Tag Archives: Ben Bernanke

This is a Test…

The saying goes that every new Fed Chair is tested (but good) upon taking the reins.  In order for that test to come about, it seems that more often than not the previous Fed Chief will have been withdrawing at least some of the particular policy (Greenspan:  Easy Fed Funds for Easy Al, Bernanke:  Easy Fed Funds/ZIRP & QE bond buying) that had made them look like heroes to so many during their tenure.  Here, have a look…


Greenspan was withdrawing the post-dot.com bubble policy that had created a massive credit bubble when poor Ben Bernanke took over.  Ben’s Waterloo was the 2008 crash.  Enter ZIRP and QE to da moon.  Now, a withdrawal of some of that for poor Janet.  One wonders what her inflation is going to look like after whatever her baptismal event will be.

End of an Era

Guest Post by Doug Noland

Bernanke chairs his final FOMC meeting.

I hope to at some point offer a more complete review of Ben Bernanke’s tenure at the Federal Reserve. I will be fascinated to see how future historians view the Bernanke doctrine. From my perspective, the Bernanke Era has been an abject failure. He was the most outspoken proponent of post-tech Bubble reflation. The noted academic was keen to use the government printing press – not to mention mortgage Credit – to fatefully drive asset inflation and stimulate a particularly unbalanced U.S. economic boom. I will give him less than zero Credit for then inciting an even greater Bubble, again in the name of system reflation, after the 2008 crisis.

Continue reading End of an Era

The Departing Bernanke on Macro-Prudential

Guest Post by Doug Noland

If the beginning is any indication, 2014 seems destined to be an unsettled year – the markets, the data, the Fed and U.S. and global economies.

Q&A from the National Association of Business Economics conference, Philadelphia, January 3, 2014: William Nordhaus, Yale University economics professor and chairman of the Federal Reserve Bank of Boston: “I asked my students if they had a question for [Bernanke]. And there were a number of them, one which I won’t ask is ‘what about bitcoin?’ – which I know he knows about. But I thought a really interesting one was this: ‘If you knew in 2006 what you know now, what step or steps would you have taken then to prevent or ameliorate the financial crisis and subsequent severe downturn?’”

Continue reading The Departing Bernanke on Macro-Prudential

Weekend Reading

(e) = external link

Inflationphobia  Doug Noland  7.20.13
Huge Backwardation in Crude Oil  Tom McClellan  7.20.13
Ben Bernanke Knows Why You Buy Gold  Adrian Ash  7.20.13
Deflation Warning: Money Manager Startles Global Conference  EWI  7.20.13
Pivotal Events  Bob Hoye  7.20.13 (pdf)
Succinct Summation of Week’s Events  tBP  7.20.13 (e)
“Just How Bad the Crash Will Be”  Market Anthropology  7.20.13 (e)
High Yield Spreads Decline From Another Lower High  B.I.G.  7.20.13 (e)
Global Business Confidence Slips to Multi-Year Low  Acting Man  7.20.13 (e)
Everything is Fine, But…  Zero Hedge  7.20.13 (e)

ZIRP! Zero Interest Rate Policy is Alive & Well

All interest rates are not created equal.  When someone says “interest rates are rising and that’s good for the dollar” or “interest rates are rising and that is bad for gold” or and especially “interest rates are rising and that’s bad for the economy”, they are either purposely leaving out important details in support of their bias or they are ignorant of them.

Bernanke Stresses Rates to Stay Low for Long Time

So 4.5 years after Paul Krugman bullhorned ZIRP! in the New York Times in December of 2008, in the midst of an epic systemic panic, the policy remains with us and so too does an important component of a coming yield spread carry trade by the banks, which have been out performing like crazy lately in anticipation.  ZIRP is the key, and Bernanke just set the record straight with his jawbone yesterday.

From the MarketWatch article:

“The central bank has gone to great pains to stress that this tool is separate from the bond-buying program.”

QE, which is the buying and monetization of longer term Treasury bonds and distressed MBS garbage, will end because global supply and demand dynamics say it will end.  I would go so far as to speculate that the Fed wants it to end sooner rather than later, when the job of managing peoples’ expectations is done.

““There will not be an automatic increase in interest rate when unemployment hits 6.5%,” Bernanke said in the question-and-answer session of a speech to economists.”

Those looking for inflation need look no further than this statement.  With the economy gaining traction, which I think it is slowly doing, and with the banks incentivized to get the printed money out there (‘Taper to Carry‘), the cost effects side of the inflation equation should start becoming apparent to the public.  The public will start to buy assets (in my opinion the precious metals, commodities and beaten down emerging world) sometime well after the smart money have already positioned.

