Hawkish? Dovish? Balance sheet reductionist? Rate-hike limited? Worried about inflation or excited by the economic outlook? Or just plain old confused? What and why did Yellen just say what she did, unleashing the latest market reaction to her supposedly "dovish" congressional testimony, and sending risk assets higher just two weeks after the same Janet Yellen warned about frothy market valuations? It turns out, you are not the only one who can no longer make any sense of it. As Bloomberg's macro commentator Richard Brelsow notes, "we’re no longer just going to have doves and hawks to consider, but B/Sers and ratists. Charts about FOMC meeting outcomes will need virtual reality headsets to deal with the added dimensions. I’d settle for here’s what were going to do because it’s the right thing to do. And we’ll deal with what comes if necessary, that’s how we roll."
He than rages at the Fed which "has a plan. But in essence has no plan. They have a desire. And the justifications for it vary over time. As does its perceived imperativeness. It’s why they keep telling us all the permutations of the stop and go strategy they say will work. They love sounding smart to themselves. But it all comes out as we hope so. They are so obviously trying to convince themselves rather than the investing community of the efficacy of their actions. Quite the opposite of sounding resolute, they appear unsure. Not what you want in a doctor, fiduciary or central banker."
# And then a disclaimer on disclaimers:
Disclaimers are there to insulate people when things go wrong. They aren’t really there as warnings. No one gets sued if everyone is getting rich. But the Fed is leading with the caution. And in the process opening wide the casino doors for harmful speculation and futile trading. When will they announce? How do we evaluate the trade-off between the balance sheet and rates? We’re all going to spend the next months, maybe years, arguing whether a number affects one or the other more. Speech after speech is going to further muddy the waters as they publicly debate the issue among themselves
He concludes with an ominous warning for the Fed: "I have news for you, when this chapter of financial history is written, the authors won’t spend a lot of time dwelling on the disclaimers then, either."
*) Then again, Breslow has had a rather "angry" period in the past few weeks; our advice: relax, the Fed confusion over how to put the genie which the Fed first released, back in the bottle, is only just starting.