Here is the money paragraph:

The focus of the Committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level.  As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant.  The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities.  Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses.  The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.

Do you get the sense these guys are serious about fighting deflation?

Category: Bailouts, Federal Reserve, Index/ETFs

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

92 Responses to “Fed Fighting Deflation”

  1. Patrick Neid says:

    Serious as a heart attack. The only problem, we are the ones that are going to have it.

    To date Bernanke is following his 2002 helicopter speech at the Fed. Scary indeed.

    You can never put Humpty Dumpty back together.

    We are at step four:

    http://www.theglobeandmail.com/servlet/story/RTGAM.20081211.wreynolds1212/BNStory/Front?cid=al_gam_globeedge

  2. I can guarantee you they’ll succeed in combating inflation. In a fiat currency system (as was not the case during most of the Great Depression), printing money, as opposed to digging for gold or silver, determines whether we’ll have inflation. Velocity can go nearly to zero, and if you print enough dollars, still you’ll beat inflation. It won’t change anything real, but no matter, rising prices will make it SEEM things are getting better. And we’re all about deluding ourselves that things are always going to be better. Trees grow to the sky. Until they topple over.

    The thing is, this is not even a good application of monetary theory. Things are not bad because there is not enough credit. Things are bad because the illusion of demand created by too much credit has collapsed.

  3. patient renter says:

    Do you get the sense these guys are serious about fighting deflation?

    As serious as a $500 loaf of bread!

  4. er, that should say combating “deflation”

  5. wally says:

    I hear that Las Vegas casino traffic is down. Here’s my suggestion: they should make lots and lots and lots of new chips. They should make truckloads of them; they should drop them from helicopters. Having lots and lots of chips would make people come to Las Vegas and gamble lots more.

    What could go wrong with this genius idea? After all, it is stolen directly from the Fed’s anti-deflation plan.

  6. JustinTheSkeptic says:

    I get the sense that they don’t have a clue about how true markets function. Their Ivory Tower lives have lead them astray of how the real markets work – how it functions by having many, many participants giving and taking prices. We are Fu*ked!

  7. jmborchers says:

    Bought Oil (USO) today. Seems like a win-win. Sold call options for $36 exp Friday for $100 each, priceless.

  8. Steve Barry says:

    @ Curmudgeon: “It won’t change anything real, but no matter, rising prices will make it SEEM things are getting better. And we’re all about deluding ourselves that things are always going to be better. Trees grow to the sky. Until they topple over.”

    Wait a minute…what you described is exactly right, only it already happened over the last 75 years and I just heard somebody yell TIMBERRRR! Going forward, the debt crash is deflationary, no doubt about it. Any money created will go straight to money heaven…or down the vortex, whichever metaphor you like best.

  9. MAL says:

    Time to buy physical gold!

  10. KJ Foehr says:

    Off-topic: Chrysler

    Chrysler will stop production all plant on Dec. 19th. It’s not the same thing, but for some reason this reminds me of when the air traffic controllers went on strike in the early 1980s. They never went back to work. Pres. Reagan replaced them with non-union controllers. Could this prove to be the end of Chrysler? Could Chrysler’s veiled threat to the Bushies that they need the money or else, cause Bush to decide to “let them go”, to make them the sacrificial lamb? I felt over a year ago that Chrysler would not survive what was then still the coming recession, and I still can’t see them being saved by the government — again.

    Conversely could Chrysler have been told by the Bushies, “you are privately owned, therefore, you are on your own”, so they decided to shutdown?

  11. Steve Barry says:

    MAL:

    I think gold will outperform during the deflation, but may lose money on an absolute basis. Wait for the deflation to end then buy gold miners for the leverage.

  12. jmborchers says:

    I think gold is too high. In today’s world you need someone else to want to buy it at a higher price for it to go up. With everyone broke and the US far away from the gold standard now I doubt gold will go significantly higher. However, oil in today’s world is a necessity. People need oil to heat homes no matter how bad things get. Both GOLD and Oil are pegged to US $. However, when you look at the charts gold hasn’t lost value and oil has significantly.

    I’d much rather err to the side of one coming off a clear bubble and has already lost signifcant value. I would have bought gold otherwise but who can afford it?

  13. DL says:

    The pain for holders of SRS may not be over just yet. IYR is still a bit below its 50 day MA. I think there’s a good chance that IYR will get above the 50 D.M.A. and stay there for a week or two before the short sellers finally get some relief.

