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Knight Capital's Take On The FOMC Minutes

Tyler Durden's picture





 

The Fed’s minutes from the December 14, 2010 meeting seem to echo our own concerns (see our “Three Threats, One Risk” report published October 6, 2010).  Though noting evidence of growth and an improving “tone” to the labor market, the Fed did not feel that the apparently improving economy warranted any change in QE.  The Fed noted that the housing market and debt problems in Europe could curb growth – further noting the impact on LIBOR funding.  The rise in unemployment was troubling to policy makers as they noted that the rise came with a backdrop of depressed labor force participation and employment-population ratios.  Further stresses come from the depressed housing market, employers' continued reluctance to add to payrolls, ongoing efforts by some households and businesses to delever, and precarious state and local municipalities’ balance sheets.  Deflation is also not totally off of the Fed’s radar either (recall it was a buzzword just a few months ago), as some participants noted that with substantial resource slack persisting, underlying inflation might fall further below the levels that the Fed desires.

The most interesting comment was that some members indicated that they had a “fairly high threshold” for making adjustments to QE2.  To our minds, this statement is twofold with respect to its meaning to the market.  First, it establishes that Fed members will not ease back on the QE program at the first hint of progress.  Their examination of past QE efforts (notably Japan’s) has led them to believe QE works and that mistakes are often made by not flooding the market with easy money fast enough.  Thus the probability of adjusting the strategy midstream is very low in our opinion.  Second, the Fed has become more of a political animal, whether it wants to be or not.  Policymakers have to weigh the fact that with new legislators entering office, the ease with which additional QE can be deployed has dropped drastically.  All the more reason to adhere strictly to the program already in place.

From Brian Yelvington

 


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Tue, 01/04/2011 - 15:39 | Link to Comment bob_dabolina
bob_dabolina's picture

QE ad infinitum

Mark it

Tue, 01/04/2011 - 16:09 | Link to Comment Sudden Debt
Sudden Debt's picture

E PLURIBUS UNUM BITCHEZ!!

Tue, 01/04/2011 - 16:16 | Link to Comment Cash_is_Trash
Cash_is_Trash's picture

"Out of many printers, one false currency."

Tue, 01/04/2011 - 16:16 | Link to Comment Pladizow
Pladizow's picture

Someones "opinion" on comments that are meant to mislead?!?!

Tue, 01/04/2011 - 15:39 | Link to Comment bigdumbnugly
bigdumbnugly's picture

right on.

restart gold silver escalator please.

Tue, 01/04/2011 - 16:01 | Link to Comment Cash_is_Trash
Cash_is_Trash's picture

SNAP! Fiat movement

Tue, 01/04/2011 - 15:41 | Link to Comment 101 years and c...
101 years and counting's picture

"ongoing efforts by some households and businesses to delever"

impossible to delever when us pee-ons are forced to pay your extorsion prices for food and gas.  we'll just cut back spending in other areas and show you the full force of deleveraging, you mother fu**ers.

 

Tue, 01/04/2011 - 15:45 | Link to Comment SheepDog-One
SheepDog-One's picture

Hell yea, Ive already been doing it for a long time, buy nothing from the mall shops, Apple store can go to hell, no more 'consumerism', no more credit cards they depend on they can all go sit and spin.

Tue, 01/04/2011 - 15:46 | Link to Comment Cdad
Cdad's picture

Dog,

Correct.  Close the wallet and a revolution will simply unfold.  I've been doing this for more than a year. 

Nothing to these crony capitalists.  NOTHING!

 

Tue, 01/04/2011 - 15:48 | Link to Comment SheepDog-One
SheepDog-One's picture

Yep, and after a few years of being solidly off the consumer credit bandwagon and buying far less of everything, pretty amazing how life is actually far better!

Tue, 01/04/2011 - 15:40 | Link to Comment SheepDog-One
SheepDog-One's picture

Damn insolent businesses just refuse to hire! FED doing all this Gods works to pump up valueless stocks and MBS junk on their books, and these spoiled brat business people wont even hire a few million people? SImply outrageous!

Tue, 01/04/2011 - 15:46 | Link to Comment Beatscape
Beatscape's picture

I guess everyone glossed over this comment from the minutes:

"Conditions in the commercial real estate market remained tight. Commercial mortgage debt was estimated to have declined in the third quarter, and the delinquency rates for securitized commercial mortgages and those for existing properties at commercial banks increased further."

The burning question in most of America's mind: Can I watch dancing with the stars on my iPad??

