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August FOMC Minutes: Increased Risk Of Disinflation, Economy To Slow In 2010, MBS Decision Would Send Wrong Signal About QE2
Update: magical unicorn, meet Neil Patrick Harris
Futures drop on the minutes which disclose increased economic weakness, which is sufficient for magical unicorns to push ES right back up.
On the economt:
In the economic forecast prepared for the August FOMC meeting, the staff lowered its projection for the increase in real economic activity during the second half of 2010 but continued to anticipate a moderate strengthening of the expansion in 2011... Real GDP growth was noticeably weaker in the second quarter of 2010 than most had anticipated, and monthly data suggested that the pace of recovery remained sluggish going into the third quarter. Private payrolls and consumer spending had risen less than expected.
On inflation:
The staff’s forecasts for headline and core inflation in 2010 were revised up slightly in response to the higher prices of oil and other commodities and the depreciation of the dollar.
On disinflation:
Participants viewed the risk of deflation as quite small, but a number judged that the risk of further disinflation had increased somewhat despite the stability of longer-run inflation expectations.
While no member saw an appreciable risk of deflation, some judged that the risk of further near-term disinflation had increased somewhat. More broadly, members generally saw both employment and inflation as likely to fall short of levels consistent with the dual mandate for longer than had been anticipated.
On the mortgage roll:
The Manager also noted the staff’s projection that, if mortgage rates were to remain near their levels at the time of the meeting, repayments of principal on the agency MBS held in the SOMA likely would reduce the face value of those holdings by roughly $340 billion from August 2010 through the end of 2011. The level of repayments would be expected to increase further if mortgage rates were to decline from those levels. In
addition, about $55 billion of agency debt held in the SOMA portfolio would mature over the same time frame.The Committee directs the Desk to maintain the total face value of domestic securities held in the System Open Market Account at approximately $2 trillion by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.
To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longerterm Treasury securities.¹ The Committee will continue to roll over the Federal Reserve’s holdings of Treasury securities as they mature.
On the now-traditional posturing by Hoenig:
Mr. Hoenig dissented because he thought it was not appropriate to indicate that economic and financial conditions were “likely to warrant exceptionally low levels of the federal funds rate for an extended period” or to reinvest principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. Mr. Hoenig felt that the “extended period” expectation could limit the Committee’s flexibility to begin raising rates modestly in a timely fashion, and he believed that the recovery, which had entered its second year and was expected to continue at a moderate pace, did not require support from additional accommodation in monetary policy. Mr. Hoenig was also concerned that these accommodative policy positions could result in the buildup of future financial imbalances and increase the risks to longer-run macroeconomic and financial stability.
On the now imminent QE2:
A few members worried that reinvesting principal from agency debt and MBS in Treasury securities could send an inappropriate signal to investors about the Committee’s readiness to resume large-scale asset purchases. Another member argued that reinvesting repayments of principal from agency debt and MBS, thereby postponing a reduction in the size of the Federal Reserve’s balance sheet, was likely to complicate the eventual exit from the period of exceptionally accommodative monetary policy and could have adverse macroeconomic consequences in future years.
As for how to trade this market, just replace NPH with BPS and you are golden.
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Unicorns, bitchez!
It was actually funny the first 500 times, but don't you think it's getting a bit corny now?
Nothing corny about unicorns.
Charlie the unicorn goes to candy mountain bitchez!!!http://www.youtube.com/watch?v=79YmYYr-Q8k
Kind of like buying those AAA rated packages eh? Next thing you know..........Candy Mountain!!
Llamas With Hats
http://www.youtube.com/watch?v=kZUPCB9533Y
http://www.youtube.com/watch?v=ZpjyH-LkEAg
Nothing to do with this but still funny
What would NPH do? Sit on the horn of course... but not before sucking it. Zing.
You horny little devil you.
LMAO! My cat's breath smells like cat food!
"Miss Hoover, there's gum in my hair. Can I still chew it?"
I guess so, but WTH, this is ZH! And Trav777 isn't here, so I thought I'd do it.
The FED report is just another con job from fairy land.
He's at a martial arts tournament.
Hopefully he appreciates the lineage of BJJ (i.e. olympic wrestling).
EDIT, he's not one of those guys that does the weapons acrobatics is he?
But you've gotta admit... that Neil Patrick Harris on a unicorn is adorable! ;)
PINK unicorns! With sparkly sprinkles!
Skittle shitting unicorns!!!
Skittle shitting unicorns!!!
I thought it was skittle farting... i know i am spliting hairs...
