Discussion in 'Central Banking & Fed Reserve' started by Ahillock, Jan 7, 2016.
Former Dallas Fed President Richard Fisher Goes to Squawk Box Confessional: "We Frontloaded a Tremendous Market Rally"; Transcript of Video
Fed governors sometimes tell the truth, but generally only after they leave office, and always after the damage has been done.
In that regard, former Dallas Fed president Robert Fisher admits "We frontloaded a tremendous market rally to create a wealth effect ... The Federal Reserve is a giant weapon that has no ammunition left."
Fisher: What the Fed did, and I was part of that group, we frontloaded a tremendous market rally starting in march of 2009. It was sort of a reverse Wimpy factor. Give me two hamburgers today for one tomorrow. We had a tremendous rally and I think there's a great digestive period that's likely to take place now. And it may continue. Once again, we frontloaded, at the federal reserve, an enormous rally in order to accomplish a wealth effect. I would not blame this [the 2016 selloff] on China. We are always looking for excuses. China is going through a transition that will take a while to correct itself. But what's news there? There's no news there.
Squawk Box: I guess the question Richard is: How ugly will it get? If you do see this big unwind of Fed Policy which fueled a 6 and one-half year bull market, what does it look like on the way down?
Fisher: Well, I was warning my colleagues, don't go [inaudible] if we have a 10-20% correction at some point. ... These markets are heavily priced. They are trading at 19 and a half time earnings without having top line growth you would like to have. We are late in the cycle. These are richly priced. They are not cheap. .... I could see a significant downside. I could also see a flat market for quite some time, digesting that enormous return the Fed engineered for six years.
Squawk Box: Richard, this digestive period, does it usher in an era where assets can't perform in the absence of accommodation?
Fisher: Well, first of all, I don't think there can be much more accommodation. The Federal Reserve is a giant weapon that has no ammunition left. What I do worry about is: It was the Fed, the Fed, the Fed, the Fed for half of my tenure there, which is a decade. Everybody was looking for the Fed to float all boats. In my opinion, they got lazy. Now we go back to fundamental analysis, the kind of work that used to be done, analyzing whether or not a company truly on its own, going to grow its bottom line and be priced accordingly, not expect the Fed tide to lift all boats. When the tide recedes we're going to see who's wearing a bathing suit and who's not. We are beginning to see that. You saw that in junk last year. You also saw it even in the midcaps, and the S&P stripped of its dividends. The only asset that really returned anything last year, again if you take away dividends, believe it or not, was cash at 0.1%. That's a very unusual circumstance.
Squawk Box: Richard. This has been an absolutely extraordinary interview. For you to come on here and say "I was one of the central bankers who engineered the frontloading of the banks, we did it to create a wealth effect" and then you go on and tell us, with a big smile on your face that we are overpriced, which is the word that you used, and there would be some digestive problems, are you going to take the rap if there is a serious correction in this market? Will you equally come on and say "I'm really sorry we overinflated the market", which is a logical conclusion from what you've said so far in this interview.
Fisher: First of all I wouldn't say that. I voted against QE3. But there's a reason for doing this. Let's be fair to the central banks. We had a horrible crisis. We had to pull it out. All of us unanimously supported that initial move under Ben Bernanke. But in my opinion we went one step too far, which is QE3. By March 2009 we had already bought a trillion dollars of securities and the market turned that week. To me, personally, as a member of the FOMC, that was sufficient. We had launched a rocket. And yet we piled on with QE3, but the majority understandably worried we might slide backwards. I think you have to be careful here and frank about what drove the markets. Look at all the interviews over the last many years since we started the QE program. It was the Fed, the Fed, the Fed, the European central bank, the Japanese central bank, and what are the Chinese doing? All quantitative easing driven by central bank activity. That's not the way markets should be working. They should be working on their own animal spirits, but they were juiced up by the central banks, including the federal reserve, even as some of us would not support QE3.
Finally, but too late, we have a frank admission by a Fed president explicitly stating some things that needed to be said.
The markets are seriously overvalued
The Fed purposely sponsored bubbles, specifically for the wealth effect
So here we are, back with another enormous bubble, on purpose, with the economy clearly weakening again.
