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Jan Hatzius Attempts To Preserve The Fed Chairman's Mystique
Here is Jan Hatzius' initial read on Bernanke speech. In a nutshell, Hatzius seems to believe that reading between the lines may mean Bernanke will not do QE2, and preserve some of the Fed's mystique, so that all those massive bond managers who get the Fed's data early appear to have a competitive advantage. Alas, they don't. And all those who believe the Fed at this point, now that fiscal stimulus is no longer an option and all out FX war has broken out, has any other option but to buy anything not nailed down, well, we would like to point them to the 9 upcoming POMO monetizations over the next 4 weeks. What is most troubling is that the market has now priced in not only that, excluding some intraday volatility especially on OpEx days, but the expansion of Fed proxy buying of AAPL to $25 billion a week. Hatzius better hope that his attempt to restore some credibility to the Phantom of the Fed is grounded in reality. Because in the off chance he is right, buying a boatload of far OTM broad market puts on November 2 may well end up being the most profitable trade of the year, if not decade.
From Hatzius:
BOTTOM LINE: Chairman Ben Bernanke adopts a cautious approach to his speech, reiterating that he sees a case for adopting more stimulus but that any decision depends on the costs and benefits of the nonconventional policies. The speech contained few details of what form additional easing could take, although Bernanke clarifies that he regards additional asset purchases and/or a tightening of the FOMC’s guidance language as the primary tools. Overall, the speech is consistent with our expectation of a QE announcement in November.
MAIN POINTS:
1. Chairman Bernanke re-emphasizes the FOMC’s dual mandate of attaining the longer-run sustainable rate of unemployment and mandate-consistent inflation. With regard to the former he argues that “the bulk of the increase in unemployment since the recession began is attributable to the sharp contraction in economic activity … rather than to structural factors.” Bernanke thus refutes the idea that labor market mismatch has pushed up the structural unemployment rate significantly. Given this large amount of slack, Bernanke notes concludes that “it is reasonable to forecast that underlying inflation…will be less than the mandate-consistent inflation rate for some time.” The tone of this speech is consistent with the "bite size" approach to asset purchases that we have come to expect in the wake of earlier speeches rather than a "big bang" approach.
2. Given this deviation from the FOMC’s mandate he argues that “there would appear--all else being equal--to be a case for further action.” However, Bernanke is careful to stress that “possible costs must be weighed against the potential benefits of nonconventional policies.” The chairman provides few specific details but clarifies that he sees asset purchases and forward guidance as the primary unconventional tools too boost the economy. His remarks contained no comments on price level or nominal GDP level targeting.
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SILVER BITCHES!!!
http://images.coinguide.com/black/au/2010koala10ozSILVER.jpg
Ass-Hatzius, Bitchez!
Now would be a great time for a return to mark to market. That trump the Fed fairy dust but what is it going to take? 3 Enrons occuring at once?
Nobody is going to convince me that every company fro Vornado,NFLX to Apple are not dressing up their assets and taking liberties very much like the banks. In the past those moves were cause for concern, loss of investor confidence, unethical and potentially criminal.
In Ponzi America it is now demanded.
Based on the current performance of the bank stocks it appears we could get 3 Enrons at once at this rate.
I guess goldman has not finished unloading all its risk assets to the public yet.
I doubt 1 trillion is coming in November, but then again, I don't have anything to sell ya.
I wouldn't be surprised to see NOTHING happen in November. Didn't hear anything concrete on numbers today, did you? It's all smoke and mirrors.
Bernanke's most famous paper talks about the need to "instill in the public the EXPECTATION of inflation" as the first step in ending deflation. He's done a great job over the last 4 weeks...I wonder if he can keep it up.
I did hear something concrete today. He said their desired goal for inflation is 2%. Then he said 'their' calculation of current inflation is 1%. He will ease tons more, but without fanfare or acknowledgement. Equities are moving sideways even as investors pull out, replaced by outright purchases by the FED. Bond 'funds' and Gold are rising which are still being seen as safe havens. When the market is 'risk on,' gold and bond funds, pause, but do not drop significantly. When the market is worried, gold and bond funds resume their relentless climb. Pimco still has legs, Gold is going to the preverbial moon, the Euro will collapse, and the US equity market after an initial jump, will follow it down.....and down and down. I like the cycle....2007, 2009, and next up...'11. Gonna be a bruiser.
