Saxo Bank CIO and chief economist Steen Jakobsen phrased Fed Chair Janet Yellen’s testimony before Congress this way: “The politicians were rude and pretty much clueless … and Yellen often looked like a deer in headlights. Her performance today is probably the worst I have ever seen from seasoned central banker!”
After an initial rally attempt this morning, the market had serious second thoughts.
S&P 500 15-Minute Chart
Email from Steen
Steen’s email lead-in this afternoon was rather humorous. Here’s a slightly edited version.
Today’s testimony showed US politics and central banking from its worst side: The politicians were rude and pretty much clueless.
The Chair of the Federal Reserve was of little help and often looked like a deer in the headlight. Incredible! I am sure Ms. Yellen is an excellent “model economist” but her performance today is probably the worst I have ever seen from seasoned central banker!
The Fed came into this meeting with very little credibility and this event did not add to the tally. Instead, we are left wondering how they expect to help the market. One Senator asked: “Ms. Yellen, what tools are those you keep talking about, interest is pretty much zero anyhow?”
Yellen responded: Well, we can do “lower for longer”!
So let’s forget about central banks. Yes, Draghi will try to command some media time and the BOJ likewise, but it’s probably to no use.
Could the European Central Bank expand its asset-buying programme next month to include corporate debt in an effort to help the eurozone’s banks?
From Evercore ISI: ECB Likely to Buy Corporate Debt.
“We think the ECB is increasingly likely to expand its (quantitative easing) programme into investment-grade corporate debt in March. This would be a means of pushing back against the surge in credit risk premia that is in turn contributing to pressure on equities in general and bank stocks in particular,” the investment bank writes.
“Buying investment-grade corporate debt would directly lower spreads on this debt, while putting downward pressure indirectly on bank bond yields and on spreads on non-financial high-yield bonds through portfolio re-balancing effects,” it adds.
Evercore ISI reckons the ECB is increasingly likely to introduce additional measures to support bank funding in a complementary effort to help stabilise eurozone banks.
“We do not think the ECB will buy bank debt outright. However, one obvious step would be to increase QE in covered bonds, allowing banks to wrap more assets and sell them to the ECB,” it writes. “Another would be to put in place an additional series of cheap TLTRO term funding operations as a backstop to private market funding.”Conclusion
Yellen did not deliver anything to help the market at all. She left Capitol Hill bruised but is back tomorrow.
My risk model is still calling for a lower market.
1st support is 1813/15, 1560/80 if broken. I still see an end of March low, Oil in 20/22$ range, Gold at 1,300.
Safe travels,
Steen
Mike “Mish” Shedlock
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Not a fair metaphor. Deer eventually knows when it’s time to walk away.
Think so? Then you have never run into a deer. I never have, but I know lots of people who have.
Yellen (jelen) means deer in polish and Janet’s father is from Suwalki Poland.
She really looks like a deer too in headlights or not.
Let’s be fair. Look at the acts that Yellen had to follow. The ship was more than 3/4 submerged when she took over the helm. I have no idea what prompted the poor woman to volunteer. She’s not a moron. She’s must have known what was in store for her. That apparent medical episode that happened a few months ago should have been her wake up call. But don’t be too hard on her. Besides, she’s just following orders.
Political Bosses absolutely demand the minions follow orders. Independent thinkers are most unwelcome! This is true for all politics: local, state, federal, domestic or foreign.
Fair my ass! and our collective assets! If Yellen was smart, she knew what she was getting into, and I don’t see any efforts on her part to stop the Fed madness. If she was stupid, then she was dumb to take the job in the first place. Who wants to assume the chair when the ship is sinking? Delusionals, narcissists, and sacrificial heroes willing to save others at their expense. Which do you see here? I agree. LET’S BE FAIR. Fair to victims, not perpetrators! These Fed people have been victimizing financially conservative savers for DECADES.
Yes. Be Fair. So stop the excuses! She took the job because she WANTED it. There is no assassin putting her golden retriever in the cross-hairs if she says no.
I have long predicted that, in the end, the world’s central banks would eventually be forced to buy all the world’s paper, public and private.
Hey Yancey!
It’s been a long time … good to see you.
(if you’re the YW who split time between CT and TN)
That is me.
Another time another blog I had a moniker whose initials were bd.
Once told you I’d let you know when I sold my treasury bonds … still got them.
Sorry for being cryptic, but don’t want to be bothered by anyone from there.
The Fed will be buying junk auto loans before this is over. Or, call it whatever, they will ultimately nationalize the financial sector.
How do you know they are not already buying nothing down no credit auto loans?
If The Bern gets elected you can absolutely count on a nationalized financial sector. After all, we’re half way there already.
There’s already talk of “student loan forgiveness”. That’s the next bailout.
What is downright funny is that every “solution” they come up with would be considered fraud or theft in legitimate business accounting. Just “creating” money through debt to cover their already horrible debt losses. I would be hilarious if it weren’t so absolutely destructive. Now we are faced with negative rates and digital currency, all in an effort to either save us or just make life so much “easier”.
What is downright funny is that every “solution” they come up with would be considered fraud or theft in legitimate business accounting. Just “creating” money through debt to cover their already horrible debt losses. I would be hilarious if it weren’t so absolutely destructive. Now we are faced with negative rates and digital currency, all in an effort to either save us or just make life so much “easier”.
Ding! Ding! Ding!
We have the winning comment of the day.
Any central bank’s entire reason for existence is chiseling. They’re supposed to deny it to their dying breaths but even that polite courtesy is out the window now.
To Jon Sellers who writes
” Mish, Your challenge to Keynesians is nebulous. When did Keynes say rising prices was a good thing? He didn’t. What he said was falling prices is a bad thing. The issue is that both rising and falling prices are good for some people and bad for others. Politics is about deciding who gets to win and who gets to lose.”
Nonsense – My challenge is not nebulous at all. I said there is no economic benefit. And indeed there isn’t. I never stated there were no winners and losers.
Indeed I stated the opposite. I specifically said the winners were those with first access to money: the banks and the already wealthy.
That makes you wrong twice.
Mish
Central Bank purchases of corporate debt is suicide. Corporations borrowed money to buy back shares, pay out dividends, and leverage buy outs. Very little money has been used for productive purposes. There is a surplus in capacity that very little future borrowing will occur; therefore, corporate debt purchases by central banks will not achieve their goal of stimulating lending.
You are correct. But if you were the Fed Chair, you would probably be a deer in headlights too when you are confronted by politicians who are no longer even hiding the fact that they have no intention of paying back any debt or even mildly interested in honest accounting. The only thing you could do is start planning your own exit from the position, but no matter how quickly you exit you also know that there are hundreds of volunteers lining up to take that Chair position and follow orders.
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The Fed can assign winners and losers, but over time the number of winners they pick gets smaller and smaller, and I am completely confident that the Fed will, like the BoJ, reach a point where it can only assign losers and bigger losers.
Sadly, the majority of people call this “capitalism”.