Baby Birds

I think people might be missing some of the nuance inherent in what’s happened to markets this month.

Or maybe they’re not really “missing it” as much as they are deliberately glossing over it because almost by definition, nuance takes some of the fun out of things, no matter what you’re talking about.

Take this, from former trader-turned Bloomberg columnist Richard Breslow, for instance:

Market participants have just become so inured to the expectation that God, in the guise of a central banker, will always provide. And they feel betrayed when asked to try to fend for themselves. Do you think birds, who after all are born to fly, feel more or less betrayed when booted out of the nest than traders, who, in concept, are meant to make continuous value judgments, when they are expected to think for themselves?

When the little birdie is sent packing it sinks a little, furiously starts flapping its wings and eventually goes happily, even gloriously, on its way. No fountain pen is awarded to mark this coming of age ceremony. Just the avoidance of smacking into the ground. You would think that investors would celebrate the challenges of navigating two-way markets with a little more enthusiasm. So far the most upbeat assessment I’ve heard is hopeful thinking from market-makers that they will be able to earn more spreads if their clients are forced to panic.

Obviously that’s funny and it’s delivered with the typical Breslow-vian flair for the derisive, but I’m not sure the “little birdies” are feeling betrayed by central bankers as much as they’re feeling betrayed by circumstance.

In the same note, Breslow goes on to write that “one of the worst, if easiest, messages peddled was that the withdrawal of liquidity would be a painless exercise if done with the sagacity promised [and] maybe that would have worked if inflation truly was dead rather than mis-measured and sleeping.”