The wealth effect primarily benefited the already wealthy, at the expense of everyone else. In the process, corporations are more debt-leveraged than ever before, and houses are not affordable for those most in need of buying them.
The process was entirely counterproductive, especially from QE3 on.
FORMER FED PRESIDENT: 'The Federal Reserve is a giant weapon that has no ammunition left'
Jan. 6, 2016, 8:05 AM
Former Dallas Fed president Richard Fisher thinks the Federal Reserve is out of tools to help markets.
In an incredible interview on CNBC, Fisher said the Fed "front-loaded" a market rally after the financial crisis with its quantitative-easing stimulus program, but he warned that the fallout was coming — and that the Fed didn't have anything left to help markets.
"I don't think there can be much more accommodation," Fisher said.
Fisher added (via Mish Shedlock):
The Federal Reserve is a giant weapon that has no ammunition left. What I do worry about is: It was the Fed, the Fed, the Fed, the Fed for half of my tenure there, which is a decade. Everybody was looking for the Fed to float all boats. In my opinion, they got lazy. Now we go back to fundamental analysis, the kind of work that used to be done, analyzing whether or not a company truly on its own, going to grow its bottom line and be priced accordingly, not expect the Fed tide to lift all boats. When the tide recedes we're going to see who's wearing a bathing suit and who's not. We are beginning to see that.
In short, Fisher is allowing that the major critique of the Fed over the past several years — that it inappropriately distorted markets — is right.
CNBC's Simon Hobbs then asked Fisher whether he would sort of "apologize" to markets for having sent stocks too far too fast.
Fisher wouldn't quite go that far, saying the Fed was backed into a corner given the fallout from the financial crisis.
But it was the final round of quantitative easing — which was launched in September 2012 and was by far the Fed's most controversial postcrisis move — that was not supported by Fisher. And it is this final push from the Fed that he believes created conditions markets will now pay for.
And while you'd expect a Fed official to speak more freely after stepping down (Fisher retired last year after taking the top spot at the Dallas Fed in 2005), Fisher's commentary would seem to open up him and his colleagues up to even harsher criticism than what they typically face.
Why Would He Say This?
Posted January 6th, 2016 at 4:52 PM (CST) by Bill Holter & filed under Bill Holter.
Based on the title, you might be guessing “who said what”? It could be thought we are discussing one of the many ridiculous quotes by Jim Cramer. His latest was a rant about how our market should not be down this morning “because” North Korea allegedly lit off and tested a nuke. He went on to say “look at earnings, they can’t be the problem, Monsanto and Sonic beat handily”… Really? Good earnings at Sonic are a sign of economic and financial health?
We could also be talking about president Obama’s speech yesterday where he actually mentioned a few folks have been killed by guns in Chicago of all places. I could be wrong, but I have never heard him mention any problems in that utopian metropolis? Amongst the many points he tried to make, he spoke of the children in Sandy Hook who were “killed” with tears in his eyes. I don’t recall seeing any tears over the heroes who were actually killed in Benghazi? These were true heroes and not part of a drill.
(As an addendum, partner Jim Sinclair made comments to this paragraph):
“Where are the tears for the 2 volunteers who gave their lives to defend our flag and embassy. Where is the bronze statue that should be on the ground on the green now in Washington showing them in action. These volunteers set up a cross fire position and took out over 70 terrorists before they were overrun by shear numbers. They knew their end before they began. How about a statue to the two snipers that came out of a safe helicopter repelling down ropes to defend Blackhawk down pilots held down under severe incoming fire. These four men knew that what they were doing was going to end their lives painfully, but as modern day patriots were proud to give up their safety and lives for the honor of defending the American Flag and the US ambassador. What has become of repayment we all owe to our vets for all these boutique wars over oil and politics? Oh my what has happened to our country. This comment is probably not politically correct, will bring in hoards of liberal trolls, but does bring tears to my eyes.”
No, these two are not what has me baffled because I would expect what they said. Yesterday, former Dallas Fed President Richard Fisher was on CNBC. PLEASE watch this video ! I can’t believe what he said and I can’t believe there was no “power outage” at CNBC to shut him off! I can believe CNBC “edited for space” the 7:28 recording down to under four minutes where some of the “juice” was removed.
