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Fed Begins Tightening Process: Discount Rate Raised To 0.75% From 0.5%, Futures Plunge, Dollar Surges, Curve Pancakes
Will the Steepener/Carry Trade/Long Stock bandwagon please proceed calmly in single file through the exit of the burning theater. Fed hikes discount rate by 25 bps - Hoenig, Plosser are finally heard. Futures plunge, dollar surges, 2s10s pancake.
For release at 4:30 p.m. EDT
The Federal Reserve Board on Thursday announced that in light of
continued improvement in financial market conditions it had unanimously
approved several modifications to the terms of its discount window
lending programs.
Like the closure of a number of extraordinary credit
programs earlier this month, these changes are intended as a further
normalization of the Federal Reserve's lending facilities. The
modifications are not expected to lead to tighter financial conditions
for households and businesses and do not signal any change in the
outlook for the economy or for monetary policy, which remains about as
it was at the January meeting of the Federal Open Market Committee
(FOMC). At that meeting, the Committee left its target range for the
federal funds rate at 0 to 1/4 percent and said it anticipates that
economic conditions are likely to warrant exceptionally low levels of
the federal funds rate for an extended period.
The changes to the discount window facilities
include Board approval of requests by the boards of directors of the 12
Federal Reserve Banks to increase the primary credit rate (generally
referred to as the discount rate) from 1/2 percent to 3/4 percent. This
action is effective on February 19.
In addition, the Board announced that, effective on
March 18, the typical maximum maturity for primary credit loans will be
shortened to overnight. Primary credit is provided by Reserve Banks on
a fully secured basis to depository institutions that are in generally
sound condition as a backup source of funds. Finally, the Board
announced that it had raised the minimum bid rate for the Term Auction
Facility (TAF) by 1/4 percentage point to 1/2 percent. The final TAF
auction will be on March 8, 2010.
Easing the terms of primary credit was one of the
Federal Reserve's first responses to the financial crisis. On August
17, 2007, the Federal Reserve reduced the spread of the primary credit
rate over the FOMC's target for the federal funds rate to 1/2
percentage point, from 1 percentage point, and lengthened the typical
maximum maturity from overnight to 30 days. On December 12, 2007, the
Federal Reserve created the TAF to further improve the access of
depository institutions to term funding. On March 16, 2008, the Federal
Reserve lowered the spread of the primary credit rate over the target
federal funds rate to 1/4 percentage point and extended the maximum
maturity of primary credit loans to 90 days.
Subsequently, in response to improving conditions
in wholesale funding markets, on June 25, 2009, the Federal Reserve
initiated a gradual reduction in TAF auction sizes. As announced on
November 17, 2009, and implemented on January 14, 2010, the Federal
Reserve began the process of normalizing the terms on primary credit by
reducing the typical maximum maturity to 28 days.
The increase in the discount rate announced
Thursday widens the spread between the primary credit rate and the top
of the FOMC's 0 to 1/4 percent target range for the federal funds rate
to 1/2 percentage point. The increase in the spread and reduction in
maximum maturity will encourage depository institutions to rely on
private funding markets for short-term credit and
to use the Federal Reserve's primary credit facility only as a backup
source of funds. The Federal Reserve will assess over time whether
further increases in the spread are appropriate in view of experience
with the 1/2 percentage point spread.
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I'm just glad the US has finally got things back on track. That whole deficit/unemployment/corruption thing was starting to worry me, but now I can just sit back, relax, sell my gold and buy treasuries - fiscal responsibility has been restored, hooray!!
To all those surprised by the announcement such before OpEx. That was exactly the point you would think. I mean why else on Thursday afternoon one day before expiry - unless you got your friends short some SPX calls (or long some puts). Say the one who bought the 35,000 SPX Put contracts yesterday?
IBot
Here comes sunshine!
So Tyler:who sold 2 mil spys just seconds before the announcment(according to market ticker)?Isn't that worth investigating,or form access to data this is quite normal event?a little historical research on close(lately and not during high volatility period,which of course might see such high volume after close),might reveal that this is not normal . But it could also be the fed itself selling their left overs. Who knows. One only knows that the market is heavily manipulated and to venture in one could drown(lol)...
Saw those four SPY sells of more than 900,000 each almost back to back right after trading hours and before the announcement. Lucky guess?
