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Goldman Dissects The Fed's Statement, Expects QE2 Announcement On Midterm Election Day
Jan Hatzius was spot on in his menu selection for the Fed's a la carte menu. What comes next? "We continue to expect that a sizable asset purchase program will be implemented in coming months." Most likely date: November 3, smack in the middle of the midterm elections. Alas, it will thus be either a case of sell on the news, or outright selling into the event. The one asset likely to benefit the most from ongoing dollar devaluation, is likely the same as the one that benefitted the most today: precious metals and other commodities.
From Goldman Sachs
Fed Signals Willingness to Ease Further if Growth or Inflation Continue to Disappoint
BOTTOM LINE: FOMC signals willingness to ease further, most likely through asset purchases, in a statement that signals dissatisfaction with inflation trends but changes very little with respect to the growth assessment. We continue to believe that a sizable (cumulating to at least $1 trillion) increase in the Fed's balance sheet will begin in coming months, most likely via purchases of Treasury securities and with a decision to this effect a strong possibility at the November 2-3 meeting.
MAIN POINTS:
1. As we thought likely, the Federal Open Market Committee (FOMC) signaled its willingness to ease monetary policy further ("provide additional accommodation," in Fedspeak), if needed, to help support the economic recovery and to get inflation back to its desired level. While the committee did not specify that this accommodation would come via asset purchases, this was strongly implied by the omission of a paragraph that had said that the committee's objective was to keep the balance sheet at its current size ($2.3trn).
2. Otherwise, changes in the statement were notable mainly for their focus on inflation. Specifically, the inflation paragraph says more clearly than ever before that inflation is below the range the committee judges as acceptable. The committee then reinforced this by noting that one objective of the additional easing would be to push inflation up. This is important not only because the Fed has explicitly said inflation is too low but becuase pushing it back up would generally take longer than to push growth up.
3. Changes to the assessment of growth were strikingly small and actually mixed, though that was relative to a fairly subdued statement in early August. The Committee downgraded somewhat its take in business equipment spending, noting that was less strong than earlier in the year, but it also qualified its comment on the declining trend in bank loans by noting that this trend had also abated..
4. We continue to expect that a sizable asset purchase program will be implemented in coming months. This will most likely cumulate to at least $1trn, possibly quite a bit more, and will probably be focused in purchases of Treasury securities. Both the size and the timing will depend on data, but the next meeting of the FOMC-a two-day session on November 2-3-remains a strong possibility. This is when the FOMC next releases its once-a-quarter set of forecasts for growth, inflation, and unemployment. The explicit recognition of the weak trends in the economy and the extra day to discuss its options create both motive and opportunity to act, though it bears repeating that the timing of this decision will be data dependent.
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dollar short status:
$$$$$
Let the USD go down through the floor. Here are Germany many folks love to drive EUR-cheap Mao-tse-Tung cars assembled by GM.
No joke.
Why the hell would I short it against Euro and risk another Greece-like soap opera. It is almost as shitty and since we are dependent on America with our security, we are destined to be their bitches.
+ 3.14159265
Take a straight line, multiply it with 3.14159265 and it gives Fed and Treasury policies: create federal debt to feed the banks, buy the federal debt to create more money to feed the banks, maintain this loophole to keep the wheels turning whilst generating preposterous bonuses for those on bank paylists. Print, collect, print, collect, print...
Like who really cares anymore? It's all window dressing, PR, bread and circuses. As if another round of OE is going to matter. There's enough net free reserves in the banking system to make Zimbabwe look prudent.
As if another round of OE is going to matter.
Holy shit, the last time I had round after round of OE it didn't end well.
http://en.wikipedia.org/wiki/Olde_English_800
All just a damn joke at this point, as a few people bust out the entire nation to try to make stock indexes somehow look good to Avg Joe retard only at this point, everyone just sits and wonders how theyll kornhole the USA next!
Personally I think all this fakery hinges on whether or not POLL NUMBERS can be brought up. I dont believe they can, and when they see proof its not working and theres no more time, WHY continue pumping markets? Theyd rather have mid east war kick off and collapsed market to 'rally the troops' to the demonrats. Im NOT so sold at all on this idea QE just goes on in perpetuity!
I think Wall Street and the financial crowd are sick of the Democrats. What do they do? Spend the US into oblivion with sh*t we don't need. Crash the markets and assure that Obama's party will be pitched out onto their ears.
Yeah! And the Republicans can get it fixed. So there.
Rocky, you have been battling rather tirelessly the last few days to stamp out the foolish partisanship. I thank you for it, but am worried for you; too much beating your head against a wall leads to a mushy spot in your forehead.
Until people learn to give up the R vs. D bullshit we're all screwed. It's exasperating as Hell. It is a sort of Zenlike enlightenment when you wake up in the morning and realize that you hate ALL TPTB with equal passion.
