BOB JANJUAH: Ben Bernanke Is Scared

bob janjuahBob Janjuah

Everyone’s waiting for the Fed’s big announcement and press conference this afternoon.  And everyone is also guessing what the Fed might do next.

The main thing no one can agree about is when the Fed will start tapering, or reducing, its bond-buying plan.

And the best way to predict when the Fed will taper, one must understand why the Fed would taper.

Nomura’s bear Bob Janjuah believes the “why” is fear.

From his note last week:

So for me, ‘tapering’ is going to happen. It will be gentle, it will be well telegraphed, and the key will be to avoid a major shock to the real economy. But the Fed is NOT going to taper because the economy is too strong or because we have sustained core (wage) inflation, or because we have full employment – none of these conditions will be seen for some years to come. Rather, I feel that the Fed is going to taper because it is getting very fearful that it is creating a number of significant and dangerous leverage driven speculative bubbles that could threaten the financial stability of the US. In central bank speak, the Fed has likely come to the point where it feels the costs now outweigh the benefits of more policy.

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