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Posts Tagged ‘easy money’

Why Might The Fed’s Party Be Over?

Posted by Larry Doyle on June 20th, 2011 8:07 AM |

Over the last few years I have highlighted the fact that the deflationary impact of declining wages and home values gave cover to the Federal Reserve for maintaining an excessively easy monetary policy and pumping up asset prices via quantitative easing. That party would now seem to be over. Why?

There is no doubt that Fed chair Bernanke’s easy money has played an integral role in the inflation we are experiencing at the pump, in the supermarket, and across a number of other commodities.

As we continue to navigate the U.S. economic landscape circa 2011 and beyond, the ongoing decline in home values in many regions of our nation now would seem to be setting the table for an inflationary spike in housing costs. How so? What is going on here?¬† (more…)

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…)

Second Stimulus Speculation Submarining Bonds and Supporting Gold

Posted by Larry Doyle on November 3rd, 2009 3:09 PM |

What are the biggest stories in the market today? Consider the following . . .

1. Warren Buffett makes his single largest acquisition ever with the $34 billion purchase of Burlington Northern

2. Ford posts surprisingly strong auto sales

3. Royal Bank of Scotland becomes the biggest banking bailout yet with another injection of capital

4. Johnson & Johnson announces plans to layoff 7% of its global workforce

Each of these developments is truly meaningful. Interestingly enough, numbers one and two are decidedly constructive while numbers three and four are clearly quite bearish about global prospects. Despite the magnitude of these stories, in my opinion, they pale in comparison to developments in the precious metals and bond markets today. What is happening? Let’s navigate.

The Treasury yield curve is steepening dramatically today with yields on longer term notes and bonds rising by 6 to 8 basis points, while shorter maturities are unchanged. A snapshot of the Treasury market is provided by WSJ Market Data.

Why is the curve steepening? What does that mean? What are the implications for other markets? All great questions. Let’s navigate further. (more…)

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