Comments on: Notes From Underground: Will the Weak Retail Sales Force Bernanke to Reveal the New Power Tools?

By: yra

yra — Tue, 17 Jul 2012 17:00:12 +0000

Danny–probably both but also the need for quality for the repo market–the combination I believe is driving a great deal of this

By: Danny

Danny — Tue, 17 Jul 2012 16:29:48 +0000

Yra,

Do you have a sense for the relative popularity of buying negative yields to express a view that the EURO will break-up vs. buying negative yields as a safe haven from risk assets?

Danny

By: yra

yra — Tue, 17 Jul 2012 12:26:50 +0000

Kevin–right on target—i think we will hear exactly what you say–the Portfolio Balance Channel is alive and well and merely peering over the FISCAL CLIFF

By: Jerry thoel

Jerry thoel — Tue, 17 Jul 2012 12:14:25 +0000

the slower fool theory ;I love that …Fall of 1987,
written before or after the crash???

By: Kevin

Kevin — Tue, 17 Jul 2012 10:04:59 +0000

Hi Yra
With a policy-driven market I think analysis using game theory could be more useful than evaluating economic data points. I think Bernanke’s biggest risk is announcing QE3 and not getting the expected positive response from risk assets. A blocked “portfolio balance channel” would be a problem that could only be solved by huge direct risk asset purchases, and it may be a bit soon for that.

With the S&P within 4% of it’s 4 year high, and very low corporate bond yields, it would be a big risk for him to provide any clarity now on future QE. However continued weak economic data without any imminent response from the Fed would engender some fear and allow risk assets to sell off. A plummiting market and growing recession fears then create the ideal environment for further QE enabling Ben to save the day again (or at least having a higher probability of the QE3 programme being regarded as successful)…