A Speech About Nothing
Back in the days when CNBC was just getting started, NBC’s most popular show was the now immortal "Seinfeld". It became known as "the show about nothing", thanks to the series of episodes in which George and Jerry pitch a show to NBC remarkably like "Seinfeld", in a clear case of art imitating life.
Nowadays, the breaking news desk runs into a similar phenomenon: The speech about nothing.
That’s not to say that the words of Fed policymakers aren’t important or relevant. But as far as investors and the markets are concerned, if a Fed-related speech doesn’t contain anything that might give a clue to the future direction of interest rates, it’s essentially a non-event.
We don’t always know in advance whether this will be the case. Sometimes, the venue or the title of the speech is enough of a clue to let us know, but in other cases, we have to wait and see.
Today promised to be a big day for Fed speeches, with chairman Ben Bernanke, Chicago Fed President Michael Moskow, and San Francisco Fed President Janet Yellen all scheduled for public appearances.
At 1:00 pm, the first headline appeared: "Fed’s Moskow Does Not Mention Current Economy Or Policy In Speech." Was that a big yawn I just heard on Wall Street?
At 1:30 pm, the text of Bernanke’s speech began to appear. The first headline: "Bernanke Remarks Don’t Address Economic Policy, Outlook." Ouch.
As of this writing, the Janet Yellen speech hasn’t happened yet, but I fear more of the same. Again, these speeches aren’t irrelevant. They just don’t move markets. And the Breaking News desk, in the words of Meat Loaf, is all dressed up with no place to go. (If you were born after 1980 and don't get that reference, go out and get the album "Bat Out Of Hell". Do not illegally download it!)
Show Them How It’s Done, Hank!
Then you have the case of Treasury Secretary Henry Paulson, a Wall Street veteran who certainly does know how to move (or not move) markets. We can’t say that this was his intent when he testified before Congress today on the Bush budget proposal and other matters today. What we can say is that he certainly did just that.
Paulson told Congress that the value of the Japanese yen was fairly set and that he saw no evidence that Japanese authorities had intervened over the past few years to manipulate their currency’s value.
Instant currency trader translation: the Bush administration won’t be pressuring Japan to address the weak yen during the upcoming G7 meeting this weekend. The yen instantly sold off against other major currencies, a cause-and-effect immediately noted by "Morning Call" anchors Michelle Caruso-Cabrera and Liz Claman.
I’m very into "cause-and-effect". Which is good, because whether I am or not, someone in the control room will inevitably yell out to me, "Hey, why is the dollar/stock market/oil suddenly rising/falling?" I don’t always know, but today, thankfully, the cause was obvious.
Hank did it. Ben didn’t. Tomorrow is another day!