ZERO

 

ZIRP is “zero interest rate policy” and what Ben Bernanke announced today was that the banking mafia will enjoy at least two more years of free money.  But I don’t believe that; I deem today’s FOMC statement to mean ZIRP is here forever.  Said another way, we are following the path of Japan.  The country is in such a mess that the Fed’s prior TRILLIONS of “liquidity” has done absolutely nothing – but they’ll keep doing it anyway.
 
When the FOMC statement was released there was the usual back and forth trade; however, the market did not like the lack of a direct QE3 comment - initially.  The S&P was slammed to a new daily low but didn’t stay there for long.
 
Once the low was in, Goldman Sachs gave its trading desk and all who listen to it the “buy signal” it wanted.  In a note to clients Goldman said…
 
The committee adopted an even easier policy stance than expected. First, the committee now anticipates that economic conditions are likely to warrant exceptionally low levels for the federal funds rate "at least through mid-2013" instead of "for an extended period." Although some form of strengthening of the guidance language was expected and the new guidance remains conditional on the economic outlook, we see this step as a dovish surprise. Three members--Fisher, Kocherlakota and Plosser--dissented from this decision, the largest number of dissents since November 1992.
 
Moreover, the committee effectively signaled an easing bias saying that it discussed "the range of policy tools necessary to promote a stronger economic recovery" and that it "is prepared to employ these tools as appropriate." In our view, this leaves open the possibility of further asset purchases ("QE3") should the economic outlook deteriorate further from here.
 
When this was released, the S&P was roughly at 1107.00 and immediately went up.  By the close the S&P exploded an additional 69.00-points!
 
Although the Fed is constantly saying the economy is on the mend (read: lying), it apparently sucks so badly that we need ZIRP for at least two more years.  Additionally, you will find these uplifting comments in the FOMC release…

• “moderated” (the economy)
• “flattened out” (spending)
• “considerably lower” (growth)
• “deterioration” (economic indicators)
• “downside risk” (to the future)
• THREE DISSENTERS – first time since 1992

 
No but really, it’s all good!
 
Trade well and follow the trend, not the so-called “experts.”
 
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

 

   

larrylevin@tradingadvantage.com
Trading Advantage
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