How to Tell a Hawk from a Vulture


“Participants noted that devoting additional time to discussion of the possible costs and benefits of various potential tools would be useful, and they agreed that the September meeting should be extended to two days in order to provide more time.” – Minutes of 9 August, Federal Open Markets Committee Meeting

It’s just a question of “when” not “if”.

Money-Printing 3 is on the way.

The mainstream likes to talk of monetary “hawks” and “doves” at the U.S. Federal Reserve.

The term “hawks” refers to those who are supposedly cautious about keeping interest rates low as they fear it will cause higher inflation.

The term “doves” refers to those who are supposedly not cautious about keeping interest rates low. They see higher inflation as a necessary payoff in the drive to boost the economy.

In reality there aren’t any hawks and doves at the Fed. They’re all just vultures in disguise.

They’re pro higher inflation and more money printing. It’s just some are more pro-inflation than others.

So whether it’s at the Fed’s September, November or December meeting (note: the Fed doesn’t meet monthly, it meets a total of nine times this year), it’s more likely than not that the Fed will unleash another round of money printing.

You only have to read the latest minutes and compare the language to previous minutes to see they’re gearing up for it.

The changing glass at the U.S. Fed


Here’s a quote from the March meeting noting non-farm payrolls:

“The labor market continued to show signs of firming. Private nonfarm payroll employment rose noticeably in February after a small increase in January, with the swing in hiring likely magnified by widespread snowstorms, which may have held down the employment figure for January.”

In other words, the Fed liked what it saw. Which is hardly surprising seeing as it was half-way through its money-printing 2 ruse.

Here’s what the Fed said at the August meeting:

“Private nonfarm employment rose at a considerably slower pace in June and July than earlier in the year, and employment in state and local governments continued to trend lower. The unemployment rate edged up, on net, since the beginning of the year, and long-duration unemployment remained very high. Meanwhile, the labor force participation rate moved down further through July.”

Now look at the following chart. It shows monthly non-farm payroll numbers over the last two years:

United States Non-farm Payrolls

What do you notice the most? That’s right, non-farm payroll numbers are volatile. It’s pretty hard to analyse the data and draw conclusions on a monthly basis.

Yet back in March when the Fed met, the members looked at the January and February numbers and liked what they saw. Things were heading in the right direction… they thought.

Roll forward a few months and two months of low numbers, suddenly the Fed needs to do something.

The other thing you’ll notice from reading the August minutes is there’s no mention of the drop in the July unemployment rate from 9.2% to 9.1%… and no mention of the fact that four days before the meeting the Labor Department announced total payrolls had beaten market expectations.

A cause for celebration? Not on your life. As far as the Fed is concerned, it’s got to do something. If they highlight the positives, it’s less reason for them to meddle.

Stuffing the economy

So now the Fed has to focus on the negatives. We wouldn’t want the economy righting itself would we? Not when there’s meddling to be done…

But let’s get something straight. The actual underlying economy hasn’t changed. It was the same in June and July, as it was in March – stuffed.

The only difference is the Fed is now doing the old “glass half empty” routine… so it can keep printing money and keep propping up its pals at the banks.

And the markets can see the Fed money printing too. Traders are placing the same old bets. Gold has rebounded after the heavy sell-off last week. It’s now trading at USD$1,827 and AUD$1,713.

And as you’d expect, traders are selling the safety of the Swiss franc and buying the risky Aussie dollar.

As you know, the Swiss franc is one of our early warning signals for crashing markets. The climb back to CHF0.875 this morning has the alarm bells ringing again… albeit quietly at the moment.

It tells you traders are backing out of safety and plunging forward into risky bets.

Enemy of the People

The 500-point snapback in the Aussie market since the recent low proves this is happening. In fact, if you look at the charts, there’s almost a perfect correlation between the Aussie dollar/Swiss franc exchange rate (blue line), and the S&P/ASX 200 (red line):

Aussie Market Chart
Click here to enlarge
Source: Google Finance

But remember: don’t start thinking this is a sure sign of a strong Aussie economy and share market. The reality is that the extreme volatility is the result of the actions of one man… Dr. Ben S. Bernanke.

Or as we prefer to call him: Public Enemy No. 1.

And one thing is for sure, expect the volatility to continue as we approach and pass the next Fed meeting on September 20-21.


PS. Slipstream Trader Murray Dawes is releasing another free market update on You Tube this afternoon. I highly suggest you watch it. The volatility index (VIX) is pushing 30. And this month alone, billions has been wiped off the market (and billions put back on again). This market action is causing havoc for most traders. But Murray has been picking the swings like a peach. In fact, he’s put his readers in a position to bank big gains. To see where Murray expects the market to head next, click here… It’s completely free.


