Tuesday, Aug 10, 2010
Well further as in not paying it back for longer... not further as in more of it in total
CNBC: Fed Signals Further Easing Amid Slowing US Economy
"To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature."
Voting against the policy was Thomas M. Hoenig"
So basically 10 to 1 in favour. And thats for maintaining the Status quo in terms of the quantity.
Posted by techieman @ 07:44 PM (1252 views) Add Comment
44 Comments
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1. mark said...
looks like they are running out of options
2. This comment has been removed as it was found to be in breach of our Blog Policies.
3. general congreve said...
Gold (gold)
Always believe in your soul.
You've got the power to know
you're indestructible.
Always believe in 'cause you are
gold (gold.)
Glad that you're bound to return
there's something I could have learned.
You're indestructible, always believe in.
Nice one FED, I f4cking love you!!!
4. debtfree said...
Of course, all the banks being bailed out by FDIC don't count.
More cash please, press the button FED.
Bye bye dollar
5. debtfree said...
Nearly 800 more banks are on the FDIC’s confidential list of institutions at risk of failure. The federal deposit insurance fund, already running a $20 billion deficit, stands to go billions of dollars further into the red.
Yeah baby yeah. More of it please, no delays.
Bullion, bullion, bullion
That's the stuff for me
6. debtfree said...
@1
I don't think they are running out of options.... Because there is only one option
He added that unless the American economy shows tangible signs of improvement, the Fed could step up its action with fully blown quantitative easing – expansion of the money supply – by Christmas.
Money supply is only going one way.
7. general congreve said...
@5 - Completely right. They have no option but to monetise their debts, as they are technically insolvent...
...cue Bullion Cat for President!
8. Keith said...
If gold is such a great investment why have the banks not put all of there QE money into it?
9. mountain goat said...
The US is not insolvent as long as people want to hold their debt. Anyone who thought they were insolvent and tried to short Treasuries lost a lot of money in the past year.
In November there are mid-term elections. Obama's left wing support might be impressed with his spending (plans) but it is the swing voters (the ones that voted him in, and are now fed up) that he needs to impress. That's why QE2 and another $1 Trillion stimulous isn't going to happen in the near future.
10. tom101 said...
Goodness! You two are sounding like a right pair of BTL'ers!
11. debtfree said...
mg,
Please, don't make me laugh.
The voters are going to make a change ?
12. general congreve said...
If, by you two, you are refering to me and debtfree, then yes, I will confess (can't speak for debtfree) that I would love a hpc accompanied by a huge gold bull market. At the right point I would hopefully cash in my gold for a few small BTL properties at bargain basement prices and let the cashola roll in from my rentiers :)
13. debtfree said...
Oh no, we said "jehovah"
Stone them.
14. general congreve said...
@10 - I should point out that this is just good business and financial common sense. I won't be using borrowed leverage to distort the housing market for first-time buyers (like the often financially incompetent BTLers of recent times past), but my own money made from my own investments, that's if the risk I have taken with my cash in investing it in gold pays off (my call and my loss if it goes wrong, no one else's).
15. general congreve said...
@10 - Typo, renters, not rentiers.
16. techieman said...
MG - The dollar bears are getting more lairy, just when the trend is getting mature (but possibly not over) - do they ever learn? Nope!
£ down almost a cent this morning and Eur 132 pips down the greenback. Is this just a counter trend move against the recent move lower for the dollar - or has the down move finished?
Personally think we are sill looking for countertrend dollar lows and equity move ups before "its all over"
Daneric is interesting re the bonds : http://danericselliottwaves.blogspot.com/2010/08/elliott-wave-update-10-august.html
"DEFLATION SENTIMENT
There is/was now too much short term recognition of "deflation" (as has been the media theme for a few weeks now). Today's "inflationary" move of the FED likely dampened this sentiment a great deal. Why the deflation talk lately? Well mainly because bond prices were in a bull move as of late and dropping yields brought out many comparisons to the Japan's off and on deflation of 2 decades and how low Japan rates are/were can be compared to the U.S. and that the U.S. was going through the same. That and the declining economic indicators brings out finally an awareness of the power of deflation. But as I said, today's Fed move will dampen that sentiment a bit and strengthen the inflation sentiment. Yet I think deflation will win and not the Japanese - style."
I would like to see the S&Ps go up (dow down about 60 this am - bear trap yesterday and a bounce on the news), and the dollar falter some more in the short term, so i can get a better position. But the markets arent always generous. A fall below yesterday's S&P lows and it looks more likely that its all over.
And gold? below 1200. The Granville quote prings o mind.
17. techieman said...
The video on the CNBC is worth looking at..
18. sj032 said...
