Posts filed under “Think Tank”

King Report: Not a Real Recovery

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Goldman CEO Lloyd Blankfein, speaking in Tel Aviv on Wednesday, said ‘chances are’ the US is not in a real recovery; the recession is likely to be long and protracted; and the recovery will be shallow. The Street quickly surmised that Goldie must be short the stock market.

The Fed, via Jeff Lacker, engaged in more verbal intervention on Wednesday after Russia hammered the dollar and boosted gold during European trading.

BN: Russia May Swap Some U.S. Treasuries for IMF Debt Russia may switch some of its reserves from U.S. Treasuries to International Monetary Fund bonds, the central bank said today. The comment drove Treasuries and the dollar lower.

The above Russia story pushed the dollar lower and gold higher during European trading. But the trend reversed about a half hour before the NYSE open.

BN: The Federal Reserve must avoid the risks of “waiting too long or moving too slowly” to tighten monetary policy once an economic recovery begins, Richmond Fed Bank President Jeffrey Lacker said.“The challenge for us on the Federal Open Market Committee will be to shrink our balance sheet and tighten policy soon enough when the recovery emerges to prevent rising inflation,” Lacker said today, without specifying the timing of such a move. “The danger will be that we will not shrink our balance sheet enough when the recovery emerges.”

In order to save banks and the financial system, the Fed and administration absorbed an inordinate amount of private sector debt and risk. The solons also inflated stocks so banks and others in need of capital could procure funds. This has forced the bond and dollar market to revolt.

Now, the Fed and administration must save the bond market and dollar. This implies sacrificing stocks, which is more palatable now because banks have raised beaucoup capital and the system is not in implosion mode…PS – This is why about four weeks ago we said the Fed should consider hiking rates.

Here’s the logic behind hiking rates: If the Fed continues its present course, bonds will continue to tank and higher rates will kill stocks and the economy. There is also a very good chance that the dollar would continue to implode, which would foster inflation. This is the worst of all worlds.

If rates are hiked, stocks will fall but bonds and the dollar would improve. There probably would be little change in financing costs for consumers because the yield curve should flatten. Commodities and inflation should decline.

And banks have raised enough capital for the Fed and administration to now try to save bonds and the dollar by jiggling rates a tad higher.

WSJ: The Fed’s beige book survey released Wednesday shows that economic conditions remained weak and even deteriorated in many regions of the country, with commercial real estate and labor markets continuing to face challenges.

Category: Economy, Markets, Think Tank

Report card is in/Fed’s flow of funds REVISED

REVISED: The Q1 flow of funds report from the Fed is out and the report card is in on the US consumer. Due to a rise in disposable income from Q4 (likely due to the large COLA adjustments and also tax refunds) and a drop in consumer credit (mortgage debt was flat), household debt (consumer…Read More

Category: MacroNotes

The report card is in/Fed’s flow of funds

The Q1 flow of funds report from the Fed is out and the report card is in on the US consumer. Due to a rise in disposable income from Q4 (likely due to the sharp drop in gasoline prices and also tax refunds) and a drop in consumer credit (mortgage debt was flat), household debt…Read More

Category: MacroNotes

Business Inventories

April Business Inventories fell 1.1%, about in line with expectations and March was revised down by .2% to a decline of 1.3%. It’s the 6th straight month of 1% or more drops and reflects the dramatic inventory correction that our economy has experienced. At the same time, it provides the backdrop for the bullish camp’s…Read More

Category: MacroNotes

Report card day for the US consumer

Over the past few weeks we’ve seen a differentiation developing in the stock market with outperformance of those name’s that are exposed to growing inflation expectations and those co’s that have large exposure to overseas markets relative to those co’s that are US centric only, dependent on the US consumer and with little pricing power….Read More

Category: MacroNotes

Fed Emails Bash BofA Chief

Excerpts “… Ken Lewis’ claim that they were surprised by the rapid growth of the losses seems somewhat suspect. At a minimum, it calls into question the adequacy of the due diligence process BAC has been doing in preparation for the takeover.” –Dec. 19 email from Timothy Clark, senior advisor in the Fed’s division of…Read More

Category: Bailouts, Federal Reserve, Think Tank

Focusing on the Wrong “Special Master”

Good Evening: The capital markets absorbed a flurry of news today and came away with only some minor indigestion. Stocks and bonds were on the defensive before each market made comebacks of varying degrees, while the dollar and commodities were firm before giving up some of their gains. Aside from a surprising drop in crude…Read More

Category: Markets, Think Tank

volume/upcoming big event

NYSE consolidated volume today is on track to be as lackluster as yesterday which, not including any holiday influence, was the slowest since the first trading week of January. What are we waiting for you ask with the S&P having already climbed the mountain of its 200 day moving average? I believe it’s the June…Read More

Category: MacroNotes

Inflation-Deflation

As we await the results of today’s 10 yr bond auction to gauge sentiment on inflation, the US$, US government finances and foreign appetite for longer term treasuries, a less scientific take on inflation expectations is looking at the number of Google search results for Inflation and Deflation. Search results for Inflation total 40,500,000 and…Read More

Category: MacroNotes

Special Master

White House spokesman Gibbs said the new compensation Czar Kenneth Feinberg, who will review “the soundness, the appropriateness” of compensation for top execs of companies receiving government aid, will take the role of “Special Master.” Toto, I’ve a feeling we’re not in Kansas anymore. We must be over the rainbow.

Category: MacroNotes