Always consider hidden risks
If you would like to receive our free daily markets updates, please Sign-Up
Federal Reserve: Tapering Expectations : Rules of Engagement - Keep Bubbling ?
Sep 19 ( From Federal Reserve, Wiki ,MarketWatch, Barchart )
Yesterday was D--Day for the Federal Reserve...
addition to the policy statement, updated economic and market projections was to be released at 2 PM, followed by Chairman Bernanke's press conference at 2:30 PM.
The first thing market participants will be looking for is a decision on tapering and after economic forecasts...
Full Federal Reserve FOMC statement
Federal Reserve: Tapering or Not That is Not the Question ? $MACRO, $STUDY, $FED
Consensus forecasts call for a $10 billion or $15 billion cut in the Fed’s $85 billion in monthly bond purchases starting as soon as
October 2013... BUT NO TAPER - KEEP BUBBLING THE FINANCIAL ASSETS
Yesterday before the FED press release, my conclusion was...
Let s realize that even if the FED start to do some tapering, the context will give them the golden opportunity to reduce their bond purchases without damaging the market expectations as a whole. So, in reality, tapering or not, that s not the question...
So To be, or not to be: that is the question can be put in our context;
What will be their economic forecasts on inflation and growth, that is the question !
BEAR STOCKS FROM SP500 FUT 1717 MAX AND BULL BONDS TLT 104.39 TARGET
Must See From Reuters:
Charting the QE Era
Reuters Poll: Expectations on Tapering
New and Updated Conclusion
Now my conclusion after the fact is even more with potential consequences:
Fed got the financial markets being addicted to continuous injections of tons of cash...
The Longer the FED keeps the Punchbowl available, the more Bubbling Consequeneces is Building Up.
It can just finish in a huge correction in financial markets with terrible impacts...
If the FED think that keeping interest rates lower by .3to.5% will change the trend of the overall US economy, then we should be scary as hell...
1) The Economy is weaker than we think
2) The Economy is more leverage than we think
3) The Economy is a lot more sensitive to interest rates than we thought
Either or, would you buy financial assets knowing those new facts!
The Market’s Unhealthy Obsession With Tapering
My call before Fed announcement was:
Not Only the Taper will Matter
For me, crucial to see their revisions in term of inflation AND Growth...
Three Scenarios FIRST SCENARIO
1) No Tapering annoucement, inflation forecasts and growth revised lower
Then Bonds well bid and sell off in stocks
2) Tapering as expected ( $10 billion or $15 billion ) and inflation revised lower and growth higher
Midly bullish on bonds and bullish on stocks
3) Tapering as expected ( $10 billion or $15 billion ) and inflation and growth revised lower
Bonds Consolidate and Worst case for stocks
Rules of Engagement
Rules of Engagement (ROE) are rules or directives to military forces (including individuals) that define the circumstances, conditions, degree, and manner in which force, or actions which might be construed as provocative, may be applied.
They provide authorization for and/or limits on, among other things, the use of force and the employment of certain specific capabilities.
In some nations, ROE have the status of guidance to military forces, while in other nations, ROE are lawful commands.
Rules of Engagement do not normally dictate how a result is to be achieved but will indicate what measures may be unacceptable.
Monday Morning Quarterback
First, the unexpected about ZERO Tapering...
The Market was caught completely by surprise by the FED in many differents ways:
1) Expectations on Tapering was expected to be between $10 billion to $15 billion
2) Small Speculators in the Fixed Income market were the shortest in the last 5 years :
US Ten Years Bond Futures (TYA) - COT Small Speculators Still Way Too Short ?
3) The only way to keep a stock market happy was to print even more cash:
SP500 Becoming a Monetary Aggregate ?
4) Large Speculators in the Emini SP500 futures was starting to short the market as shown by the chrt below
From Market Watch
Bonds Way Up: The iShares Barclays 20+ Year Treas Bond (TLT) were up 1.2% on the day on September 18 as shown by the chart below...
Stocks Way Up: The Sp500 Futures (ES_F) were up 1.2% on the day on September 18 as shown by the chart below...