The ISM has once again expanded. Policy is working, so please Dear Mr. Bernanke, begin to withdraw not only a token amount of Treasury bond asset buying in October; make a real statement for the ‘organic’ economy. Pull all T bond purchases and stop buying some MBS to boot. You’ll not only help the Fed’s balance sheet by doing so, you’ll also send a clear message to the people that you have confidence in the natural economy to build on its momentum.
Inflation spigots are open and running 24/7…
Last week the Fed treated us to a whipsaw as market perceptions apparently were not in line with the FOMC policy statement, which was basically a punt. Then the very next day the Fed’s James Bullard jawboned the media about a possible October Federal Reserve tapering. Hence, a letter writer was left with images of a 3 ring circus heading into the weekend. From the opening segment of the September 22 edition of Notes From the Rabbit Hole:
Last week’s opening title was ‘Get Ready for a Climax to the ‘Taper’ Hype’ and boy did it ever climax. The FOMC rolled over and the market over reacted. Everybody it seems (bears, bulls, inflationists, deflationists, gold bugs; everybody) was punished at one point or another. James Bullard even had the nerve to get in front of a microphone and exercise his jawbone about a possible October ‘taper’ and the anti-climax was on.
I ended last week a little disoriented after the ‘Fed taper’ hype fest last week. Enter once again the hidden bonus that I get by having to sit down every weekend and rummage through the material.
I feel more clarity now and the analysis pretty much resumes where it left off, pre-hype. NFTRH 257 out now.
In the current policy and media stoked market environment, anything is possible. It’s the wonderful, magical world of hands-on policy making. 5 years after the financial crisis, but still not enjoying a ramping economy like the good old (and long gone) days of the last great secular bull market (RIP 2000)? Just sit back, relax and let the man in charge control the image.
Well, I do not have a conclusive answer yet. But the industrial metals are going to have a say in the matter. This morning NFTRH did an extensive update looking at indicators of a would-be ‘inflation trade’. The GYX was one of them, and not due to this daily chart with its seemingly inconsequential resistance @ 350. Go pull a weekly chart and you’ll see something very consequential about this level. Daily chart follows…