Tue, 01/04/2011 - 15:53 | Link to Comment SheepDog-One
SheepDog-One's picture

Also an apparently missed point in the last sentence, basically saying Q/E cant stop, yet its future ability to monetize at whim looks quite shaky near term.

Tue, 01/04/2011 - 17:40 | Link to Comment Raynja
Raynja's picture

I've taken the bernanks comments to mean ' we know we can't do qe 3, so were going to just change 600 billion to 600 trillion'

Tue, 01/04/2011 - 15:53 | Link to Comment Hondo
Hondo's picture

The FED hasn't a clue if any of this will work.  They are willing to blow up the economy without knowing if employment will improve or not......that's a huge risk and one that can't be quantified.....except to say the skew works like this......if it works great the next 1000+ generations are in debt up to their eyeballs....if it doesn't work we're all dead....now that's a poor payoff.

Tue, 01/04/2011 - 16:02 | Link to Comment thepigman
thepigman's picture

Exactly. They practically admit they

don't know what they're doing.

Tue, 01/04/2011 - 16:06 | Link to Comment SheepDog-One
SheepDog-One's picture

Scary part is this whole thing is to just keep the wheels on this jalopy a BIT longer....for what? They know the end game, I dont believe theyre stupid people, madmen yes but not dumb.., this was all planned long ago.

Tue, 01/04/2011 - 16:00 | Link to Comment mynhair
mynhair's picture

So, pile into TBT now?  Or stick with AVL?

Pansy bond vigilantes.

Too late, added AVL @ 7.26.

Tue, 01/04/2011 - 16:09 | Link to Comment Cash_is_Trash
Cash_is_Trash's picture

AVL @ 7.35

Tue, 01/04/2011 - 16:14 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

It was a Vancouver penny 3 weeks ago.

Tue, 01/04/2011 - 16:22 | Link to Comment mynhair
mynhair's picture

That's still bigger than your dick, dick.

Tue, 01/04/2011 - 16:03 | Link to Comment Revolution_star...
Revolution_starts_now's picture

"The FED hasn't a clue if any of this will work."

They don't care if it works or not, just like an alcoholic, just another excuse for a drink. It's just an excuse to give banks money.

Drink up benny the next default is on us, and by "us" I mean the tax payers.

 

Tue, 01/04/2011 - 16:03 | Link to Comment sodbuster
sodbuster's picture

QE1,1.5,2,4,6,9,10,......whatever- it has nothing to do with economic improvement or unemployment. It is to pump money into insolvent banks. Pure and simple. Just uttering the word- deflation- makes these guys piss themselves.

Tue, 01/04/2011 - 16:04 | Link to Comment mynhair
mynhair's picture

Got 8K left, REE @ 16.25?

Tue, 01/04/2011 - 16:07 | Link to Comment Cash_is_Trash
Cash_is_Trash's picture

It might bounce back...

Tue, 01/04/2011 - 16:22 | Link to Comment mynhair
mynhair's picture

Helped a neighbor flip his boat, made no order.

Tue, 01/04/2011 - 16:04 | Link to Comment buzzsaw99
buzzsaw99's picture

Unemployment is high so we are giving more money to our friends bitchez!

Tue, 01/04/2011 - 16:08 | Link to Comment SheepDog-One
SheepDog-One's picture

Squeezing every last bit of blood from the turnip systematically.

Tue, 01/04/2011 - 16:08 | Link to Comment 101 years and c...
101 years and counting's picture

if oil can't maintain $90 here, deflation may begin to rear its.....OH SO BEAUTIFUL HEAD!!!

 

 

Tue, 01/04/2011 - 16:11 | Link to Comment SheepDog-One
SheepDog-One's picture

Im not going by 1 day here, but if deflation kicks in theyll panic the hell out!

Although in real terms we know we have big inflation, 60% rise in commodities is clear enough. But theyre not talking about that kind of inflation, theyre talking about the currency thats all they give a rip about is tanking the dollar.

The Euro could really kornhole the FED huge here.

Tue, 01/04/2011 - 16:08 | Link to Comment Tic tock
Tic tock's picture

Surprising hawkish (in terms of QE) statement. I would've expected a more resilient outlook given the current skew in activity. Where is the FED trying to prop up weakness?

Tue, 01/04/2011 - 16:11 | Link to Comment thepigman
thepigman's picture

That's what makes it so friggin amusing.

Some think things are strong, others

think things are weak, and they have

their own camps of deflationistas and

inflationistas....geniuses running an

experiment.

Tue, 01/04/2011 - 16:17 | Link to Comment SheepDog-One
SheepDog-One's picture

Inflation or deflation just in the assets theyve purchased is all they care about, and thats just currencies. If Europe has real trouble as it looks to be in and the Euro takes a dump boosting up the dollar, they are in a world of shit with their piles of MBS garbage and hand grenade P/E stocks on the FED's books.

