The Day Ahead: Time for Fed Silence

 | Jul 11, 2013 | 8:00 AM EDT  | Comments
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Dear all relevant members of the Fed:

I, as well as most #FinPros, kindly ask you to please shut the hell up. Quite frankly, your frequent communications done in real-time, either from the bearded chairman to the Dallas Fed guy, are creating so many inefficiencies in an alleged efficient market that it's disturbing.

Ben, this isn't the Great Depression period you lovingly chronicled on Wednesday evening; humans are walking around with iPhones and iPads and executing investment decisions based on your words.

Most importantly, you are crushing the souls of the average investors (who have not returned to the market, I don't care what those fund flows say). These average investors have no clue whatsoever the correct data to analyze, who to trust or where to go with their hard earned savings.

I once applauded your mission of greater transparency following years of Greenspan's KGB-run Fed. I am indeed aware now of my error in judgment, and long for quietness from your institution so that markets could function properly -- even if they have to be injected by the crack being dealt to whacked-out machines.

  • Investing History: There was no chapter in "Intelligent Investor" titled: "How to Analyze Fed Minutes."

It's high time for you to wake up, reducing Fed communications so as to restore sanity to the investing process. At least, please work closer together behind the scenes to form a cohesive plan to articulate to the markets. By cohesive, I mean not having people vying for the top job -- or paid contributor appointments post-Fed service -- spewing completely off-consensus opinions and using jargon that rattles the brains of investment advisors, traders and their eager- to-win-client bases.

Your humble servant,

Mr. Brian Sozzi

Back to Reality

As you might imagine, hysteria regarding the Fed's actions has arrived to my email inbox! When I land emails from very educated, sophisticated investors saying they want to exit all long positions on fear of Fed minutes sending the market into a 3%, two-day tailspin something has gone horribly wrong with investing. Admittedly, I closed shop on the Citigroup (C) long trade I recommended to clients on Monday (a tidy 3% profit, thank you very much). I did this just to be as clean as possible into Wednesday's late afternoon ridiculousness.

Here is where my head is at post-melodrama:

Bernanke dropped one of those comments that will probably be used as a reference point should equities keep on ripping. Remember that comment so you have it mentally handy: "Highly accommodative monetary policy for the foreseeable future is what is needed."

It doesn't matter if this line suggests a summer economic swoon; the continued suppressing of Fed taper talk puts the bulls in a similar position to the first half of 2013.  I think this is happening because Bernanke still has been unable to properly explain the Fed's unwinding plan, which is a function of this type of unconventional policy never being in the mix before. The dude is creating on the fly!

Mark July 10, 2013 -- Ben Bernanke reaffirmed that he is in fact a transformer -- one that morphs into a helicopter to fight his arch nemesis, disinflation and 14% underemployment.

In other news:

  • Fastenal (FAST) had same-store sales that bottomed in April, encouraging for similar industrial companies.
  • Consumers are being "forced to make spending choices between basic needs and wants", noted Family Dollar (FDO).
  • Overall, second quarter earnings season continues the early theme of better than expected sales and profit margins. From my perch, it looks as if companies are still finding ways to drive productivity and surprisingly, are combining those gains with pricing power.

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