The Fed. Minutes aka Adventures In Navel Gazing

This past Wednesday the Federal Reserve released the minutes of its prior deliberation in June. There was a time when looking deep into what words were used, for what reason, and in what context, had the semblance that maybe, just maybe, there was an edge to be found in what the participants might actually be signaling without actually signaling. i.e., Leaving clues for the industrious investment sleuth to find without directly stating it.

But that was then, and this is now. And as Bob Dylan elegantly stated years ago, “You don’t need a weatherman to know which way the wind blows.”

That now holds true for Fed. watching sleuths, because the more I listened to the next-in-rotation economist on either radio or television tout their “insights” about what the Fed. meant by this, that, and the other thing contained within the minutes – the harder it was to keep my lunch.

It was an absolute real-time example of what I now call, ” a word-cloud Rorschach test.” i.e., As long as you use any of the words or phrases contained within the release – you can make stuff up all day long (or at least to fill a segment) about what it means. Here’s a news alert: It means nothing. Period. End of story, or segment.

If one wants to see just how relevant “forward guidance”, or “reading between the lines” of any so-called communique or reporting of what possible “words for profiting” might be contained within. Look no further than one who at one time was considered “The Fed. Whisperer”, Jon Hilsenrath of the WSJ™.

For years reading or listening to what Mr. Hilsenrath had to say on Fed. insinuations, or possible policy innuendo was like reading crib sheets produced from a fly on the wall that would make any spy agency jealous. Many times it bordered as if he no longer needed the fly and could just read their minds, because of the curious timing of his subsequent releases in respect to official embargoed time frames. Nevertheless, more often than not, far more was garnered reading or listening to his take on what really might be forthcoming, rather than trying to decipher the Rorschach inspired press-releases.

But then something changed. That change? Hint: Donald J. Trump.

In August of last year it was none other than Mr. Hilsenrath himself that took to the pages of the Wall Street Journal slamming the Fed. for it enabling the rise of Mr. Trump via its monetary policies. So informative was this sudden, and what appeared to everyone (well, those actually paying attention) as a “biting the hand that feeds you” moment, it prompted this observation from ZeroHedge™. To wit:

“For years we have argued that the main reasons for rising social anger, populist sentiment, and general disillusion with the US economy boils down to one thing: the Federal Reserve, which as we have argued since 2009, has approached the crisis aftermath in a wrong way, generated unprecedented wealth inequality through its monetary policy favoring a tiny fraction of the population – those invested in risk assets – and instead of reflating another debt bubble, should have allowed the system to undergo a debt purge and start afresh.

For this we have been branded perpetual conspiracy theorists and permabears.

Moments ago, none other than the WSJ’s Fed “whisperer”, Jon Hilsenrath admitted these allegations have been correct in an article titled “Years of Fed Missteps Fueled Disillusion With the Economy and Washington”, and which as the WSJ notes “helps explain one of the US’s most unpredictable, populist political years.”

In other words, it is the Fed’s policies that have led to the current failed economic regime (as noted again yesterday by Citi’s Matt King and today by former Fed governor Kevin Warsh), and which are responsible for the rise of such candidates as Donald Trump. Which, incidentally, is also something we have predicted over the years would happen. As such we are delighted that one of the most popular establishment Fed watchers now agrees with our assessment.”

Now with the above for a little context let’s move onto what we heard emanating from the so-called “experts of everything that is the Fed. and economics” on television, print, and radio following the release of the minutes. i.e., The next-in-rotation Ph.D crowd.

I’m going to sum up the basic premise that was used via the word-cloud generated. Ready?

“Well there were participants that questioned this, that, and the other thing. This implies that the Fed. is really concerned and may not be as aggressive for this, or that reason. I expect the Fed. will watch very carefully the financial conditions based on this, or that, and tread carefully, blah, blah, blah.”

The only difference between what I just typed, and what was dispensed by this crowd, was a greater use of $10 words. The meaning is the same. Or said differently: An exercise in Rorschach Word-Clouding. i.e., Means anything you want – including delusion.

I have said since the December meeting of 2016 after watching Ms. Yellen’s follow-up news conference that the Fed. was not only about to raise again, and soon, but would raise far more aggressively, regardless of any financial conditions. I posited that argument around the idea that it was in direct opposition of the election results.

