With the Fed decision out, you already know the most salient information about what the FOMC did today. What follows are the top 10 things about the FOMC you probably don’t know about:
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Top 10 Things You May Not Have Known About the FOMC
10. The Fed exists to insure maximum employment, price stability and moderate long term rates. Their purpose is not to backstop speculators
9. 4.25% Funds rate very accommodative and historically low.
8. Between votes, Fed Governors make fun of BLS economists.
7. Overheard at FOMC meetings: “What would Greenspan do? Let’s do the opposite!”
6. Jealous that Jean Claude Trichet gets to hang out with Gisele Bundchen
5. Doesn’t give a rat’s ass what Cramer thinks.
4. "Then it’s resolved, we print more money and we make more speeches . . ."
3. There is no Santa Clause — just some guy with a beard named Ben.
2. Has been long Gold and short the Dollar since 2003.
and the #1 thing you may not have known about the FOMC:
1. “Hey, Wall Street: We’re not your Bitch anymore.”
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Feel free to come up with your own additions in comments . . .
* That notepad Greenspan used to pen his memoirs on? They switched it to water soluble paper three times during the writing of the book.
* They play monopoly with real $, just because they can.
* Have a side bet going on if they can cause the aneurism in Cramer’s head to pop.
* Get a HUGE kick out of tipping with $2 bills and watching the reaction of the “idiots who don’t know basic currency”.
* Apparently don’t listen to Larry Kudlow (Sorry dude!)
* End each meeting by running into the special Fed Chucky Cheese and rolling around in the cash cage.
* The salt & pepper shakers at the Fed are bundles of rolled up $20s.
Ben’s helicopter runs on a nasty, nasty concoction made from Maria Bartiromo’s tears and Jim Cramer’s armpit sweat.
I think your wrong on #10– The fed was created to keep financial markets from freezing up–that was the purpose for creating the fed–otherwise emplyment and prices don’t matter.
Also, if #9 was true, then the economy would not be stalling.
Also, if #9 was true, then the economy would not be stalling.
Tell that to Japan.
Fact: Although he’s well over 50, Ben Bernanke’s first testicle just descended today.
Johnny Vee: That’s a terrible argument. The economy is stalling, ergo 4.25% is not a pretty low rate in historical context? What?
Hit that nail right on the HEAD!
Since summer I’ve been prattling on that everyone should throw out their Greenspan playbook, this is not Al’s Fed.
This is a very difficult situation that Bernanke has inherited and the solution will be a combo of pain, pain and trying to mitigate pain a little…
I do think they are falling a bit on the maintenance of price stability. Talk to bond traders and it is apparent that stability isn’t present. I also notice their prime directive says nothing about inflation, specifically.
“we still do intra-meeting cuts”
“I could see it was a rough-cut Tuesday, slow-motion weekdays stare me down.” – J Giels Band, “Freeze Frame”
Eh, maybe “rate-cut Tuesday” today.
One day wonder or something more? Everyone sure seems bearish. And 57% of people believe we’re already in a recession.
Of course, that’s using the new definition of recession. People believe that they’re in a recession when their neighbors with DirecTV get over 100 HD channels, while they’re stuck with only 10 or so on cable.
OH THE HORRORS!
Johnny Vee: “The fed was created to keep financial markets from freezing up–that was the purpose for creating the fed–otherwise emplyment and prices don’t matter.”
I agree and also contend with you.
After ~100 years of inflation & growth — despite 1929 & 1987, the crisis that enabled the creation of the FRB (deflation of latter 19th century and crashes of 1890’s and 1907 — the Fed’s been creating credit for IB’s and elite banks to trickle down.
Therefore, add these to the “What You Don’t Know” list:
– The Fed was charted to make oil to lubricate the financial machinery, not gasoline to fuel it.
– They got it exponentially bass ackwards for the past twenty-five years.