No, no, no...they fart glitter and shit Skittles...that's basic Unicorn 101 stuff.
http://www.unicornfart.com/
100% Pure Unicorn Farts
Uni-corny bitchez!
It's not about the money, it's about the money.
"
Downside risks have become somewhat larger..."
Sounds like they're boiling a frog.
....and the market marches back up. Hopefully this will be like the last time FOMC notes were released, with an up EOD and then massive decline the next.
expect to see this "event" used as cover to bust a ME move
So much is wrong with this Fed statement that I dont know where to begin.
Revisions mean they dont know where they were, never mind are. There is no plan to get back where they want to be. I dont even think there is agreement on what that place they are aiming for even is anymore.
They seem to think that low yields are a good idea, but they know too low is scary. They dont know where that too low boundary is.
I have never seen the Fed so confused.
I'd prefer them confused rather than overconfident. Thinking of the late 2006 increases and the do nothing months of 2007.
Point taken, but now we are in a crisis the lack of leadership is worrying. The full minutes are worse than the summary above
http://www.federalreserve.gov/monetarypolicy/files/fomcminutes20100810.pdf
When all you have is a hammer as these Keynesian cultists do, then all the world looks like a nail!
Including the collective thumb
Note the concurrent confusion from the capital on most items - stimulus, war, economy, good/evil - and it all works to unhinge our great country. Please be prepared to stand in the gap when the time comes to reorganize and defend.
they have done their job. double speak is their mantra.
Atari bitchez!
http://news.cnet.com/i/ne/p/2007/StarRaiders_550x393.jpg
High frequency circle jerk?
"economy to slow in 2010" - a bit late on that news, eh?
Friggin' morons
Hmmm so lower the economic forecast, talk about 'disinflation risk' and slap the pink unicorns on their butts to get busy pumping stocks back up! Totaly magical!
on Fri, 08/27/2010 - 15:28
#548100
Screw deflation.The Benzerker Fed just stated "we have all the necessary policy tools to fight disinflation".
"A few members worried that reinvesting principal from agency debt and MBS in Treasury securities could send an inappropriate signal to investors about the Committee’s readiness to resume large-scale asset purchases."
Translation: Are we there yet, Pappa Smurf?
Papa Smurf: Not much farther. Keep drinking the kool aid.
http://3.bp.blogspot.com/_rtOXMZlMTkg/Sz7XDAtmr5I/AAAAAAAACbo/nL_NqwXnlb...
Gotta love the market's focus on a bunch of economic clowns who have never got anything right about anything. Says a lot about how much the market cares about reality (i.e. not at all).
This report for public consumption is not to provide any real update. It is a bureaucratic brief. The FOMC probably finds as much humor in the non-information as most people in finance. The report is devoid of any real guidance. Some paragraphs are so uninformative that they should be completely omitted. The whole report could be summed up by 3 bullet points.
1) Rates (FFR, Reserves, Discount).
2) QE/easing/tightening.
3) Balance Sheet actions.
I will say though that the FED, by way of power, are not clowns. They have redirected over $1T USD from future revenue to buy bad bank debt. These guys, in terms of money, are all powerful.
Think of what you could do with $1T in labor and materials. For example build a huge canal from lake Michigan to St. louis. Double the size of the Mississippi river. And build feeder canals all the way across the plains to the rockies for growing crops and shipping goods. $1T is epic money, and the FMOC decided to blow $1.3T on bad debt amongst themselves with no approval of the people.
Epic waste.
----------
The FED is not concerned with the economy, employment, or price stability, other than to provide collateral for its fiat actions.
What was interesting in this report was to provide marginal data on losses to real estate holdings. As to prepare for the day when they have to address congressional needs for transparency.
Mark Beck
Some big player seems to have his buy and sell buttons the wrong way round today. Either that or some one has let a Fed sponsored magic unicorn run across the keyboards of GS.
I had a beautiful rainbow colored unicorn that poops lovely chocolate swirl and vanilla frosted cupcakes. He escaped a few weeks ago. Not sure if this is the proper place to post but I am desperate to get him back. Please call me at (888)555-1234 if you locate him.
Aw man, Im sorry to hear that. My pink unicorn used to shit delicious Skittles and peed pink lemonade until it ran off with some zebra, damn you bitch!! Anyway, looks like their Crazy Ivan stock pump only lasted minutes.
Sorry, the unicorn I found only craps on my Puts.
LOL
I told you that if that thing didn't stop going through my thrash I'd go drastic.
http://www.steamcrow.com/image/cache/poison_death_unicorn_brn-800x800.jpg
Tyler, don't you have a live chat module on your site?