It is the FED's job to print money to get the government out of a tight place. It is the reason it was created, the reason for its existence. The question is will it work. Will a further increase of money into the system stimulate economic activity? More than likely the answer is no. The economy needs less regulation, less taxes and less government and until government allows this to occur this economy is going nowhere. 'Too much money chasing too few goods,' was that Friedman's line, I can't remember. Anyway, whoever it was he hit the nail on the head. Another bubble in....... eenie, meenie, miney mo, who knows, but another bubble in something is inevitable.
19. hpwatcher said...
"DEFLATION SENTIMENT
There is/was now too much short term recognition of "deflation" (as has been the media theme for a few weeks now). Today's "inflationary" move of the FED likely dampened this sentiment a great deal. Why the deflation talk lately? Well mainly because bond prices were in a bull move as of late and dropping yields brought out many comparisons to the Japan's off and on deflation of 2 decades and how low Japan rates are/were can be compared to the U.S. and that the U.S. was going through the same. That and the declining economic indicators brings out finally an awareness of the power of deflation. But as I said, today's Fed move will dampen that sentiment a bit and strengthen the inflation sentiment. Yet I think deflation will win and not the Japanese - style."
I would like to see the S&Ps go up (dow down about 60 this am - bear trap yesterday and a bounce on the news), and the dollar falter some more in the short term, so i can get a better position. But the markets arent always generous. A fall below yesterday's S&P lows and it looks more likely that its all over.
And gold? below 1200. The Granville quote prings o mind.
I think the lack of action by the FED is an indication that they don't yet see deflation as that much of a threat - yet. And if it does appear to be a threat - more radical action will be taken. There are a number of mechanisms which can be employed, some more palatable.
And gold? Will find probably find support around the 1,140 to 1,160 in the next few weeks, until October. What happens after then, will depend upon what else is going on.
20. growler said...
And if it does appear to be a threat - more radical action will be taken
The really interesting bit will be if the action they take will actually work. I can't see markets saying: "oh great - QE2. We can all relax now". I really think there is currency risk
21. techieman said...
HPW thanks for providing yr levels on gold.
There are a three points worth raising here.
First, and ironically you have fallen into the sentiment trap " Today's "inflationary" move of the FED likely dampened this [deflationary] sentiment a great deal." i.e. for the very reason you say - that the fed will do anything to stave off the evil deflation.
Second - they actually have done some action (which is of course why the markets moved a fair bit) what did they do? Well two things they indicated that short term IRs will stay low for the foreseeable. [its interesting to see what happens to the curve now]. The second thing was they arent going to reduced the size of the balance sheet naturally but are going to replace maturing debt with new debt. A subsidiary point there is what they are going to replace the MBS' with.
In effect they are continuing easy conditions, but not making them any easier.
Third there was a dissenting voice. It was actually 9-1 [not 10-1 as i said]. Now that makes me wonder if some of them wanted to go further [Ben springs to mind] but there would have been more dissenters had they. You have to ask the question why did he dissent, and how close were others to it.
As MG says its now political - if there is a next round (and we cant rule that out) its likely that there may very well be more dissenters. Should that happen, that will (whatever the vote) spook the markets.
22. sj032 said...
Can someone point out to me why I should be soo scared of a little deflation. I uderstand that run away deflation, just like run away inflation, is generally a bad thing. But why is 1 or 2% deflation a year a bad thing. From an individual perspective, as long as I have a job deflation doesn't seem all that bad. I can buy more with money I get, ie a real increase in purchasing power. And, provided I do not have completely overwhelming debts, a small increase in the real price I have to pay will balance out the increase I get in my real purchasing power. Also, just because prices are going down by 1 or 2% does not mean i will hold off buying things. Surely when inflation is running at 1 or 2 % people do not think i must have it now before the value of my dollars decrease. Why are we constantly told that the reverse would happen if a little deflation were to take hold???
23. techieman said...
as for " There are a number of mechanisms which can be employed, some more palatable." If you want to outline what you think they are feel free..
24. techieman said...
sj032 - maybe you should maybe you shouldnt. But YOU are not the issue. In the aggregate we are indebted. If things deflate the economy contracts and we are less likely (in the aggregate) to have jobs. Add to that the debt is not eroded by inflation.
You have kind of hit the nail on the head - if there is inflation or hyperinflation then asset prices are likely to rise and the loans secured on them fall in real terms (if your pay keeps pace with inflation then your debt automatically gets eroded).
Personally i have "some" cash on the basis that asset prices - including houses will fall and i will get more house for my £. But that is a personal view. In the meantime the prices of other things going up (and it looks like big ticket "luxury" items are starting to fall / margins squeezed etc), is likely to further squeeze household budgets. To my mind im not that fussed about other things going up since it depends on your own position. For example if HPs fall 10% in a year and i have a budget of say £1m then that fall will save me £100k.
