Hilarious Santelli Rant
This is gold. Ever since becoming a bit of a Tea Party celebrity in 2009, Rick Santelli has delivered the goods and this clip is no different. Despite his theatrics, he brings up a great point about how little sense it makes for the Fed to maintain "crisis mode" when the market is hitting new highs and the fact that there really is no way to put the toothpaste back in the tube (worth watching just for that, lol). I'm interested to hear what ripple effects you guys think the Fed's eventual exit from the market will cause. Soft landing, or crash and burn?
Great clip Braverman.
Santelli is a smart guy, but I have to disagree with him. He argues that bullish equities indicate that we are in the clear and that the fed should back off. He seems to be ignoring the possibility that equities are rising to new highs because of fed intervention, and perhaps not in the way we would hope. I'm not an expert, but with artificially low interest rates investors look to equities for their returns. I don't want to call equities an asset bubble but someone more articulate than me can help me find the word for an investment that rises in value as previously viable alternatives are rendered less attractive. For example, at one point every hedge fund on planet earth had stupid amounts of cash parked in the apple vault because they didn't know what else to do with it.
My guess is that the market will rally when the fed exits; feds gone so we're in the clear. Potus will get on tv under a 'mission accomplished' sign and give us all an I told you so. Next batch of earnings come out and shit hits the fan. I invest in trampolines and park my setup outside 200 west street. Save a life and hopefully get an informational that I can turn into a first round interview.
Heres my Santelli impression:
"Listen everyone, the amputee has been wearing crutches for 3 whole days now and can stand upright. If he can stand upright than why is he being told to wear crutches? RIDICULOUS! TOOTH PASTE! LOUD NOISES!"
I don't think that he is arguing that bullish equities indicates we are in the clear. I think the more prevailing point is we have no idea where we actually are because of zero interest rates and fed easing policies. Yes, your seeing people more further and further out the risk curve because they really have no choice at this point but that doesn't really mean that people see equtiies or anything else as a value or a stronger investment than they were; they are just the only option for our need for yield and return because pensions etc are fucked in the long run as they promised unsustainable, high rates of return. That goes for every single human out there who has had money in anything over the past 50 years.
I think we are getting to the point where we need to actually see if the economy can stand on it's own without 80 billion a month in stimulus. We NEED to find out if we have actually recovered, and I'll tell you very simply the answer is a resounding no. We just inflated the bursting bubbles enough to isolate a majority of people from the real effects of a true deleveraging economy. We masked the pain they are feeling over in Europe by pulling forward entire generations worth of future earnings to keep the present stable. Listen, the longer QE continues the greater risk asset bubbles will inflate. Paper wealth will again rise, people will begin to re lever, and guess what! This will happen again. The difference this time is we already have blown our load on how much debt we can take on to insulate ourselves. Don't give me that bullshit that private sector entities are deleveraging because we are turning around and making up for it by leveraging up publicly. Unemployment, in real terms, has not come down and more and more people are entering government rolls because they have absolutely no choice.
I'm beginning to believe that the Fed simply will not exit this trade and just hold all their securities until the mature and roll off. There is absolutely no way on earth they can begin selling and paring down their balance sheet once rates start to rise. Look, the Fed is simply looking to avoid the deflation trap that has crushed Japan over long run and would absolutely, unequivocally destroy the United States. They want inflation, will call it growth, and praise that although we start employing more people prices are going up and real wages are falling.
Nail on head. I'm tempted to write a long ass post about how the low interest rates have forced new bonds down so low that they are no longer an option for the pension funds, and that the money has to go somewhere. These funds have to make a return, and so flood into big cap dividend yielding equities, forcing prices up way beyond fair value. Has been a big theme of mine recently.
Fed policy isn't influenced by equity performance. Two mandates, not three. I kinda hate Santelli - basically ZH with a TV platform.
Hopefully soft landing, very possible serious crash issues. This administration has favored stability over growth, so my guess is that they want as smooth a transition as possible.
How feasible a soft landing is, I don't know. Crank rates up even 25bps and the bond markets will go nuts? Or is everyone under the mistaken assumption that the FED is going to exit: remember, right now people are paying an inflation adjusted negative interest rate for the right to hold American debt because things are so fucked everywhere else. Why would the FED exit?
Given these circumstances, they should be issuing all the debt they can...
So great.
However, I agree with Cookies With Milken with respect to how Santelli ignores the Fed's positive influence. He doesn't mention it at all.
But the government couldn't keep handing out Obamaphones if it had to pay a normal interest rate on its debt...
always great to start the day off with a nice long-winded rant. very amusing. gotta say, he needs to work on his analogies. wind energy in the 7th century had nothing to do with 'clean' energy. it's cuz we couldn't figure out another way to generate electricity.
duh, brah.
Santelli is an institution.
Had CNBC on mute yesterday. Someone told me to look up because Santelli was squeezing toothpaste all over his hands and other things. Figured he was ranting about something and went back to what I was doing previously.
GDP dropped because Defense spending slowed down. We have increased consumer spending about to stop because of a 2% increase in payroll taxes. The equities market is booming because of cheap credit and QE. Real Estate is doing better because we have massive PE firms buying blocks of housing with cheap capital and renting the houses.
The economy simply looks pretty. Nothing strong or fundamental about it. We have 7.5% unemployment, with low labor participation and high underemployment/long term disability. Add to that people front loaded all of their consumerism and ruined their credit. Couple that with banks deciding to be responsible again and increasing their lending requirements.
aka the New Normal. It'll never go back to the way it was, and that isn't necessarily a bad thing (if you're young and have your shit together.)
Pretty hilarious, but Santelli misses a pretty big fact with respect to Fed action: Central Banking is a team sport involving all the major central banks working together. Sort of, really it's more like the Hunger Games where they're all trying to kill each other's currency, by killing their own(?) Something like that, either way, I'm pretty sure Jennifer Lawrence can fix everything somehow.
Okay, I'm pretty sure there's a useful analogy here, but I'm clearly not smart enough to figure it out.
Y/n?
Maybe, so, if you take the NFL, the teams would be nations, the coaches would be presidents, the players would be the economies, and the owner would be the central bank. That seems like it'd work. But, then, what would the NFL itself be? The global swaps market? Might work.
Thoughts?
Est consectetur est ea voluptas. Quo vero eos tempora ducimus quis. Autem possimus quo inventore eum aut. Quia saepe quae temporibus.
Amet iure enim necessitatibus rem est atque. Architecto dignissimos cupiditate voluptatem commodi. Excepturi consequuntur et omnis repellat dolor. Provident est asperiores magnam est laborum enim eaque sint. Quam saepe est odit quos ratione fugit.
Possimus qui sit tenetur. Sit reiciendis qui nihil laborum quia expedita error totam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...