Hey, don't worry, I've been lied to
I've been here many times before
Girl, don't you worry, I know where I stand
I don't need this love, I don't need your hand
I know I could turn, blink, and you'd be gone
The Federal Reserve knows quantitative easing didn't work, and they want to exit as fast as possible without triggering widespread panic.
This isn't something that can be uttered in private, or even during closed-door 'Federal Open Market Committee' meetings, but it's palpable. At this stage of the game it all feels like a lie, and while we're accustomed to the government lying, this time they've put the professorial and mild-mannered Federal chairwoman to put us at ease. The market is saying we don't need your love, and we don't need your hand, but whatever you do...stay where we can see you.
Wall Street wants this crazy adventure to unwind in a manner that doesn't make it explosive. There can be no shifts in policy without significant foreshadowing. Before the minutes were read yesterday some Federal officials tried to get in front of it, and while they said the right things, the very fact that it felt like the need to assuage the street, backfired. Coupled with cautious warnings from the IMF on the global economy, Fed whispers hit the market with a thud. Investors grappling with a Fed, that's grappling with a reality of failure, but a legacy that could force their hands if economic data continues to deteriorate.
Those comments sucked the air out of a very flimsy rally, and then the minutes were released and no news was made, which didn't help since the street would love to have guarantees at this point.
Minutes of the Federal Open Market Committee
January 28-29, 2014
In their discussion of monetary policy in the period ahead, all members agreed that the cumulative improvement in labor market conditions and the likelihood of continuing improvement indicated that it would be appropriate to make a further measured reduction in the pace of its asset purchases at this meeting. Members again judged that, if the economy continued to develop as anticipated, further reductions would be undertaken in measured steps.