By Tyler Durden
Back in May, we first reported that Goldman became the first bank to dare to ask if the Fed, and Janet Yellen, have lost control of the market, if in slightly more polite terms. This is how Jan Hatzius phrased it: “Despite two rate hikes and indications of impending balance sheet runoff, financial conditions have continued to loosen in recent months. Our financial conditions index is now about 50bp below its November 2016 average and near the easiest levels of the past two years.” Several months later, after the third rate hike, Goldman found that once again, paradoxically, financial conditions eased further, in direct opposition of what Fed rate hikes are supposed to do!
Fast forward to this weekend, when we reported that that lovely word which describes the new normal so well – “paradox” – made a repeat appearance, this time in the last quarterly report by the Bank of International Settlement, which for the nth time issued an alert on the sate of the stock market, an alert which will be summarily ignored by everyone until after the crash, and reminded everyone what happened the last time financial conditions eased instead of tightening when the Fed hiked …read more