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In the aftermath of the Fed's second consecutive dovish capitulation, which while framed as a response to the slowing economy (a slowdown which the Fed completely missed as recently as December when 9 FOMC officials expected 1 or more rate hikes and now expect 0) but was really meant to support assets, many have taken turns to urinate and/or defecate on the grave of Fed credibility, the latest among them Nomura's Charlie McElligott, who this morning derives an intense pleasure, and feels "vindicated" as "the Fed’s hilarious tightening / normalization “clown car” experiment (and ensuing credibility farce) is now complete."
To avoid "diluting" his stream (of consciousness and/or metaphorical Fed graveyard micturation), we will present his full rant as extracted from his morning post in its entirety, just as a #timestamp for posterity, which may one day be curious when it all started to turn for the modern-day central planners.
Morning - Brexit - Spasm…I - All-in - Fed
Outside of this morning’s Brexit spasm…I’m going all-in on the Fed and our worst “Balance-Sheet Recession” past / “Japanifcation” / “end-of-cycle” worst fears seemingly being confirmed, which now looks to have indeed set us permanently stuck within “The QE Trap.” Richard Koo quotes, hashtags AND Wu Tang Clan references….get it all “hot” below.
Chest - Fed - Normalization - Car - Experiment
Allow me to get this off my chest immediately: the Fed’s hilarious tightening / normalization “clown car” experiment (and ensuing credibility farce) is now complete, and I feel….vindicated.
I was openly dismissed / laughed-at by many, many investors late last Spring - early last Summer when I first-posited my “UST steepener” call (specifically expressed in a 5s30s curve cap) off the back of my long-held 2018 “Two Speed Year” thesis, based-upon a then-building “tightening ourselves into a slowdown” impulse which would metastasize- then-force the Fed to pivot away from “tightening” and towards “easing” as early as 2019—all because the market...
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