10Y dollar Dow economy fed fomc gold jerome powell

Breaker One-Niner

The market's verdict was as follows.


That shit right there isn’t going to work forever. Irrespective of whether you’re in favor of moving away from a regime based on #failing (as Trump would put it) academic models and even if you think we need less jargon from the Ivory Tower academic crowd (Taleb’s “pseudo experts”), the fact is that we’ve been relying on that for a long time and if you think transitioning away from it is going to be seamless, you’ve got another thing coming.

Remember, there’s a parallel to politics here. More than a few ostensibly rational/smart people thought we should give a political neophyte (Trump) “a chance” – and look how that turned out. I’m calling it right now: if “Fed speak” turns into “plain speak”, under Powell, you’ll get more volatility from markets precisely because there won’t be as much room for people to hear what they want to hear.


I think what’s underappreciated when it comes to the two-way communication loop between markets and policymakers is that paradoxically, obfuscation is critical. If the relationship between market participants and policymakers is to remain reflexive, you can’t have a situation where policymakers come across as overly blunt. You want a constant give and take, where policy and markets influence one another. Part and parcel of that is transparency but what I would argue is that the type of bluntness demonstrated by Powell on Wednesday actually creates more uncertainty for markets as it suggests inflexibility.

As far as the details on the Fed (the dot plot, the SEP, etc.), you can read them here and my take on the presser is here.

Long story short, I think that press conference was largely pointless and if they’re all going to be like that, then I don’t see why have them at all, let alone have more of them.

The market’s verdict was as follows.





10Y yields:


Real yields (which briefly spiked to their highest since the taper tantrum before receding quickly):


And gold (which rose as real yields and the dollar came off):


Make of all that what you will.

I’ll leave you with a little afternoon “covfefe” which seems appropriate to the extent it underscores what can happen when you eschew a carefully-planned communications strategy for bluntness:




2 comments on “Breaker One-Niner

  1. Is it possible that the nature of a Fed Chairperson’s education is related to the manner in which they think, or are trained or understand how deliver of what they know at these hearings?

    Volker graduated with a University degree and graduate degree (MA) in Economics and a fellowship from the London School of Economics; Greenspan, Bernanke and Yellen each graduated with University degree and graduate degrees (MA and PhD) in Economics; all of the above the above immersed themselves in the field of economics (whether academics or commercial) post-graduation until appointed to serve as Fed Chairman.

    Powell took a different route, graduating Princeton with an AB in Political Science and from Georgetown with a law degree. Then he served as a law clerk for an appeals judge, and worked as a transactional lawyer in banking, finance, mergers and acquisitions and then in 1990 took a three-year stint with the government. Then he worked here and there but not as if “economist.” Finally, in 2011 he was nominated to the Federal Reserve Board by Obama, until Trump made him chairman.

  2. The Fed chairs are (were) all throwing darts. Maybe I should care about what number on the board that the Fed chair is calling before the toss — but I care more that he has a blindfold on…

Speak On It

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Skip to toolbar