Tue, 01/04/2011 - 16:14 | Link to Comment SheepDog-One
SheepDog-One's picture

Almost looks like theyre positioning to cover their ass, could it be theres an actual threat of their wild QE monetizing activities getting curtailed greatly?

Tue, 01/04/2011 - 16:14 | Link to Comment thepigman
thepigman's picture

Yes...it's clearly an ass covering statement.

Tue, 01/04/2011 - 16:20 | Link to Comment redvetttes
redvetttes's picture

When does Ron Paul and Ben go at it

Tue, 01/04/2011 - 16:22 | Link to Comment mynhair
mynhair's picture

When R. Paul tags in R. Jeremy.

Tue, 01/04/2011 - 16:56 | Link to Comment Revolution_star...
Revolution_starts_now's picture

I just want to see either Ron lay some serious pipe in the bernank.

Tue, 01/04/2011 - 16:14 | Link to Comment Double down
Double down's picture

I think politicians have learnt that deficits are meaningless as long as the fed is there to monetize them in a way that is not measured by the CPI.  I think the Fed will  necessarily have to embrace QE not only as the method of interest rate manipulation but also because the senate will not see any reason to change its fiscal behaviour.  The senate will rely on the fed to monetize incremental debts.

Tue, 01/04/2011 - 16:16 | Link to Comment redvetttes
redvetttes's picture

Not buying anything too
Besides puts when the time it right
The stuff is not cheap enough yet
Yes that HP laptop for 379,that was 499 after it was 599 is not cheap enough yet

Tue, 01/04/2011 - 16:21 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

Gold. Gold will be CRUSHED.

Real estate price deflation will surely not end by FED dictate being 20% above 100 year trend. Wage price inflation cannot arise with 19% underemployment and cheap labor overseas. Asset price inflation is as much, if not more, a function of Chinese growth (and their fear of availability) than of inflationary hedging. The FED is worried about US price deflation and they should be but they won't stop it because the USA is in serious, and perhaps irrevocable, competitive decline rooted in expansionary government policy.

Tue, 01/04/2011 - 16:24 | Link to Comment mynhair
mynhair's picture

Harry, that u?

Tue, 01/04/2011 - 16:33 | Link to Comment mynhair
mynhair's picture

Emancipation Day gives me 3 more days to file IRS BS!

WTF is Emancipation Day?  The Squirrel declare a holiday in his honor already?

Tue, 01/04/2011 - 16:35 | Link to Comment mynhair
mynhair's picture

AVL to 10 within a month.

Book it, Dano.

Gotta play the stupid is as stupid does game.  Just ask Harry.

Tue, 01/04/2011 - 16:39 | Link to Comment goldmiddelfinger
goldmiddelfinger's picture

"AVL to 10 within a month."

Oh Yeah! Three times. But at $3 four times. Now in which order will the counts come? Hmm

Tue, 01/04/2011 - 16:55 | Link to Comment mynhair
mynhair's picture

What?  Quit bogarting that joint, Dick.

Dumped that last 8K into AVL @ 7.35, just to piss you off.

All the nervous nellies are selling.  To me.

Ooops, just wait til pre-market.

Tue, 01/04/2011 - 17:01 | Link to Comment tahoebumsmith
tahoebumsmith's picture

What is QE? No really? Who is financing our debt right now? Of course they will raise the debt ceiling and of course there will be QE3 to cover the raise. It is really simple if you just look at what's going on in Washington. They are using the FEDS ability to print so they can expand every entity of the government without having to go through the normal channels. If the FED didn't impliment QE1 or QE2 who would have bought the debt? NOBODY! plain and simple ponzi scheme to keep a bankrupt Nation afloat and to keep the world's currency from being revealed as to what it truley is...WORTHLESS!

Tue, 01/04/2011 - 17:10 | Link to Comment mynhair
mynhair's picture

QE(x+1) finances QE(x).

Any more questions?

Tue, 01/04/2011 - 17:27 | Link to Comment ThirdCoastSurfer
ThirdCoastSurfer's picture

Employment and housing are supposedly the worries. It sure isn't auto sales. If it isn't auto sales (and it isn't retail or equities by extension), who cares about housing and employment? 

Tue, 01/04/2011 - 18:13 | Link to Comment Kina
Kina's picture

Fiats going to be stronger or weaker at the end of this year? USD purchasing power dilution to the n. AUD over-valued 30%

Buy gold, buy silver.

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