    (Anyone who can figure out how to time this thing has a realistic shot at a 5:1 payoff).

  14. DL says:

    jmborchers @ 4:50

    Just looking at the technical picture, it looks to me like GLD could head back down to 70 before long. However, over the course of the next three years, I think gold is going a lot higher.

  15. Steve Barry says:

    NYSE Bulls up to 47%…was 4% at the bottom.

  16. jmborchers says:

    I’d be more worried it breaks the 65. Gold bought in 2006 has doubled in 2 years. That’s always a sure sign of asking for trouble. It doesn’t matter what asset it is.

  17. DL says:

    For people who are lazy, a simple trade would be to go long GLD and short SPY (in equal amounts). However, I would wait for a pullback in gold first.

  18. DL says:

    jmborchers @ 5:00

    Maybe GLD will drop below 65. But whatever happens, I think it very likely that the bull market in gold will begin well before the bull market in stocks. Take a look at the charts of gold and SPX over the period 2001 to 2006.

  19. jmborchers says:

    The only way one could assume gold would go higher is if the world looks brighter. Otherwise it’s not worth as much. Since Nixon abolished the gold standard gold’s value doesn’t necessarily have to move with the $ or against it. It’s on it’s own. Gold will move on a perception of inflation, however it’s quite clear we don’t have inflation so why should it be 850 then? It’s clear it shouldn’t.

  20. ButtoMcFarty says:

    Is anyone else catching this USD/JPY meltdown??

    Looks like the USD/CAD is ready to follow any moment.

  21. DL says:

    jmborchers @ 5:04

    I appreciate your response. But gold will “sniff out” inflation long before it becomes obvious to the majority.

    Also, you’ve got to give a lot of weight to the currency issue (EUR/USD, USD/AUD, USD/CAD, USD/JPY).

  22. DL says:

    ButtoMcFarty @ 5:19

    “Is anyone else catching this USD/JPY meltdown?”

    Yeah. JPY used to be the doghouse currency.

    We’re the new doghouse.

  23. @JMBorchers…sounds lucid re gold, but I bought a little anyway. Just a hedge against a black swan currency disaster. Probably paid way too much for it, but didn’t bet the farm, just bought a little insurance.

    I agree that oil looks mighty interesting. It can’t fall much more, or it won’t be worth pumping out of the ground.

  24. KJ Foehr says:

    They are serious; but the question is, as always, they are ahead or behind the curve? Ben seems dependent upon data, and data is always after the fact. Therefore, it seems he will always be behind the curve.

    This may be even truer now as he/they may wait to see if the liquidity they have injected so far does any good. And if it doesn’t work and he waits too long, the recession worsens and drags on into 2010. Roubini is still saying deflation is a given in 2009, so that seems to indicate Ben should start printing more money and buying long-Treasuries now. Otherwise deflation will get its grip on the consumer’s psyche.

    On the other hand, if they move too quickly, inflation will break out sooner and could be much worse than expected.

    As with most things in life, timing is everything. So far his timing hasn’t been real good, IMO. Why would it get any better now?

  25. Andy Tabbo says:

    Months ago I sent a note to friends and clients with this paragraph and it’s still relevant.

    “It is Mr. Bernanke’s thesis that the Great Depression was ‘avoidable’ by dramatically increasing the money supply. His thesis will be put to the test. Can an economy really avoid recessions and depressions? I believe that herding behavior, mass psychology and sentiment rule markets. We cannot forget that “markets,” while made up of large institutions, are run by people with emotions and feelings. When the mood of the market turns negative, there may be few remedies. The best action may be to simply let the fever run it’s course. Central Banks cannot force banks to lend, nor can they force consumers to spend when fear and anxiety abound. The Fed’s primary weapon is to shove massive amounts of money (liquidity) at the problem in order to “reflate” assets. To the chagrin of the government, the market has shrugged it off. The government’s efforts may slow the decline and slow down the inevitable “debt unwind,” but it will not work. The natural workings of human nature: herding behavior, fear and greed, must play out.”

    It’s an overused expression, but I really think these guys are pushing on a string. It would be better to just print Two trillion bucks and send $50,000 bucks to everyone who is hitting the street newly unemployed. And then used the leftover money to set up huge DIP facilities to facility Ch.11 filings for the viable, but overly leveraged firms.