My question to you: Why are businesses in Europe (Germany, France, Belgium, Netherland) hiring back at 2006 levels? I also have contact with 19 out of the top 100 producers in Europe and they almost all say sales is picking up also to 2006 levels.
I already posted the great debate about the august sales numbers and these are comming in at +3.2%! This while most of them just hoped to break even.
Hmm well sudden debt I guess a trillion free Benny bucks are really great for Europe! And throw in todays announcement of limitless IMF borrowing for them, I guess theyre in a re-hiring bubble frenzy!
http://www.consumerindexes.com/commentary_2010_contraction_watch_full.png
Because the above chart says the US economy is going down the drain and will drag Europe down with it.
They are competing abroad with US businesses and the FX at ~1.20 makes some of them competitive. Sales even for strong US companies like for example Cisco isnt going so well. And Japanese? Um, no, not so good.
There is a global lack of demand compared to 2000-2007, its effects are rattling round the world as the FX rates move.
European unemployment is static at high levels, overall. Smaller companies who are not global can't reach the foreign demand and are shedding workers as European economies south of Paris contract.
1 very small,small part of europe --(Germany, France, Belgium, Netherland).
How is the job market in the other 23 member states?
Many Eastern European businesses borrowed in low-interest-rate euros. New homeowners in Hungary and the rest of Eastern Europe borrowed in Swiss francs (This is the dumb money)..... tick,tick,tick...
(EUR/CHF March 10th = 1.46)-----(EUR/CHF August 31st = 1.29)
Get out the popcorn!!!
That very small part you say is called "Western Europe" and happens to be the biggest economies who started Europe in the first place.
But whatever, for you Americans Europe is about 1 square mile of farmland with some windmills and cows on it right? :)
Now now don't be mean.
And do keep in mind that the smaller parts of the EuroZone can decapitate the others, if the winds are blowing correctly. To us 'Mericans, it has been sounding a lot like "all or nothing" for a while now.
Is it that big?
I was not talking about the economies of "Western Europe". I wanted to point out that the other member states (23) do not give a shit about German companies hiring, they need jobs...
Magical unicorns....almost spit my coffee out after reading that cause' my laughter was out of control.
I think it is possible that Bennie told some of his proxies to buy and others to sell after his "minutes" just to make himself seem important even though he doesn't really say anything important. I mean it would be important but it doesn't really make sense. It's not the words, it's the man, it's not the man it's the beard, the beard and the suit. And his pal looks like Beavis. Beavis and the beard. And the suit. Buy sell no buy not sell, no really buy now sell.
Sounds like an "inappropriate signal"...
I snorted some pixy dust...and, TA DAH, SPX is GRREEEEEEN.
Real video of Bennie meeting the magical unicorn.
http://www.youtube.com/watch?v=5qDsqPaJht0
You can tell the banks are too big to fail when it takes this long to get their book short.
All short SPY convergence trades getting run over right now....
prices increasing? prices declining? take your choice. economy to accelerate? economy to decelerate? you guess is as good as theirs. still looking for a one handed Fed Chairman.
That sounds like a Zen koan: What is the sound of a one-handed Fed Chairman clapping?
Regards
QE 2.0: Because *obviously*, the problem is that treasury yields and mortgage rates are just *too* damned high.
Preparing for a Saturn V style lift off of SPX 1040 in T-minus 4, 3, 2, 1...
It's a go for throttle up!
Update: magical unicorn, meet Neil Patrick Harris
Some days, i adore this site more than anything else in the world.
Tyler is unmatched... Marla where are you??
Germany has the lowest unemployment rate in 16 years! How about that!
http://de.news.yahoo.com/2/20100831/tts-arbeitslosenzahl-auf-niedrigstem...
Too bad the taxes are still high (my last cheque looked like this earned 1,700 got 1000 ;(, PS that's for 2 weeks)
Well, don't forget to subtract 19% from that 1,000 Euros for the VAT that is applied to every damn thing you buy. So, your purchasing power is really about 810 Euro.
Sorry about that...Thank you, come again!
VAT on gold is 0% :)
Rowing the indexes is what we are seeing.
Well their unicorn pumpjob didnt last long anyway. Guess they need to feed it more magical hay sprinkled with lots of angel dust.
I KNOW that expansion is coming, I can just taste it, maybe next year, I hope, like I thought last year it would be this year, was pretty sure of it really, yet have been disappointed, but not too d*pr*ss*d about it...
End of Month +1040 = Massive Stick Save imminent!
Could be. Also, they might be counting on POMO tomorrow, Thursday and next Monday.
