Is The Bernanke Put Now Dead?

Go figure:

The US central bank discusses a slowing economy, and makes it plain to speculators that they are on their own, that there will no imminent rescue, no bail out, perhaps even the end of the Bernanke Put.

Markets throw a two day, 5% hissy fit.

The question surrounding this whackage that traders should be asking themselves is simple: Is this the beginning of a deeper sell off, or is this the end of a correction that began in the spring and has taken US markets down nearly 20%?

The parallels between 2010 and 2011 are obvious: Coming off a big Fed-induced equity rally, the slowing economy begins to make investors wonder about an earnings peak and potential reversal. A market sell-off of almost 20% gets the Fed chairman’s attention.

In 2010, a Jackson Hole speech leads to a broad based liquidity program, aka QE2. Its rocket fuel, and gets blamed for the next leg up of the equity rally, the gold rally, food inflation, and even the Arab Spring.

The difference, of course, is that there is no QE3.

Global equities plummet 5%; Copper gets shellacked, Gold and especially silver see sellers. Bernanke gets criticized, but so was Volcker (unjustly) lambasted, as was Greenspan (deservedly so).

The question all of this raises in my mind is this: Has Bernanke recognized the moral hazard of the Fed guarantee to traders formerly-known-as-the-Greenspan Put?

Asked differently, is the Bernanke Put now dead . . . ?

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

It's way out of the money, at the least

Asked differently, is the Bernanke Put now dead . . . ?

reply: ————– Hell no, it’s just too early. My guess is November, 2011. It’s far enough off for the markets to fall and hit a congestion level. I’m thinking S&P 900ish or lower. It’s far enough to the end of the year to accomplish window dressing and make Q4 look like an improvement. QE3, Nov 2011, $1T.

Also, Bernanke has built a career on money printing, trickle down economics, asset inflation, and wall street appeasement. He won’t declare his life’s work to be a wasted effort and a mistake by holding back on a big one. Japan has survived an explosion of money printing. So will the US.

The Bernanke putz is alive and well.

“Has Bernanke recognized the moral hazard of the Fed guarantee to traders formerly-known-as-the-Greenspan Put?”

Nope. We just left QE2 literally 2.5 months ago. With 3 dissents the economy needs to worsen before QE3. The language in the statement left more action on the table for the future. We’ll be QE3ing within 2 meetings.

If its not, it should be

the world is looking at 1100 before a counter trend rally commences. If the counter trend rally doesn’t hold on, then Bernanke will pull out his QE3 (my personal opinion).

The US central bank discusses a slowing economy, and makes it plain to speculators that they are on their own, that there will no imminent rescue, no bail out, perhaps even the end of the Bernanke Put.

—————————————————————————————————– Way to be HONEST and speak in CLEAR LANGUAGE, Bernanke.

Didn’t Greenspan teach you anything???

I think this a valid talking point -provided we agree that it existed. And the tone on floor today was on this pulse. My pedestrian comment wud be that you- as have most- substituted QE for LSAP. CB swap lines are a form of QE as they can create ex reserves. IF- and its iffy- the EU-ECB can create facilities of critical mass –then Fed’s balk on more LSAP but continued QE will look smart

Instead of writing puts, Bernanke ought to be purchasing a put on long Treasuries.

He’s levered more than fifty-to-one. He’s buying the top of a thirty-year secular bull market in bonds. And he’s unhedged. Or as ZZ Top put it: ‘He’s BAD … and he’s nationwide.’

When long rates move back up, as they surely will do, Bernank-o will be carried out of the Eccles Building on a stretcher.

Bernanke is Kweku Adoboli on steroids, coke and mushrooms. Who will stop the madman?

dead Hobo say:”Also, Bernanke has built a career on money printing, trickle down economics, asset inflation, and wall street appeasement”

Uh, no. Ben built a career as an academic. Being the Fed Chair isn’t exactly a “stepping stone” position.

Let’s hope that the Fed Put is over since then end result seems to be holders of wealth not doing anything productive with it (“investing” in gold, is not a productive activity, it is a bubble inflating activity).

Look at it this way: the S&P 500 is still about 10 percent over what it was ten years ago. So all is not lost yet.

On the other hand–my credit union is now offering 3.85 with no points on a 30-year mortgage. It might actually be worth refinancing.

What’s the opposite of the Bernanke Put? Is it the Congressional Call?

I’m not at all sure that the Bernanke put is dead … OK, it is and it isn’t.

When the banksters squeal loud enough, and the politicians cry enough, there will be a QE3 — so it’s not dead. However, QE3 will have no impact whatsoever, most likely we will see a repeat of yesterday’s post-FOMC behavior upon its announcement. So it is dead.

We live in a quantum reality. Call it Schroedinger’s QE.

What WILL change things? Nothing that the government/Fed are willing to do.

Start by fixing what is broken — restore the regulatory constraints (Glass-Steagall, limits on bank leverage, eradicate the Commodity Futures Lunacy Act of 2000, HEAVILY regulate credit default swaps (or better yet, ban their use by banks or any publicly-traded company, utilize the antitrust laws to break up TBTF companies), wipe out the insolvent companies and allow capitalism to work again. Jail the most visible perps, making a statement to the rest.

Then we can move on to getting corporate money out of politics, establish term limits for Congress, and passing legislation that makes violation of campaign promises a breach of contract that is actionable by the voters — either by recall, no-confidence votes, or some mechanism.

We do need to downsize government, but not the rank and file so much as the bloated administrative and legislative branches. And a limit on Supreme Court terms would be nice as well — something long enough to fulfill the spirit of the current “elected for life” nonsense, but not so long that the increased life spans of people today (as compared to that in the 1700s) leaves us with 9 grumpy old senile fools on the bench for decades. A dozen years at least for their terms, but two dozen is way too much.

And then we need some ethics in our laws regulating business conduct. No more “anything goes”. For public corporations, we need laws that constrain what executives and board members can be paid, and especially limiting the cash payments to them. Some kind of formula relating the average non-management wage, the after-tax profits of the firm, and the medium-term performance of the firm, cranking out a range of values that executives can be compensated within. And when I say “average non-management wage”, I am referring to ALL the employees of the company, including those in China and other parts of the world. No more cutting wages for the average employee to bump profits so that the CEO can make his/her bonus. When employees take a cut in pay in order to make the company more competitive, I expect management to lead the way.

Don’t like those rules? Then take the company private. But if you’re gonna sell stock to the public, be prepared to play by rules.

Yeah, I know, we’re never gonna see ANY of those ideas put into practice. But that’s what it would take to make the system work again.

I think the selling is coming from the realization that congress will destroy liquidity regardless of what the FED does. It looks like austerity trumps FED:

Republican Defections Defeat Bill With Disaster Relief Aid

Sept. 21 (Bloomberg) — The U.S. House defeated a spending bill that included $3.65 billion in aid to victims of recent natural disasters and would keep the government operating past this month, delivering a setback to Republican leaders.

Republicans objecting to the measure’s overall cost joined Democrats opposed to a spending cut aimed at shrinking the price tag to derail the measure, 230-195. Opposing the legislation were 48 Republicans and 182 Democrats; backing it were 189 Republicans and six Democrats.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/09/21/bloomberg_articlesLRWDV31A1I4H.DTL#ixzz1YhBDqygo

I must say, I am impressed by the decline/rout following the Fed statement yesterday, and today’s rather muted (non-existent) follow-through. My guess is that some “artificial” mechanism is providing a veneer of fake prices, and that if any significant volume emerges, it would vanish in a digital heartbeat.

Wile E. Coyote is doing a splendid job of not looking down, as he walks across the air between the cliffs.