I wish the market would crash and get it over with, but unfortunately, it’s drip-drip-drip.
I keep selling stock, it keeps going higher.
Maybe one day soon, it’ll feel smart. Not right now.
Alaskan Pete-
You’re killin’ me man. That was too funny.
And “B”, all is forgiven. Some of your latest posts are Truth Unvarnished. Good stuff.
Bernanke’s actions are really quite concerning. Since when does the fed chair make such frank comments to a cnbc reporter? Furthermore, i think one day moves in stocks and bonds should not be something he frets over. I also didn’t like how financials just treked lowere all day long, and then this surprising news which maria has known all weekend gets dropped on us. Who else was at this dinner? Was maria the only one privy to this?
As for the comments themselves, bernanke is stuck between a rock and a hard place. He knows rates can’t go much higher than 5% without seriously hurting homeowners, and thus has just about run out of ammunition. So, he basically needs to pray that what he’s done will be enough, and advocating flexibility is his insurance policy just in case the current tightening doesn’t cut it. (which i equate to a trader taking a wait and see approach on a deteriorating position)Of course on the other hand he can’t look dovish with global rates heading higher for that would be the equivalent of hanging the dollar out to dry. Which would be very unkind to our very generous foreign investors with export driven economies. We wouldn’t want to slap a massive sell sign on us treasury bonds now would we. Not very aappealing choices.
So what does he do? He tells maria to tell the market that it should be going down and not up…because well…that would be the prudent thing to do at this time. Hoping that maybe this complex thing we call our economy will just take his word and slow down…becasue well….it needs to or else.
btw…great blog
….
Why would BB need to defend the dollar? Word is (Feldstein) it’s too expensive.
Good thing Fed Chairmen don’t face any SEC regulations on disclosure of material information. We need a Reg F-E-D to go along with Reg FD.
Brace yourself – BB will be quoted tomorrow as saying Maria misinterpreted his comments about the market misinterpreting his comments.
How do you inject risk back into the market?
How do you keep an idiot in suspense?
I’ll tell you tomorrow.
Hey–anyone notice that GS made the cover of The Economist just as the brokers are finally breaking down?
I’ve got all the contrarian classics in my collection: Drowning in Oil ( March 1999)… The Disappearing Dollar (Dec 2004)… and now the newest addition, Goldman Sachs and the Culture of Risk (April 2006).
Combine that with the Roach tell and we gots some baaaad mojo risin…
Why think Bernanke will turn to obfuscation? The notion that monetary policy only works when the central bank tricks the public was jettisoned long ago. The Fed has been pretty good about letting us know what the next move will be, when it knows when the next move will be. Other than just after last year’s hurricanes, has there been an extended period during which substantial numbers of economists or investors misunderstood the next FOMC move?
I think we also need to be more precise (to the extend that Bartiromo is accurate in her transmission of what Bernanke said) about the message. Bartiromo said that Bernanke complained the press misunderstood his message. It is not all that clear he was complaining about the coverage of a potential pause. He may have been grousing about the dovish spin, not the pause. Guynn yesterday said he can’t tell whether the Fed needs to hike rates again, in the present tense, suggesting he’d be happy with a pause in May. The “one and done” crowd may well be wrong, but it is hard to find anything in yesterday’s nonsense that speaks to that issue. I read it as Bernanke telling a reporter her lot had done a bad job of covering his message. Bloomberg, for instance, dug up a few guys to say that the steepening of the curve was a sign of renewed inflation worry in response to Bernanke’s testimony (tens gained after Bernanke’s testimony, which Bloomberg failed to mention).
There may be a bad case of “it’s all about us” going on among financial market fans. Bernanke’s comments need not be interpreted as about market pricing – though those caught up in “it’s all about us” won’t believe that. He may have been trying to kill the “Bernanke is a dove” hooey since he was named.
Agree with bronxite on the dollar, though not for the Feldstein reason. Bernanke is unlikely to think that his jawboning is good for much in beyond the short term, and there is no reason to think he is caught up in the short term.
the dollar probably is too expensive and Bernanke may not care to defend it, but when half of outstanding debt is owned by foreigners you risk higher interest rates if holders lose faith in the Fed’s ability to control inflation expectations. a falling dollar erodes the foreign holder’s cash flow and removes the “risk free” designation of our treasury debt. if he lets the dollar fall commodities will continue to rally and interest rates will continue to rise. i don’t think that would be desirable in an economy that is supported by credit.
