Nomura: “BOOM, Roasted: The Fed’s “Clown Car” Experiment Is Now Complete”

Thursday, March 21, 2019
By Paul Martin

by Tyler Durden
Thu, 03/21/2019

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.


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.


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 would experience a late 2018 “Financial Conditions Tightening Tantrum.”

BOOM, roasted.

Obviously this “Fed credibility loss” dynamic is nothing new for the institution, and in this case, the issue isn’t so much about the (pathetic) flip-flop driven by their tone-deaf failings last year into this year. Remember, three months ago the FOMC was projecting two hikes this year—now they’ve not just ‘nuked’ those to ZERO, but they also had to “TAPER THEIR TAPER” lolol—which net/net AGAIN shows a remarkably consistent inability from the Fed to see things coming which the market “somehow” consistently ‘does’ see. Thus, the Fed’s perpetually reactive / defensive posture (and fear of their own shadow).

Instead and on a larger horizon, the Fed’s credibility issue is about the simple-fact that for over 10 years now, market participants have already long-realized that, per the lessons of Japan from 1990-2005, the U.S. variety “balance-sheet recession” of 2007-09 would then lead us down the path of “the QE trap”…and here we are, “realizing” in real-time.

The Rest…HERE

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