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HomeFed Hikes the Discount Rate….$urprisingly Quick
Posted by Larry Doyle on February 18th, 2010 4:50 PM |
The Federal Reserve indicated on February 10th it was going to raise the discount rate ‘before long.’ Well, in this case, Ben Bernanke is a man of his word as the Fed just raised the discount rate by 25 basis points (.25%) effective tomorrow.
While many market participants had minimized the potential rise in the discount rate as not being significant, I was not and am not in that camp. In fact, the speed with which Bernanke raised the rate after indicating that he would do so ‘before long’ has caught the market by surprise.
What is the immediate market reaction? (more…)
The Federal Reserve Has Failed Miserably
Posted by Larry Doyle on January 25th, 2010 8:46 AM |
How are we to judge the Federal Reserve? The Fed by its very nature has been an opaque institution. What truly goes on behind the closed doors of the Fed? What are the relationships amongst the Fed Chair and Fed governors? How about the relationships between Fed representatives and political operatives?
While volumes have been written about the history of the Fed, to the American public the Federal Reserve remains a mystery. How can we lift the veil on this mysterious institution? Let’s “kiss” the Federal Reserve. What? Oh no, LD, where are you going with this? Let’s plant a big “kiss” on the Fed. That is, keep it simple stupid. (more…)
Audit the Fed or Washington Rope-a-Dope
Posted by Larry Doyle on January 13th, 2010 8:47 AM |
The American public wants answers.
The Washington establishment, primarily in the persons of Ben Bernanke and Tim Geithner, clearly feel America can’t handle the truth. What truth? The depth of economic despair and problems primarily embedded in our nation’s financial system. What institution has tried to fill the hole in our financial system? The Federal Reserve.
Given the shadowy operations of the private institution that is our central bank, Americans are justifiably nervous and concerned as to what lurks behind the shadows inside the Federal Reserve. To this end, with the leadership of Ron Paul (R-TX) the calls to ‘audit the Fed’ are growing ever stronger. (more…)
CFO/Duke University Survey Paints Different Picture Than Federal Reserve
Posted by Larry Doyle on December 17th, 2009 9:24 AM |
A recently released survey of CFOs paints a decidedly different picture on the jobs front than that portrayed in yesterday’s Federal Reserve release. Let’s compare, contrast, and navigate the most important trail on our economic landscape.
The Federal Reserve’s statement yesterday:
Information received since the Federal Open Market Committee met in November suggests that economic activity has continued to pick up and that the deterioration in the labor market is abating. The housing sector has shown some signs of improvement over recent months. Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment, though at a slower pace, and remain reluctant to add to payrolls;
In every report that I have read and heard, this statement has been portrayed as one in which the employment situation is improving. I am an optimist by nature, but one has to spin that statement very hard to view it as a sanguine outlook for jobs. (more…)
Federal Reserve Says “One More Drink”
Posted by Larry Doyle on December 2nd, 2009 2:31 PM |
Illustration by Zhou Tao
I have to admit, I chuckled upon reading the news today that the Federal Reserve is debating whether and how it may fight the prospects of asset bubbles developing. The Wall Street Journal addresses this story in writing,
Fed Debates New Role: Bubble Fighter:
Not so long ago, Federal Reserve officials were confident they knew what to do when they saw bubbles building in prices of stocks, houses or other assets: Nothing.
Now, as Fed Chairman Ben Bernanke faces a confirmation hearing Thursday on a second four-year term, he and others at the central bank are rethinking the hands-off approach they’ve followed over the past decade. On the heels of a burst housing-and-credit bubble, Mr. Bernanke now calls financial booms “perhaps the most difficult problem for monetary policy this decade.”
With Asian property prices soaring and gold prices busting records almost daily, the debate comes at a critical time. Mr. Bernanke wants to use his powers as a bank regulator to stamp out bubbles, but the Senate Banking Committee, which will grill him later this week, is considering stripping the Fed of its regulatory power.
