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Realistbear

Market Uproar As Bernanke's Statement Was Misunderstood

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Expect some chaos in the markets tomorrow? Anyone shorted the $ too much?

http://www.msnbc.msn.com/id/12583997/

Market uproar follows Fed 'misunderstanding'

By Jennifer Hughes in New York

Updated: 7:12 p.m. ET May 1, 2006

Stocks fell on Monday after CNBC's Maria Bartiromo revealed on air that Ben Bernanke felt his testimony last week had been "misunderstood."
The anchor said Mr Bernanke had told her at the White House Correspondents' dinner in Washington on Saturday that he had not intended the markets to infer that the Fed was nearly done raising interest rates.

Pause--what pause? We are just getting started on IR hikes........ :o

http://today.reuters.com/investing/MarketR...APAN-STOCKS.XML

Tokyo stocks seen edging lower on rate concerns

Mon May 1, 2006 7:23 PM ET

TOKYO, May 2 (Reuters) - Japanese stocks are expected to edge lower on Tuesday after U.S. stocks declined on concerns the Federal Reserve could prolong its campaign of raising interest rates in one of the largest markets for Japan's exports.
But losses are likely to be limited as many investors hold back from active trading on the last day of trade before the start of a series of national holidays.
Fed Chairman Ben Bernanke said markets had misinterpreted his comments last week
, which had been taken to suggest the possibility of an immediate end to rate increases, U.S. business news television channel CNBC reported on Monday.
Edited by Realistbear

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Maybe Bernanke's original statement was made before the Chinese raised their base rate,

and now he has to back pedal.

The ECB had a similar misunderstanding recently - maybe they

know something we don't :)

ABb

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The ECB had a similar misunderstanding recently - maybe they

know something we don't :)

What? That low interest rates lead to inflation?

Do you really think that central banks are going to be looking at property valuations when core inflation starts to take hold :lol::lol::lol::lol:

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If the Fed stop rising the dollar is toast; the US housing market (which is toast) will be burnt toast if the Fed keep rising. Ask Bernanke for a definition of a rock and a hard place.

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I'm wondering if we need to see the US at 6% at least to stop the dollar sliding... :blink: Or will they have to go even higher?

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Euro's recent uptrend still in tact for now. Could we be on for a sell off? May be some good opportunities coming up.

Against the USD$ and the GB£ the euro will do very well and not just "for now" but longer term i feel

The bubble in the UK is popping, jobs are going and it's all starting to look bad plus they fiddle the inflation rates more than others so it's only time before you see a big devaluation of the £ and with the USD$ dragging it down you may see £1.00= 1.10 eu

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Up Roar! :D

It just goes to highlight the general nervousness around the markets IMO. Everyone knows the game is about up. All they are wondering now, is how long they have left to make hay. Bernie's little mistake must have suggested they have some extra time. Wrong. :lol:

Bring it on!

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http://www.telegraph.co.uk/money/main.jhtm.../02/ixcity.html

Dollar drops as great sell-off looms

By Ambrose Evans-Pritchard (Filed: 02/05/2006)

"Beware regime change. When it turns, it will be totally poisonous for the dollar because the
US will have to start paying investors for the risk of financing their massive deficits,"
he said.
Smaller central banks are already taking precautionary steps. Sweden's Riksbank has slashed its dollar reserves from 37pc to 20pc over the past month, while the United Arab Emirates said it is planning to switch 10pc from dollars to euros.
The combined dollar reserves of China and Japan are so vast - perhaps $1,400bn, mostly in US bonds - that they cannot easily be sold without setting off a global panic. However, the Bank of Japan has stopped accumulating US treasuries now it no longer needs to hold down the yen to combat deflation.
The fall may be checked, however, by the inherent weakness of Europe's monetary union. T
he euro's strength in early 2005 set off mayhem in Italy, prompting two ministers to float ideas for a return to the lira, largely to bail out struggling exporters.
The European Central Bank is already softening its monetary policy to try to dampen enthusiasm for the euro, stunning the markets last month by shying away from an expected rate rise in May.
"If the euro gets to $1.30 against the dollar there will be another chorus of complaint from the weakest states," said a veteran EMU-watcher.
"If it gets above $1.40, Italy will be blown out of the euro-zone."

The weaknesses showing up in the EU will be magnified if the dollar does not stablise soon. When the US catches cold etc. What is for sure--IR are going to have to go to atl east 6% at the Fed because a weak dollar may well set the stage for a global meltdown. It is amazing that stockmarkets are holding up under such a threat to stability. A new era of higher rates is dawning that is for sure--that way there will be more confidence in cash and less money being pumped into already bloated assetts. Something has to give and it could well be the housing markets because this is where most of US and UK inflated capital is residing. When IR skyrocket this could be the "commodity" that will take the big hit. :o

http://www.baltimoresun.com/business/inves...story?track=rss

Fed called not done with rates

Bernanke tells CNBC data may extend rise

Bloomberg News

Originally published May 2, 2006

NEW YORK // Federal Reserve Chairman Ben S. Bernanke said the
Fed is not necessarily done raising interest rates
, as investors and the media interpreted his congressional testimony last week, CNBC reported yesterday.
Edited by Realistbear

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So they tested the market with a few comments but the market response (falling Dollar) wasn't at all favourable. So on with the rate rises we go. Expect another test of the market from time to time to see if it's "safe" to pause on the rate rises.

One thing that's pretty certain is that the situation is tightening for the borrowers. Just think what would happen to the US Dollar with a 1% rate? And yet that's exactly what they had 2 years ago.

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So they tested the market with a few comments but the market response (falling Dollar) wasn't at all favourable. So on with the rate rises we go. Expect another test of the market from time to time to see if it's "safe" to pause on the rate rises.

One thing that's pretty certain is that the situation is tightening for the borrowers. Just think what would happen to the US Dollar with a 1% rate? And yet that's exactly what they had 2 years ago.

The West has enjoyed "accomodative" (Alspeak for inflationary) IR since 9/11 occured.* The VIs continue to admit that low IR will underpin (VIspeak for inflate) the market. With so many imbalances caused by Al's accomodation its time to balance the books with rates that will return equilibrium. "Neutral" rates will not work so its time to tighten. 7-8% is considered the historical norm in the US market which suggests that we may have another 1-1.5% to go on the Fed rate in order to get mortgage rates where they need to be (now that Al's conundrum seems to have been overcome by financial reality and tighter lending standards).

I agree that Bernie's baloon was a market tester and the reaction against the dollar was huge. For the sake of stability and at the cost of deflating the housing market its up up and away from here.

_________________

*Courtesy of Asia who are tightening to curb inflation in their own economies.

Edited by Realistbear

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  • 339 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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