I'd be very surprised to see gold trade lower than 1365 today. If I were doing the buying for the buyer(s) of size, I'd start loading up around there.
The market then turns and even adds a dash of POMO today and Monday.
Mentioned yesterday that this new, short-term range should be defined by about 1360-1400. Probably stuck there through next week, if recent history is any guide. Monday and Tuesday of the following week should see the beginning of the next "stair" up to about 1440 or so.
Now's your chance Turd, get busy @ 1365.1
Nothing unusual about today's action. Keep the faith.
A nice little dip today coincided with a strong urge to buy more physical.
Hoped for a bigger pullback. Those days seem to be long gone.
File her statement under "full of shit."
got credit default swaps? Everyone else does... http://creditlime.com/
Goldman is now saying flow of funds went positive this week for the first time since April '10. Could greed really be that powerful that retail would come back in to a manipulated market?
I'll wait for the actual numbers. Goldman Sucks has no credibility.
Goldman is presenting Lipper/AMG numbers which are not at all related to actual mutual fund flows, which is what ICI tracks.
Thank you sir....I almost had to commit Seppuku. I can't take much more of this.
capitulation
GOLD CANNOT BE MANUFACTURED OR MASS PRODUCED.
THE DOLLAR IS NOTHING BUT MASS PRODUCED WORTHLESS PAPER THAT THE FEDERAL RESERVE SAYS HAS VALUE.
THE MASSES SIMPLY NEED TO QUIT USING THE WORHTLESS PAPER AND START BARTERING WITH ITEMS THAT HAVE VALUE.
$1 HAS NO VALUE. BENNY PROVES THIS EVERY DAY BY DESTROYING THE VALUE OF IT WHILE WE HOLD ONTO IT. SIMPLY GET RID OF THE $1 BEFORE EVERYONE ELSE DOES.
Get rid of your worthless currency paper and get things that have value. The dollar is worth nothing but the paper it is printed on. Simply get rid of it since Benny wants to destroy its value while we hold on to it. Simply get rid of it. Keep as little as possible until the next system.
+1 quadrillion
I think instilling in us the notion that dollars are to be spent as quicklyas possible on asets in precisely what Ben wants us to do. If some of us (comparatively miniscule) elect to acquire PMS as part of the "get rid of FRNs ASAP" mania, Ben is quite willing to live with that, as long as the rest of the herd starts spending.
However he is pushing against a string. The only assets that will respond are financial assets and commodities, and the great herd holds those only in the form of generally off limits 401ks, IRAs, etc. that cannot be spent. And as commodities rise, particularly oil and food prices will sharply diminish any hope of a consumer led recovery.
The real plan, or better said, "hope" is that there will be some sort of trickle-down effect as the rich move around these assets and occasionally cash them in to buy assorted trinkets, so at that juncture some amount of money actually moves through the economy giving rise to "growth."
But actual growth is a pipe dream for now, as there are no drivers of growth in the USA. At best we are in "stasis" mode, and that means we are really contracting, as the debt load requires growth to be serviced. Lack of growth and the debt cannot be serviced. Without jobs and wage increases, the average household cannot increase spending - it can't borrow to do so, and it has to cut back in order the service the 23% credit card debt. I'm not sure how Ben thinks the money will get out there, into the economy to kickstart inflation, from all this QE. And one thing is for sure, the last place QE will increase prices is in non-exportable, illiquid real estate. And that, ladies and gentlemen, is all she wrote - this will end badly.
> I'm not sure how Ben thinks the money will get out there, into the economy to kickstart inflation, from all this QE.
Here's an idea. When the crash happens, millions of dumb investors will rush to the US Dollar, while the smart ones rush to Gold/Silver. It worked in 2008, but it FAILED on May 6th 2010.