Man, some people are so lucky - imagine, you're just sitting around at the end of the day, and the thought crosses your mind - 'maybe I'll dump a couple milliion SPYs', and so you do, and then BOOM, the news comes in about the bump in the discount rate, and your like 'WOW, I can't believe that just happened!, but I had a feeling...'. Guess some folks just have a knack for these things.
Round up the Usual Suspects! It was Kaiser Soze the whole time or Silazzo fior that matter. The PPT needs to get the head's up from its Chinese Wall ervery so often. When you got a lock with the edge..Life is Good.
One good way of balancing the book is to make one of your own.
fat finger.
I humbly submit that the only significance one might read into this action is that highly massaged CPI numbers as well as todays PPI are giving ooff some steam and the FED needed to do 'something' to show they are still in the game...curve should flatten a tad too. Stocks are going nowhere.
Not trying to pick a fight, but there are two good reasons for at least a few of us to be happy right now and they have nothing to do with spoo 500.
1) The dollar carry trade is caput, and there is profit in playing the return crash.
2) Maybe now that Ben has a new guaranteed term he is trying to make Fed decisions independent of vested interests. This includes the whores in government these interests bought off a long time ago.
Everyone needs to calm down. The discount rate is pretty much irrelevant. There's only 14 bil in outstanding primary credit right now but 1.2 tril in reserve balances ready to flood the fed funds market.
Wake me when fed funds starts to rise.
so I turn up the volume on cnbc to get a little "reaction" to this. Apparently this is good for the stock market (if you stand or your head). I thought "Alice in Wonderland" came out NEXT month.
Johnny Depp taking Gasbag's place.
I can only imagine how they will spin this.
The scarecrow seems like it's out of intensive care after catching fire when Dick Fuld burned the shorts.
Need.money.for.treasuries.
plus someone has to replace the 12b a week in MBS buys.
+1
btw, ghost, with your background, do you follow the title companies? yes, they are boring, but a good leading indicator...i worked for one of the biggies for several yrs....
Jeff, is that you? Get back to work or I'll tell my wife to stop sending you files.
Yes, space monkeys, I'm married to an exec at a TBTF. They didn't get/need funds during the first go-around, but there's no way fed.gov will ever let the two big title companies go down.
This.is.pathetic.
Just one bad auction and they resort to THIS?
As Marc Faber put it, when you see/hear Bernanke you know you can't do business with this person..
Too bad i sold my fucking FAZ a couple days ago. Hindsight..
Got stopped out of UUP on Wednesday and did not get back in, Gawdamit!!
Got stopped out of UUP on Wednesday and did not get back in, Gawdamit!!
Goodness. Some fed members not drinking so much. Quick, what's the best way to short Kool-Aid?
Perhaps this explains the ES rally this week on air. PPT frontrunning the news...goosing up the market then selling into rallies.
http://market-ticker.denninger.net/archives/1978-Fed-Changes-Terms-In-Front-of-OpEx-Again.html
My theory? Has nothing (or little) to do with Friday. Has everything to do with March.
March or April will witness a massive economic melt-down. The rumored "second leg down". The FED just gave themselves another 25 bp to throw on the fire. Pathetic of course, but what else can they do? All outta ammo.
cougar
Umm, ever heard of Quantitative EASING??? The Fed can go out and buy stocks if it needs to. They can print at will and buy all sorts of risk assets. Your theory doesn't make any sense whatsoever. If anything, get ready for another melt-up in March.
Leo, even black holes have a bottom dude. Please, please please please, get your head out of your ass. It will not go on forever. Massive oversimplifications will not allow for infinite quantitative easing. And even if it did, every single psychological consideration would have to be removed. Is your efficient nothing more than a few boxes pushing the same bits back and forth? Look at how the currency pairs are responding right now. Infinite QE is not an option, although I wouldn't rule out another relief rally. However, like any political animal, the machina of american politics and monetary policy do not march in lockstep to the drum beat of Benny Boy. Lots of reps. from non export states could give a fuck if P&G can't make a profit shipping phosphates to Uranus.
Dude, do some research on how QE was used to help the US get out of the Great Depression. Read a little book by Graham Turner called No Way to Run an Economy. Get informed and stop spewing trader bullshit in my face. If you're going to short stocks based on this release, you're going to get your head handed to you!