“The Fed chairman drew a clear distinction between asset purchases and rate hikes.  The purpose of the asset purchases is to give the economy some forward momentum, Bernanke said”

The Fed controls one (“rate hikes” meaning Fed Funds rate, which is now ZIRPed) but not the other (“asset purchases”, which applies to the rest of the Treasury yield curve).  The problem though is that at some point the effects of the inflation will start to become apparent and then there will be questions about whether or not the great Hero can put some very bloated Genies back into some very small bottles.

“Ian Shepherdson, chief U.S. economist at Pantheon Macroeconomics, said he was sticking with his forecast of a September tapering after Bernanke spoke.”

Wow, did a media quote robot actually say something that I totally agree with?

“And he stressed that the Fed was concerned about the current very low inflation rate.”

Seen the stock market’s ‘copper roof’ lately?  The chart looks like the HUI did 160 points ago.  In other words, brutal.

“Bernanke defended his decision to lay out a potential timetable for winding down asset purchases after the Fed’s last meeting.”

Again, people need to get off the QE obsession.  It was just one phase of the inflationary operation.  The thrust phase.  The after burner, in the form of a banking sector profit motive, is yet to really kick in.  Don’t take to heart lazy analysis.

Bernanke felt compelled to speak after the FOMC Minutes were released.  This is the jawbone market and these are smart people with, in my opinion, a well laid out plan given that they know China and Japan may be liquidating Treasury bonds to help in servicing their own internal issues.

The biiwii.com copyrighted ‘Taper to Carry’ or ‘T2C’ makes sense because it is a logical extension of very real events currently in progress in an over-managed market.  With Bernanke’s strong pro-ZIRP words yesterday T2C has become an even firmer plan.  QE is one thing, ZIRP quite another.  But T2C would incorporate both of them into one grand scale operation with the banks and financial institutions borrowing funds nearly for free, marking them up and lending them out.

It’s brilliant actually, and as of yesterday the Hero is very much with the script, which calls for a continued and intense inflationary attempt.  To the bears and deflationists out there who keep sending mail, I again state that this is an attempt, not a guarantee of success for our heroes.  But it is the attempt at creating inflationary effects that we are now interested in.  The inflation itself has already been manufactured.  The delivery system seems to be coming along now as well.


Channeling Our Inner Rick Santelli

Remember the ’08 crisis when Cramer started foaming like rabid dog on CNBC about the Fed not being accommodative enough?  Well, here is a perfect bookend 4.5 years later.  Rick Santelli wigs out and channels Howard Beale in questioning why all the continuing accommodation?

We are truly in Wonderland.

And here is his spot with Ben Bernanke’s tailor…

Good stuff all around here in FrankenMarket.

10 Year to Ben Bernanke

TNX to Ben Bernanke:  “Screw you…”

TNX 15 min.

How to Play the FOMC? Risk Management

How to play the FOMC?  Does it matter beyond “manage risk?” asked the robotic blogger.*

The Fed has been using its jawbones as well as talking out of every other orifice over the last month or two with regard to ‘taper or not to taper’.  The stock market is at the moment on a tout that sees them saying ‘never mind about the taper stuff for now.  We were just floating a trial balloon to prick the speculative atmosphere’.

The US dollar has been hammered but is now at a support point.  Inflationists are wondering why on earth are commodities so weak and precious metals so bearish while Uncle Buck is on the mat like this?  And that is a good question.

USD daily

I am sure many people are thinking that T bond yields are indicating economic growth or at least that inflation is coming, but I am not so sure.  There is this man of infinite patience and consistency of message – a super robot* really – who sees higher bond yields as fitting in nicely with a deflationary scenario.  That would be Robert Prechter.  His view is that yields would not be rising because of the usual ‘inflationary expectations’ or economic growth, but because of impending debt default.

There is that word again; D.E.B.T. and with stocks again soaring amid robust use of margin (yeh, yeh, I have heard all about that money on the sidelines, but much of the money that is playing the market is borrowed).  I would have to think that a large proportion of the money on the sidelines is a) being used by individuals and businesses to repair balance sheets and deleverage (deflationary) and b) sitting on the books of banks and other privileged corporations.

This last condition could change if – and it is still a big if – the banks are compelled to put that money to work with the prospect of higher interest rate return (our ‘taper to carry’ thesis).

