The Fed’s Birthday Party Trick: A Market Of Monetary-Punch-Drunk Liquidityholics…”They may have printed themselves into a corner.”
by Tyler Durden
If ever there was an investor reaction that summed up just how much the Federal Reserve has broken the markets it was yesterday morning’s post-dismal-jobs-report surge. As John Phelan notes, we now appear to be in a position where the interests of financial markets are precisely at odds with the interests of the rest of the economy; where the good news for us is bad news for them and bad news for us is good news for them. The one way bet of the Greenspan Put maintained, so far, by Ben Bernanke, has created a market of monetary-punch-drunk liquidityholics. On its 100th birthday the Federal Reserve has the tricky task of sneaking the punch bowl out of the party, a task it seems they’ll struggle to manage without starting a riot. They may have printed themselves into a corner.