As you’ve heard me say before, I am not an economist, so I generally avoid trying to apply Fed speak and economic data to my day to day trading. There are plenty of financial media voices (both old and new) who seem more confident reading the Fed tea leaves. But their track record usually doesn’t justify that confidence. There is one voice who at least has a specific knack for capturing the mood of the room of the Federal Reserve Board, and that’s the WSJ’s John Hilsenrath. In mid August (prior to the late month flash crash) Hilsy got the antennas up of many large asset allocators:
Hilsenrath absolutely nailed the debate within the Fed. That debate eventually led to the delay in their rate liftoff at their Sept 17th meeting, and this was before the extreme volatility in global markets the last week and a half of August. Heck it helped nudge me to write this the following day: Warning Bells Scream in Silence.
Whether Hilsy is an amazing investigative reporter or he simply serves as a vessel for Fed trial balloons doesn’t matter. He has access. So this seems important. From last night:
While fed fund futures have been singing this tune for weeks, note the recent calm in global equity markets, reflected in spot VIX’s epic decline back to its 200 day moving average:
So in August, prior to the meltdown, Hilsenrath was warning (likely from sources within the Fed) that they lack ammo/tools to combat the next systemic financial crisis, and within two months now it appears that despite the calm in global equity markets (save for Brazil) it appears that that the economic conditions that could cause at the very least a global recession are only increasing. It’s a better bet to take the cues from a reliable Fed Whisperer like Hilsenrath on what comes next, as opposed to fairly counter intuitive price action in what is becoming an increasingly silly value proposition to commit fresh capital to equities.