Tuesday, January 19, 2010

BERNANKE OUT AS FED HEAD

Breaking news on CNBC. Yes I watch CNBC. I have to know where the herd is. Steve Leisman was blowing Ben on the AM slot. Steve was "fawn eyed" holding his charts showing there were 12 days before Ben's confirmation expired. I believe he broke down and cried briefly. Ummmm no....satire again. Ben will be easily confirmed but the Senate is showing their protest to the "real power" by dragging their feet.

Now back to useful informationa and of course....fed related. One must try to understand the limits of Fed policy and their monetary limitations. The following excerpt and article are very useful and provide an opinion that I share......

It is clear that the Fed's plan is to keep its interest rate target close to zero until there is a significant improvement in the US employment situation. It's not likely that there will be any improvement in the US employment situation over the next 12 months, so does this mean that the Fed Funds rate will remain near zero for at least another year?

Whether it does or not will largely be determined by inflation expectations. As the "Austrians" have always known and as the "Keynesians" discovered to their amazement during the 1970s, a high rate of unemployment will not prevent the prices of goods and services from rising in response to rapid money-supply growth. Rising prices lead to rising inflation expectations, and once inflation expectations exceed a certain level it will become necessary for the Fed to hike its targeted interest rate regardless of what the employment situation happens to be at the time. The reason is that if the Fed refuses to boost the overnight interest rate in the face of rising inflation expectations, then long-term interest rates -- including interest rates on adjustable-rate home mortgages -- will begin to accelerate upward.

That is, in the absence of a meaningful increase in employment the start of the Fed's next rate-hiking campaign will be determined by inflation expectations. The question, then, is: how will we know when inflation expectations have exceeded the level at which a Fed rate hike will be deemed necessary? We suspect that the 'tipping point' will be a decisive break below the support line (the base of the multi-year topping formation) drawn on the following monthly T-Bond chart.

http://news.goldseek.com/SpeculativeInvestor/1263885180.php

Immred bump comment
the destruction of the middle class wealth is going along just fine with the monetization and reflation and transfer of overleveraged crap assets to their portfolio. There is no "MUST" raise rates, there is only try and reinflate the Ponzi until it bursts. Remember WIN? (Nixon's whip inflation now slogan along with pay freezes, unemployment, high prices, now coupled with continued low short term rates by the Fed. The Fed does not control long term rates alone like short term, so this year you may still see zero short term rates and possibly 4% to 5% on the long end. You won't see double digit long term rates until gold hits 2-5k, and the dollar is toast still some time off.


“But Tom Sawyer he hunted me up and said he was going to start a band of robbers, and I might join if I would go back to the widow and be respectable.” ....satire.

18 comments:

  1. Big pullack in JAG today. I don't know JAG, so is this just a technical move or something bigger?

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  2. Today is awefully green for a start to P3. But the worship of the EW lemmings will continue, until their cult members go broke that is.

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  3. Prechter will be wrong once again and he has the balls over and over to say 200% short...his followers are brilliant TA folks so it surprises me that they continue to drink his Koolaid. Will they ever learn?

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  4. His followers are permabears or followers of them who do not understand analysis, many deep under water, and they held short because of EW saying each wave up was the top. Now they are stuck and their only way out is to hope he is right. They continue to find news or events to support their hope. No matter how good someone is at TA in general, when they bring bias to their analysis it is flawed. And it will continue to be flawed. It is the great flaw of EW, continue to renumber to support your bias until you either are broke or may get it right.

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  5. In order to ensure the destruction of the housing market, and middle class wealth, the Fed MUST raise rates sometime this year. By a substantial amount, too. The market follows the political agenda, and not the other way around.

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  6. JAG hurt my AZZ this am .......reported production problems ...check news.....dumped half at 12.02 and not add.....may be blip but i don't like surprises.

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  7. @Kli, miner's will be a tough trade until you get to the extremes or midpoint (20 dma) of the daily Bollinger Band of GLD to time entry exit of miners. Currently looks like midpoint is possible before bouncing higher or lower, this is where the trade gets tough.

