Breaker One-Niner

This:

I don't like Powell's demeanor. Not one bit. And if the rest of you think that shit is going to fly forever, you're probably wrong. He's not going to be able to reconcile bluntness with obfuscation. those two things are usually mutually exclusive.

— Walter White (@heisenbergrpt) March 21, 2018

That 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.

Dollar:

Stocks:

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:

I called President Putin of Russia to congratulate him on his election victory (in past, Obama called him also). The Fake News Media is crazed because they wanted me to excoriate him. They are wrong! Getting along with Russia (and others) is a good thing, not a bad thing.......

— Donald J. Trump (@realDonaldTrump) March 21, 2018