In a nutshell, Mr. Fisher admitted “What The Fed did, and I was part of it, was front-loaded an enormous rally market rally in order to create a wealth effect…” and followed with “The Fed is a giant weapon that has no ammunition left.”!!! I do want to point out the term “front loading” could be replaced with many other words such as “rigged, manipulated, supported or even forced” and the meaning would still be the same!
Why would he say this? And why now? I am sure these two questions, (the first in particular) are being asked all over in elite land. The “wizard” behind the curtain must be none too happy with Mr. Fisher’s confession! To bluntly answer the two questions, Mr. Fisher must have a guilty conscience and wants to separate himself from “blame” just as Alan Greenspan has attempted. Put simply, “he knows”! He knows what they (the Fed) did, he knows the result (bubbles everywhere you look) and he knows the “timeline” to the unwind (now)!
I don’t want to do a complete review of everything he said for the sake of time. Please view the video for yourself as the entire seven minute interview is as inflammatory and full of truth as any interview I could do in 30 minutes. The phrases “over valued, unwind, front loaded, giant weapon, no ammunition, horrible crisis, over inflated, we went one step too far, we had already purchased $1 trillion in securities by March 2009, that was sufficient and we had launched the rocket, it was the Fed the Fed the Fed and other central banks …that’s not the way markets should be working, markets were juiced up by central banks” were all included. I could go on and on but you get the picture. Mr. Fisher in one 7:00 interview wrapped up and confirmed everything us “nutjobs” have been saying all along!
He did stop one step short of the reality we nutjobs see mathematically coming. He got close when using the term “unwind” but stopped short and did not go all the way. This “unwind” is going to end in the closure of markets all around the globe. Forget about circuit breakers, the only way to stop the selling once it gets out of control …will be to take control by pulling the plug out of the wall! THANK YOU Mr. Fisher, now when someone laughs at me I will send them a link to your interview!
Fisher was always, for lack of better word, the "outsider" of that group of fed presidents. He was a dissenter on several occasions and was very vocal throughout his tenure. I've always liked his no BS approach. Very straightforward, clear and concise with what he has to say.
O.K. let me put my 2¢ where it doesn't belong
He was allowed to speak his mind
I've taken it as an "In your Face" type of a move:
The Progressives, the Elites, TPTB, etc, they seem to have a fault, they do tell us the truth
More often than not, it's hidden inside a bunch of double-speak, but if we're listening, and I think many of us do, we can hear it
It takes away part of the sting and later, when indictments should be coming along, they can simply say, "We told you so and it seems you didn't listen, Your Fault, Not Ours" and it seems to be like a Get Out of Jail Free card for them
I do consider it to be a fault, perhaps a human fault, IDK but they all do "tell the truth" - some just a bit more clever than others
Picture Hillary, Very Good at this game, Richard Fisher, not so much
Upside down world we live in
I hear ya Jay dub & buck but none of these pieces get a pass. There'll part of the problem. I don't need an insider to clue me in on the raping our economy is getn.
Give this interview while on the board and I'll give more respect to that. If I play judge in his future he's part and parcel to the racket
And the insiders all made money........................
I like how they call him the "former Dallas Fed President" but don't mention "former head of the Israeli Central Bank".
This guy is the ultimate insider and IMHO has more power than Mr. Yellen.
EDIT: Disregard. This is a different Fisher, not Stanly, but Richard. Sorry for the misinformation.
I'm open to a different perspective
But, let me ask, to what end would a presentation like Fishers benefit?
What percent of the American population is aware of the frauds perpetrated by the Fed? What percentage of Americans saw this interview? Of those who saw it, what percentage were NOT enriched by this "front loading"? He was preaching to the choir - most CNBC viewers thank him for the massive wealth transfer.
80% of Americans are drones who simply want to follow along and not make waves. They live then die and make no difference at all during the short time they're on the planet. That's fine if things are stable and the economy is doing well are but when you see the type of totalitarianism like we're seeing today and the economy being manipulated by a very small number of people in power they become even more oblivious of the underlying tyranny and eventually become victims of it. The problem with that is good men and women who actually don't accept tyranny and die fighting against it are the ones who die first.
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