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The Great Snore of 2011
As I expected, Ben Bernanke’s long awaited Jackson Hole speech turned out to be a huge nonevent. He effectively put off any serious action to repair the sagging economy until the next Federal Open Market Committee (FOMC) meeting on September 20-21. He will look at the world then and decide if the global financial system needs any further assistance to avoid a collapse.
His reasoning? The economy is already humming along well enough to postpone any further stimulative action. In fact, he stated that he expects GDP to be stronger in the second half than in the first. This is in sharp contrast to the market’s opinion that things are going to hell in a hand basket, and that Armageddon is near.
Who is right? Mr. Bernanke, or Mr. Market? Could “surprise at the failure of the economy to accelerate” become the most commonly used phrase in future Fed releases?
The Dow immediately tanked 200 points on news that Ben wasn’t pouring another pint of 200 proof ethanol into the punch bowel. It then rallied 400 points. Gold soared by $70 in anticipation of a big “RISK OFF” trade next week. At the end of the day, stocks and gold were rising at the same time, which never happens. I thing that traders were just throwing up their hands in despair and going flat so they could board up their windows ahead of the approaching hurricane.
With Ben now out of the picture, I think we are in for a period a continued tearing your hair out type market volatility that could extend all the way into the next FOMC meeting in 3 ½ weeks. Look for the S&P 500 (SPX) to continuing putting in a narrowing triangle off the 1,100 bottom that could pave the way for a more robust move to the upside in the fall. If 1,100 fails, the market will try again to find a floor just above 1,000.
I believe that there is a 50% chance that we already saw the bottom of this move at 1,100, and a 50% probability that it is at the 1,000 handle. Let me toss this silver dollar and I’ll tell you where it is for sure. Cling. And the answer is….
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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Lessee, five weeks ago MHFT was a raging bull, now he's taking about 1100 or 1000 SPX handle.
In both cases, he was 180 degrees wrong.
A final agreement could create a short term love fest for equities and take the (SPX) up to the old high of 1,370, and possibly to a new yearly high of 1,400
Where are the meds/medics?
I believe that there is a 50% chance that we already saw the bottom of this move at 1,100, and a 50% probability that it is at the 1,000 handle. Let me toss this silver dollar and I’ll tell you where it is for sure. Cling. And the answer is….
And MHFT's point is?
SPX targeting 1360
(Took just three words to make a profitable point without self-serving promotion)
The Great Snore has spoken, now get out.
OK, lets pretend the fed actually cares about the economy. Maybe so as far is it can maintain the status quo and not be a target. I would argue the fed has commpletely done it's job and can now step out of the picture as they have managed to make sure the masses get screwed and the wealthy had the ability to get their wealth back
Fair Game The Rescue That Missed Main Street By GRETCHEN MORGENSON Published: August 27, 2011FOR the last three years we have been told repeatedly by government officials that funneling hundreds of billions of dollars to large and teetering banks during the credit crisis was necessary to save the financial system, and beneficial to Main Street.
But this has been a hard sell to an increasingly skeptical public. As Henry M. Paulson Jr., the former Treasury secretary, told the Financial Crisis Inquiry Commission back in May 2010, “I was never able to explain to the American people in a way in which they understood it why these rescues were for them and for their benefit, not for Wall Street.”
The American people were right to question Mr. Paulson’s pitch, as it turns out. And that became clearer than ever last week when Bloomberg News published fresh and disturbing details about the crisis-era bailouts.
Based on information generated by Freedom of Information Act requests and its longstanding lawsuit against the Federal Reserve board, Bloomberg reported that the Fed had provided a stunning $1.2 trillion to large global financial institutions at the peak of its crisis lending in December 2008.
The money has been repaid and the Fed has said its lending programs generated no losses. But with the United States economy weakening, European banks in trouble and some large American financial institutions once again on shaky ground, the Fed may feel compelled to open up its money spigots again.
Such a move does not appear imminent; on Friday Ben S. Bernanke, the Fed chairman, told attendees at the Jackson Hole, Wyo., conference that the Fed would take necessary steps to help the economy, but didn’t outline any possibilities as he has done previously.
If the Fed reprises some of its emergency lending programs, we will at least know what they will involve and who will be on the receiving end, thanks to Bloomberg.
For instance, its report detailed the surprisingly sketchy collateral — stocks and junk bonds — accepted by the Fed to back its loans. And who will be surprised if foreign institutions, which our central bank has no duty to help, receive bushels of money from the Fed in the coming months? In 2008, the Royal Bank of Scotland received $84.5 billion, and Dexia, a Belgian lender, borrowed $58.5 billion from the Fed at its peak.
Walker F. Todd, a research fellow at the American Institute for Economic Research and a former assistant general counsel and research officer at the Federal Reserve Bank of Cleveland, said these details from 2008 confirm that institutions, not citizens, were aided most by the bailouts.
