“Fifty Shades of Tightening”
This is the title of a recent Wall Street research note, which invokes the title of the popular erotic novel “50 Shades of Grey.”
The note, of course, has nothing to do with erotic novels.
It’s about impact that an increase in the Federal Reserve’s target Fed Funds rate will have on the broader market.
The crux of the note is right here, and is admittedly less compelling than the novel:
There is no question that hiking the main policy rate, even by the smallest amount, will have a very powerful signaling effect. However, what may escape some observers is the simple fact that just hiking the Fed Funds target rate alone may have very little monetary tightening effect. The Fed Funds market — the only one directly “affected” by the policy rate setting — has shrunk to a shadow of itself in pre-crisis years, as banks have been forced to shift away from short-term funding. Consequently, we believe making Fed Funds a bit more expensive is not likely to affect broader credit conditions.
This is an important thing for markets to consider. Much has been and is being made about what the market reaction will be following the first interest rate hike since 2006. Rate hikes are expected at some point this year.
Though again, this has nothing to do with the novel, or really fifty shades of anything, let alone monetary policy.
What does this say about Wall Street research?
But what this note is really about is that there might just be too much research on Wall Street.
Of course, sell-side research is about serving a firm’s clients. UBS isn’t going to just not publish a note on the broader credit market implications of an increase in the target Fed Funds rate, because, say, analysts at Goldman Sachs or Morgan Stanley wrote the same thing.
And while of course part of the job of an analyst or economist is putting this research out, the titles are sort of the place to have some fun.
That is, until you have too much fun. Or you just say something ill-advised.
A recent example from Bank of America Merrill Lynch finds the firm using the title “Je Suis Bullish” in a note to clients, a play on the “Je Suis Charlie” phrase that became an international show of solidarity following the terrorist attack in Paris that saw 12 people killed. This isn’t just lame but in bad taste.
And the cheesiness of sell-side research titles is not a limited phenomenon.
A cursory scan of research notes sitting in my inbox from just the last couple of hours yields titles like, “All’s not quiet at the Western ports,” “Feelin’ alright,” and “The Sum of Vol Fears.”
And like, you’re probably more likely to open or read one of those notes than another note I’m looking at titled, “Updated thoughts on the bond contract shift” or “The Dollar, Earnings and Multiples.”
The point of writing something, whether for a reader on a website or magazine or newspaper, or an investing banking client, is to get readers interested and keep readers engaged.
There are many ways to do this.
But you’ve also got to deliver: this is not an erotic narrative about the Fed.
And you’ve also got to make good choice: an erotic narrative about the Fed probably wouldn’t be a good read anyway.