All Talk, All Hat, No Cattle
Bill Fleckenstein comments on why he thinks the Fed is all talk, all hat, no cattle.
We believe that the +13% growth in commericial paper over the last year points directly to a concerted effort to perk up and sustain the housing market ATM and bond market teets.
The debt spreads and carry trades necessary to sustain this growth rate are disappearing, resulting in a liquidity drain.
These are symptoms of the multipler effect working in reverse, and its counter velocity will be exponential, not linear.
Even though the Fed is talking tough, the Fed is in fact not tough. Recently, we've seen a couple of coupon passes (i.e., Fed purchases of Treasury securities from dealers). And, as economist Carl Pellegrini pointed out last Wednesday:
"The Fed is not tightening. If it were, do you really believe that the growth in commercial paper outstanding would be 18.4% for the last few weeks;
and that bank loans and commercial paper outstanding would be up a seasonally adjusted rate of 24.6% for the last seven weeks, 15.7% for the last 13 weeks, and 13.35% for the last 52 weeks?"
Thus, not only is the Fed not tough, it has no real intention of being tough." Of course, if the Fed wants to save its reputation -- while trying to act dovish -- it has to talk that way.
To quote my daily column last Tuesday: "The Fed knows the economy is slowing down. It's really dying to pause. But since so many have essentially laughed at it, the Fed feels as though it has to do something to make sure it's still perceived as being in charge."
We believe that the +13% growth in commericial paper over the last year points directly to a concerted effort to perk up and sustain the housing market ATM and bond market teets.
The debt spreads and carry trades necessary to sustain this growth rate are disappearing, resulting in a liquidity drain.
These are symptoms of the multipler effect working in reverse, and its counter velocity will be exponential, not linear.
Even though the Fed is talking tough, the Fed is in fact not tough. Recently, we've seen a couple of coupon passes (i.e., Fed purchases of Treasury securities from dealers). And, as economist Carl Pellegrini pointed out last Wednesday:
"The Fed is not tightening. If it were, do you really believe that the growth in commercial paper outstanding would be 18.4% for the last few weeks;
and that bank loans and commercial paper outstanding would be up a seasonally adjusted rate of 24.6% for the last seven weeks, 15.7% for the last 13 weeks, and 13.35% for the last 52 weeks?"
Thus, not only is the Fed not tough, it has no real intention of being tough." Of course, if the Fed wants to save its reputation -- while trying to act dovish -- it has to talk that way.
To quote my daily column last Tuesday: "The Fed knows the economy is slowing down. It's really dying to pause. But since so many have essentially laughed at it, the Fed feels as though it has to do something to make sure it's still perceived as being in charge."
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