At the same time, pending legislation in the House could leave Mr. Bernanke running a less independent institution. The House Financial Services Committee has passed a measure that would subject the Fed’s interest-rate decisions to scrutiny by the Government Accountability Office, an investigative arm of Congress. Mr. Bernanke and others at the Fed fear that with Congress looking over their shoulders, any decision they make about interest rates would be subjected to the winds of politics — making it harder to control inflation or financial bubbles.
My immediate thought upon reading this article is to think of the bartender who is happy to push one more drink upon an overlubricated patron. Or perhaps a junkie who is willing to sell a down and out addict one more fix in order to ease the pain. (more…)
Federal Reserve Statement: Is No News Supposed to be Good News?
Posted by Larry Doyle on November 24th, 2009 3:50 PM |
In the Uncle Sam Economy circa 2009, seemingly every meaningful economic development runs through Washington. From housing to health care and finance to “you name it, ” the grand old man and his henchmen have their hands on almost every aspect of our lives. Getting smothered yet?
Against that backdrop, the Washington establishment dominates the news and has numbed the American public in the process. I witness this novocaine effect once again today with the release of the Federal Reserve’s Statement from its meeting on November 3-4.
While analysts pick over each and every word in this statement, do we truly learn anything new today? Assuredly not.
The Fed states:
Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.
With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
Having read and reread this statement to pick up minor nuances or subtleties in the Fed-speak, I detect little to no real news here. The fact is the economy remains horrific and the Fed will continue to flood the system with a fire hose of liquidity.
Given that there is no real news in this Fed statement, could we be so bold and say, “no news is good news”?
Now that would be a stretch, but it is one many in Washington and Wall Street don’t mind making everyday.
LD
Chris Dodd Has an Epiphany
Posted by Larry Doyle on November 11th, 2009 8:58 AM |
Senator Chris Dodd (D-CT)
Senator Chris Dodd (D-CT) is in a fight for his political life. Dodd continues to trail his primary Republican opponent Rob Simmons in recent polls. More disturbing than the actual polls versus his competition is the fact that fully 51% of those polled do not consider Dodd honest and trustworthy.
What happens to individuals faced with a potential death sentence? Come to Jesus. Faced with the prospect of death, literally or professionally, individuals often will undertake drastic changes in appearance and demeanor in an attempt to stave off that deep, dark descent. In that light, I am never amazed by actions, statements, and positions put forth by politicians.
What is Chris Dodd’s epiphany? Dodd clearly smells the wrath of the American populace toward Washington and Wall Street. Few politicians have been more closely linked with these two worlds than Senator Chris Dodd. After a year’s worth of debate and discussion on financial regulatory reform, Dodd is now proposing the most sweeping and all encompassing overhaul across the entire financial industry. Is this a Hail Mary pass in an attempt to pull victory from the jaws of political defeat? The American Banker provides a wide angled view of Dodd’s desperation pass in writing, Dodd Goes for Broke with Tough Reform Bill:
A draft version of his bill introduced on Tuesday was so far-reaching it would pick a fight with virtually every entrenched interest involved in the debate, including community banks, large financial institutions, the Obama administration, House Democrats, the Federal Deposit Insurance Corp. and the Federal Reserve Board.
How Will The Fed Exit ‘Hell’?
Posted by Larry Doyle on November 4th, 2009 3:06 PM |
None other than Meredith Whitney, the top rated bank analyst on Wall Street, characterized the Federal Reserve’s quantitative easing program to purchase mortgage-backed securities (MBS) as a ‘deal with the devil.’ Can the Federal Reserve sneak out of hell without disturbing the other residents? Can the Federal Reserve regain its stature of credibility and independence in the face of such massive government intervention and Wall Street influence? The challenge embedded in communicating how the Fed will ‘exit hell’ will be the single greatest determinant of economic and market direction over the next six months.
Did we catch a peek into those depths of hell today given the release of the most recent Federal Reserve policy statement?
What did we learn? (more…)