– They’ve won a game of chicken with all other CB’s, exporting inflation while making foreigners create credit at nearly the same rate or risk unemployment spikes caused by exchange rate disadvantages… until now.
Just had to watch Cramer tonight. I guess he wont be happy until we have a 1% fed rate again. 500 pts from all time Dow high, and he is complaining cause Fed is too tight? Dude, we need a correction!!! I think Dave said it best in the prior post. didn’t 1% help get us into this mess to begin with? He really thinks the Fed listens to him, amazing…
We don’t “need” a correction. The PE of the S&P 500 is not high. The index is more than justified by the earnings. Truthfully, stocks can actually be called “cheap” here. We are, however, “overdue” for a correction if you look at history (less so since we did have that quick 10%-er).
The Fed doesn’t and shouldn’t act according to how how the indexes are, but how strong they think the economy (and employment) are. Apparently that’s what they are doing, at least in their minds.
Todays “pre-organized” market tantrum felt so fake and so just for show that it was really pathetic. The market will force the FED into a surprise rate cut before the January FOMC meeting, as expected. I expect a little better pretending from the FED and the stock market, this is getting too obvious!
Perhaps the Fed was considering the fact that the ECB is poised to raise rates.
A cut when ECB is raising would devalue the dollar further, to new lows. A global perception/confidence issue?
Further devaluation might be worse for the economy.
Mike G.
Re: S&P not being high relative to earnings–Earnings are at an all time high. If the historical average is applied the S&P is high. If earnings typical of a recession are applied, then the S&P is really really high.
All of the Feddies agree that Andrea Mitchell is nuts and Greenspan is not “a great kisser”. Well, all of them except Eric S. Rosengren.
Love it Barry!
Can you believe all the whining from investors and the press?
These people probably think it’d be best to keep interest rates at 1% permanently!
I haven’t heard one person try to explain why the Fed might be reluctant to cut 50.
The currency? Maybe inflation?
The economics textbooks explain why monetary exchange, exchange through money rather than goods, is so important. But that all depends on a steady monetary unit. Without that, trust me, Cramer, you have NO IDEA how bad it would be. NO IDEA!
Barry,
The market was overbought, time for profit taking.
To win cut losses short, those who don’t lose on falling stocks.
The fed knows that pheo-inflation is getting worse.
Japan has been suffering for almost 20 years since its credit ballon collapse even though it continues to run massive trade surpluses. Japanese companies have all the capital they and then some. America, on the other hand, has few competitive industries and is unlikely to grow them anytime soon — unless the average worker is paid the current equivalent of 2 dollars a day. Due to the piss poor rate of investment in US industrial production over the last 30 years there is nothing going forward.
The DOW drops 300pts so the FED has “sources” leak information to CNBC that they are going to do more stuff…you really can’t make this shit up.
#5 is my favorite here. Why does it seem like Cramer goes from loving to hating Bernanke and back about 3 times a week? Its gotten past silly.
Have to disagree with ‘jag’ above on Lil’ Ben’s newly discovered Testicle.
The only pair of Ball(s) Bernanke has are those of Hank Paulson’s as they Bounce off his chin…
I’m a sap for ignoring the blatant telegraphing tantrum from Pisani et al that “we don’t get .50, we shoot the market.” My bad, shoulda shorted. But then I watch that idiot Cramer go wigshit again, telling his sheep that recession is 100% certain, sell everything I told you to buy yesterday, blah blah blah. I don’t believe Cramer is venal. But he is a public hazard. I know, a fool and his money etc., but instead of giving someone rational like BR an hour to speak intelligently we get this carnival clown feeding “investors” total bullshit. He is a menace. And I’m with Sammy20 re: the Liesman leak. How lame.
#11: Moral hazards not limited to the late night activities on West 42nd Street.
#12: I can has liquidity trap (Bernanke’s cat).