    - AT

  26. DMR says:

    In a fiat world, debt deflation should lead to lower gold, lower oil, higher dollar.

    About gold sniffing out inflation, the fed is creating its gazillions at a slower pace than the rate at which debt is collapsing. So, there is really nothing to sniff out! As for historic analogy, it took till 1945 for the Keynesian spending to overshoot the deflationary forces. Even when it did, it only led to one year of serious inflation.

    About the dollar, our wheeling and dealing over the last decade was funded in part by cheap Japanese ZIRP money leaking here through the carry trade. To the extent that this crisis is related to the unwinding of those trades, JPY will soar due to the smaller base after all the Yen debts are settled, followed by USD which should outperform the “rest”. In fact, with the yen soaring, I’m sure there are going to be some margin calls that will make the unwinding feed on itself. So, no…the CAD will not follow JPY, it will instead track downwards like the EUR and the rest of the world for that matter.

  27. vansantos says:

    Here is my big problem – their policies change in a heartbeat.

    Yes, they may simply be responding to market conditions, but their lack of clear policy AND ability to communicate that message to the market (in a way that even the general public understands) is why I don’t trust what is coming out from the Fed/Govnt at this point.

    Deflation may be the concern from the Fed today, but apparent reason it may not be a priority tomorrow. It’s all most they have attention span of a puppy at this point.

    Van
    http://vansantos.com

  28. larster says:

    Re- USO

    Might be a tad early but bought some last week. Storage is filling up but this is due to buying near term contracts and selling next year delivery for around a 10-11% profit including all storage costs. Setting up for a good whiplash up at some time.

  29. jmborchers says:

    DL if you are ahead of the curve and more deflation comes than you expect gold will get crushed as oil has. Of course oil can go down more too and I’m considering that as part of my plan but with the world needing oil more than it needs gold I’ll pick oil and sell the calls against it.

  30. Mannwich says:

    @AT: Agree with everything you said. I would add: the more the Fed does, the less confidence/trust there is in the “markets”. The masses have lost trust/confidence in the system. Until that’s restored, we’re nowhere and the Fed’s actions only seem to be making people even more skittish, hence, they’re making matters worse, not better.

  31. km4 says:

    Beware – “Quantitative Easing” is Hallucinogenic
    Wed, 17 December 2008 By Gary Dorsch, Editor, Global Money Trends

    The Bernanke Fed can’t wait to experiment with QE, by printing unlimited amounts of US-dollars out of thin air, and monetizing the US Treasury’s debt.

    However, “Quantitative Easing” is a very dangerous hallucinogenic drug – it produces changes in perception, thought, and feeling, ranging from distortions of what is sensed (illusions) to sensing objects where none exist (hallucinations). QE can transmit false perceptions about the health of the economy and the direction of the stock market.

    http://news.goldseek.com/GoldSeek/1229538290.php

  32. jmborchers says:

    I also posted this morning that GS announced $2B loss but without the $10B gov’t injection would that have to be a $12B loss or $30 per share instead of $5?

  33. sinomania says:

    @KJ Foehr, OT Chryser

    Yeah, Chrysler will shut all 30 plants in USA but still trying to get production of small cars going in China. Chrysler Asia chief Philip Murtaugh developing a new deal with Great Wall Motors after the Chery deal finally collapsed last week. From what I’ve heard the aim is not necessarily export to the US but other areas where car sales are actually growing. But Chrysler’s concern is that standards be high enough to introduce the models into the US. Just where will their bailout dollars go?

  34. jmborchers says:

    Any company strapped to China and Asia area is screwed.

  35. Mannwich says:

    @sinomania: So, we should all move to China and make $4/week? Is that where we’re headed? The Big Three stay “open” in China but gone in the U.S?

  36. JustinTheSkeptic says:

    DMR, I wouldn’t be so sure…CAD has commodities up the ying-yang. Gold and Silver do good in both inflationary and deflationary times. Anytime there are uncertain events on the horizon. These “interesting times,” we live in most definitely are uncertain.

  37. donna says:

    I actually think much of the economy is about to go under the table. Barter, non-traceable trade, cash, etc. Deflation, yes, officially….

    Banks are toast.

  38. Mannwich @ 5:55 pm

    “…the Fed’s actions only seem to be making people even more skittish, hence, they’re making matters worse, not better.”

