Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Janet Yellen, U.S. Interest Rates and Market Psychology at Major Market Turns

Interest-Rates / US Bonds Dec 01, 2013 - 04:47 PM GMT

By: EWI

Interest-Rates

Janet Yellen just moved closer to her place in history when the Senate Banking Committee approved her nomination to lead the Federal Reserve. The full Senate is expected to confirm. If so, she will be the first chairwoman in the central bank's 100 year history.

But when her term concludes, gender may be secondary to the narrative about her time at the helm. The larger focus could be that Yellen was at the helm of economic disaster.


Here's what Robert Prechter said in the October Elliott Wave Theorist:

Economists and journalists are taking Janet Yellen's approaching stint as Chairman of the Fed at face value and opining what she will bring about for the economy. Our socionomic point of view prompts a different tack and makes us ask what social mood will bring about for her.

...Social mood is a powerful regulator of public perception. Consider this contrast: Nixon lied to protect his buddies, and his career and reputation were ruined. Clinton lied to a grand jury and the nation to protect his own hide, but he makes six figures a speech. What made the difference? The answer is that social mood was deeply into a negative trend in August 1974, when Nixon finally resigned and entered retirement in disgrace; whereas it was soaring in a positive trend in 1999, when Clinton survived impeachment and went on to become perceived as an elder statesman. The stock market had been falling for over eight years in Nixon's case, and it had been rising for over eleven years in Clinton's case. This is why society condemned Nixon but forgave Clinton.

The coming negative trend in social mood will cause Yellen to fail at her job. When bond investors become more cautious -- as they will in a negative-mood trend -- the image of central-bank potency will begin to dissolve. That will neuter the Fed's presumed jawboning power. As for its ability to force inflation, the bond market, not the Fed, is ultimately in charge of interest rates. Investors' demands for higher rates will negate the Fed's inflationary activity. As rates on Treasury bonds move up, the values of existing bonds will fall, lowering the total value of money+credit, thus neutering the Fed's inflationary policy. Finally, when bond buyers begin demanding 4%, then 6%, then 10%, then 20% interest for assuming the risk of owning a Treasury obligation, both the government and the Fed will face ruin. ...

Indeed, 10-year Treasury note yields stand near a two-month high.

Moreover, bond yield spreads have widened:

The difference between the yields on two- and 10-year notes widened to 2.54 percentage points, the most since August 2011 as investors demand more to own longer-term securities ... A report showed producer prices fell last month, suggesting inflation is tamed. The Treasury sold $13 billion of 10-year inflation-protected securities at the highest yield since July 2011.

-- Bloomberg, Nov. 21

Worried bond investors may well demand even higher yields down the road.

Bond yields skyrocketed during the Great Depression; the October Theorist also said that the Yellen era will likely have a parallel with former Fed chair Eugene Meyer, who presided over the central bank during the Great Depression.

For a limited time, you can read Robert Prechter's 6-page report to prepare for what EWI sees ahead. In this report you'll learn why the risk of deflation is mounting and how you can see it coming in the prices of gold, gas, real estate, crude oil and other markets. See below for full details.


What Do the Prices of Gold, Gas, Real Estate and Crude Oil Tell Us About the Economy?
Read this new FREE report from Robert Prechter

Robert Prechter of Elliott Wave International gives you a clear sense of what really drives the markets and the U.S. economy. In this FREE report, you will read about real estate, crude oil, gold, and other markets (with the support of 16 charts!) to see why these markets point to deflation rather than inflation - exactly the opposite of what the Fed wants. But never mind what the Fed wants: What you want and what you will get is a new perspective on the financial markets to help you invest prudently.

Download your FREE report by Robert Prechter now - for a limited time >>

This article was syndicated by Elliott Wave International and was originally published under the headline Janet Yellen Is Close to Making History in Two Ways. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in