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U.S. is now Japan

Well, the "most anticipated" September FOMC meeting has come and gone, and no hike yet again. After the release of the FOMC statement, SPX rallied to a high of 2020, then sold down 30 handles into the close, and another -28 handles at today's open. Why? Well maybe people have finally realized the Fed is absolutely clueless, and that they have been completely misleading.

 

Two major surprises happened yesterday. First was the introduction of a negative dot on the FOMC's infamous dot plot, despite the "Fed hike anytime now" mantra. Second, was when Reuters reporter Ann Saphir asked Yellen about never lifting off from zero.

Fed Dot Plot from Yesterday's Statement. After talking about lifting off since 2009, and especially all the talk this year alone, "prepping markets for a lift-off", we now have a negative dot on the dot plot. 

 

The second major surprise was the exchange between Reuter's Saphir and Yellen:

Ann Saphir: "say the U.S. economy has been growing, are you worried with the global interconnectedness, the low inflation globally.... that you may never escape from this zero lower bound?"

Yellen: "I would be very surprised if that's the case. That is not the way I see the outlook, or the way the commitee sees the outlook. Can I completely rule it out?  I cannot completely rule it out. Really that's an extreme downside risk that in no way in the center of my outlook"

 

Well, as I mentioned multiple times over the years, my biggest fear was that we are heading in the way of Japan, where they have had ZIRP for over 15 years now. We are now 7 years into a ZIRP policy, and the Fed cannot even move a quarter of a percent. What does that say, when after 7 years, our economy cannot handle a lift off by only .25%, and that now the central planning academics are now talking negative rates and cannot rule out never leaving ZIRP land? Still have faith in the same people who created the last crisis and are now helping us "recover"?

 

 

Yesterdays Presser: Fast forward to the 39:50 mark