Once again, the Ivory Towered economists raved “That’s crazy!” only they used more of those $10 words. Today? It’s so blatantly obvious it’s getting harder and harder for those trying not to admit it to continue that the ensuing arguments against, along with the rationale, now borders on incoherent drivel. Expensive wording or not.

In other words – the excuses of why the Fed. is raising, at the rate it is, while also throwing the balance sheet into the mix against the current data for a self-identified and staunch defender of the idea that they are “data dependent”, is making anyone trying to hold that monetary line look more foolish by the day.

And that leads me right into another axiom which fits this situation possibly better than any time prior. i.e., “If you have nothing good to say, don’t say anything at all.”

Here is where omission (in my opinion) screams for attention to those truly looking for clues. Once again, I’m using Mr, Hilsenrath. To wit:

As per Mr. Hilsenrath’s bio on the Wall Street Journal’s website:

“Jon Eric Hilsenrath is the chief economics correspondent for The Wall Street Journal and is based in Washington. He is responsible for covering the Federal Reserve. In cooperation with reporters in the economics and other bureaus, he also covers major developments in the U.S. and global economies for all print and on-line editions of The Wall Street Journal and contributes to’s Real Time Economics site.”

Now with the above for context here’s his most recent article archive lineup from late 2016 thru today:

From October 2016 thru December 2016. e.g., 3 months: There are seven Federal Reserve based articles. The skew going by the headlines, via my eye, are that they are of the more dove inclined arguments than hawkish. I suggest you don’t take my words for it and view them for yourself, and make your own conclusions.

Now – from January 2017 until today, as of this writing (all the while remembering this is now a seven month stretch as compared to three prior) the total number of Fed. articles?: One.

What is the tone or reasoning of that article? Well, it is in January, and in relation to Davos. A story that one might say (for the financial/business media et al) is covered in one way or another, no matter what, just to make sure any and all “receipts” can get reimbursed by H.R. or the I.R.S.

In other words – it’s the biggest junket of the business/financial media bar none and get’s covered regardless, although his headline is Fed. specific. So counting it as a “Fed.” specific article is appropriate.

I don’t know if Mr. Hilsenrath was there or not, and it really doesn’t matter. What I’m trying to make clear is there is no way this event doesn’t get press one way or another. Especially by someone in Mr. Hilsenrath’s position. Why is this point so informative you may be asking? Fair question, so once again, re-read the above bio, particularly the line, “He is responsible for covering the Federal Reserve.”

Now do you notice anything in his article archives now? Hint: Not a single Fed. article since, now going on seven months. And if one wants to try to read deeper, here’s another way one can view things: If you want to exclude the “one” article based on its “must be reported on status – regardless by who.” e.g., Davos. It would be fair to say the total over the last 7 months goes from one – to zero. As in Zip, zero, nada.

Again, as of today, there is the one referenced article, and two others which revolve around other topics, not The Federal Reserve.

I can’t make this point more strongly:

During what is now quite arguably the most important shift in both policy and timing in the history of the greatest monetary experiment conducted via the Federal Reserve, with the hiking of rates into increasingly deteriorating data, while subsequently launching the most troubling bugaboo that Wall Street fears more than a bench warrant (e.g., balance sheet reversal.) And there is not one, again, not one single article opined by what many deem as “The Fed. whisperer?” Not one (again if excluding the Davos piece) now nearly 7 months in? And per his bio: “He is responsible for covering the Federal Reserve.”

Are you beginning to see my point?

Here’s my take away – If you think “participants raised concerns” trumps ” participants voting record?” You must have a Ph.D. Because only this crowd seems more caught up in “mights” rather than “deeds.” Deeds as in – every once deemed dove voted affirmative to raise, and begin reducing the balance sheet not only this year, but possibly as soon as September if not earlier.

Now what in the world could have made such a metamorphosis happen? Any guesses? Hint: Donald J. _____.

Forget reading between the lines. If you take Mr. Dylan’s affirmation to heart and use it properly – you’ll know everything you’ll need to know not by reading, but from noticing there are no lines to read from what has been the most well-connected “weatherman” or Fed. writer over the last decade.

Gives a whole new interpretation for insight into “what goes unsaid” rather than what is, doesn’t it?

No ink blot required.

© 2017 Mark St.Cyr