"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen

"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont

"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister

"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Saturday, September 28, 2013

Fed communication

Investors and Fed Talk Past Each Other by James B. Stewart
At least some market professionals read the Fed’s signals right. Michael Hanson and Brian Smedley, analysts at Bank of America Merrill Lynch, presciently warned before the Fed’s meeting that “the markets believe a September taper is a done deal,” but “we anticipate the Fed will attempt to recalibrate market expectations at this meeting. In our view, the best way to do that is by not tapering in September.”

Bill Gross, Pimco’s founder and widely followed bond and interest rate expert, also warned that market expectations had gotten ahead of reality, suggesting the Fed was more likely to “tinker” than “taper.”

Justin Wolfers, a professor of economics at the University of Michigan who is currently at the Brookings Institution in Washington, told me this week that investors shouldn’t have been so surprised. “Bernanke never promised to taper in September,” Professor Wolfers said. “He always said the decision was data-dependent.” It turned out that “the data were worse than when he first started talking about tapering.” And with a fiscal showdown looming in Congress, tightening monetary policy now would have been reckless, he said.

Blinder and Woodford are quoted.

Some bond traders were upset that the Fed didn't taper as they said they might. The analysts above who guessed right recognized that Bernanke said their decision was data-dependent and the data wasn't good. Plus there's the debt ceiling clown show.

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