Leo, if you have the flu and I come over and slap you around a little, and a few days later you don't have the flu, did you overcome the illness because of or inspite of me slapping you around?
Now THAT is FUNNY!
[Edit]
Unnecessary, but funny!
The impact of my example was to signify that Leo's statement "QE saved our country from the depression" confuses correlation with causation. In fact, there's compelling arguments that Keynesian interventionism lengthened, rather than shortened, the duration of the 'great depression' -- ie, it was "Great" directly as a result of Government trying to help.
I stand corrected... ABSOLUTELY necessary! Well played.
Geez Daedal
Don't confuse Leo with CAUSE and EFFECT.
If a rooster has a crap on a Russian farm and oil drops a buck, then of course, there is causation. Leo, just hasn't figured out that it was the drop in oil that caused the rooster to crap.
Being serious for a moment, at the start of the Great Depression the country wasn't up to its nostrils in debt. And the Fed didn't have an electronic printer.
Just keep doing it till it becomes a correlation. Then start doing it as a preventative measure.
I don't know but it sounds like a good idea...
QE has been a fail since around 1913.
However, like any political animal, the machina of american politics and monetary policy do not march in lockstep to the drum beat of Benny Boy. Lots of reps. from non export states could give a fuck if P&G can't make a profit shipping phosphates to Uranus.
Altan...one of the more astute political observations that I have seen on ZH. Well said and an excellent (and accurate) observation on American politics.
thx much deadhead, I just can't stand Leo towing the party line all the time. I'm not even sure what party it is, but it sure sounds more like trader bullshit than what I'm spewing.
Sadly, I think Leo's hoping his conventional pension investments can maintain some of their value.
Suddenly, visions of screws start popping into my head...
Leo, I understand that you're a Canadian. If so, then perhaps you missed the news about the MA election. However, an even bigger tell, one that for some reason is getting absolutely no attention, is Bayh resigning from the Senate.
Ben might have some immediate short-term leeway with regards to QE, but the writing is on the wall. Come November, the electorate is going to make a collective decision to bring this bitch down.
Those with kids may recall this exchange from The Emperor's New Groove:
Kuzco: Let me guess. We're about to go over a huge waterfall.
Pacha: Yep.
Kuzco: Sharp rocks at the bottom?
Pacha: Most likely.
Kuzco: Bring it on.
The Bayh move is huge.....rats off a ship that they know is sinking.
B9K9,
In addition to your excellent points, the Stack manifesto has the potential to take on great import to the tea party folks as well. Might wanna cover the bet of an outbreak of copycats. Think TPTB have noted the effectiveness of the US military against suicide bombers? One can hope that TPTB are wise enough to figure out it is time to pause in blood-sucking before the host (that would be us) either dies or performs surgery to remove the blood-suckers.
Leo is the diminutive of Leonidas, but he is acting more like Ephialtes of Trachis.
Leo,
true fed can print like crazy, and this can conitnue into eternity. problem is QE has never worked historically without a serious ramification thereafter (just in case your going to reference the depression QE) - what was the net rsult thereafter?
the longer QE continues/extended/renamed the more confident I am we are in a deflationary state. the only way for US to get out of this corner is deflate initially, with market rallies in between, then extend the term of the shit that everyone is holding.
Get the investor tired of the market and they will run to treasuries because "at least I get my money back".
once that is complete then inflate the shit of this.
too many people calling for inflation near term which tells me its the opposite. kinda like the dollar trade this past six mths.
Federal Reserve must be short the market. Funny how this "unexpected" news just happens to occur as the S&P 500 ran into the 50 Day MA on declining volume.
Connect the dots.
Bad Treasury auction.
After just trying to sell a new "Stimulus" program, Obama now suddenly talking about need to deal with our debt/deficit.
Obama sets up "Blue Ribbon Committee" to deal with debt/deficit.
BB raising Discount rate.
All of these things were clearly coordinated to send a message.
What is that message, and to whom was it sent?
It's not that hard.
Market will end green tomorrow - guaranteed. More manipulation, more money for the big boys. Amazing how they ran that up so fast today at 2:15 - Gee isn't that the time the Fed usually anounces??
For FOMC announcements, yes. For surprise rate changes like in August 2007 and January 2008 it has been between 8 and 8:15 in the morning.