    Indeed. It is a principle of government action that it always accomplishes the exact opposite of its stated intent. Things aren’t really all that bad, yet. But just wait– we’ve got the fed on the job. It’s gonna get lots worse. Guaranteed. Until they give up on the string.

  39. Bob A says:

    “Any company strapped to China and Asia area is screwed.”

    Seems shipping traffic from the far east is a little slow:

    Big ship eats into the view, restaurant business at pier
    http://seattletimes.nwsource.com/html/localnews/2008528828_bigship170.html

  40. jmborchers says:

    I’m watching the US $ collapse.

  41. DL says:

    Andy Tabbo @ 5:38

    “It would be better to just print Two trillion bucks and send $50,000 bucks to everyone who is hitting the street newly unemployed”.

    I’m all for that. But it wouldn’t cost nearly the two trillion cited. (Also, you’ll need some money to pay off depositors when banks fail).

  42. jmborchers says:

    Big stock market crashes coming very very soon.

  43. DL says:

    KJ Foehr @ 5:34

    “…the question is, as always, [are they] ahead or behind the curve?”

    Problem is, they create a new “curve” every time they intervene.

  44. danm says:

    Here is my big problem – their policies change in a heartbeat.

    Yes, they may simply be responding to market conditions, but their lack of clear policy AND ability to communicate that message to the market (in a way that even the general public understands) is why I don’t trust what is coming out from the Fed/Govnt at this point.

    ———–
    I dunno. Ben is doing EXACTLY what he told us he’d do in his 2002 (?) speech. That is quite transparent to me.

    He’s basically convinced everyone about deflation (that’s his goal) and that has given him the right to print, print, print!

    Now he can easily devalue the dollar, exactly what he wanted in the first place in order to deflate the American debt and make the rest of the world pay… because we all know that more than 50% of the debt is held by foreigners.

    Can’t get any clearer than that!

  45. danm says:

    Barry:

    I was listening to the news in the car while I was stocking up on dry goods today and they had someone from New York telling us how times are tough. Apparently prices are not coming down and 88 (?) new taxes have been created.

    Do you have any input?

  46. Pat G. says:

    “Fed Fighting Deflation”

    Great! True from The Curmudgeon: “It is a principle of government action that it always accomplishes the exact opposite of its stated intent.” In this riddle that would indicate they’ll create inflation. Which has been my bet….all along.

  47. jmborchers says:

    Pat G:

    To assume you would have inflation indicates the other worldwide banks won’t print as well. I do believe every gov’t will print out of this problem. Therefore, if everyone does the same thing the effect is nill as with algebra.

  48. AGG says:

    This calls for a TRANSLATION:
    “The focus of the Committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level.”
    We will manipilate the crap out of the markets by buying futures with your money. We will also use proxies to sell puts to bears so we can break them later with a short squeeze. And nobody is allowed to look at our balance sheet so we’ll just make it look good in the media.
    ” As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant.”
    We are still going to keep using your money to cushion the derivative meltdown to save our pals in the big banks and hedge funds. Yeah, you won’t get any discount on house buying or get a break on you mortgage payment but you have to understand that the little guy doesn’t have a hell of a lot of leverage here.
    ‘ The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses.’
    Boilerplate. You need to look at how we define “households” and “small businesses” and then you will “get it”.
    ” The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.”
    We will go forward to avoid going backawards because we are in a flat out panic to save the rich leisure class. This is serious shit, folks. Ri ch people may have to go back to work. We can’t have that.

  49. jmborchers says:

    LOL AGG, good translation.

  50. ben22 says:

    I think gold is too high. In today’s world you need someone else to want to buy it at a higher price for it to go up. With everyone broke and the US far away from the gold standard now I doubt gold will go significantly higher. However, oil in today’s world is a necessity. People need oil to heat homes no matter how bad things get. Both GOLD and Oil are pegged to US $. However, when you look at the charts gold hasn’t lost value and oil has significantly.
    @Jmborchers

    you posted a little below this that you are watching the $ collapse, I think you do not understand gold…maybe at all

    do some research or read some Faber, there was even a very good post in the Cafe just a week or so ago about the shadow price of gold, i’m not a buyer of gold at these levels, if it drops again as it did a few months ago it is a buy and SB is correct about the miners after deflation, a simple look at history shows you this will be a good place to be.