What is the sound of one head hitting the wall?
I'm betting Rocky forgot the </sarcasm> tag again.
I was standing with Rocky, not against him. I got the sarcasm.
About the politics Gore Vidal said something to this effect - There is only one corporate party in America with 2 branches, the Republican and Democrat branches.
I don't know why people are still beating themselves up in disbelief and denial over this 2 party bullshit.........on second thought I guess it serves to demonstrate how effective social conditioning in a belief, religious or political, can be.......or how dangerous too.
You guys are pretty great. I don't use the sarcasm notation since I figure if I'm obvious enough the good guys will get it. I don't care about those so steeped in the kool aid that it goes over their heads. I've observed that the more intelligent amongst the ZH crew are the ones least likely to fall for the Dem/Rep partisanship. As an added low view: Those folks aren't reading this. They are trolling for some arbitrary political opposing viewpoint to either junk the comment or post their own pointy-headed comment.
Well said. Game is already over, they just don't know it yet. Everyone please go ahead and load up on silver eagles so we can re-kick start the economy. If everyone would buy like 500 silver eagles I think that would be enough to convert the economy to sound money.
You mean a total of 500, or 500 more? I'd have to sell some to meet your quota.
Zimbabwe ditched their currency and now use the USD. Doh!
ADBE and SNDK getting smoked after hours.
Perhaps we finally get some type of correction.
Or maybe some rotation back into safer names like drugs, HMO's, major oils or something.
What? No charts? Oh, yeah, those charts would be moving in a general downward direction. Can't have that. How 'bout some hot chicks then?
or just skip all that and delete profile
Hey!...I'm up for hot chi...errr...yeah what you said ;-)
Yes, drugs are a safer bet right now. Heavy drugs. It's nothing but a hologram hallucination anyway, might as well just roll with it. Down the rabbit hole!
More POMO to come this morning, and then again Friday.
In the past the Fed had catalysts for these actions. Stock market crashes and rioting in the streets, well almost for the rioting part, right.
What, if any, catalyst does Jan believe will occur this time around?
5 more boring weeks?!
I wonder what the ECB has cooking because they mostly follow like a puppy
Actually Long 10 year bond futures did very well today...Does this mean they will continue to do well as the fed continues quantitative easing?
Yes, being long bonds of a country that owes the world 20 trillion and tries to get rid of this debt by devaluing their own currency and paying it off in cheaper future money can only be a good idea.
Except you will get your profits in the same cheaper future money.
It's what I told VW this morning.
Of course we could just call it even for bailing Europe out of two world wars and all we got was some Brit named Keynes infecting our universities to show for it.
Whadya say...call it even? ;-)
Sure getting profits on cheaper money in the future sucks. But when you are trading a 100x leveraged future in 1 day, you beat inflation by a long shot.
I'm actually confused as heck why bonds are going up when the risk on play is in effect.
That is an interesting take no one ever comments on.
You pay 35% taxes on the whole dollar gained instead of it's fractional worth...if it loses 7% you don't pay taxes on 93 cents...you still pay taxes on 100 cents.
Fantastic...sign me up ;-)
I guess all will do well... always.
The only thing we won't get to see is the hidden inflation numbers because the more I start looking at overall consumer prices, the more it's becomming clear inflation might well be over 12% this year alone.
The all powerful OZ (lightning crash) will announce QE2 (rumbling thunder) on ELECTION DAY (BOOOM!).
The all powerful OZ has spoken!!! (No, that's nobody over there behind the curtain.)
Well boys, as much as I hate to say it, get ready for the dollar to crumble(no matter what the Japs think they can do), and get ready for DOW 14K( soon to be 20K).
Benny has set the table for a massive inflation mark-up on stocks and gold, and the dollar is going down the toilet.
Hyperinflation anyone?
Is it possible that the gold price gets away from them before then? They can do all of the QE they want, right. I am just one of the very little guys that feels as if the govt/fed can control everything, but, is it possible that this one gets away from them before the midterm elections?
This is more than insane... It's like being in a nightmare where things come at you and it doesn't matter what you do, stuff comes at you and you can do anything about it. You just ask yourself, why is this happening - it doesn't make sense.
It would be the highlight of ignorance to have QE2 during the midterms.
Goldman is such a joke.
You want to know what won't happen? Listen to what Goldman says will happen.
My guess is QE has already started but they have not announced it, and only will announce it when they need to overcome eroding confidence. Then it will be kicked into high gear. Since we can't audit them we really don't know what they are doing.
POMOPOMOPOMOPOMOPOMOPOMOPOMOPOMOPOMOPOMOPOMOPOMO
Oops! No POMO today. Why were the markets flat today?
People (central banks?) lapped up plenty of long yield bonds... and PMs did well... seem like decent plays to me at this point. Expectation of austerity + continued deleveraging + depression with a PM hedge to boot. If bonds kick off into high gear, my guess is the euro takes a big shit shortly thereafter... did that last time.