It's all about the squid bitchez!
Shades of things to come.
Not so funny, I retract my comment.
Seems to me that the basis for Sutton's Law is no longer valid...
Hhmm, I had thought that was originally attributed to John Dillinger. I stand corrected.
And the WSJ has the nerve to title the article "Ex-Con Shot in Failed Heist"
It should have read:
"CHASE BANK HAS NO MONEY!"
Is this the Fed Carnage Support Group?
"Hi, my name is Dagny and I shorted the banks yesterday..."
Very good, Dagny...you are making progress. Gosh darn it, we people like you. Never mind all the dollar bills around you that are on fire. Here...warm your hands.
Right there with you. FAZ! The market sells from here to the bell.
We are freakin' doomed.
Like Lt. Col. Frank Slade (Al Pacino) in Scent of a Woman, "I'm just getting warmed up.."
Quite possibly the most brilliant speech ever spoken in a movie...or in real life for that matter. I would love to send a sample of that video clip to Obama and all of the members of Congress.
I think we'd lose them at amputating our souls.
no no no, send them "The scent of a tramps pants", in a jiffy bag.
In a free market I would short, but you out of all people should be aware of directive 10-289.
There are some items that Ayn forgot to mention about that directive like, the stock market will be kept elevated to maintain morale and consumption...
I could be wrong, but how many times in the last year have we declared the market on the verge of collapse, but then "bam" higher it goes.
Who knows.
Why should they announce QE2? They have broadcasted that they are buyers of assets and will print money, they can now scale back their comments and still do it. It's not like we are going to get an audit while they are a going concern.
The bearded clam is now known as "the Phantom of the Fed"
If they were going to do it they would have acted by now, but i am more than happy to let them keep on truckin...the paint has actually worn off my bid button. (true)
ps, i think folk are catching on though.
QE2 is like throwing gasoline on a fire to put it out.
Forgive me for saying this, but a lot of the people who are unemployed are underachievers. The world would probably be a better place without having to support all that deadweight. Job creation is NOT the problem in my humble opinion. The go-getters will always find work. It's the lazy and inept that need to look in the mirror and work on a bit of self-improvement.
Just imagine how beautiful it would be if there were no taxes... No welfare for loose women that pop out babies they know that can never support. Some enterprising person/group could build a road and simply charge a fair toll for using it. Competition would yield far better levels of service and value.
Stealing an idea from the movie "Brewster's Millions," how about we write in "none of the above" for the next election and see what happens...(?) What have we got to lose? It would be the ultimate statement of voter displeausure.
Why do we need politicians anyway? Why not just put every issue up to a simple vote? Everyone could use an Internet terminal to cast their opinion. Should we do QE2? Yes/no? It's that simple. The majority was against national healthcare and they pushed it through *anyway*. What kind of BS democracy is that?!?
Maybe have some sort of college education program. Give a free education with a double major in political science and something else of a person's choosing. Then they have to perform "community service" for X-length of time at a fair wage to offset the free education. Then they are free to go on to their career of choice. The brightest minds and best leaders are appointed to the top spots of gov't. They're only there to gather the collective will of the people and then execute those directives. All automatic. None of this skull & bones nonsense where you have a virtual entry of 1&1A where the choice is 1 crook or another.
The political system should not exist to enrich a select/elite group. The entire thing is broken and needs to be replaced.
"People should not be afraid of their governments. Governments should be afraid of their people." -- from "V for Vendetta"
This is their system though. They have owned it for a long time. We don't have control the same way that serfs in the middle ages didn't have control. The system is only different in that the manner of control has changed. We have been conned into think we are in charge when nothing could be further from the truth. One only needs to look at the TARP to see the voice of the people does not matter, short of open revolt or protest.
The welfare system exists for 2 reasons. To keep the people placid in situations that would normally lead to revolt, and to point to them and convince the populace that their taxes are going to something other then the oligarchs pockets. Look at the food stamp and official U6 number. I think some of the big boys must be surprised at how calm Americans are right now.