The writing is on the wall. John Snow’s comment on CNBC last week. G7 meeting which led to some unusual comments about the dollar floating more freely by nearly all of the attendees. Martin Feldstein’s comments (Ronny Reagan’s advisor and the one I wanted as Fed Chair) about weakening the dollar. Something he presided over as a policy.
We are likely going to see a new band in the dollar. I’m not clairvoyant but mentioned on here four months ago the US would see a resurgence in US manufacturing just like after Japan’s currency revaluation(s). When and how is the only question. Gloomers and doomers think in a straight line to the bottom of the barrel. They don’t take into account that trends never last forever. If you want to see the future, you need to become a historian of human behavior, markets, reactions to long term economic events, etc.
Now here’s the $64 question. What is the law of unintended consequences here? Many come to mind. The first is that global economies will stimulate their consumers if they are smart. Most will not because the structural changes will be too painful and they’d rather believe they can suck on that export tit forever. Big mistake. Imported inflation. We will more directly feel the impact of the lack of sophisticated central banking in the countries who manufacture our goods for us. Chinese economic collapse. A true bubble in the making. The recent interest rate hike in China will end up being a disaster without addressing the mess they are creating.
http://www.koreaherald.co.kr/SITE/data/html_dir/2006/05/02/200605020050.asp
…………Global export recession. American resurgence of competitiveness. Increased American wages. etc. etc. Some short term and some long term. None may come to pass.
I still remember three odd months ago when Barry was on Kudlow along with a money manager from Fifth Third asset management. Barry made a prediction and the guy said for that to happen we would need some kind of dollar crisis. I can still remember chuckling as to how silly he will look one day. Not because I could divine the future but because I had studied the past. Obviously he hadn’t so I wouldn’t invest my money with him. So, is gold telling us of inflation? Maybe. It might also be telling us the dollar is headed for a party in the basement. Or both. Or another. Global asset bust causing deflation.
What i was trying to say is that bernanke’s hands are tied. If you honestly believe he has the freedom to fight inflation as aggressively as he would like, you are mistaken. Rates have to stay below about 5.25 or we are talking 8% mortgages. I also think there is serious derivative issues in the financial markets that could not handle rates going much higher in a short period. So, if he is not free to fight inflation as he sees fit, he needs to come up with a way to send a message that markets will believe….but then again i think a lot of people know this….so it won’t matter. Bernanke can’t and won’t risk destroying housing. As for defending the dollar i don’t think he has any intention of doing that, but you can’t let the world think you are going to hang it out to dry in the face of super hot economies. That too would be irresponsible. So we get the mixed message he delivered to congress…which allows him to build in some time between increases if the data slows down a bit. I think this has more to do with the fact that destroying the housing market is a shock that even multiple quick cuts won’t reverse…so the fed is avoiding that scenario at all costs.
Unfortunately, the ‘party in the basement’ scenario also happens to be the ‘screw the bagholders’ scenario.
I feel sorry for the Asian tigers.
After the late nineties bust that deemed Soros an undertaker and swallowed up Vic Niederhoffer –remember Asian contagion?– the banged up tigers all swore off IMF assistance and said ‘never again.’
Unfortunately they chose to pack the vault with greenbacks, leaving them at the mercy of a drunken empire. Damned if they do (sell), damned if they don’t.
Pretty soon now it’ll be BOHICA time… Bend Over, Here It Comes Again.
Unfortunately, the ‘party in the basement’ scenario also happens to be the ‘screw the bagholders’ scenario.
I feel sorry for the Asian tigers.
After the late nineties bust that deemed Soros an undertaker and swallowed up Vic Niederhoffer –remember Asian contagion?– the banged up tigers all swore off IMF assistance and said ‘never again.’
Unfortunately they chose to pack the vault with greenbacks, leaving them at the mercy of a drunken empire. Damned if they do (sell dollars), damned if they don’t.
Pretty soon now it’ll be BOHICA time… Bend Over, Here It Comes Again.
Dunno why that posted twice… just call me Johnny Two-times.
I’m gonna go get the papers, get the papers.