USD monthly

But in an era when governments competitively try to stave off debt reckoning by compromising currency (some might say the oldest monetary trick in the book), a currency with as much upside potential as the USD – especially after the hard decline of the last month – is not going to prove convenient to the inflationary growth crowd.

This brings me to another thought.  You know how Ben Bernanke is public enemy #1 in the gold “community”?  Well, was he not once thought of as Helicopter Ben, subject to mockery and ridicule but also depended upon as the great inflator who would personally enrich the community’s members?  What if – the brilliant Op/Twist aside – he is the same old Ben but the inflation is just not working?  What if he is just as nonplussed as the average gold bug or commodity bull?

I am just asking questions here.  The stock market is the last man standing and could be on its final tout as well.  Maybe the precious metals blow off in 2011 was the kickoff to a new era where they lead commodities, T bonds and finally stocks, down into a phase where there is only one king and his name is Cash.

USD, Euro, Yen, Aussie & Canada, weekly

The USD is still on a bull signal with the cross of the weekly EMA 10 over the EMA 35.  If this is negated then we might watch the monthly for failure.  But USD is still bullish until then.  We might want to watch the Aussie dollar with respect to any ‘inflation trade’ potential.  Crude oil, as already noted, looks bullish for a trade.  The majority of the commodity complex is however, in a sad state.

In a deflationary scenario on the other hand, King Dollar – the reserve currency and marker of claims to a world full of assets –  would rule.  The ruthlessly abused Yen and the Barbarous Relic of monetary value would eventually play roles in a rush to liquidity as well.  But I think it would be prime time for Uncle Buck first and foremost for a while.

* Why not stick to what has worked in robotic fashion during a phase when markets appear so screwed up that luminary market players are publicly considering cashing in and leaving the game due to the messed up signals that meddlesome policy, systematic manipulation and investment by machines have injected.  In my case what has worked is risk management and risk management only over the last 6 months and really, two years.  I’ll stick with it until I get solid data.

Biiwii.com, Notes From the Rabbit Hole

Guest Market Analysis, News & Commentary


(e) = external link

Chutzpah  Michael Ashton  5.22.13
Half Science, Half Art, Half Luck  Brent Cook w/ TGR  5.22.13
Psychology in Gold News  Greg Canavan  5.22.13
Desperate, Deceptive Measures Penny Stock Scammers Use…  IKN  5.22.13 (e)
Live Blog of Bernanke Testimony  MarketWatch  5.22.13 (e)
3 Things Not to Worry About Right Now  Mark Hulbert  5.22.13 (e)
Present Shock & the Loss of History & Context  Of 2 Minds  5.22.13 (e)
Bernanke KIKs the Can  Bruce Krasting  5.22.13 (e)


It’s the Mixed Signals Market

I have made no bones about the fact that some of the tools I have depended on have stopped working, at least temporarily.  For example, the gold-silver ratio would normally have croaked junk bonds and the stock market by now.  For another, the 30yr-2yr yield spread would have pulled gold up as opposed to its current bear market state.  There have been other indicators that have just stopped working and the temptation is to rave “Bernanke this!” and “Bernanke that!”

But that does no good.  Bernanke is winning (duh) and he is the man on the cover of the Atlantic, smugly grinning out from behind the bold headline The Hero.  I on the other hand am just a schmo with some broken tools.  But I also have nominal technical charts that have helped avoid the hazards that we might believe active policy making have wired in to the markets.

By the way, speaking of indicators that don’t seem to make sense, why on earth are T bonds (which do not like inflation) and commodities (which do) both getting hammered today?

TLT & DBC hourly

The hit to commodities of course has something to do with the strength in the USD* (which we have noted over the last several weeks is on a bullish – not bearish – signal by weekly chart), but what on earth is up with T bonds if inflation is not an issue?  Could it be that somewhere in the T bond market lies the future undoing of the Hero’s myth?

I am going nowhere with this post other than it is an over-stimulated market with policy makers front, center and every which way screwing with normal market management.  Within that context, survival in the short term in service to proper positioning in real value over the long term is vital.

Gold bugs may be right with the hysteria (like that showing up in my inbox) about Cypress being the first leg kicked out from under the neatly set table, and oncoming confiscatory policies.  But those that went all in with ideology are paying the dearest price in the interim.  This is speaking of the paper markets, anyway.  Gold is gold (value) in the monetary realm and ain’t nothing gonna change that.

The play remains to be intact first and ready to capitalize second.  That is because the other way around, trying to capitalize (on ideology) first and be intact second is not working and has not worked for over a half a year, and has not worked well for 2 years.