  51. jmborchers says:

    When it comes to making money by figuring that history will repeat is a grave mistake of the poor and those bankrupted by the markets.

  52. Andy Tabbo says:

    danm Says:
    December 17th, 2008 at 6:30 pm

    “I was listening to the news in the car while I was stocking up on dry goods today…..”

    That is an extremely funny opening line.

  53. Pat G. says:

    jmborchers @ 6.40 PM

    The USD is an asset. If they keep printing more of them out of thin air like they have been doing then the USD will become inflated. The rest of the worlds’ major banks are printing right along with the FED, albeit at a slower rate. Which means that ALL money will become inflated. We all know how badly bubbles end.

  54. ben22 says:

    jmborchers,

    I don’t think I’m speaking of history in the same sense you are. Understand my comment to represent where I think the price of gold is going.

  55. jmborchers says:

    Right will be unless they take it back later when we start to see inflation. They can easily unwind it because the chance of a fast economic recovery now are relatively low. We would only need worry if we had a sudden V shaped economic recovery.

  56. Pat G. says:

    But there are two problems with your theory. First the FED is incompetent. Look at how they’ve fought deflation. By the time they start to sop it up, it’ll be too late. Second, all the world’s banks have to sop it up too. More problems.

  57. mudpuppy says:

    jmborcher long USO and selling calls. Why not just sell puts? Same thing.
    Also, what has been rising lately as the US reduces interst rates? Oil down, gold and silver up.
    Gold is a store of value. Oil is a commodity.

  58. jmborchers says:

    Ben, Gold is more a fear play than a monetary play. Faber is way wrong. The time to buy gold was before the commodity boom. Gold will collapse; it is inevitable. The only question to ask is this.

    What gives gold it’s value?

  59. Pat G. says:

    “What gives gold it’s value?”

    Fear of hyper-inflation. Fear of worthless money. So no, gold is BOTH a fear and a monetary play.

  60. jmborchers says:

    Could do it it either way. Apparently my broker has had some problems with put sellers going broke this year though Mud so they don’t allow it anymore, lol.

  61. jmborchers says:

    If US $ is worthless how is Gold valueable? It’s impossible.

  62. Pat G. says:

    Oil was down $3.50 a barrel today, a 4 year low. Gold was up $25.80. While oil and gold are lumped into a sector labeled; commodities, as mudpuppy pointed out, one is a store of value and the other is needed to make machines run better.

  63. jmborchers says:

    “The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value—plus or minus one percent—in terms of gold and the ability of the IMF to bridge temporary imbalances of payments. In the face of increasing strain, the system collapsed in 1971, following the United States’ suspension of convertibility from dollars to gold. This created the unique situation whereby the United States dollar became the “reserve currency” for the states which had signed the agreement.”

    http://en.wikipedia.org/wiki/Bretton_Woods_system

  64. ButtoMcFarty says:

    If it comes down to a metal…silver always made more sense to me.
    1 oz silver coin = groceries
    1 oz gold coin = herd of goats

  65. DKTrader says:

    Who think stocks sell off again tomorrow?

  66. Pat G. says:

    Gold IS money. It’s been used for that purpose for more than 5,000 years. You can’t simply print more of it. That’s why it’s a store of value. Like real estate or precious stones. Hard assets.

  67. jmborchers says:

    Gold isn’t money. If everyone is broke who is going to buy it from you for an inflated price? LOL

  68. Mannwich says:

    @AGG: That is sadly hilarious.

  69. Pat G. says:

    “In the face of increasing strain (preventing our government from creating more debt because of the USD’s link to it), the system collapsed in 1971, following the United States’ suspension of convertibility from dollars to gold.”

    That was the first lynch pin that was seared which in effect, sealed the USD’s fate.

  70. Pat G. says:

    There is a difference in being broke or insolvent.

  71. jmborchers says:

    Pat I’d agree with you if we were back in the days where people were used to trading gold back and forth. Today go to a store and try to buy something for gold and see what happens. They have no idea what the value is. And what more I hope when you are referring to hard assets you aren’t referring to GLD which is a paper asset which has claims to gold. Those are two very different things.

  72. jmborchers says:

    Pat all those other countries agreed to it too. Asia will go under far before the US because they are more dependant on us. That’s the good side of importing more than exporting.