Rumormongering about the Unpopularity of Political Leaders Has Become a National Sport in China
http://israelfinancialexpert.blogspot.com/2010/08/stratfor-explains-rumormongering-about.html
That picture is perfect!
Stick save in progress...
http://www.youtube.com/watch_popup?v=ZeOYYk1Iqis&vq=small#t=15
"adverse macroeconomic consequences" - as in the end of the world as we know it? Parabolic blow-off of epic proportions resulting in a complete collapse of modern society?
Hereafter to be known as the "Unicorn RALLY!!!".
Problem is, after the rally you get totally gored by the horn. Ooops!
Only virgins can invest in a unicorn rally. Expect little volume.
They don't come out virgins though. Each rally needs new ones!
Sending an inappropriate signal ... is that because 1) it is a false signal, or 2) because it would be a bad signal? These guys never do come right out and say anything -- ever -- do they?
LOL. The real ammo has mostly been fired. Only a handful of .22 remains, along with the nukes. All they really have now is doublespeak. Super double reverse psycology to hopefully move the herd the right direction. Toss in a bit of misdirection for shits and giggles - and continue the process of passing the blame.
Passing the time is also important. The quiet, harmless expiration of derivatives is a blessing each day. If they can just tiptoe through the (black) tulips a little bit longer...maybe even another year...much of the derivatives problem is solved as they are term-dated instruments.
Lots of other problems remain or even grow worse--but notice how little we see or hear about the 'derivatives time bomb' (Buffet's "financial weapons of mass destruction") lately....
So, just whistling Dixie is also part of the plan.
Who would have thought Doogie Howser would grow up to be a bad ass riding a magical unicorn?
My money was on him turning out totally gay...I stand corrected.
...
DOW 10,000 making a late day come back!
Ending print will be 10,000.0000001
SPX 1040.0000001
Just a hunch...
OH, yea, Commerical Real Estate is up again for ump-teenth fucking day in a row. Just because, I guess.
10000 now!
10000 tommorow!
10000 forever!
In the economic forecast prepared for the FOMC, the staff lowered its projections for real economic activity during the second half of 2010 but continued to anticipate a moderate strengthening of activity at some point sometime in the future... Growth was noticeably weaker in the second quarter of 2010 than most had anticipated, and monthly data suggested that the pace of recovery remained sluggish going into the third quarter. Private payrolls and consumer spending had risen less than had been hoped. The staff’s expectations for headline and core inflation in 2010 were revised upward in response to the higher prices of oil, gold, silver, food, water filters, ammo, and other commodities, and the apparent devaluation of the dollar. Participants viewed the risk of deflation as quite small, but judged that runaway disinflation was almost inevitable. More broadly, members generally saw both employment and inflation as likely to fall short of levels able to sustain civilization. The Manager also noted the staff’s projection that, if mortgage rates were to remain near current levels for very much longer, participants wouldn't be able to realize nearly as much profit potential as has come to be expected. The Committee directs the "Desk" to maintain the total face value of domestic securities held in the System Open Market Account at approximately $2 trillion by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. To help support the appearance of economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longerterm Treasury securities.¹ The Committee will continue to roll over the Federal Reserve’s holdings of Treasury securities into their 401(k)s as they mature. Mr. Hoenig dissented because he thought it was not appropriate to indicate that economic and financial conditions were really as bad as they are. Mr. Hoenig felt that the “extended period” expectation could limit the Committee’s flexibility to extract profits from the general population in the future, and he believed that the recovery, which anyone who listens to the MSM believes has entered its second year and would otherwise expected to continue at a moderate pace, did not require support from additional accommodation in monetary policy. Mr. Hoenig was also concerned that these accommodative policy positions could result in the buildup of future financial imbalances and increase the visibility of longer-run macroeconomic and financial instability. A few members worried that reinvesting principal from agency debt and MBS in Treasury securities could send an inappropriate signal to investors about the Committee’s readiness to resume large-scale asset purchases. Another member argued that reinvesting repayments of principal from agency debt and MBS, thereby postponing a reduction in the size of the Federal Reserve’s balance sheet, was likely to complicate the upcoming suprise exit from the period of exceptionally accommodative monetary policy and could have adverse macroeconomic consequences before they would be able to implement such actions.
http://www.youtube.com/watch?v=ktKNEGSqLB4&feature=player_embedded#!
FRBNY nothing but crooks
remember Stephen Freidman's GS share purchase on eve of AIG bailout he authorized
these demons need to be cast out
For entertainment, go read the exchanges between the late great Jude Wanniski and Bernake.
http://www.polyconomics.com/bernanke.html
I apologize for my shit editing.
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