I would have to consume a few hundred tonnes of savoy cabbage to spend that amount!
25. techieman said...
sorry - to finish off the point - its the spiral nature of deflation thats the problem. If say this month the price of tellies goes down 2% and people PERCEIVE that will fall further then (again in the aggregate - accepting that the utility for some people will be different to others) they will hold off their purchasing, which begets more discounting / laying off of staff ... etc etc
26. techieman said...
... and of course HPs are most at risk in a deflationary environment because of the gearing / mewing. Which then affects sentiment - etc etc.
Which is why we are all "here" isnt it?
27. str 2007 said...
sjo32
I hink for the majority here who have lived within their means a bit of deflation would be a good thing.
Just look what happened to spending over the last 10 years as the 'cheap' imports came in from China. Official figures may have shown a little inflation. But excluduing houses most of us constantly felt better off as prices fell.
Technology always falls, but flat screens came out at about £4000 and can now be had for a 1/10th of that price.
As our suppliers sourced from China prices generally fell for the last 10 years.
The HUGE mistake made by Gordon Brown, was to allow a huge credit expansion during a period of what felt like falling prices and frankly alot of people went mad.
28. mark wadsworth said...
All this talk about people putting off purchases because they think prices will fall is complete hokum (apart from house prices), or else nobody would ever buy consumer electronics, because next year they'll be better and cheaper. And people like to go on holiday once a year come rain or shine. And some people "have to" buy a new car every few years.
And a lot of people go to the pub once or twice a week and would continue doing so even if they knew beer would be a few pence cheaper next month. We can safely assume that if wheat prices really do go up that beer prices will go up a bit and that people will drink ever so slightly less for the time being. If the "deflation discourages consumption" argument held, then people would be drinking like fish now in anticipation of beer price rises, but once prices start falling again, they would suddenly drink a lot less.
29. techieman said...
Mark - i think you need a different example! Cause the beer one is just a bit silly!
As for cars i think that's wrong too - i mean why did they introduce the scrappage scheme? Because people were putting off buying new, and keeping hold of what they have for a "bit / lot" longer.
I dont know if you saw the news last night but there was a classic statement by a girl. "no i wont be buying anything big like a new telly, but i will be getting an Ipod and an Ipad..." eh??
30. techieman said...
you are getting your inelasticities of demand in a bit of a twist!
31. mark said...
I don't plan on replacing our TVs until they stop working, we generally keep our cars until they end up at scrappers, the last 4wd we owned we had from new for 13 years until it became uneconomical to repair..
However we do invest heavily in shares..
So i do believe people will hold off waiting for prices to drop, the only people who run out and buy the latest tech are the wannabees and scroungers with taxpayers money, you want to drive around some council estates up north, the lounges look like odeon cinemas, soon they will all look like 3Dmax cinemas.. I have honestly been truly shocked by some of the TV's I have seen from the road in peoples lounges, you don't need streetlights the TVs light up the road.
32. techieman said...
I think a point we are missing is that people will put off purchases by actually saving for them - rather than using the old plastic. If deflation does hit us hard (and i agree its debatable at the moment) then regardless of the rates people will just add to their savings - which of course is NOT what HM Gov wants.
When they can afford to buy it they might find they have some left over / get a better version for their £.
33. techieman said...
I think a point we are missing is that people will put off purchases by actually saving for them - rather than using the old plastic. If deflation does hit us hard (and i agree its debatable at the moment) then regardless of the rates people will just add to their savings - which of course is NOT what HM Gov wants.
When they can afford to buy it they might find they have some left over / get a better version for their £.
34. growler said...
And for those people in a house paid for right now with mortgage debt, a bit of deflation will mean their disposable income OUGHT to fall as they should pay back debt as the debt burden increases in such circumstances.
It's this that Governments really want to avoid. The downward spiral of waiting for prices to fall. Which, techie, is exactly what I'm waiting for as far as any non-essential purchase is concerned - especially the house.
Really volatile time coming up I think. I only wish I had the experience to get in the right product at the right time. Having S2R in middle 2007 it's tempting to be tempted to invest.
35. mark said...
techieman twins quite possible, but most people don't earn enough to save
36. mark said...
growler unilever shares are very cheap at moment £16.91 buy price they are ex divi today
37. techieman said...
Dollar rampant at the moment by the way! 2 cents up v £, 180 pips v the Euro. Interesting week in store!
38. mountain goat said...
Hi TM yes big swing day, start of 3rd for dollar and stocks?
Have opened an account with Capital Spreads. Euro's fall got me off to a good start...
