{"id":16522,"date":"2016-01-15T20:40:36","date_gmt":"2016-01-16T01:40:36","guid":{"rendered":"http:\/\/olduvai.ca\/?p=16522"},"modified":"2016-01-15T20:40:36","modified_gmt":"2016-01-16T01:40:36","slug":"what-if-there-is-no-fed-put-paul-brodsky-thinks-yellen-will-not-bailout-markets-this-time","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=16522","title":{"rendered":"What If There Is No “Fed Put” – Paul Brodsky Thinks Yellen Will Not Bailout Markets This Time"},"content":{"rendered":"

What If There Is No “Fed Put” – Paul Brodsky Thinks Yellen Will Not Bailout Markets This Time<\/a><\/h3>\n
Earlier today,\u00a0Art Cashin summarized\u00a0<\/a>most (very desperate) traders’ thoughts when he said that as a result of today’s market crash, “the Fed will try anything” to prop up the wealth effect it had so carefully engineered with seven years of central planning in the aftermath of the financial crisis.\u00a0 Perhaps the only question left is “where is the put”, or where on the S&P 500 is the Fed’s breaking point beyond which Yellen will have no choice but to make a statement, or take action, in support of the market.<\/div>\n

Yet one person who is far less sanguine abou the latest in a long series of central bank bailouts of the stock market is\u00a0Macro-Allocation’s Paul Brodsky<\/a>, who believes that instead of the Fed Put, the time of the Fed Call has come.<\/p>\n

Here’s why:<\/em><\/p>\n

\n
The Fed\u00a0Put\u00a0Call<\/strong><\/div>\n

Investors are blaming Fed rate hikes, and hence a strong dollar, for weakening global output, commodity prices, and global equity prices so far in 2016.<\/p>\n

The Fed knows exactly what it\u2019s doing.<\/p>\n

Equity returns are certainly dismal thus far in 2016. Through January 14 at 14:00PM EST, the MSCI World Index had declined by 8.6%. Accordingly, \u201cthe markets\u201d had begun to doubt the Fed\u2019s resolve to hike rates four times in 2016. Fed funds futures implied the December Fed Funds rate at 0.70%, up only 34 basis points from the current rate (0.36%). This implies the market is betting the Fed will hike once or twice more.<\/p>\n

Clearly, investors see the equity markets as the leading indicator of Fed policy.\u00a0We disagree. The Fed no longer works implicitly for equity investors (i.e., \u201cthe Fed Put\u201d); it is primarily working for the U.S. banking system by stabilizing and increasing its deposit base, and for the state by providing an incentive across the world to invest in Treasury debt.\u00a0<\/strong><\/p><\/blockquote>\n

…click on the above link to read the rest of the article…<\/p>\n","protected":false},"excerpt":{"rendered":"

What If There Is No “Fed Put” – Paul Brodsky Thinks Yellen Will Not Bailout Markets This Time Earlier today,\u00a0Art Cashin summarized\u00a0most (very desperate) traders’ thoughts when he said that as a result of today’s market crash, “the Fed will try anything” to prop up the wealth effect it had so carefully engineered with seven […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[11740,1450,303,4468,305,366,431,459,501,534,11741,1264,2773],"class_list":["post-16522","post","type-post","status-publish","format-standard","hentry","category-economics","tag-art-cashin","tag-equity-markets","tag-fed","tag-fed-funds-rate","tag-federal-reserve","tag-global-economy","tag-interest-rates","tag-john-williams","tag-market-crash","tag-monetary-policy","tag-paul-brodsky","tag-recession","tag-volatility"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16522","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16522"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16522\/revisions"}],"predecessor-version":[{"id":16523,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16522\/revisions\/16523"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16522"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16522"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16522"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}