  73. AGG says:

    Now hear this:
    I heard Maria Shapiro was just named to be the Obama administration SEC chairperson. Does anybody here know her story? Will she do a good job?

  74. jmborchers says:

    I don’t know. Here’s her site.

    http://schools.portnet.k12.ny.us/~mshapiro/

  75. AGG says:

    Barack Obama, the US President-elect, is to name Mary Schapiro, a former commodities regulator, to be the next chairman of the Securities and Exchange Commission (SEC), it emerged last night.

    Ms Schapiro is currently head of Wall Street’s self-regulator, the Financial Industry Regulatory Authority. She served under the Clinton administration in 1994 as chairman of the Commodity Futures Trading Commission and as an SEC commissioner from 1988 to 1993.

    While every new US President appoints his own chairman of the Wall Street watchdog, the swift choice comes at a time when the SEC’s current head – Christopher Cox – is under fire for failing to spot the world’s biggest ever fraud. Last week, Bernard Madoff confessed to his sons that he had created a Ponzi fund with estimated losses worth $50 billion.

    Mr Obama is expected to announce his choice about the next SEC chair as early as today.

  76. Pat G. says:

    What stores? If the dollar hyper ventilates they’ll be no need for them. But you will still have to buy the things you need to stay alive. Gold and silver functioned as money in the U.S. through the first couple of decades just this past century. Some countries which have currencies still use gold and silver as money, interchangeably. Going back to a time when precious metals functioned as money isn’t an impossibility. No, I’m not referring to paper GLD. I take delivery. Asia will not go under before the U.S. because those people are savers, we are spenders. And as far as their dependency on us here’s a quote from an article I’m currently reading between these postings: “For all of last year, the current account deficit totaled $731.2 billion, which meant the country needed to borrow $2 billion a day from foreigners to finance its activities.” Because of our lack of savings, we actually need them more than they need us. But no nation is an island.

  77. jmborchers says:

    Maybe this bio will be more suitable for you AGG.

    http://www.sec.gov/spotlight/seniors/bios/mary_l_schapiro.pdf

  78. AGG says:

    Now I remember something about Schapiro. She got into some kind of ruckus with Greenspan and Rubin over some trading “policies” in futures trading. If she didn’t get along with them, she may be good for the job.

  79. AGG says:

    jmborchers,
    Thanks. I’m on it.:

  80. jmborchers says:

    AGG that’s pretty interesting. She was part of the old Plunge Protection Team AKA (Presidents Working Group).

    “Ms. Schapiro joined NASD in 1996 as President of NASD Regulation and was named Vice Chairman in 2002. Before assuming her present duties, Ms. Schapiro was appointed Chairman of the federal Commodity Futures Trading Commission (CFTC) in 1994 by President Clinton. The CFTC is responsible for regulating the U.S. futures markets, including financial, agricultural and energy markets. As Chairman, she participated in the President’s Working Group on Financial Markets with the Secretary of the Treasury and the chairmen of the Federal Reserve Board and the Securities and Exchange Commission (SEC).”

    We can see the gov’t is setting up for something big to happen. Or to no holds barred to fight it. They picked Bernanke for his speach on depression too.

  81. DP says:

    @DKTrader, no idea on tomorrow, but the market range is getting narrower by the day. It has to break out in one direction or the other here soon.

    It seems to want to go up, but the S&P has taken several runs at 920 in the past 2 weeks and failed all of them.

    If we get 500k on job numbers tomorrow market goes down. If we get a million, up 300 points on the basis that we’re closer to peak unemployment than we were so there’s less bad news to come. (Err, no, I’m not serious).

  82. jmborchers says:

    DP Fed went to almost zero. The number tomorrow has got to be bad. I think it’s highly likely the Fed used that number in their meeting earlier this week.

  83. jmborchers says:

    Asian fabs are shutting down for weeks. This is the first time this has happened that I can remember. Hynix semi says idling and trying to sell the entire idle factory. Now that’s interesting. Say it’s idle and then try to sell it. That ought to get a good price.

  84. DP says:

    I suspect you’re right. I bought QID when we failed to break 920 again. If we do break 920 I’ll sell it. I realize it’s odd to peg buying QID to the S&P, but it’s worked 3 times already for quick easy trips from mid 60s to mid 70s.

