Going over these FOMC statements is akin to the ancient art of divining the future by the examination of animal entrails. I can see the conversation:
Demetrius: "I see what appears to be a twisted piece of gut. That is a sign from the gods that the future is twisted and unclear. Perhaps we should wait before going to war".
Apollos: " I see the same thing but tells me that our enemies will lie twisted and ruined on the ground. We should to war immediately".
Lydia: " I see a big fat worm. That tells me that this animal is so screwed up on the inside that we should not believe a single thing this entrail reading crap tells us".
The takeaway I get however has to do with inflation. We have been saying here for some time now, much to the chagrin of some of the gold perma bulls, that the market is not the least bit worried about inflation at the moment. That sentiment has been reflected in the flat to lower TIPS spread as well as the sinking commodity indices. Also, the concern of both the ECB and the Bank of Japan as been the LACK of INFLATION and what they like to euphemistically term, 'disinflation'.
Today our Fed said essentially the same thing if I am reading the entrails correctly.
Here is a short excerpt from the statement:
"... inflation edging lower in near term partly due to decline in oil prices..."
There are several other interesting things in the statement but that one seems to have caught the attention of investors/traders. Simply put - if the Fed is not worried about inflation than neither are we going to worry about is how the market seems to have reacted to things.
Another thing was the Fed's remarks on the recent "mid-October turbulence in financial markets". The Fed essentially glossed over that by stating that they saw the impact of those recent "world developments as likely quite limited".
Gold, which has been all over the place in today's session, seemed to finally digest the statement by heading lower. If there is no inflationary concerns and the Fed seems undeterred by any of the recent financial issues buffeting the global economy, traders viewed the statement as "hawkish" or perhaps a better way of saying it, "not dovish".
Like I said when I started this set of comments - deciphering these pronouncements from on high sure is an enormous waste of time but the fact is that the markets respond to them so one might as well at least try to get the flavor of the moment.
Gold has fallen to just above that key $1180 level a second time in today's session. Bulls are trying to hold it there but the mining shares falling out of bed have pretty much undercut any attempt to push it up and away from there at the moment. Maybe that will change before the session is out - give it 5 minutes!
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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