Readers of this blog should be expressing a "what took so long" approach to the market sell-off rather than any suprise. The theme on this site has been questioning the market's obsessive pricing of Fed eases amidst expectations of a collapse in personal spending on the heels of collapsing home prices. The consistent answer to this view has been that the money creation process (that is bank lending) continues apace without any meaningful tightening of credit standards. Credit expansion trumps any concurrent slump in real estate pricing. Ask Sam Zell if there is a problem finding money to chase a mixed bag of properities. Continued lending by the banks is the reason why the inverted curve was indeed different this time around.
This is what Fed officials have been yapping about and why they remain vocally concerned about monetary inflation -- not the mere follow through of a commodity price spike. They have let us know that they anticipate some wage inflation in response to the multi-year trend that shifted earnings to the owners of capital and away from workers. The line between catch-up and inflation is for them to define.
While the FOMC waits and watches, you can expect the Fed to continue to talk a tougher game than they are playing. Market yields will continue to rise as ease expectations are unwound. Fed policy stays on the sidelines until the market approaches a positive curve that says the Fed is lagging economic events. Not something Bernanke would like to see. Until that time, mixed data and the unwind of those ridiculous expectations of Fed eases. Wonder what all the "street savants" will be saying after there is a no go at the end of the month.
Apologies for not writing since mid December. I have been taking time off and rearranging life priorities. My words of wisdom, balderdash to others, returns on a more regular basis in the next several weeks.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment