Fed Autopsy: Why Fischer was Bluffing in one Chart

Activity Summary

Last night a suicide bombing rocked a Karbala wedding in Iraq. ISIS was the likely terrorist. EU stocks are softer with Gold on the back of a stronger USD. Markets continue to digest and decipher the Fed's words and meaning from Friday. Goldman Sachs has raised its expectations of a rate hike. Bonds and the Dollar agree. Pimco disagrees and holds a larger than usual bond position likely on QE4 expectations as we've opined recently.

Fischer and Yellen are Bluffing if  August Employment is Really their Guide.

Friday Yellen gave a Hawkish sounding speech that the markets ignored. Fischer came out and backed her words with tougher talk. For us this was bad cop-badder cop; or "We really mean it this time!". The markets didn't read it as a bluff with Gold and Stocks giving back their day's gains. But we are not convinced it wasn't just tough talk based on what Fischer stated was "really important" to their next rate decision, August Jobs. That was the tell for us. Looking at the wide range of reports and missed expectations, how can the Fed reasonably rely on this report at all?

Look at the Survey Average vs the circled Actuals below:

h/t: Driehaus Capital

This is Fischer's report of choice in making the next rate decision? Good luck with that. Given the wide past range on jobs and utter lack of action, what  number would make them act?  An outlier to this crazy dispersion? So we are less sanguine about a rate hike in September than recent headlines would have you believe. We do think a rate hike is coming, ideally for all in December post election. Now if only the Fed can make the markets rally enough to justify their pretense.  For us either Fischer is:

  1. a genius at interpreting the Jobs number patterns
  2. using the Aug Jobs focus  comment is a misdirection
  3. bluffing on the September rate hike

related reading:


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PRICECHANGE% CHG GC=F1,324.00-1.90-0.14% SI=F18.66-0.09-0.48% PL=F1,081.00+3.30+0.31% HG=F2.080.000.00% NG=F2.88-0.03-1.17% CL=F46.99-0.65-1.36% GLD126.05-0.18-0.14% USO10.950.000.00%



EUR/USD1.1177-0.0020 (-0.18%)USD/JPY102.2090+0.2890 (0.28%)GBP/USD1.3084-0.0042 (-0.32%)USD/CAD1.3012-0.0007 (-0.05%)USD/HKD7.7564-0.0001 (0.00%)USD/CNY6.6856+0.0058 (0.09%)AUD/USD0.7553+0.0011 (0.14%)


Economic Calendar

DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised FromAug 298:30 AMPersonal IncomeJul-0.4%0.4%0.2%-Aug 298:30 AMPersonal SpendingJul-0.2%0.3%0.4%-Aug 298:30 AMCore PCE PricesJul-0.1%0.1%0.1%-Aug 309:00 AMCase-Shiller 20-city IndexJun-5.3%5.1%5.2%-Aug 3010:00 AMConsumer ConfidenceAug-97.597.097.3-Aug 317:00 AMMBA Mortgage Index08/27-NANANA-Aug 318:15 AMADP Employment ChangeAug-190K170K179K-Aug 319:45 AMChicago PMIAug-54.054.555.8-Aug 3110:00 AMPending Home SalesJul-0.7%0.7%0.2%-Aug 3110:30 AMCrude Inventories08/27-NANANA-Sep 17:30 AMChallenger Job CutsAug-NANA-57.1%-Sep 18:30 AMInitial Claims08/27-267K265K261K-Sep 18:30 AMContinuing Claims08/20-NANA2145K-Sep 18:30 AMProductivity-Rev.Q2--0.6%-0.6%-0.5%-Sep 18:30 AMUnit Labor Costs - Rev.Q2-2.5%2.1%2.0%-Sep 110:00 AMConstruction SpendingJul-1.0%0.6%-0.6%-Sep 110:00 AMISM IndexAug- 110:30 AMNatural Gas Inventories08/27-NANA11 bcf-Sep 12:00 PMAuto SalesAug-NANA5.16M-Sep 12:00 PMTruck SalesAug-NANA9.10M-Sep 28:30 AMNonfarm PayrollsAug-200K180K255K-Sep 28:30 AMNonfarm Private PayrollsAug-190K175K217K-Sep 28:30 AMUnemployment RateAug-4.9%4.8%4.9%-Sep 28:30 AMAverage Hourly EarningsAug-0.2%0.2%0.3%-Sep 28:30 AMHourly EarningsAug-NANA0.3%-Sep 28:30 AMAverage WorkweekAug-34.534.534.5-Sep 28:30 AMTrade BalanceJul--$40.0B-$43.0B-$44.5B-Sep 210:00 AMFactory OrdersJul-2.2%2.0%-1.5%-



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