The easiest setup was January of 2008 when the futures were nearly limit down and an announcement came across that one of the governors was going to miss a speaking engagement that day (which everyone on our desk took to mean that there was an emergency meeting and either the discount or FF rate was to be cut. Sure enough, a little past 8 a.m. the spooz shoot up as the news pours out that they did.
Tyler said, "Will the Steepener/Carry Trade/Long Stock bandwagon please proceed calmly in single file through the exit of the burning theater."
That's some funny sh!t
Ya gotta get 'em up ... so ya can sell 'em down. Just sayin'.
Did anyone bother reading the Fed's release? I quote:
"The Federal Reserve Board on Thursday announced that in light of continued improvement in financial market conditions it had unanimously approved several modifications to the terms of its discount window lending programs."
Get ready for another monster rally in stocks. Keep buying them dips, especially in alternative energy.
Well what do you expect them to say, "The Federal Reserve Board on Thursday announced that in light of being scared shitless of currency collapse it had unanimously approved several modifications to the terms of its discount window lending programs."?
Fed didn't need to prop up the USD....Europe did that for them! Wait till I post tonight, I am going to clear some falacies once and for all!
Leo, I challenge you to a duel.
Wet noodles @ 10 paces?
You're being facetious, right ??
If not ... sold to you and your evil twin brother Cramoo the Whale.
Just shaking out the little guys again to buy in the morning. Whether you agree the economy is actually improving or not, just follow the money. My bet is, the low on the futures will be bought up to open and we'll see a decent rally tomorrow. Timing is a little odd though. But we do get CPI in the morn - maybe....
Well what did you expect them to say Leo?
"The Federal Reserve Board on Thursday announced that in light of continued improvement in financial market conditions it had unanimously approved several modifications to the terms of its discount window lending programs."
I mean I know the Fed is the Ministry of Truth and all but what else would they say? The actual truth?
"Well shit guys, those pesky unemployment numbers are on the way back up and even though mortgage rates are still at historic lows applications are falling off again, and we are likely to see something on the order of 4 million forclosures this year but hey, financial markets are clearing. Let's start raising rates."
They missed going in and they are going to miss coming out also. But hey, keep buying the dips. Nothing to see here.
Amusing to see on the latest news column on the side
of the page:
02-19 07:16: First Solar downgraded at ThinkEquity
I love how you believe everything that the govt. says.
It does not exactly help your case.
The last time I listened to the Fed was 2008, when they claimed 'that the subprime crisis was contained and that there will be no recession'.
2:3 says GS had SPY 110 puts and 109 puts at 3:55 p.m.
purchased after the calls were dumped just after the bottle rocket around 2:15 p.m. EST.... yep, all those desperate to get out of the 110 puts were offered the opportunity by a generous squid. how thoughtful of them.
This is August 2007 all over again. GS went from below the 200 DMA to a skyrocket above the 200 and 50 in three days.
This bullshit is only going to cause bigger problems in the long run. People fled the fixed Ruskie markets of the 1990's. The only difference here? We are not as transparent as they were.
Seems to me this could well be about helping the squid and JPM C WF dump MBSs that have been unmarketable without a hike in rates. If they can sell them with before they go sour with the next big leg down in housing, somebody else will take the big hit on them and they will avoid ever having to mark them to market.
Would not the value of the MBSs decline if the "rates are going up signal" has been given? And on that topic, how much damage does a .25% hike in rates do to the value of the Fed's own MBS portfolio? How many billions just evaporated? How's this affect the Simon bid for GGP? This will have a ripple effect.
Any increase in rates, even if slight or "symbolic", will have an adverse effect on real estate valuations, period.
Bacon makes everything better!
incredibly, i put on a nice flattener trade this afternoon. i havent heard so many "wtf??" s uttered in one spot in a long long time!
haha, well, tomorrow will be fun.
Certainly helps to explain the funny action and tight range yesterday and today - keep the market up to take advantage of the interest rate move.
Conspiracy? Nah...
DavidC
GOLD BITCHES!!!
I am Chumbawamba.
dollar oo= 1/gold
what about gold? it's in trouble in the short term along with equities. I'm guessing one more big shakeout down to the 900-950 range and then the real move higher.
TBT bitches!!
Sounds about right.
One can only hope. That would be sweet.
He just wanted to roll out the line. It's as good a post as any I suppose...