Kris Sayce

Kris Sayce

Publisher and Investment Director at Money Morning Australia

Kris is never one to pull punches when discussing market developments and economic events that can affect your wealth. He’ll take anyone to task — banks, governments, big business — if he thinks they’re trying to pull a fast one with your money. Kris is also the editor of Tactical Wealth, and Microcap Trader — where he reveals the best opportunities he’s discovered in the markets. If you’d like to more about Kris’ financial world view and investing philosophy then join him on Google+. It’s where he shares investment insight, commentary and ideas that he can’t always fit into his regular Money Morning essays.

Kris Sayce is the Publisher and Investment Director of Australia’s biggest circulation daily financial email, Money Morning Australia.

Kris is a fully accredited advisor in shares, options, warrants and foreign-exchange investments.

Kris has close to twenty years’ experience in analysing stocks. He began his career in the biggest wasp’s nest in the financial world — the city of London — as a finance broker back in 1995.

It’s there where he got his ‘baptism of fire’ into the financial markets, specialising in small-cap stock analysis on London’s Alternative Investment Market. This covered everything from Kazakhstani gold miners to toy train companies.

After moving to Australia, Kris spent several years at a leading Australian wealth-management company. However he began to realise the finance and brokerage industry was more interested in lining its own pockets with fat fees, commissions and perks —rather than genuinely helping out the private investors they were supposed to be ‘working’ for.

So in 2005 Kris started writing for Port Phillip Publishing — a company which was more attuned to his investment outlook.

Initially he began writing for the Daily Reckoning Australia— but eventually, took over Money Morning. It’s now read by over 55,000 subscribers each day.

Kris will take anyone to task — banks, governments, big business — if he thinks they’re trying to pull a fast one with your money! Whether you agree with him or not, you’ll find his common-sense, thought-provoking arguments well worth a read.

To have his investment insights delivered straight to your inbox each day, take out a free subscription to Money Morning here.

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47 Responses to “How to Tell a Hawk from a Vulture”

  1. TRB

    Drood that’s where intregity and responsibility has been lost in our society.

    As Viktor Frankl said “Man has the freedom to choose”.

    As for HIH and Babcock Brown employees they knew, rejecting insurance policies to people in a very bad situation was wrong.
    Babcock & Brown Employees knew alot of the financial products they were selling 100% sure to blow up.
    Milgram experiment increase the volts to 400 volts and kill the person as long as I don’t need to take responsibility and I still pick up my money every week.

  2. M&M


    A business might have been overleveraged and badly run, they may fail becasue of it, but if their product or service is good (not toxic, not a saham) and the demand for their product or service still exists then many of the employees will find a job elsewhere in the industry….. eventually.

    But yes there will be dislocation.

  3. Drood

    TRB and M&M ….I dont disagree with what your saying , what i advocate is a little bit of the innovation youre so fond of. Everyone agrees the system has failed. People may differ on the reasons for failure but the fact remains. We need a new , completely different system if we are ever going to move on.

  4. M&M


    Until the system changes – the government and private sector will continue to act the same.

    When times are good we borrow & spend like drunken sailors, when really we should rat hole most of the surpluses or invest them in something productive.

  5. J.C.

    “Cat go my tongue”? I answered your post! But is it serious??

  6. TRB

    We are showing innovation how offer do you hear short sellers are the good honest guys?
    Never the media thinks they are public enemy number one.
    Drood innovation is to happen you must have responsibility and deep sense of purpose.
    Example is Cochlear that invention the professor who made that happen did not do it for a bunch of money or share options.
    He did for a meaning a purpose to help humanity as Viktor Frankl would say.
    So you want society to change needs to start by taking responsibility not the victim mentality of today.
    I lost my money in the sharemarket who can I sue.
    I lost my job because those nasty shortsellers.
    People lose money because they herd, do not think independently and do not do the hard research themselves.
    People lose jobs fact of life, get over it look to help humanity in a productive way.

  7. Drood

    TRB…. Drood innovation is to happen you must have responsibility and deep sense of purpose.

    Where,s yours?
    Is short selling someone the only idea you have?
    Its not even yours.
    You guys really are dinosaurs. What about a system that doesnt use money (and i have lived in one).
    The free market that you guys so espouse would work perfectly if there was no money.
    Innovation means coming up with something new, something that has not been tried before.
    It has absolutely nothing to do with losing jobs or who pays what taxes.
    It has everything to do with helping each other to achieve more.
    In my teens , talk was of a future where all people worked less , had great healthcare and more leisure time to enjoy with their families.
    What future has your system brought so far, nothing but negativity. you can only have it if you have the money.
    What exactly do you do that is so productive? You tell everyone to stop whingeing and earn their living, while you gamble your lazy ass off, screwing their living over and whining about about it being the banks, governments anyone but your own fault that you cant make money.
    Hows about taking a leaf out of your own responsibility manual and earning your living through actual productive work.
    What is your ambition? To die laid on top of a bigger pile of money than anyone else?
    Tell me something new, tell me how you intend to make the world better for your children to live in.

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