We've often documented here the obvious Fed Goon strategy of jawboning and lies in an effort to prompt the "markets" to do what they'd like them to do. The ridiculousness of yesterday may have set a new standard by which future verbal interventions will be measured.
With some time to spare this morning, I thought I would just double back and summarize the events of yesterday:
IT WAS COMPLETE AND TOTAL BS!
So, the world waits with baited breath for Mother Fellen to give her all-important speech at Jackson Hole. The text of the speech was released and Mother began speaking at 10:00 am EDT. The headline-scanning algos had a field day for the first few minutes as the message The Fed wanted to portray was in the headlines. The Pig rallied. The USDJPY spiked. Bonds sold off sharply and gold was clipped for 1%.
But a funny thing happened on the way to the market manipulation. It took a few minutes but, eventually, some actual human beings read the body of the speech and noted that the title was deceiving. Oh sure, The Fed "stands ready to raise rates again soon" but how about the stuff about also standing ready to feed another few TRILLION into the markets at the first sign of the next crisis? Suddenly, everything reversed. The Pig fell. The USDJPY puked. Long Bond rates rallied 6 bps in a matter of minutes from 2.27% to 2.21% and gold shot from $1325 to $1344.
At that point, I was typing a new post and, rather prophetically, added this passage:
"After spiking on the initial "news" at 10:00 am, the USDJPY has fallen backward and, as you can see, it is once again clinging to the 100 level. At this point, it wouldn't surprise me if Mother has a bud in her ear giving here tick-by-tick updates so that she can adjust her massage on the spot. Absent that, perhaps this sucker will actually finish the week perilously close to 100?"
Well, of course, Mother doesn't have a bud in her ear as just simply sticking to and reading the prepared text is about all she can handle. So, what did The Criminals do in order to reverse the action since the weren't getting their desired response? They immediately called up LIESman and had him interview Goon Fischer. The sycophant CNBS jumped at he opportunity to have the Fed #2 on its air and the rest is history.
Don't you see how this works? It's exactly as we discussed when the latest FOMC minutes were announced. This is all about manipulating the markets and coercing them into giving The Fed the reaction that The Fed wants. At the end of the FOMC in April and again in July, The Fed released a statement that summarized the meeting. When, three weeks later, the "markets" hadn't responded the way The Fed wanted them to respond, The Fed released alleged minutes, created from whole cloth, in a blatant attempt to reconfigure a market reaction more in the direction they had originally desired.
AND THIS IS EXACTLY WHAT HAPPENED on FRIDAY!
Mother's speech and all the hype and build-up that accompanied it was supposed to rally The Pig and break down the bond market into higher rates. When instead the opposite happened, Goon Fischer was immediately summoned to change the narrative...again, just as if Mother had had that bug in here ear to make changes to her speech on the fly.
This is also precisely why you get the seemingly endless parade of Fed Goon after Fed Goon blasting away with jawbones, often contradicting each other and sometimes even themselves on a day-to-day basis. All The Goons have is the Fed Funds rate and this jawboning process and, as they are desperate to keep all of their plates spinning, they milk these "tools" for all their worth.
AND, ULTIMATELY, HERE'S WHAT THIS IS ALL ABOUT...
We're all getting conditioned. Do you know what that means? Did you ever take Psych 101 in college? Here's a general definition of operant or instrumental conditioning:
Whether "market participants" and the general public realize this or not, this is precisely what The Fed is attempting to do to them. This is why CNBS, BBG, the WSJ and every other media outlet has convinced everyone that we all need to hang on The Fed's every word, as if they are this omnipotent, all-powerful and altruistic organization. The goal is to "condition" everyone for the future.
And why is this so important? Because the next time the markets collapse (and we all know this is coming), the investing and general public will be fully in support of anything The Fed proposes to save their member Banks and, thus The System. I mean, who would argue at that point? The Fed and the media have spent years now convincing everyone that The Fed is all-powerful and never to be doubted. So when the SHTF again...AND IT WILL...the masses will gleefully accept whatever destructive nonsense The Fed proposes to "rescue" everyone!
DOES THAT HELP YOU TO UNDERSTAND THE BIGGER PICTURE?
And, frankly, this is why I simply can't get angry anymore when I witness days like yesterday. Oh sure, would it have been nice to be 100% correct and have both metals finish UP on the week. Of course. And was it frustrating to see the utter BS wipe out any potential profits and drive the calls I bought early last week to near zero? No doubt. But in the end, I'm mainly just angry at myself for foolishly thinking I could out-trade The Fed at this time. I violated the primary, #1 rule that I vowed to follow when I resumed some light trading in 2015. That rule:
Consider the trade idea. Weigh it versus the chart trend. But then, more importantly, weigh it versus what The Banks and The Fed want to happen. If all three line up, then make the trade. If not, expect to get your butt kicked. And here I am.
Meh, whatever. At the end of the day, all of this Banker desperation just proves again the central mission of this site...Preparing for the end of The Great Keynesian Experiment. If The Fed wants to push The Pig and interest rates higher in the short term, I say we let them. They may win some daily and hourly battles, but they are doomed to defeat in the much larger war. To that end, my stacks of gold and silver are just as beautiful and lustrous as they were last week, last month and last year. All additional time they give me to add to those stacks is truly a blessing and I will use that time to continue to prepare accordingly.