Earlier today Fed Chair Janet Yellen made a speech to the Economic Club of New York on The Outlook, Uncertainty, and Monetary Policy.
In her speech, Yellen was Lovey-Dovey Citing “Other Tools” and More QE.
Let’s explore the effect of Yellen’s newfound lovey-doviness on interest rate hike expectations and other financial assets.
Rate Hike Odds September
Rate Hike Odds November
Measuring Yellen Yap
Gold is up $21 (1.73%), treasuries rallied, the S&P 500 stock market is up 17 points (0.82%) and the dollar down about 0.82%.
I offer this musical tribute.
You’re the cutest thing that I ever did see
I really love your peaches
Want to shake your tree
Lovey dovey, lovey dovey, lovey dovey all the time
Ooh wee baby, I sure show you a good time
Rate Hike Odds Shift to November
Rate hike odds have now shifted to November as noted by a look at September and November implied probabilities.
Yesterday the probability of no hike in September was 37%. Today it’s 51.4%.
Yellen’s yap was worth 14.4 percentage points on CME September Fed Funds futures.
Actually, the odds between yesterday and today didn’t really change one bit. Rather, the market’s expectation of them did.
Those speculating on delayed hikes and the eventual capitulation of Yellen to lovey doviness came out ahead.
Mike “Mish” Shedlock
Mish, I think that there is more to the speech. First this is the end of the quarter, it has to be positive on all fronts. Second, it is also a suggestion that negative interest rates may be coming, probably first go be tested in Canada , my home, where it was mentioned by the central bank a few months ago. Third it shows the will will all over the world of NOT letting anything go to low too far, and this is very very disturbing. They (Central banks?) must know something that is not very good. And we (investors) have literally nowhere to go. Claude >
Claude – relax and buy some gold 🙂
Sorry, somehow I got Full Metal Jacket instead of Steve Miller from the title. It’s definitely more fitting.
mish. don’t be a dick. don’t stereotype asian women as whores. its really ignorant and arrogant.
mish. don’t be a dick. don’t stereotype asian women as whores. its really ignorant and arrogant.
OK I am curious.
Please explain how I did that.
Mish
You know what you did, Mish, pretending that you were quoting Steve Miller when you were really getting inside brokenenglishb.s.’s head and making him think you were really saying this, which you clearly were since I can read your mind and my i.q.’s less than my shoe size and plus I’m drunk:
Really?
You are in fantasy land
I had absolutely no thoughts in my head about Asians nor am I aware of any derogatory connections of that song to Steve Miller.
If there are any I would not have used it.
Mish
By the way, if you think you can read my mind (or anyone else’s) you need serious help.
This statement of yours is totally believable “plus I’m drunk”
Mish
Considering that the economic problems are not monetary problems, Yellen is just a stage act for the Casino. So, the odds and the song are fitting, Mish.
No amount of monetary fiddling, no monetary tools, old or new, can put the economy back together again -Humpty Dumpty.
Quote of the day (if not the year or even the decade) compliments of Jesse: “Do you ever get the feeling that the powers-that-be are no longer treating the US as a ‘going concern?”
Yes – as a matter of fact, I do.
Prepare yourselves.
Since you know the Fed doesn’t lead and only follows the invisible hand, then you also know that the only thing that will make the Fed raise rates is the fear of being labeled a serial bubble blower. Here is my theory on how the story unfolds into 2017. Where do you disagree?
When the civil unrest turns up in Europe due to the continued decline in the world economy, led by China, and sovereign defaults start rippling across the continent like ping pong balls sitting on mousetraps, the capital flows into the US Dollar and dollar-based assets will blow up the balance sheets of companies and countries holding too much dollar-based debts. To compound the problem, the Fed will raise rates trying to avoid being labeled a serial bubble blower, as stocks make new highs due to becoming the only safe-haven market that’s big enough to absorb the world’s reserves when the govt bond bubble pops, ending the age of big, debt-financed, govt’s.
There will likely be a sell-off in stocks first to get the last of the bond bag holders on the same side of the boat before it capsizes. This will coincide with a decline in the dollar, which will cause the rise in the euro, triggering the sovereign defaults and blowing up the balance sheet of the ECB, sending capital fleeing into the relative safety of the dollar.
Unfortunately, as Trump and the other anti-establishment groups around the world are exhibiting, the time has come for the big reset that we all knew was coming. Whether Trump wins the election or is assassinated by a desperate establishment hell bent on keeping their jobs, perks, and power, the peak in govt is in and the transition from public to private has already begun.
If only govt could look in the mirror and reform, instead of digging in their heels to save their lifestyle. The problem is they never have, and neither have the passions of man changed, which is why man keeps repeating the same mistakes. There is a true Democratic solution that starts with the elimination of the career politician. Unfortunately, due to man’s ability to procrastinate, it can’t come until after the big reset.
Thanks for all you do. Financial and historical education will be essential to chosing freedom over totalitarianism during the reset.
You are wrong.
The Fed doesn’t give a rat’s a** what they are labelled as.
The ONLY thing that will make the Fed raise raise rates is a global currency crisis which eventually threatens the US Dollar. And then, only grudgingly.
Period. Full stop.
With all do respect, you are as clueless as Larry Summers, and the other Ivory Tower theorticians at the Fed who have no practical experience, and don’t even know their history. Other than a black box full of faulty algorithms, the Fed has nothing but its reputation, which it tries to mold into trust.
Since the US Dollar is the worlds’ currency, you cannot have a global currency crisis without a dollar crisis, which will occur due to global capital seeking the relative safety of the dollar (that will increasingly not be in the form of govt debt.).
Follow the money and Armstrong if you hope to survive this unprescedented event that no one alive has seen, and therefore have no idea how to predict because they don’t have the data for backtesting and analysis (other than Armstrong).
https://www.armstrongeconomics.com/world-news/fed-admits-it-is-the-worlds-central-bank-not-just-the-usa-central-bank/
“Ooh GI, I sure show you a good time.” Mish if you were ever in the military in Asia you would have recognized this immediately. When I read the title, I thought “either Mish doesn’t get it or he for sure gets it”. We are collectively about to get a good time … i.e. screwed!
Even to mention a QE is to suspect a future financial disaster, but the market rally from the very rich is to say I have your back covered and those middle class investors it will hep you also. All is well , whew, we won’t need negative interest rates. Yellen, “Did they buy the big lie? “