  85. Andy Tabbo says:

    The price action on the S&P is starting to get a little worrisome for bulls. The fact that we couldn’t power through 920 day is a little disturbing. The whole pattern on the futures and cash is starting to resemble a “rising wedge” type formation. If we power significantly higher…i.e. break 940…then it negates the rising wedge action…but ladies and gentlemen, please be very concious of that uptrend line on the equity charts. If that uptrend line breaks, you need to start exiting long positions, post haste.

    I still think we have weeks of whipsaw coming before we finish this fourth wave, but given the way this thing is struggling near 920, it’s becoming a little troublesome for the bullish view of seeing 1000.

    - AT

  86. Andy Tabbo says:

    Anyone catch the action in crude oil lately. The US dollar is basically collapsing, the stock market has been doing well from the Nov. lows….and the oil market is actually 20% lower in the same time frame. That is a shockingly bad performance from crude oil. The front spread hit a HISTORIC contango level today. I’ve never seen anything like it, ever.

    I want to be long energy. But, like the UGLY stepchild, he’s tough tough to love right now.

    - AT

  87. 10 cc says:

    The best take on the “deflation fighting” I came across today was from John Kemp (Reuters)via the FT.

    excerpt …

    “Bizarrely, Bernanke and Co are in fact inviting [treasury] investors to bet the policy will fail, the economy will remain mired in slump for a long period, deflation will occur and interest rates will remain on the floor, as Japan’s have done since the 1990s.”

  88. DL says:

    Andy Tabbo @ 8:59

    Speaking of “rising wedges”, do you have a thought on the chart of the VIX over the last three months?

    It seems to be carving out some sort of a triangle. The obvious question is, which way will it break? (I say upward).

  89. DL says:

    Andy Tabbo @ 9:04

    As for crude oil, couldn’t the upward sloping forward curve be regarded as a sentiment indicator? It would seem that the contrary view would be that oil is heading lower. Certainly, if we get a selloff in the SPX (as I am expecting in January), that is likely to pull oil down.

    (But yes, there are some weird interrelationships lately between EUR/USD, oil, and treasuries).

  90. Andy Tabbo says:

    DL: great question on VIX. I don’t actually trade that or chart it, but i just took a look…there’s nothing bearish about that chart…..37 ish looks like huge support.

    in re: oil

    used to be a real life physical oil trader…the shitty cracks..the huge contango…nothing looks good…however….i’m now a technical trader and I can see the ‘light’ at the end of the tunnel….

    sentiment is hugely negative. this is the time of the year for oil to rally. the dollar is going down the toilet. my bias is to get long summer rbob cracks and then get net long oil into the $35 level….we may see $30 oil, but I think we’re setting up for massive rally in oil very soon. Tho’ I must admit I can see some near term downside.

  91. schoolsout says:

    Per Shapiro…..from Denninger

    “Shapiro was tapped by Obama to head the SEC. Bloomberg hails her as someone who can “overhaul” the SEC. I see her as “more of the same.”

    Why? Well, let’s just keep it simple – she’s a top brokerage regulator – a former CFTC head and FINRA CEO. How did Madoff manage to get under her radar, specifically, as CEO of FINRA?

    Nor does it stop there. It appears that Shapiro appointed one of Madoff’s sons to a position that oversaw disciplinary actions made by FINRA!

    So there you have it. The hand-jobs under the table in politics have certainly not changed with the election of a new President.”

    http://market-ticker.denninger.net/archives/693-Bawahahahahaha-Change-Where.html

  92. mark mchugh says:

    I don’t get it.

    These guys are serious about something, but I don’t see how buying toxic assets, keeping treasury returns ultra-low and making sure banks can’t fail fights deflation. I mean, I understand that they are trying to reflate the housing bubble, so that banks don’t go bust, but I don’t get the connection to deflation.

    All this means to me is the clowns who bought houses they can’t afford will get to keep them a little longer. I think maybe the Fed’s making these moves under the guise of fighting deflation, but, quite frankly, aside from the drop in gas prices, I don’t see any meaningful evidence of deflation. Have retirement communities cut their fees? Is your doctor charging less? How come milk’s not under $2 a gallon? Will we all get jobs in the mortgage business to pay for our refinanced houses? Maybe the Fed can hire us all as regulators.

    One thing I understand that Greenie and Ben never will is that it’s a whole lot easier to maintain price stability than to get it back once you’ve lost it.