Tomorrow is a big day for disseminating information with market-moving potential. The market is bored with war, pestilence and famine so it must be FED pronouncements and GDP data that can provide a volatility boost. The markets did twitch today as the European Union and the U.S. both upgraded the sanctions against Putin’s Russia. It will be very difficult for Russian banks and large energy consortiums to raise dollar- and euro-based capital. Even with the advent of new and improved sanctions the global equity markets barely moved, especially as corporate earnings in the U.S. continued its string of “beats.” The counter to the continued strength of the equity markets is the behavior of the global debt markets as European sovereigns from Spain to Germany have reached record low yields. The U.S. yield curves continue to flatten as investors continue purchasing 10- and 30-year debt driving long-term yields lower. Again, I will state that while the curves are flattening the 2/10 U.S. curve is not historically flat.
Posts Tagged ‘Plosser’
As rumors about Greece run rampant, it is apparent that Greek FINANCE MINISTER VENIZELOS has stepped to the fore to try to influence his hand as the leader of Greece. THE COURT-APPOINTED LUCAS PAPADEMOS HAS BEEN QUIET OF LATE AND IT IS VENIZELOS LASHING OUT AT GREECE’S EUROPEAN “BENEFACTORS.” The fact is that there are so many microphones in EUROPE in search of an expert that all the media reports prove to be worthless. Timelines of action are void as soon as they are presented yet the markets continue to be affected by random noise.
In a BLOOMBERG article published today, “Bernanke Doubling Down on Housing Bet Asks Government to Help,” it appears that the Obama administration and the FED are in sync that something needs to be done to lift the moribund residential real estate market. This is certainly not a new development but it shows how the FED is at a loss to explain how the ultra-low interest rate policy for the last three years has FAILED to stem the decline in housing prices and ultimately foreclosures. The FED and others don’t want to admit that this IS A BALANCE SHEET RECESSION.
Today the FED let it be known that they will MOST PROBABLY be on hold until mid-2013. The best outcome of this is that it removes the FED from the election campaign of 2012 and puts the burden on the 535 posers who pretend to represent anybody but themselves (yes, there are exceptions I know). The FED has done their “work.” Now it is time to get the fiscal house in order. The markets’ daily gyrations is representative of how uncertain the world’s capital feels: ONE DAY YOU’RE UP AND THE NEXT DAY YOU’RE DOWN. From Bernanke’s perspective, we ain’t got nothing yet.
Austan Goolsbee, the chair of the Council of Economic Advisers, announced that he is heading back to the University of Chicago to spend more time with his students. Professor Goolsbee believes that the Midway is a much safer place to be than the chaotic environs of Washington, D.C. It is better to be beloved for challenging the minds of the next generation of leaders than to lead the challenge against the economic buffoons that are generating nothing but red ink and angst. More importantly, this is the second head of the Council of Economic Advisors–and the third from Obama’s economic team (Larry Summers)–that has headed for either the lecture circuit or the safety of the classroom.
Between every FOMC meeting we hear from Plosser, Fisher and others that the FED needs to reign in QE2 and start reversing the huge amount of liquidity that it has added to the financial system. The airwaves are filled with the dissenting voices of the “monetary hawks” proclaiming their fidelity to edicts of responsible monetary policy. However, come the scheduled meetings, the “HAWKS” become detaloned as they fall prey to the soft coos of the “doves.” It seems that entrance into the FED’s citadel requires that one must leave individualistic thought in your home district and resolve to join the consensus.
Notes From Underground: Hey Mr.Bernanke and/FED–GOD GAVE YOU TWO EARS and ONE MOUTH SO LISTEN MORE AND SPEAK LESS!April 14, 2011
The news out of Europe today was not favorable for Greece as it was reported in the German paper DIE WELT that German Finance Minister Wolfgang Schäuble suggested Greece would need to restructure. Schäuble’s comments led the cost of interest rate on the DEBT of the peripherals to rise. By day’s end, Greek 2-year rates climbed to 16.8 percent. Portugal rose 25 basis points to 8.87 percent and Ireland increased 25 basis points to 8.20 percent. Spain’s bonds were also priced higher as rates increased 10 basis points. All in all, not a very splendid day for the European debt-stressed nations, but yet again the DOLLAR could not gain ground against the EURO as an initial DOLLAR rally faded quickly. It appears that some central banks are recalibrating reserves as even a DOLLAR rally seems to be so short-lived. The EURO has performed well even though it has the cloud of uncertainty overhanging its economic and political situation.
As we all know, the FED held rates at the FOMC meeting and left the “extended period” phrase in and will maintain QE2 through its duration. Two weeks ago Jon Hilsenrath opined that the FED would likely remove the “extended period” language but that proved another opinion without material support. Many analysts felt that the March 15 FOMC statement was more hawkish than previous statements but I struggle to see how that is in fact the case. Yes, the FED did say the economy is on “firmer footing and overall conditions in the labor market appear to be improving gradually.” There were a few references to inflation but that hardly makes for a hawkish outlook.
Notes From Underground: Sovereign Wealth Funds aren’t like you and me (they have OPM-Other Peoples Money)March 14, 2011
The news for most of the day was about Japan and the continuing despair as a result of Friday’s earthquake and tsunami. Markets were fixated on the problems of the nuclear reactors that were severely damaged by the tsunami and whether or not there was going to be a meltdown of the core. The talking heads were dragging out the experts from central casting. Each had an axe to grind on whether they were pro- or anti-nuclear energy. I am certainly no nuclear expert but the best research that was sent my way focused on the importance of the 72-hour period as being the most critical. Hopefully, those nuclear experts are correct and the most significant danger has passed. Many pundits offered opinions that this was the end of the nuclear energy debate for no citizens would want the reactors built in their areas.