Yellen’s Insurance Policy

As Fed chair, you can hope that your message will be well received — even if it seems a little nonsensical.  I imagine these thoughts were foremost in Janet Yellen’s mind yesterday as she took the microphone.

If, however, you’re peddling the snake oil that the timing is right for a rate hike (with 0.9% GDPNow) and that inflation isn’t yet a problem (even though it’s quadrupled in the last four months), then you’ll be very glad to have a friend in Chicago working the VIX button — your insurance policy.

Even as Yellen’s most non-sensical answer landed like a thud amongst the friendly crowd of “journalists” VIX was in the midst of a 15% plunge.  It was enough to keep stocks on the rise and from performing a basic backtest, the type of which has been commonplace before central bankers took control of the “markets.”

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