The Federal Reserve held a meeting Wednesday. Kevin Warsh spoke words. Traders analyzed those words like they were decoding the f*cking Rosetta Stone.
Warsh followed the script on interest rates. He did exactly what everyone expected. Five takeaways emerged from this non-event, because financial journalists need to justify their existence and can't just write "nothing happened, go home."
The chairman read from a piece of paper. Markets moved. Not because the words meant anything. Because algorithms detected the words and executed trades in microseconds while Dave from Reddit was still trying to figure out what "dovish accommodation" means.
Here's what actually occurred: Warsh maintained the status quo. He used the exact language every Fed chairman has used since Greenspan figured out that saying nothing in twelve paragraphs keeps everyone calm. The takeaways are that rates stayed where they were, will probably stay where they are, and might change later if things change. Groundbreaking stuff.
Retail traders spent Wednesday afternoon cross-referencing Warsh's statement against previous Fed statements, building color-coded spreadsheets, posting technical analysis on social media. They're convinced they found hidden meaning in his use of "monitoring" instead of "watching." They did not find hidden meaning. There is no hidden meaning. The man read a script.
The five big takeaways could have been one takeaway: the Fed did what it said it would do. But one takeaway doesn't fill a slideshow or generate ad impressions, so we got five. Each one a slightly different way of saying "steady as she goes."
Warsh's first meeting as chairman will be remembered for absolutely nothing, which makes it a perfect Fed meeting. The script was followed. The markets pretended to learn something. Everyone goes home believing they're informed.
Dave from Reddit is now long on volatility because Warsh paused for three seconds between sentences and that must mean something.
Photo by History in HD on Unsplash
Leave a Comment