People arent' buying bonds to get repaid in inflated dollars...
I'm betting a cold beer on a succesful ramp job tomorrow.
http://www.youtube.com/watch?v=R82OM5tzcrk&feature=related
Nice, Hulk.
I'm betting it's another gold busts banks in the nuts wednesday.
Monday's child is fair of face.
Tuesday's child has far to go.
Wednesday's child is full of woe.
POMO
Ponzi Opaque Madoff Operation
best i can come up with. please do one better
Ponzi of Monumentous Order
Piece of Monstrous Ordure
Placating our Monetary Obsessions
A Pimco Only Market Order?
Puff on My Organ?
Participating outside Meaningful Oversight
Pulverizing our Monetary Outlook
"Participating Outside Meaningful Oversight"
LOL...you win.
An empty victory as the amount of time I spent thinking them up only serves to prove how pathetic my life really is.
The only man who can damage eternity is the man who is willing to kill time.
So we ask, specifically, how will another $1T in Treasury purchases help the economy?
To better control rates from doing what exactly? To me the reason for another long term T buy program, or whatever you wish to call it, is to fund government and manipulate rates. The FED will control rates outside of market forces. They will have the power to set the rate. $1T in new Treasuries will allow the FED to ramp monetization of US debt.
The FED is and will continue to monetize the debt in ever greater churn. What we are seeing is the beginning of the systematic montization of US debt by our central bank, and by extension, interest rate control (setting).
I know for me if the FED announces another $1T Treasury buy, I will exit my last remaining positions in USDs. A point is reached when the FED cannot tighten without massive fiscal cutting.
I do not see a politically viable fiscal plan that would allow the FED to reduce its balance sheet. This is why we do not here the fiscal outcry from the FED as before. Ben knows that fiscal restraint will only come through crisis.
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The re-inflate argument is no longer believed given the de-leverage magnitude and fiscal mismanagement track record.
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At some point Ben will be asked can debt effect growth? The answer will show that the ability to pay for debt is finite, and is beyond US taxpayer capacity. Funding government will degenerate to a fight between federal and state acquisition of limited tax revenue. The states will be at a disadvantage without the power to print. So the federal government has the power to obligate states into bankruptcy. Medicaid is a good example.
At some point we will see the realization that debts (obligations) cannot be paid. Hard choices will have to be made, benefits will be cut, and bond holders will suffer.
Mark Beck
My basic question is, if the Fed announces such a program, what would be the backlash from the US citizenry? My guess: not wonderful.
What if they used backdoor tactics and FanFred dump jobs to accomplish this goal without telling anyone? Can you imagine the backlash then, if there were really such things as investigative reporters any more?
Quite a pickle. Quite a pickle, indeed.
The average citizen does not know the FED exists. Even less understand fiat money systems and the concept of sound money. However, we are beyond the point of sound money solutions to our problems.
The FED will monetize until crisis. Politically, the FED will exist to fund government until the currency is in jeopardy, and then the politicians will be forced to act. It is interesting to me that in the end, the FED will not be needed as an institution. There is no need for a central bank when currency debasement is policy. Actually it would be easier to just centralize the activity at Treasury. The FED is just an unwanted middle man, an unneeded cost. When the central bank clearly abondons oversight of the currency, it is no longer providing stability to the banking sector, and its role of lender of last resort is out of context.
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The politicians need the FED to monetize, in its now customary backdoor approach. But, over time the FEDs balance sheet will show the true momentum is enough to control rates. The real danger with Ts QE2 is that outside buyers will start to minimize participation beyond what is needed to address trade surpluses. The bond market will start to adjust.
To participate in bond purchases while the FED actively debases the currency on a scale equivalent to total yearly net tax revenue is beyond reason. To purchase something that is actively being devalued as you buy it, I find amazing given alternative investment options.
Given the fiscal reality, to cling to the notion that the bond market is safe in regards to wealth maintenance is really incredible. Where is this faith coming from? Based on what policy? To put it another way, at the low rates being offered, you could lose any real gain for the duration of the bond with just one FED QE action in an environment where the FED is unable to tighten.
Mark Beck
In other words, running an engine with the oil drain plug removed results in a seized (and ruined!) engine! I REALLY have to go get that handgun permit...
While I agree that most people wouldn't have a clue that the Federal Reserve is no more "federal" than Federal Express, there can be no doubt that most of us know that something, somewhere, is quite wrong.
I am not sure the populace would go for it.
Peter Schiff spotlights the idiocy of the FOMC's comments today about its need to inflate (plus a few stinging remarks about Obama's 'town hall meeting' yesterday) on his recent video blog at: http://www.europac.net/media/video_blog
Enjoy!!
++
Peter is always good!
Just shut this whole thing down. ENOUGH ALREADY!