* Here is the weekly USD chart from NFTRH 230, created 7 weeks ago noting a bullish moving average cross.

US dollar, weekly

Young FrankenMarket Lives

Excerpted from Notes From the Rabbit Hole #237:

Young FrankenMarket Lives

In failing to take a “healthy” correction to the equivalent of SPX 1350 to 1450 from the upside target zone of 1550 to 1590, the market is now running on policy and momentum. Hence we now dub thee Young FrankenMarket; Ben Bernanke’s creation, sustained by government and legacy MBS debt, following Alan Greenspan’s monster that was stitched together with artificially low interest rates that ultimately manifested in a huge commercial credit bubble.

Payrolls came in at 165,000 and an over bought, over loved* market popped its cork and exploded into blue sky. It had to be more than an okay ‘jobs’ report that did the trick. It was likely the combination of a still inflating Fed (and ECB, Europe popped hard as well) with some data that was good enough, but not so good as to call into question the Fed’s systematic inflation regime. This is Bernanke’s FrankenMarket, created by policy.

After making bearish patterns and/or negatively diverging from the Dow and S&P 500, the Russell 2000, Nasdaq 100 and Semiconductors all broke to new all-time (RUT) or recovery (NDX, SOX) highs on Friday. This left one notable holdout, the often-watched Transports. Since I normally do not give much weight to Dow Theory, I’ll not do so now. But it should be noted that the Trannies are not at new highs… yet [edit: They are now].

So it appears that recent writing I have done about a topping process may have been incorrect or at least, early. The current period reminds me a lot of Greenspan’s monster that emerged from the credit bubble early last decade, FrankenMarket as I called it in the first public article I ever wrote.

I remember wanting to be bearish [in 2004] because bearish seemed like the honest way to be. You cannot after all create (print) a bull market and a sound economy to go with it, can you? Well, yes and no.

Through interest rate manipulation, Greenspan created a bull market that really wasn’t (as measured in gold, which stripped out inflation’s effects and gave a ‘real’ and bearish view by the Dow-Gold ratio).

As noted previously, the But It Is What It Is website name came in large part due to my realization that the bull (in nominal stock prices) should not be fought as I looked around and saw (non-gold bug) perma-bears being blown up left and right. Any gold bull who was also bearish the stock market likely did just fine. But the play was long gold, and avoid or long the stock market.

Today we are challenged with a different monster. This one is more dangerous to the honest money contingent because it appears the golden shield has melted down and stopped protecting people from the obvious inflation being promoted in service to liquefying the banks, propping the economy and promoting a stock market bubble.

But here we have to take a step back and realize that it was 10+ years of bull bull bull for gold. Who are we to say what type of corrections should be suffered along the way? Stripping out the emotion, what we have is a really smart (I’d say diabolical in a way that is not entirely negative) policy maker who has somehow either engineered a ‘best of all worlds’ Goldilocks environment or taken the horseshoe out of his ass and hung it up on the wall of his well-appointed office.

I think it might be the latter, which in less crude terms means that it was just time for a technical adjustment. I hate to qualify the pain real people are suffering as an “adjustment”, but think about it. The negative energy at the bottom of markets and the economy in 2008/2009 was incredible. This very letter reproduced the Time Magazine Depression 2.0 ‘breadlines’ cover in support of its then bullish orientation.

Markets may need to work their way through an equal and opposite upside blow off before all is said and done. Who knows when that will come? It could be next week or it could be next year. But it is a near certainty that sentiment will play a big role.

For now, the trends are the trends, there are few signs that anyone is getting concerned about inflation and hence, the inflation continues. It is the Alice in Wonderland market:

“Nothing would be what it is because everything would be what it isn’t. And contrary-wise; what it is it wouldn’t be, and what it wouldn’t be, it would. You see?”  –Alice

* AAII (Individual Inventors) had been an inexplicably skittish exception, as its members have fled to a bearish stance at the first sign of every recent minor correction. This had been a caveat to the bear case and the market will now try to suck them and any other holdouts in before a top is realized.

Notes From the Rabbit Hole has been following events with great interest since the Fed’s QE regime kicked in to its new phase (III), and technical analysis has kept us on the right side. When I named the newsletter I did so with Alice’s quote above in mind. Never has the idea of accepting what is contrary and counterintuitive been so important for everyone from speculators to savers to honest money advocates.

We remain intact first, and ready for opportunity – that “contrary-wise” could be big opportunity – second.

Biiwii.com, NFTRH, Twitter, Free eLetter