“What is the benefit to the American taxpayer of propping up a Belgian bank with a single New York banking office to the tune of tens of billions of dollars?” he asked. “It seems inconsistent ultimately to have provided this much assistance to the biggest institutions for so long, and then to have done in effect nothing for the homeowner, nothing for credit card relief.”
Mr. Todd also questioned the Fed’s decision to accept stock as collateral backing a loan to a bank. “If you make a loan in an emergency secured by equities, how is that different in substance from the Fed walking into the New York Stock Exchange and buying across the board tomorrow?” he asked. “And yet this, the Fed has steadfastly denied ever doing.”
If these rescues were intended to benefit everyday Americans, as Mr. Paulson contended, they have failed. Main Street is in a world of hurt, facing high unemployment, rampant foreclosures and ravaged retirement accounts.
This important topic of bailout inequities came up in Congress earlier this month. Edward J. Kane, professor of finance at Boston College, addressed a Senate banking panel convened on Aug. 3 by Sherrod Brown, the Ohio Democrat. “Our representative democracy espouses the principle that all men and women are equal under the law,” Mr. Kane said. “During the housing bubble and the economic meltdown that the bursting bubble brought about, the interests of domestic and foreign financial institutions were much better represented than the interests of society as a whole.”
THIS inequity must be eliminated, Mr. Kane said, especially since taxpayers will be billed for future bailouts of large and troubled institutions. Such rescues are not really loans, but the equivalent of equity investments by taxpayers, he said.
As such, regulators who have a duty to protect taxpayers should require these institutions to provide them with true and comprehensive reports about their financial positions and the potential risks they involve. These reports would counter companies’ tendencies to hide their risk exposures through accounting tricks and innovation and would carry penalties for deception.
“Examiners would have to challenge this work, make the companies defend it and protect taxpayers from the misstatements we get today,” Mr. Kane said in an interview last week. “The banks really feel entitled to hide their deteriorating positions until they require life support. That’s what we have to change. We must put them in position to be punished for an intent to deceive.”
Given the degree to which financial regulators are captured by the companies they oversee, prescriptions like Mr. Kane’s are going to be fought hard. But the battle could not be more important; if we do nothing to protect taxpayers from the symbiotic relationship between the industry and their federal minders, we are in for many more episodes like the one we are still digging out of.
EVALUATING bailout programs like the Troubled Asset Relief Program and the facilities extended by the Fed against “the senseless standard of doing nothing at all,” Mr. Kane testified, government officials tell taxpayers that these actions were “necessary to save us from worldwide depression and made money for the taxpayer.” Both contentions are false, he said.
“Bailing out firms indiscriminately hampered rather than promoted economic recovery,” Mr. Kane continued. “It evoked reckless gambles for resurrection among rescued firms and created uncertainty about who would finally bear the extravagant costs of these programs. Both effects continue to disrupt the flow of credit and real investment necessary to trigger and sustain economic recovery.”
As for making money on the deals? Only half-true, Mr. Kane said. “Thanks to the vastly subsidized terms these programs offered, most institutions were eventually able to repay the formal obligations they incurred.” But taxpayers were inadequately compensated for the help they provided, he said. We should have received returns of 15 percent to 20 percent on our money, given the nature of these rescues.
Government officials rewarded imprudent institutions with stupefying amounts of free money. Even so, we are still in economically stormy seas. Doesn’t that indicate that it’s time to try a different tack?
The reason the Fed bailed out the Belgian bank was because it was the Fed/dollar system that was failing. Notice how the ECB didnt bail them out ?
This is horrible. I thought Mad Harry the Name Dropper was gone for good, like Leo Pensionopolis after he said "The VIX will stay down here around 15 for at least another decade or two."
He's like a dog turd that won't decompose into the yard, and no one will get the shovel.
yea sucker. leave it away i never read your posts. just the comments. people hate you on here.
We all hate you MHFT.
You are the worst of the worst.
Go away.
MHFT has no Silver Dollar to flip. MHFT told everybody Silver was useless and overpriced at $26. MHFT is a greedy boomer clinging to his useless Fiat narco paper until the very end. Deceitful shills such as MHFT are the real problem.
What a scumbag:
MHFT (John Thomas) completely ripped off the analysts at StockCharts (Murphy/Miller) without any due credit.
http://www.madhedgefundtrader.com/august-29-2011.html
The charts from his actual post are NOT his!
f**k me, he's back
"200 proof ethanol into the punch bowel"
Intentional or not, the misspelling was incisive and amusing.
"Punch bowel" indeed. Thanks, Irene.
http://fastcache.gawkerassets.com/assets/images/4/2011/08/sewagefoam2.jpg