Golds got rock hard granite support at 980 If you look under it you get a volcano to the face.
stop playing with computer and go to bed... kiddy time is up
I'll go to bed if you make a wish. LOL
Wishful think me to sleep with nightmares of 750 gold. LOL
Is that the whole secret bankster meeting in sydney last week for?? Gold $7k bitches
Bernanke emerged from confirmation a wounded duck. Did the new dynamic duo of Hoenig and Scott Brown tell Bernanke and his puppet master Lloyd B. to get stuffed?
I was caugt short the USD versus the EUR....
uh huh
You don't have a private pilot's license, do you?
Bernanke's first proposal would be to raise the discount rate. The discount rate is the rate charged by the Fed when banks borrow directly from the Fed. Raising the discount rate is meaningless right now as a tool to regulate systemic liquidity because the banks have plenty of money to lend out in the form of excess reserves. Excess reserves are bank deposits kept at the Fed in excess of reserve requirements. As of 12/31/09, banks had around $1.1 trillion in excess reserves. The banks thus have no need to borrow money from the Fed - and thus will not be affected at all by a rising discount rate. As of Feb 3, Discount Window loans were an insignificant $14.7 billion. As you can see, the discount window is not even a source of bank liquidity in comparison to the liquidity the banks already have on deposit at the Fed. Raising the discount rate would be about as useful as taking away ice machines in Antartica. In Banana Ben's own words today (Feb 10): raising the discount rate is “not expected to lead to tighter financial conditions for households and businesses and should not be interpreted as signaling any change in the outlook for monetary policy."
http://truthingold.blogspot.com/2010/02/bernanke-hikes-discount-rate.html
+10.
The action itself is of no consequence of course, but the timing..
True dat but it is more symbolic than anything. No the banks don't need the window but it is a shot accross the bow that the puchbowl is being removed. Buckle up.
good point, but the purpose is to tell a story to the market, to achieve the desired objective. I think No. 1 is to sell Treasuries, and reinforce the dollar - at least temporarily. This could be like the last time - the drip drip drip of .25% increases, to eventually have room to lower them when TSHTF.
Where the hell is my "All Available Tools" box?
Bingo. It's theater.
They'll devalue or allow some "sudden catastrophe" to appear, or declare a bank holiday or QEII+p out of the blue.
Do not trade with these people. Incremental gains from their drawers-full of toxic equity, bond, derivative IOU garbage have blowup functions ONLY they control. Include of course the currency. Six weeks ago, the bottom of the dollar was to fall out, suddenly it is the Euro.
Ridiculous pantomime street theater.
Buy Gold. This thing is going down. Although they still hold the rudder for micro steering, gravity and the sea have final say.
"They shall grow not old as we that are left grow old. Age shall not weary them, nor the years condemn. At the going down of the sun and in the morning, We will remember them."
dually noted. I think this was BS hype.
tomorrow will not be as much fun as March and April !!
More importantly - is this some semblance of a katow to the recent Chinese de-leveraging?
Why not release this news on Friday afternoon, after the close? This seems an intentional act by Fed (w/ concurrence of Geitner and Summers) to affect options expiration. Not sure who sold the 1100 SPY call/puts. Could it be Govt payback to GS, JPM, et.al. for not being team players on financial reform?
payback, hmm who still remembers Greece talk about
blowing an item off the front page..problem solved.
No, it could not because you have it backwards.
The FED (that means Ben and his co-conspirators in "The Syndicate") takes its orders from Lord Blankfein, Jamie Dimon, Mack, Rubin, Greenspan, Pulson, Friedman and some folks whose shiny black shoes you can see peeping out from under the curtain.
They know what the moves are because they create them, and front run them. In the old days it used to be called inside information but that was because someone else created the information. In this case, "The Syndicate" created the move higher and told Ben what to do.
There sure are some very naive people on this board.
Well done.
How about buying some dollar ETFs to get the rate climb going. Take a look at some dollar etf ideas:
http://etfdailynews.com/blog/?cat=136
It's sort of fun watching Bernanke fuck somebody else for a change.
futures plunged? puhuleeeez. They are up 400 - 500 points within few days and down 50 points in AH. Thats not even remotely a plunge, just a pullback before gogin to new highs.
you must be leo
Fed gesture in front of CPI.....
The banks don't need the Fed's discount window because the same Fed is the 800 pound gorilla in the room at the repo market vis a vis the targeted 0-.25% Fed Funds Rate.