39. techieman said...
hi MG - "I would like to see the S&Ps go up (dow down about 60 this am - bear trap yesterday and a bounce on the news), and the dollar falter some more in the short term, so i can get a better position. But the markets arent always generous. A fall below yesterday's S&P lows and it looks more likely that its all over. "
"MG - The dollar bears are getting more lairy, just when the trend is getting mature (but possibly not over) - do they ever learn? Nope!"
Think that more or less says it all really!! Its just amusing that debtfree / GC starts calling the $ finished and then we have a 300 pip move in the Euro and 2 cents in the £. Honestly? The dollar could weaken one more time and bump up equities in the 2nd wave of the 1st wave of this 3rd wave - and yes it does look like we are now starting the third wave. This should explain it : http://2.bp.blogspot.com/_TwUS3GyHKsQ/TGMLQ-a9nbI/AAAAAAAAHBo/RuY2gzr_70s/s1600/spx30.png
Nice trade on the Euro - fair play to you. Here is the daily dollar index : http://1.bp.blogspot.com/_TwUS3GyHKsQ/TGMLzVaa9wI/AAAAAAAAHBw/e64eGZe6AtA/s1600/dolalr.png
Glad you kept the faith! Hope you can stay safe and build a nest egg for the little one. That may sound a bit patronising but its really not meant to be!
40. techieman said...
MG - maybe the yachts have been moored a bit early?!?!?.
41. techieman said...
MG - dont know if you still get it but Mr P did a special interim report today - it says before the markets opened. Either way its pretty good stuff! Have you read it?
42. mountain goat said...
Hi TM - writing this here to avoid people getting upset about market chatter...
Yes I still get EWI and saw Mr P's report. Since his timing isn't alway great I did not act but I did put in an order for a trade in case there was a sharp move in Euro/dollar, which made me some money. I still respect MrP's work very much and like his combination of EW with sentiment etc. When the EW count gets difficult as it did in the past couple of weeks I think sentiment becomes very valuable. EWI were consistently bearish whereas Lara and other EW analysts were calling for another move up/down for the dollar. We may still get this but as you said the market does not give handouts and as the flash crash showed getting a good position is not easy. People with enough money to move the market have the upper hand. Starting this spread betting has made me watch the charts more closely than usual and it is obvious there are violent thrusts the opposite way before big moves, to shake people out of their positions.
Thanks, mainly trying not to lose money with spread betting, which is hard! They had an offer of $100 topup starting deal, which gives a bit of lee-way to get started and experiment.
43. techieman said...
yes was very difficult to call this wedge. I do think that the following are worth reading:
1. EWI [which actually hedged itself on the short term updates].
2. Daneric - think he is probably the best free EWaver here.
3. Lara.
As you say none of them got it spot on - I was anticipating the bear squeeze on the day the fed made their announcement, and then yesterday you could (IMO) re equities only get in when the low of Tuesday had been breached. It was debatable that the pattern had completed, and Lara for one was very confused!
But now the patterns should be easier to trade. As i have always said they do everything they can to squeeze you out, because thats how it is. This is what most people dont get and why most give up. Granted EW is only perfect in hindsight - but it does give probabilities in real time. Really nothing (i know of) is perfect, if it was i wouldnt use money management.
It was an ending diagonal form - which states - p37 and p38 of the book, that once reversed it will "usually" go back to the level from where it started and often a fair bit more.
http://www.elliottwave.net/educational/basictenets/basics2.htm
"Ending Diagonal
An ending diagonal is a special type of wave that occurs primarily in the fifth wave position at times when the preceding move has gone "too far too fast," as Elliott put it. A very small percentage of ending diagonals appear in the C wave position of A-B- C formations. In double or triple threes (see next section), they appear only as the final "C" wave. In all cases, they are found at the termination points of larger patterns, indicating exhaustion of the larger movement."
Ending diagonals take a wedge shape within two converging lines, with each subwave, including waves 1, 3 and 5, subdividing into a "three," which is otherwise a corrective wave phenomenon. The ending diagonal is illustrated in Figures 8 and 9 and shown in its typical position in larger impulse waves.
44. techieman said...
"When the EW count gets difficult as it did in the past couple of weeks I think sentiment becomes very valuable. " . He actually never used to use sentiment as a measure, i think that is why his calls previously were often off the mark. You are right on that point. Of course whether 95% or 97% bulls is too extreme is conjecture - and can be separated by a fe hundered (dow) points - so yes in combination.
Since they use it so much it makes you wonder why the measure still works?!? [i mean why people still jump on the bandwagon]. I think that debtfree and GC - illustrate perfectly the contrarian concept. and no i am not having a go at them at all. What they assumed was quite "natural" and obvious - as is the case for hyperinflation ;-).