If You're In Montreal, Try Not to Get Any In Your Eye Next Time Bernanke Speaks

Thursday, July 29, 2010 , , , , 0 Comments

The Montreal Gazette actually said this:

In his semi-annual testimony before Congress on Wednesday, U.S. Federal Reserve Chairman Ben Bernanke said the prospects for economic recovery were "unusually uncertain."

On those two words, stock markets in North America took the rest of the day off. In New York, the Dow plunged 109 points to close 1.3 per cent lower on the day, while the NASDAQ lost 35 points or 1.6 per cent. In Toronto, the TSX was off 116 points or one per cent, with much of the dip on the hot chart coming in the hour after Bernanke's afternoon testimony.

Such is the power of the chairman of the Fed to move markets. Not since his predecessor, Alan Greenspan, worried about "irrational exuberance," during the 1990s, have two words caused such a commotion in markets. Greenspan was subsequently more circumspect in his pronouncements, and developed an impenetrable vernacular of his own that he called "Fedspeak."

Maybe there's some sort of translation static interfering with the Gazette's perception but by my calculations, we haven't cared about a Fed move in at least a year and a half. Extended period. We get it. Whatever it takes. With you. Choppy. Heard you the first time you said it, homie. As long as the pipeline stays open, no one gives a shit what the Fed has to say.

They can publish as many papers as they like that prove me wrong but one of the largest contributing factors to the ineffectiveness of Fed announcements of late in accomplishing their objectives (whatever the fuck those may be) is that those easily spooked by the Fed have long since abandoned the market. It's the HFT robots against Ben Bernanke's printing arm, neither are anything but mechanic and their reactions are automatically priced in. Who is left to react?


Bernanke's choice of words rattled markets because they are worried about the pace of the recovery and the prospect of the U.S. economy tipping into a double-dip recession. Bernanke offered little comfort, suggesting a modest recovery with "a somewhat weaker outlook."

Again, to say markets were rattled by Gentle Ben's little commitment to whatever it takes for the 400th consecutive speech (or are capable of being rattled by him at all) is a bit of a stretch. The invisible hand gets PTO when Bernanke speaks to make it appear as though they still possess the least amount of control. Looks like the Montreal Gazette fell for that old trick hook, line and sinker.

Way to go, ZB, you still have it in you.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.