Crikey! A 50% increase in one hit! Oo-err!
DavidC
Abby Cohen gets it right again!
Here's a decent play on rising interest rates beyond your standard short treasury ETF: USB-H (USB-PH on Yahoo Finance)
This is a US Bancorp Preferred security. The security pays a quarterly dividend based on the greater of:
1) LIBOR + 60bps or 2) 3.5% (22 cents/quarter based on $25 par amount) Given that LIBOR is currently .25%, this security will pay the 3.5% for the time being. However, at a price of $19+ your actual yield is 4.5% (22 cents/quarter) because the 3.5% is based on a $25 par amount. These securities got crushed during the credit crunch, just like everything else. Now they've come back, and they've cheapened from 21 to 19 recently. These securities are callable at $25/share in April 2011 at the earliest.
DXY at 82 yet?
(Just a subtle reminder.)
Leo, where are you when I want to flog you. Here's a chart for everyone to look at a reminder that you don't buy the next socially disruptive new technology at the height if excess, you buy it after it is debased to pay for progress through the pain of retail investors (the kind Leo herds to solars) screaming and kicking to the poorhouse.
http://finance.yahoo.com/echarts?s=WHRT#chart2:symbol=whrt;range=19961213,20100217;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on
What will this do too the interest rate swap markets and how will it affect the banks?
So Bernanke has a plan? Lets see it BS!
Let's not forget the recent decline in commercial shorts in the weekly COT reports for gold and silver. My guess is the banks are using this as another opportunity to reduce their short positions further ahead of a significant price rise in commodities. Just sayin'
this is where Leo's advice will take you
--Paranoid Pilot flies a tiny single engine Cessna into a Federal Building in Austin Texas targeting the IRS with whom he had a long running dispute. Given the amount of fire and damage to the large building from the tiny plane, it's obvious the plane was loaded with explosives or additional incendiary materials such as extra aviation fuel. It was a Kamikaze attack.
Implication: People are very angry and getting a little crazy. I've noticed an increase in road rage personally.
--The International Atomic Energy Agency (IAEA) is now, just now, concerned that Iran either never stopped, or has restarted work on an Atomic Bomb. Did anyone ever think that Iran wasn't working on developing its own Atomic Bomb from its own weapons grade Uranium?
Implication: Heightened risk of a preemptive strike against Iran by US or Israel or both. Risk of Iran's retaliation including world wide terrorism, attacks on Israel, and interruption of the world's oil supply. Gold and Oil would go through the roof, stocks would tank.
--The Fed Hikes the Overnight Bank Lending Rate, after hours today, from 0.5 to 0.75%, likely a prelude to a hike in the Discount Rate.
Implication: Although symbolic, Bernanke sends the message that rates could creep up from near zero percent. With unemployment high, the banking system still a mess, real estate still imploding, and our national debt exploding, the FED can't raise rates much. If commodities sell off, I'd buy them. If the dollar rises much, I'd sell it.
yea, i can see it already. Oil going to shoot up to 100, tax's will increase, "for the good of the country," and suddenly we're catching Senior taliban and terrorists very easily.
something fishy going on
Did anyone ever think that Iran wasn't working on developing its own Atomic Bomb from its own weapons grade Uranium?
Yeah, me. Oh, and the IAEA. Iran bumped up its enrichment to 20%, which is for, as they have been claiming for some time now, is for nuclear medicine work. Before you, or anyone else (who is ignorant) laughs, weapons grade is 90% enrichment; the difference in getting to this level is like your neighbor building a firecracker vs. building a ballistic missile in his backyard- it would be more than obvious.
Thanks for playing...
will this push investors off the short end and more to long end ?
the bloomberg piece is wrong by my calcs its an even 150B next week including tips.
actually maybe a little below average considering this week had barely anything which hasnt happened for looooooooooooooong fucking time. so let them come back w/ a bang!
Personally, this is just more smoke and mirrors by Ben. He's trying to make good with all the buyers of the US crap. Like China. He's now screwed, so are we. If he raises the rates, that's the the end of the market and the US. If he keeps them at the current level, we're still screwed. And he will, at least until after the mid-term elections, if not until 2012. It's the politics that are going to screw us, whether it comes from the Dems or the Repugs. Roman Empire, on a much grander scale.
+1000
It is not the longstanding conflict of desired outcomes ( low inflation/ high employment) between The Beard and O'POTUS that bothers me, but rather it is the areas where their interests align which keep me awake at nights.
Ben's testimony clearly says: (i) the fed funds is currently meaningless, and (ii) that they are considering increasing the discount rate (better yet, the spread between the meaningless fed funds and the discount rate). He also said that the economy needs stimulus to stay afloat.
Here's the key though: why is the discount rate relevant? There's only about 30B worth of borrowing going on at the discount window?
PPI goes up more than expected = perfect opportunity to scare the inflation hawks by pressing on the meaningless rate boogeyman button... all the while they continue to increase the monetary base.
The news in Hooverville was good: banksters will get charged more.
Hooverville rejoices.
Now back to warming hands over burning trash cans
I was bored at work and figured out on my cell phone calculator that if the IMF sold all of its 3000 tonnes of gold, at $1100 per ounce, that's only 68 billion dollars. Chicken feed in a world where 68 billion dollars is a rounding error. Given how massive budgets and budget deficits have become, I think gold is undervalued by a factor of 10.
That's the way I see it too. Gold is a bargain at under $1500. "As income rolls in, I buy gold."
Funny that Feb SPX Futues expire at the open tomorrow. Calls and puts will be left with nothing
Funny that the SPX options expire at the open tomorrow. Calls and puts will be worthless
Funny the SPX Options expire at the open tomorrow. Calls and puts will expire worthless
First China, Now The U.S. Strange
The bull market in gold moved from $400 to $887.50 in the 1970s as interest rates rose from 3% to 14 7.8% on Ten Year money.
I am calling them out. I think this move has no direct impact. Discount rate? Please.....this move is a gimmick. I think China said, 'Do something, anything right now FED, or else!' So the Fed raised the discount? The majors have ALL THE CASH THEY COULD WANT ANYWAY!
Personally, and i am out on a limb here, I think they could smell the hype cooking, and they were not ready to serve dinner. Short term, bunch of trader zombies freak out and pull back. No way I will. I will look for buys until Mid March, but I am certain of one thing, Zimbabwe. Good luck doelarr, the longer you hang on, the more time 'Merica has to build high speed rail. Good luck.....
Does this mean money market yields will go up?
Money market accounts have yields?
People put their "money" in money market funds?
C'mon, boyz, it's just a Bernanke trial balloon with a little insider trading to make a few bucks. Most likely this move won't mean a thing. Chill out with a little Jamie-Josie Runaway:
http://www.youtube.com/watch?v=XSKad0vr8V8
I think the rate hike process will be a shortlived process...
These days of 0.5% interest.....it's been over a long time ago:
http://www.youtube.com/watch?v=tTmtpNjYHxw&feature=PlayList&p=9C8C05F552406B90&index=46
Any chance there is another incident tomorrow or over the weekend?
Copycat attacks tend to come rather quickly these days ...
Anybody watching the wild ride of the EURO?. You would think this is the battle for the galaxy. Vertical and horizental line. Any FED or ECB action in there around 9 something pm?
Yes, Bullard come out about then and among other things said no interest rate hikes until 2011.
Completing the trifecta of idiot fed governors who have been trotted out for damage control, this fine Thursday night.
However, the Forest Gump award for "stupid is as stupid does" goes to Bullard for this line:"A future Fed, with an appropriately broad regulatory responsibility, may be able head off a future crisis."
Hey, anyone else notice that the Hang Seng just pancaked?
Down 2.3% as I write this.
no didn't notice don't care ...
markets go up markets go down ,,
Oh.
So why are you reading Tyler's post then, and why are you commenting on it?
It is, after all, a post on the markets, and how they go up and down and do their whole uppy-downy thing which a lot of folks really do care about.
Wrong!! nobody cares about this shittake market !!
"Its all about managing perception."
--- Jesse's Café Américain
18 February 2010
Managing Perceptions: Fed Raises Discount Rate After the Close
"The last duty of a central banker is to tell the public the truth." Alan Blinder, former Vice Chairman of the Federal Reserve
In a largely symbolic move, the Fed raised the Discount Rate after the bell by 25 basis points to .75%.
As you know, the Discount Rate is the interest rate that the Fed charges banks who borrow from them short term on an emergency basis.
This is the shaping of perception by the Fed. It does not raise rates for the consumer or businesses, and does not affect the rates and guarantees in the many Fed and Treasury programs which are still supporting the commercial banks.
One has to wonder why the Fed chose to jawbone at this time. Is this a move to help them with next week's $100+ Billion Treasury auction? We are discounting rumours that the nose counts among the Primary Dealers showed the risk of another 'failed' auction was rising.
Or was this mainly to provide another opportunity for the bullion banks to take the prices down ahead of their option expiration next week? Plan B stands for Bernays.
"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K." Eddie George, Bank of England Governor to Nicholas J. Morrell
Its all about managing perception.
When the Fed starts backing off on quantitative easing, we will know that things are truly changing. Bernanke is all too aware of the Fed's policy error in 1931 of raises rates prematurely, which caused the second leg down to the trough of the Depression in 1933. So let the Fed wave their hands all they want, but watch the Adjusted Monetary Base. In other words, its not what they say, but rather what they do.
One wonders if Obama is also aware of Hoover's policy error in trying to balance the budget as the nation slid into the most serious part of the Great Depression. He is certainly no FDR, and the nation is unlikely to be on the road to recovery during his hapless Administration. Will he, like Greenspan, later confess that he erred for a theory, a mistaken belief? A small comfort for those they have ruined.
Man wird nie betrogen, man betrügt sich selbst.
[We are never deceived; we but deceive ourselves.]
Johann Wolfgang von Goethe
http://jessescrossroadscafe.blogspot.com/
when tightening cycle started, all risky assets perform badly: stocks, bonds, commodities. Its. cash is the king!
The market will rally tomorrow once all the dipshits on CNBS agreee, "It could have been worse."
This is such a fucking joke. The discount rate was relevant only for a brief period at the height of the crisis when banks actually used the window. Banks don't borrow from the Fed window except in extreme liquidity crises. The real rate is the Fed funds rate - and that's not moving. Bernanke will exhaust QE (and that could go on for years) before he raises the FF rate in any meaningful way. Only a disruption in the supply chain can end his game very quickly and then he will have to deal with the nasty bitch Gold... until then he is and will remain the Puppetmaster.
let me all help you out here. there is a GLOBAL Coordinated rate hike cycle underway. get your head out of your ass. the FED and all government will raise rates now and remove liquidity. the FED is not just the USA anymore..they work with the world and with the IMF/World Bank/etc and with rich elitist families and the member banks/related international banks.
the Fed wouldn't raise a the discount rate if its meaningless. its not meaningless, its a huge warning shot to people. its actually a KEY way the FED manipulates money- anyone with a finance degree knows this. we have a stagflation scenario right now and potential failed auctions coming not only in this country but other big countries. they will raise rates or be FORCED to by bond bandits. Wake up
jobless rate and PPI rates were very bad today for the economy and yet market ignored it. this is scary
the IMF signal to sell billions of gold is part of the signal you should have be listening to the other nite. the market was walked up again past 2 days so big money could sell calls again
the FED is not to be trusted. do not trust the damage control folks. rates will rise in the end and the liquidity is already proven to have been unwinding
what this means is people will start moving to cash and money markets as rates rise rather than wait for risky assets to justify valuations. the bottom line is this...trust no one let alone a private banking cartel. their missions since 1913 was to help to pump and dump the economy and consolidate power. remember...bildbergs have an agenda and the Fed/imf/world bank complex is how they will get what they want in the end from us: more power and control and ability to tax and move towards more unified world government
You forgot one minor detail in your "rate hike" scenario......the economy. Or may be I should say the banks. If they raise rates, we're back to square one and worse actually because bailouts are now simply just unaffordable. No chance in hell rates are going up. This whole thing is a Bernanke head fake.
One other thing. Get it through your head. There are no bond vigilantes out there. They've all been fired long ago since they were getting their scalp handed it to them by the FED's proxy on the bond market, day after day, month after month, year after year. They own it all Tripps, all of it.
also, its not just the discount rate change..they are reverting back to overnite lending only, not 30 days. liquidity party is over folks
per DENNIGER:
That's "right now", in case you didn't figure it out yet.
This is something we did warn about, and in addition we're giving notice. See? Hope you don't get a margin call in the morning - BOOYA!
See above.
Tripps, they don't need to borrow from the FED, they have trillions of excess reserves just sitting there, two lines later on the FED's balance sheet.
Somebody set us up the bomb.