The leak and the GE missing ‘at least’?they will do anything for a few points. The book ” How i made 2 Million” the author says whenver he was away from wall street he made money and when he was with the wall streeters he lost money. Now I know how he felt. So much nonsense . I wonder who is so afraid of falling from all time highs. Why the panic . Its as if we already lost 20% not 2%
#4 makes me laugh every time I hear it.
I also don’t think anyone said “Balls” it was first Ball, and maybe only partially descended.
How about:
“GoldyLocks, you’re my little Bitch now!!!”
And it’s Long “Of” Gold, and Short “Of” Dollars.
Hats off to Ben!! That was the right move. but I would have preferred the 50 to the discount, so that they could stop saying that the .50 to the discount was the reason for the sell off.
What a lode of Talking Head Dribble.
and this crap about “The fed may cut between meetings” or “they have other “stuff”…”
What kind of fed official would be quoted saying, “We may have “Other Stuff” to do.” It sounds like Dubja “We Gots some Special Cards to play, Don’t you count the fed out… There is some super secret fed Mojo strings to push, we will be back here, Like Oz… Pushing them… You just wait”
I mean, why wouldn’t they have done it now.. Just too busy? Couldn’t fit it in between 8-2.. had to make it to the opera and just ran out of time?
Maybe they will just print some $100,000 bills and mail them out? to some lucky winner.
The fed will be sending out a mailer to all ARM holders in the country, for 30 special winners(Must stay current on their reset for 5 years) in the end they may win a brand new $100,000 bill(AKA The Smirking Chimp Bill). for the rest of us, we just get a special subscription to “Inflation” magazine.
Out with the Bitch, In with the Dominatrix…
If the Fed really wants to help all those in “exotic” mortgage loans it should do the one thing that has any chance of lowering 6-month LIBOR rates: raising the Fed Funds rate by 100 bp at a minimum.
Johnnie Vee:
S&P 500 PE
What? You’re saying if I compare earnings to recession earnings then current S&P P/E is high. Well, yeah. We aren’t in recession so why would I use recession earnings to evaluate today’s P/E? If I lower the denominator of P/E for any reason, P will be higher. When we finally go into a recession, earnings will plummet and the P/E will then accurately track with typical P/Es for recessionary times that you are talking about.
As the chart shows, we are at the high end of the range, but still not “expensive”. Avg P/E for the time in question is 15 and change, current P/E is around 17.
#13: And all this time we thought “credit crunch” was the name of a tasty new cereal.
#14: FOMC believes inverted curves are associated with NASCAR and Jennifer Lopez but not with monetary policy.
Type-O. Should be:
If I lower the denominator of P/E for any reason, P/E will be higher.
Eric Davis :
Apparently the other thing they can do is loosen reserve requirements for the banks. Loosening the reserve requirements means that they automatically have more $ to loan out. If they are trying to break through a credit/liquidity crunch that might be the tool. But it does sound like a move in the wrong direction for the long term to me. It doesn’t address the cleanup of the bad loans out there. It might help the commercial paper market though.
If we had seen 50bps, the market would have gone????? Down! “Fed panicking”… The market was bid up on speculation:
25 bps “Fed disappoints”
50 bps “buy the rumor sell the news” “Profit taking’ whatever…
Pump was primed either way.
Mike G.: What you’re missing is that it is extremely short-sighted to calculate P/E ratios based only on the most recent year’s earnings, especially when the most recent earnings are at historic peak levels. A better valuation picture is formed when you used normalized earnings over the last 7 years to calculate the P/E ratio, and with such normalized earnings, the S&P 500 still looks overvalued. This explains why many of us think that stocks have a ways to go down yet.
And don’t get me started on forming P/E valuations from next year’s projected earnings… *sigh*
the letters FOMC don’t stand for
Federal Open Market Committee
but
Facilitating Outrageous Money Creation
#11 – Hey, Greenspan said we’re headed for higher inflation, so what do you expect us to do? Volcker would have raised rates.