Trying to make changes to their system is a losing endeavor. Some things can be corrected but the fundamental flaws can't be, it's their game. Sometimes it's best to simply start over. And the vision of democracy everyone seems ot have is not the answer, where the individual can be trampled by the many. I would recommend everyone check out Hoppe on this point. He has some great views and arguments.
Volume has picked up in the past few days... stock selling seems to have started in a very low key way. Just don't know if it is the cycle re-setting or more....
The selling on SPY is really something...and yet it only moves down slowly. I should think the slowly part should end soon...because the selling is very clear.
From here to the bell, I suspect.
The FED just doesn't seem to get it. They want to stimulate the economy with yet more debt, that ultimately falls on the taxpayers and their children. My feelings, along with many people I know feel that the deeper our govt goes into debt, the more we should save since the govt debt simply devalues our savings. There seems to be a psychological battle going on here between the govt and the people. The govt wants us to spend more than we make, as their leading by example suggests. But instead, the govt's actions are making the public feel more insecure, compelling us to save more. I am in retail, and I fear that the upcoming holiday sales season is going to get real ugly. And that is based on things being on a trajectory as they are now. But any black swan event will trigger another retail disaster as the oil spike did a couple of years ago.
But even if people start feeling better about spending money, there has been a fundamental shift in society from buying more crap they don't NEED to simplifying their lives. I mean, most people's houses are crammed full of crap mostly because of the last couple of decades of cheap (Chinese) stuff. Basically, the saturation point has been reached with "stuff", regardless of where it is made. I think retail has been at the bubble stage for a while and fortunately the govt has let the market work for itself and retailers have come and gone - no bailouts! (except of course retail auto). I wonder if Walmart would be considered TBTF if their business model goes south?
Your observations and conclusions both seem very accurate to me. We (Americans) need to stop spending and start saving to invest in companies that provide jobs for Americans.
I wish we could make the world a better place. However, we had better focus on making America a better place and let the rest of the world take care of itself.
We can't afford to police the world or help it get rich. We need to concentrate on providing jobs (not welfare) to Americans.
Your comment is good and noble. I can tell you one thing though as a person who has traveled the world extensively and lived in multiple countries:
MOST of the world wants NOTHING to do with America, no involvement from/by America, and does NOT see the American way of life as desirable.
So, if we just "listened" to what the world was saying, we wouldn't be as deep in this quagmire. But alas, that is not reality......
As fucked up as this sounds, I think the DXY is touching massive, long-term support right now. Ben's pee-wee is going to be innefective from hereon in?
Announcer: "It's all quiet at the conference table, as Ben - yes, Ben is choosing a $1.7 Trillion Queaser for today's operation... and..."
[Crane shot, Ben hits a single key on the laptop]
Announcer: "... It's PRINTED!"
*golf clap*
What is the point of it? How is it going to fix things?
So the last throw of the dice is to thouroughly debase the currency in the hope growth will come that way. But Europe is fucked and needs exports, Japan....
This is going nowhere. It is utterly pointless.
The net result will be Dow 20,000 and 50m on food stamps.
Insanity squared. US is on its way to being a rogue state.
My first suspicion was also that maybe Bernanke will not do QE2 but Bernankes goal is crystal clear the target is 1.7% to 2% inflation.
So no focus on GDP but the extreem focus on inflation or rather too low inflation or inflation going lower as it is- disinflation.
So the sign for Bernanke to act will be disinflation. Since the dollar is depreciating (inflation) this indeed may not be necessary and strenghten Jan Hatzius idea.
FED’s gonna announce to keep rates low till 2012 for “the change language” part.
I find it interesting that Bernanke ignores the thousands of those who have been on unemployment for 99 weeks or more. He might want to start actually asking how they hit the unemployment lines in the first place.
Benny apparently only hears what he wants to hear.
Big head fake so the banksters can take the weak hands in gold, copper and silver. I used the head fake to load up on AEM.
GOLD updated chart showing parabolic move.
http://stockmarket618.wordpress.com
Really this is a great post from an expert and thank you very much for sharing this valuable information with us.
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