The Fed's Decemberist revolution

You have to wonder about Janet Yellen and the Federal Reserve governors. They voted 9-1 to hold rates at zero, but suggested December is on the table for a rate rise.

I’ll have what they’re having.

Let’s ticked off what’s wrong with their thought:

  • China just cut interest rates to combat slowing growth as it moves toward recessionary pricing pressure.
  • Europe’s central bank is promising further easing in December to pull out of a recession.
  • The December meeting is on the 15th and 16th of the month. How many bond trading desks will be staffed leading into the holiday? What does that mean? A liquidity crunch not seen in seven years.

It’s all jawboning as a way for the markets to correct its exuberance. Stocks sold off, and then bounced because of the impossibility of the move. But its having the desired effect as strong dollar has futures market showing lower stock prices.

Bonds sold off with 10-year falling in price, due to uncertainty.

Yes the Fed did take out the language about monitoring conditions overseas, because it sees such weakness in China, Europe, South America and other BRIC nations, that its narrative would never hold up if the wording was left in.

As an aside, why do you think China is ending its one-child policy? It sees that it will need to grow its consumer class as a means to grow. It’s not out of the goodness of their heart or love of family.

We get GDP at 8:30 this morning. It’s the first look at Q3 after the Q2’s 3.9% print, which showed huge inventory build.

I believe it will come in at 1.1% to perhaps 1.4%, which is a marked slowdown.