Jag:
I disagree that in this case the 7 year average gives a more “accurate” view of whether today’s P/E is high or not. It would “smooth” things, but part of the reason today would seem higher is because we’d still be coming down from the dot-com boom which was way off the scale. And why is 7 years the magic #? Why not 5? 10? Why not put a MACD on it?
Bespoke has a bunch of stuff on this. The avg. P/E, the avg. standard deviation (I think I saw that there). We’re not over valued here.
You can also go to bigcharts.com and plot and index, it’s P/E and a bunch of other stuff.
Mike,
Hopefully this comes off like I’m not taking issue with you. Since I’m not and I was mostly jokeing…. and this is a RANT
I joke, and honestly this is serious business. I honestly want no one to lose money, and we could have tolerated a .50 cut without pushing the Peso/dollar off a cliff.
Yes, there are things they could still do.. But it will only go to their lack of competence to come back in 3 days and change the reserve ratio, or lower the discount window… or other things, which comes in like they were “late with their homework”
Without doing a thesis of Risk Vs. Reward, and how lack thereof started this Fiasco..
and the obscene idea that the fed would try and pull the risk from the market, and create and even more catastrophic event that the one they/congress/and “the consumer” already built.
The market coming down could…
Pull the steep end of the yield curve down, lowering the Mortgage rates.
Also…
force more money from equities to cash, providing more Liquidity for the banks.
The Biggest problem in my guesswork/estimation is that Europe/Asia won’t loan us a nickle….
Comercial paper won’t move because it has been rated like someone was rolling dice.
That is why we have a credit crunch, not because of loose money or tight money, but because we(our financial system) tried to rip off the people loaning us money, and they have turned off the spigot… Now all that comes out is Dirty Pee water(AKA the remaining American Liquidity, that investors aren’t smart enough to move out of the country).
But sure, “we will pay it back THIS time”, we sound like my sister.
We can’t force people to loan us money, no matter how much Kudlow, or cramer. Cry about it.
To me it’s good to hear that we could keeping a bid in the dollar, and show some integrity, to the world that we won’t print our way out of our debt. by pushing the Dollar down another 20%.
Crazy stuff like that may get some of the people with cash around the world to provide some Lequidity… as opposed to “Printing Fake Dollars.” from the Lender of First resort. Trying to Reflate every bubble popped in the past 30 years. Maybe if we pump hard enough we can Bring Back The housing boom, tech 1.0, japan, S&L, Bellbottoms, and Stagflation…. oops did I just say that.
Let’s not forget that in the Walking Around Economy (the W.A.E.), better than 99% of its participants don’t know or care what the Fed says, or does. They are oblivious to everything that happened today, even the market action.
If it doesn’t both, a)- get on the nightly news with Brian Williams, and b)- have its own thematic chime assigned, it doesn’t exist.
Haven’t you ever watched a nature film in which a lion is stalking a warthog herd, but the lion is carefully downwind and the herd never senses the lion is there.
A lone warthog will wander from the herd slightly and the lion will zone on it, 500 lbs. of rippled muscle cocked and ready to explode in a lightning quick kill.
However, just before the attack something changes. Maybe the herd begins to move away and draws the lone warthog out of range, or for some other reason the lion’s opportunity is suddenly lost, but only the lion knows it.
The lion licks its lips and relaxes its ears and body, standing up with a sort of body language that says “f-it.”
The economy and its children that can’t find Kansas on a map is that warthog herd.
Oblivious to danger… but you just watch the dust fly if they ever get the scent of the lion.
Maybe the Fed has got better scents.
Eclectic, the wind be blow’in their direction soon and they (the joe sixpacks) will become Lions.
Barry… brilliant Top ten… still laughing. Thanks.
justin,
You are misguided metaphorically, but I catch the scent of your drift anyway.
I take it back.
I might be the mal-metaphoric!…
…which ultimately might give us a whole ‘nother picture of herd instincts, huh?
looks like the fed had something in its back pocket in case the 25bps was not accepted well
so much for free economy.