Friday, April 25, 2014

The Hand of the Fed

While we understand the reticence by some of looking for guidance at a monetary policy regime of yesteryear and near the birth of the Bretton Woods System, we see more parallels than differences when considering the Fed's quite visible hand and their policy disposition with respect to the broader interest rate cycle. 

From our perspective, the current Fed cycle - because of ZIRP and QE - is nothing like the previous 15 tightening periods since the post-war period began. Moreover, the underlying market psychology (as we described in previous notes (see Here & Here) - which tends to wag the dog, rhymes closely with today and a participant community, who a.) believes the market absolutely needs the Fed b.) sees an economy only a few stumbles away from armageddon.        

In keeping with the spirit of the times and another lively chapter of Game of Thrones: