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Fed Minutes: Hoenig Protests, Says Low Fed Funds Rate Extended Period "Not Advisable"
March 16 Fed Minutes Released.
Key highlights:
View on market responses:
The decision by the Federal Open
Market Committee (FOMC) at the January meeting to keep the target range
for the federal funds rate unchanged and to retain the “extended
period” language in the statement was widely anticipated by market
participants. However, investors reportedly read the statement’s
characterization of the economic outlook as somewhat more upbeat than
they had anticipated, and Eurodollar futures rates rose a bit in
response. The changes to the terms for primary credit and the Term
Auction Facility that were announced on February 18 resulted in a
small increase in near-term futures rates, but this reaction proved
short lived, as the statement and subsequent Federal Reserve
communications— including the Chairman’s semiannual congressional
testimony—emphasized that the modifications were technical adjustments
and did not signal any near-term shifts in the overall stance of monetary policy.
On
balance, incoming economic data led investors to mark down the expected
path of the federal funds rate over the intermeeting period. By
contrast, yields on 2-year and 10-year nominal Treasury securities
edged up, on net, over the period. Yields on Treasury
inflationprotected securities (TIPS) rose at all maturities, reportedly
buoyed by investor anticipation of heavier TIPS issuance and by reduced
demand for TIPS by retail investors. Reflecting these developments,
inflation compensation— the difference between nominal yields and TIPS
yields for a given term to maturity—declined over the period, a move
that was supported by the somewhat weaker-than-expected economic data
and the publication of lower-than-expected readings on consumer prices.
Spreads
between London interbank offered rates (Libor) and overnight index swap
(OIS) rates at one- and three-month maturities stayed low, while
six-month spreads edged down somewhat further. Spreads of rates on
A2/P2- rated commercial paper and on AA-rated asset-backed commercial
paper over the AA nonfinancial rate werealso little changed at low levels. The Federal Reserve continued to taper its large-scale asset purchases and wind down the emergency lending facilities with no apparent adverse effects on financial markets or institutions.
Broad
stock price indexes rose, on net, over the intermeeting period, boosted
in part by favorable earnings reports from the retail sector. Bank equity prices outperformed the broader equity markets. Option-implied
volatility on the S&P 500 index dropped back to post-crisis lows
after increasing earlier in the period on concerns about Chinese
monetary policy tightening and fiscal strains in Europe. Nonetheless,
the gap between the staff’s estimate of the expected real equity return
over the next 10 years for S&P 500 firms and the real 10-year
Treasury yield—a rough measure of the equity risk premium— remained
well above its average over the past decade. Yields on
investment-grade corporate bonds, as well as their spreads over yields
on comparable-maturity Treasury securities, were about unchanged over
the intermeeting period; investment-grade risk spreads were near the
levels that prevailed late in 2007. Yields and spreads on
speculative-grade bonds edged down, and secondary-market prices of
leveraged loans rose further.
"Extended" not pertains to unemployment charts, not to actual time:
A number of members noted that the Committee’s expectation for policy was explicitly contingent on the evolution of the economy rather than on the passage of any fixed amount of calendar time.
Concerns about housing:
Participants indicated that the pace of foreclosures was likely to remain quite high; indeed, recent data on the incidence of seriously delinquent mortgages pointed to the possibility that the foreclosure rate could move higher over coming quarters. Moreover, the prospect of further additions to the already very large inventory of vacant homes posed downside risks to home prices.
On extend and pretend:
No decisions about the Committee’s exit strategy were made at this meeting, but participants agreed to give further
consideration to these issues at a later date.
Details of Hoenig's dissent
Voting against this action: Thomas M. Hoenig.
Mr. Hoenig dissented because he believed it was no longer advisable to indicate that economic and financial conditions were likely to warrant “exceptionally low levels of the federal funds rate for an extended period.” Mr. Hoenig was concerned that communicating such an expectation could lead to the buildup of future financial imbalances and increase the risks to longer-run macroeconomic and financial stability. Accordingly, Mr. Hoenig believed that it would be more appropriate for the Committee to express its anticipation that economic conditions were likely to warrant “a low level of the federal funds rate for some time.” Such a change in communication would provide the Committee flexibility to begin raising rates modestly. He further believed that making such an adjustment to the Committee’s target for the federal funds rate sooner rather than later would reduce longer-run risks to macroeconomic and financial stability while continuing to provide needed support to the economic recovery.
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Hey Hoenig, didn't you hear Greenspan say there was no relationship between low rates and speculative bubbles?
courage is often rewarded by a "boating accident"
But his wife said he can't swim, he hates the water and he would never even get into a boat........oh.......boating accident it is.
Hoenig is totally safe. He is little more then a steam valve to show the aware part of the masses that "someone is looking out for them". I'm certain a man doesn't sit in on the FOMC meetings without being willing to play some ball.
After all he is saying possible inflation and maybe not wise move, not that this will kill the currency and ruin the economy in the long term. And yes Japan did it, who here thinks USA today is structurally the same as Japan circa 1988, and Japan is not looking super great at the moment either.
I guess it's getting a bit late in the season for a ski accident. And fatal tennis accidents are not very credible...
I wouldn't say that. Just like there's the endless summer for surfers, isn't there an endless winter for skiers? :>))
http://www.youtube.com/watch?v=XmudLnEV48k&feature=related for the endless summer
http://www.youtube.com/watch?v=UsqqIcgqKzU for the endless winter
http://www.youtube.com/watch?v=6xMz_nflqzk great video of different accidents
http://www.youtube.com/watch?v=j1hn1fNEhfY bad tennis (foot) accident
http://www.youtube.com/watch?v=2R4LJzgNhKw&feature=related bird died in tennis accident
It's called Las Lenas
Pounding in Vail right now. Tomorrow should be semi-huge.
Ah, Argentina. Should have known. Thanks RC.
http://www.laslenasvacations.com/flash.html
Perfect. A car accident is so 10 days ago.
Too late; we are bubbly, bubbly.
Fed minutes...bla bla bla...Market Rallies, Stocks Soar, hilarity ensues. This is such a joke.
Endless money printing as far as the eye can see.
Expect more of the same in the weeks ahead - rising commodities prices, stagnant wages, etc.
All I can think of is the FOMC rapping this crap to a crowd of thousands.
/advertisement
Coming to a stadium near you The FOMC featuring Zimbabwe Ben on the Infinite Liquidity Tour! Promoting their new album ZIRP-4-Life with such hit singles as Deflation Is My Bitch, Trash This Cash, Banker's Delight, and mega hit Currency Crasher featuring Gideon Gono! This is a once in a lifetime event you don't want to miss!
/end
Come early so you don't miss the opening act by the puppet theater.
Is this asshole even aware of what he is doing to pensioners, the elderly that rely on interest payments to buy fuckin food, medications, and heat??
Who does this guy think he is to ENSURE THE POVERTY of seniors around the country? To starve them of income? To transfer it to banksters and debt junkees?
I want to see him implicated fully in the fallout of this. I will and have been advising everyone I know that does not understand economics or anything remotely close just what Gentle Ben and his Merry BAnd of Brigands is costing them.
Of course he knows, he just doesn't care. You think it's bad for the old now wait till they seize the pensions and 401ks and either default SS or kill it through inflation. My prayer is this ponzi holds out till at least Jan and my folks can cash out their 401ks.
What do they care for the old? They exist to prey off the productive. Once the old retire they would prefer that they be shipped off to the glue factory or served up as dog food. Give Animal Farm another read for where we are at and where we are going. They don't care about us. They treat us worse then a medieval lord would treat his serfs.
the elderly were just taken care of in the new health bill. The central planners intend to define the population age spectrum such that is most efficient for frivolous consumption and debt slavery.
Just goes to show how few people are in this market now... fed minutes are not the event they used to be...
And once again, Fed Playhouse Theater makes it look like there's discussion, dissent and debate.
I wish I knew. A business acquaintance was a former chairman of a regional fed bank. He seemed kinda oblivious to these discussions and would not engage me when I probed. Maybe that's the defense mechanism. Maybe the peripheral apparatus is disconnected and he was really not in the loop. I don't know. This is speculation on my part.
But the effect is a kind of 'good PR' for the fed. 'See, there is dissent and debate within! It's not an oligopoly! We're a healthy democracy.'
The ramp to SPX 1230 has begun... All Aboard!
Yes of course, and forget valuations, earnings and any such silly thing as those annoying fundamentals
They should just gap up SPY to $150, DOW to 14K and double the price on all bank stocks. Why not? It's about as reasonable as whats taking place now isn't it?
Our economy must be ok...the market tells us so.
That was what I thought
OT: But the latest from Matt Taibbi is a damn good read: http://www.rollingstone.com/politics/story/32906678/looting_main_street/1
Seems like Rolling Stone is one of the few uncaptured MSM outlets left.
I have to admit I never paid it much attention before.
Business Week is running a cover about it not being all Goldman's fault.
That should be good..................................................
The very best that our money can buy.
Has anyone ever witnessed such obscene abuse and without regard for the public? Maybe in Venezuela?
It will continue as long as the people let it continue....and judging by the level of intelligence of the average American...it's gonna continue for a long long long long long long time.
" We are willing to accept lies if they make our lives easier. "
Producer from the TV series "People's Century"
That pretty well sums up the average American.
Or like wanting to keep living in The Matrix cause the real world is so wrecked.
Is this market for real. How long can this go? Anyone
As long as they can keep more fools buying or shorting against it
It's going to be one helluva hang-over from all that Kool-aid!
There's no support for the upside except for ZIRP&Co which is really protecting the "downside". So, we remain "lying in wait".
41 days in the emini without a retracement of more than 28 points from a high.
I think that beats last year's July August pump.
Had to laugh at one of today's Yahoo Finance headline: "Fed Keeping Eyes Out For Speculative Bubbles."
ROFLMAO
As if they could EVER spot a bubble, even if they had one sitting on their heads with BUBBLE written in front of their faces!
Hey, I resemble that remark!!
Unleaded gas futuresnow up to $2.35/gal which means $3 or over at the pump very soon. I have to believe that will put a wet blanket on Joe Sixpack and the stock markets.
Because oil is up on expectation of increased demand from the jobless recovery. Makes perfect sense and the best part is, it won't affect CPI (ex food & energy of course) so Joe has nothing to worry about.
How about when he goes to buy school clothes next fall for the kids and all the clothing manufacturers have priced in record cotton prices?
Same for those shoes, pants, whatever. All product in the creation pipeline is already pricing in significant price increases and inferior quality/ quantity to overcome the oil input increases (oil in rubber, oil in transportation, oil in fertilizer and machinery to make that cotton...etc, etc.). Inflation is being built into the pricing and margins for products soon to arrive. It's already a done deal w/ oil nearing $90. It just takes a little time (6 to 18mos) to work it's way from refiner to producer to end consumer.
$3 here already.
Hoenig must have bought a boatload of CDS' betting that the US Treasury will default on its obligations.
What a patriot.
Rock & a hard place is where they be.
Hoening has probably figured that its worth it to be the sole voice of conservative monetary policy - even if he's likely to be wrong - in order to protect his legacy when/if this whole giant expirement falls apart.
Or maybe allowing the myrmidons to dissent is one of the early steps in a tightening policy...the fed has much less power to tighten with all those excess reserves out there and long rates rising; theyd be much more effective getting the market to tighten for them(play games w/ language, more dissents at the FOMC, increased hawkish tone to speeches and soundbites) while actual policy stays accomodative, keeping long rates contained and hopefully bringing unemployment down.
Morgan Stanley Said to Seek Supertanker to Store Oil
Jan. 15 (Bloomberg) -- Morgan Stanley is seeking a supertanker to store crude oil, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from higher prices later in the year, four shipbrokers said.
The bank has yet to find a suitable vessel, said one of the brokers, all of whom asked not to be identified because the information is private. Carlos Melville, a spokesman for Morgan Stanley in London, declined to comment.
“There’s a lot of people looking for storage,” Denis Petropoulos, London-based head of tankers at Braemar Shipping Services Plc, the world’s second-largest publicly traded shipbroker, said by phone.
PAGING SEC's MARY SHAPIRO, AG ERIC HOLDER,CFTC GARY GENSLER
HELLO? ANYONE!!!
Can you dance the Con tango.
http://seekingalpha.com/article/182954-outlook-for-oil-when-contango-tra...
The fed will not see a bubble so long as they ensure their "indices" keep their eyes shut tight.
Sort of like playing hide and seek by hiding via closing your eyes and thinking you are hidden because you can't see anyone else.
However, in my new CogDis spirit of resolve, I'm tired of bitching. Point made - Fed wants inflation. Duly noted. Let's discuss actions to counterbalance and if not possible, then profit from this.
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