There are only three words that send a chill down the spine of Ben Bernanke -
Ron, Paul, and Deflation. His life's work is devoted to the
avoidance-at-all-costs of the latter (and probably the former in reality). As we
discussed here two weeks ago, his actions in extreme monetary policy have
all occurred at periods when the market's expectations of future rapid de- or
dis-inflation have increased rapidly. As we noted then: without inflation
break-evens dropping, the Bernanke put will not arrive; but the market in
its infinitely efficient wisdom has created a self-defeating spiral of
BTFD reflexive front-running on any rapid spike down in future inflation
expectations - which implicitly sparks a non-dis-inflationary reaction
and removes Bernanke's punchbowl for another day. This has occurred 4
times this year - with this week's early plunge being caught by Draghi
and Hilsenrath - and with inflation break-evens almost at their highest in 10
months, it would appear the 'desperate-not-to-miss-the-life-giving-rally' market
just removed its own blood supply.
Each time the inflation break-evens have cracked down hard towards 2.0%, Bernanke has stepped up bowl-in-hand and ladled out the yummy QE Kool-Aid; 2012 has seen 4 'mini-spikes' which have all been triggers for responsive equity buying to front-run Ben's-Bowl. But as is clear, the more this occurs, the less likely the bowl is to actually appear!
Each time the inflation break-evens have cracked down hard towards 2.0%, Bernanke has stepped up bowl-in-hand and ladled out the yummy QE Kool-Aid; 2012 has seen 4 'mini-spikes' which have all been triggers for responsive equity buying to front-run Ben's-Bowl. But as is clear, the more this occurs, the less likely the bowl is to actually appear!
No comments:
Post a Comment