The Federal Reserve’s increased transparency, such as indicating last week that it may taper quantitative easing (The Fed’s massive easing itself can hurt markets, El-Erian tells CNBC. 

“The longer they stay unconventional, the deeper they venture with these experimental policies, the more the costs and the risks start to become large relative to the benefits,” he notes. 

But, “there’s a second really interesting issue, which is, are they giving us too much guidance?” 

The openness can accelerate market declines, El-Erian says.  (Ed Note: 

Just look at the amount of information the Fed has given investors, he states, adding that the Fed has thrown out lots of numbers for when it will start tapering QE, such as a 7 percent unemployment rate, a 6.5 percent unemployment rate, a date this year and a date next year.

“When you give so much guidance to the market, you risk over-determining,” El-Erian explains. “So what happens, people jump to the terminal values. They don’t even wait for the journey. They go immediately to the destination and the re-price. Then the bad technicals kick in.” 

Even St. Louis Fed President James Bullard questioned whether Bernanke went too far in specifying the central bank’s intentions.

Bullard said in a statement that he “felt that the committee’s decision to authorize the chairman to lay out a more elaborate plan for reducing the pace of asset purchases was inappropriately timed.”

Ed Note: It would seem investors are favoring the strategy indicated by both of these charts