    S&P still headed towards 200 week moving average with occasional fake downs towards 20 week moving average to hear the hoarse chorus of P3 is coming from the Prechter Bears.

    @Nombre, the destruction of the middle class wealth is going along just fine with the monetization and reflation and transfer of overleveraged crap assets to their portfolio. There is no "MUST" raise rates, there is only try and reinflate the Ponzi until it bursts. Remember WIN? (Nixon's whip inflation now slogan along with pay freezes, unemployment, high prices, now coupled with continued low short term rates by the Fed. The Fed does not control long term rates alone like short term, so this year you may still see zero short term rates and possibly 4% to 5% on the long end. You won't see double digit long term rates until gold hits 2-5k, and the dollar is toast still some time off.

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  8. No real rate hikes until they are forced is right red.....essentials will have to rise to the point that the public bleeds out of every orifice of their body....they may play at the margins a little but they are so scared right now...they won't even change language.....just gotta trade um.....and you are right about miners

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  9. Jag a problem, but SWC having a fantastic day so thanks for that.

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  10. long term jag is ok...BUT..short term...??? watch the support for squeeze...but will not go heavy

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  11. Whip Inflation Now (WIN) was a Ford Admin strategy...along with Swine Flu vaccine. Neither worked too well...so Jerry went to Palm Springs...

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  12. The Club of Rome, "Mankind at the Turning Point," 1974:

    "The winds of change have begun to blow. A keen and anxious awareness is evolving to suggest that fundamental changes will have to take place in the world order and its power structures, in the distribution of wealth and income, in our own outlook and behavior. Perhaps only a new and enlightened humanism can permit mankind to negotiate this transition without irreparable lacerations. In the UN, for example, new concepts such as that of "world collective economic security" as a necessary correlative to political security, and an innovative "charter of duties and rights" of member states is under consideration.”

    "Isn't the only hope for the planet that the industrialized civilizations collapse? Isn't it our responsiblity to bring that about?"
    - Maurice Strong, founder of the UN Environment Programme

    "A massive campaign must be launched to de-develop the United States. De-development means bringing our economic system into line with the realities of ecology and the world resource situation."
    - Paul Ehrlich, Professor of Population Studies

    "The only hope for the world is to make sure there is not another United States. We can't let other countries have the same number of cars, the amount of industrialization, we have in the US. We have to stop these Third World countries right where they are."
    - Michael Oppenheimer, Environmental Defense Fund

    "Effective execution of Agenda 21 will require a profound reorientation of all human society, unlike anything the world has ever experienced — a major shift in the priorities of both governments and individuals and an unprecedented redeployment of human and financial resources. This shift will demand that a concern for the environmental consequences of every human action be integrated into individual and collective decision-making at every level."
    - UN Agenda 21

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  13. I thought of another mantra for EW - that's not upside you are seeing, it's all just a big backtest.

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  14. There goes the super-majority. I'm no partisan but this one's ok with me. Until we get new people in congress on both sides I'd be content if no bill of any kind ever gets passed by anyone.

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  15. Establishing a more balanced democracy by eliminating the super-majority is very bullish lol. Brown wins - ramp financials and healthcare, Brown loses ramp something else, any major event just needs a different juggler. All the directions are pre-set regardless of what events occur, outside of an act of nature.

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  16. Oxymoron #1: Federal Reserve
    Oxymoron #2: US Treasury

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  17. You sure the healthcare industry would be hurt by healthcare passing? The individual mandate alone might make up for whatever new regulation was created, and I'm sure the lobbyists will make sure said regs as toothless as possible.

    I don't think the individual mandate is constitutional, but in a vacuum it it's a massive boon to the industry. The consumer ends up losing of course because the customers being browbeat into contracts gives the corps less incentive to offer attractive rates. You pay the rates or you pay the government and get nothing.

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