By the way, does anyone remember the days of the Investment Banks during QE, reporting earnings and not having a single trading day's loss through an entire quarter?
Has anyone paid attention to the Financial sector's earnings over the last week now that QE is gone? Without putting together a graph of Financials earnings and specifically trading earnings both during and after QE, I think for anyone paying a little attention to earnings, the trend is quite clear... the F_E_D cut off the intravenous drip and the banks' earnings are reflecting it.
I can only suppose this is why the F_E_D or at least certain members are willing to flip flop on an almost daily basis (Friday to the next market day/today), but as I said in Friday's post, they always maintain plausible deniability.
Lets take the one F_E_D member who is probably most active, or at least most effective, the president of the F_E_D of St. Louis, James Bullard who told the F_E_D whisperer, the WSJ's Jon Hilsenrath,
"I still think we should get off zero (interest rates). The kinds of things we’re observing now, it is not the constellation of data that would be consistent with a zero policy rate. I think it is important to get started and to start normalizing policy...
The thing about the funds rate is it is 400 basis points below normal. We’ve really got an emergency setting for the policy rate right now and we don’t have an emergency constellation of data anymore."
With the F_E_D Funds effectively at ZERO, Bullard sees the rate 400 bps too low, or 4%.
This just after his jibe on Friday,
"FED COULD RESUME UNCONVENTIONAL POLICY IF NEEDED... LESSON OF QE IS IT WORKS `FAIRLY WELL"
When you are a F_E_D president, you know EVERY word, even where a pause or coma is placed, is scrutinized by the market, you don't just go off with ambiguous statements like Friday's which many might argue if it were a normal citizen, "Well he really didn't say that", THIS ISN'T A NORMAL CITIZEN, THIS IS THE ST. LOUIS F_E_D PRESIDENT. They know better than anyone what their comments can mean to the market.
Now if we just take a step back, I believe what we are hearing today is the real Bullard opinion and possibly the Real F_E_D Message to the market. Back in April of 2014, Bullard told Bloomberg Radio,
-He expects the Federal Open Market Committee will need to begin hiking rates in the first quarter of 2015.
-He also told Bloomberg Radio that asset price bubbles may become a "big concern,"
Also from the same interview early April 2014, when he becomes a F_O_M_C voting member in 2016, he says the federal funds rate will be at 4% or 4.25%. ...Exactly what he just said today, just separated by 9 months.
I believe the F_E_D has known their path for quite some time and they have been letting out bits and pieces here and there so there's not a SNB reaction like we saw last week with the Swiss National Bank.
This is probably as close as we get to the actual truth with Bullard being he's said the exact same thing ago in a radio interview, ironic though that after 9 months of data and developments that his target expectations and for the F_E_D to get going with rates sooner than later, is exactly the same... data dependency and all!
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