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HomeBen Bernanke Is Running out of Ammo
Posted by Larry Doyle on August 10th, 2010 4:24 PM |
What if you were playing a round of golf with a set number of balls and were restricted by how often you might be able to use specific clubs? Might feel somewhat overwhelmed, no? What if you faced this predicament when you realized that you were still many holes away from the clubhouse? Might feel increasingly overwhelmed, no? Why do I have this mental image of Ben Bernanke and his fellow Fed governors standing out on the farthest point of a golf course wondering just how the heck they are going to finish their round–that is, navigate the economy–and get back to the clubhouse.
Let’s quickly review the Federal Reserve’s statement released today. In the process, let’s take the pulse of the economy and the Fed’s ability to impact it. From the Federal Reserve’s website, (more…)
Insiders’ Views on Financial Regulatory Reform
Posted by Larry Doyle on July 16th, 2010 1:02 PM |
What do industry insiders think of the Financial Regulatory Reform package coming out of Washington? The Wall Street Journal provides a fascinating review in Fed Gets More Power, Responsibility. Let’s navigate.
1. Henry Paulson
Former Treasury secretary
Grade: Incomplete
The systemic-risk council, tougher Fed regulation over top financial institutions and new authority to wind down failing institutions are essential steps forward. Improving derivatives rules is a real positive. But the bill doesn’t tackle Fannie and Freddie, and there are too many unknowns as to how the regulations will be applied.
Will it help prevent another crisis? (more…)
Fed Minutes Flashing Caution
Posted by Larry Doyle on July 14th, 2010 3:24 PM |
The Federal Reserve just released the minutes from a June 22-23 meeting and an early May conference call. The Fed as an institution is always careful in its delivery, but in reading through their tea leaves this afternoon I sense concern on the Fed’s part of a real slowing, if not a double dip, in our economy. A summary of the Fed minutes includes the following highlights:
FOMC participants’ forecasts for economic activity and inflation suggested that they expected the recovery to continue and inflation to remain subdued, but with, on balance, slightly weaker real activity and a bit lower inflation than in the projections they made in conjunction with the April 2010 FOMC meeting. (more…)
Ambulance Chasing on Wall Street
Posted by Larry Doyle on April 12th, 2010 10:58 AM |
What is driving our markets higher? A rebound in earnings along with a rebound in the economy, correct? Well, let’s take a quick look at corporate earnings.
Thanks to our Sense on Cents Hall of Famer and resident Economic All-Star David Rosenberg, we learn this morning that:
Financial sector profits have accounted for 85% of the overall increase in corporate earnings.
When I read this, I immediately think of the market akin to that gutless driver who jumps behind an ambulance as it screams down the street. Who is in that ambulance? Main Street. Who is in that car getting the ‘free ride’? Wall Street. (more…)
Consumer Financial Protection or Wall Street Beats Main Street?
Posted by Larry Doyle on March 3rd, 2010 9:49 AM |
News that a newly proposed Consumer Financial Protection Agency will be housed within the Federal Reserve is another shot across the bow in terms of Wall Street owning Washington and beating Main Street.
Am I surprised by these results? Not at all. The power of the Wall Street lobby is enormous and ultimately the crowd in Washington needs the money from Wall Street in order to pretend they represent the interests of Main Street. All the press conferences and politicking on the topic of consumer financial protection truly amount to nothing more than pure bluster. The bottom line of Wall Street banks feeds the bottom line of many politicians in Washington on both sides of the aisle. (more…)
Dollar Carry Trade Remains in Vogue
Posted by Larry Doyle on December 4th, 2009 3:47 PM |
Today’s price action in the markets is very telling. What is it telling us? The dollar carry trade remains in vogue and technicals continue to dominate overall flows much more than fundamentals. Let’s navigate.
Recall that the weakness in the U.S. dollar has facilitated a large number of hedge funds, market speculators, and to a less extent investors to borrow dollars and buy a variety of risk based assets. What assets? Equities, a wide array of bonds, a basket of commodities, primarily gold. How are these sectors performing?
After an initial spike of 1-1.5% across the equity markets, these major market averages have retraced and are now effectively unchanged to slightly better on the day. Is that a sign of investors not believing in the details of the employment report? No, anything but. In fact, I believe the equity performance today is quite strong given the fact that the dollar has increased by 1.6%.
Bonds have traded in a very narrow range. Interest rates moved higher by approximately 12 basis points (.12%) and have sat there almost all day. The question that now comes back front and center is when the Fed will decide to raise rates. While most analysts had written off the possibility of an increase in rates prior to 2011, now analysts are projecting that the Fed may raise rates by mid-2010.
If rates do rise here, what does that do for our greenback? It will do better and it is doing just that today. As I referenced the U.S. Dollar Index has increased by 1.6%. (more…)
Time to Reinstitute Glass-Steagall
Posted by Larry Doyle on December 3rd, 2009 3:16 PM |
A car needs gas to run. An engine needs steam. A factory needs power. The fact is without a steady source of energy nothing can operate. Welcome to the Uncle Sam economy circa 2009.
You may be thinking, wait a second LD . . . the Federal Reserve is flushing the system with liquidity. Money is easy and it is propping the markets. While availability of credit may be tight, the demand for credit is also weak. So what am I talking about?
Thanks to RM for providing the FDIC Third Quarter 2009 Banking Profile (a link to the full document is provided at the end of this commentary). For those who care to rip apart the inner workings of our banking system, this report is the owner’s manual. The report highlights the following:
> Industry Posts Net Profit of $2.8 Billion
> Increased Revenues, Lower Securities Losses Offset Higher Loan-Loss Provisions
> Net Interest Margins Improve at Most Institutions
> Troubled Loans Continue to Rise, But Rate of Growth Slows
> Loan balances Decline by 2.8% in the Quarter
Based on this overview, it would appear that the banking industry is slowly recovering. In aggregate, perhaps that may be the case. But what doesn’t this report tell us? (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…)
