The following graphic is from the Financial Times Alphaville blog.
Showing posts with label Federal Reserve. Show all posts
Showing posts with label Federal Reserve. Show all posts
Tuesday, September 18, 2012
FOMC Policy Bias 2012 & 2013
This chart is useful for guessing the policy bias of members on the FOMC. It includes not only the members in 2012. It also includes the four new members that will rotate onto the Committee in January 2013. The Chairman (Bernanke) does not get to select who the new members are in each annual rotation because they are predetermined. His primary variable for strategy is the timing of the monetary policy matter he wants to present for vote. Obviously, the policy hawks are outnumbered and therefore not able to impact a vote in either 2012 or 2013 as well as they can impact a discussion.
The following graphic is from the Financial Times Alphaville blog.
The following graphic is from the Financial Times Alphaville blog.
Monday, July 30, 2012
John Taylor Interview, July 27, 2012
John Taylor, CEO of FX Concepts LLC is interviewed by Bloomberg's Sara Eisen on July 27,2012 and describes his opinions around the current level of GDP in the US, actions out of the FOMC meeting this week and the ECB meeting this Thursday, his outlook for the Euro, US$ the Yen and the Aussie $. This is a compelling interview in which he admits to being stretched emotionally to the point of wanting to pull his hair out. He contends that emerging market currencies are what he is looking to for a signal of sustainable risk-on sentiment.
Friday, April 27, 2012
Robert Wenzel's speech at the NY Fed, April 2012
From the Economic Policy Journal;
Thank you very much for inviting me to speak here at the New York Federal Reserve Bank.
Intellectual discourse is, of course, extraordinarily valuable in reaching truth. In this sense, I welcome the opportunity to discuss my views on the economy and monetary policy and how they may differ with those of you here at the Fed.
That said, I suspect my views are so different from those of you here today that my comments will be a complete failure in convincing you to do what I believe should be done, which is to close down the entire Federal Reserve System
My views, I suspect, differ from beginning to end. From the proper methodology to be used in the science of economics, to the manner in which the macro-economy functions, to the role of the Federal Reserve, and to the accomplishments of the Federal Reserve, I stand here confused as to how you see the world so differently than I do.
I simply do not understand most of the thinking that goes on here at the Fed and I do not understand how this thinking can go on when in my view it smacks up against reality.
Saturday, March 17, 2012
The Primary Dealer System is Deadly
Below is the entire text of an article I found on Zero Hedge. Here is a link to the post on ZH. I want to capture this article for future reference because it does a good job of describing the Primary Dealer system which is a giant financial squid that has its grip on the throat of the governments around the world and has supported financial corruption in the developed economies in the world. No editorial changes, it is copied as published at ZH.
"Yesterday I noted that the “addict/ dealer” metaphor for the Fed’s intervention in the markets was in fact not accurate and that the Fed’s actions would be more appropriately described as permitted cancerous beliefs to spread throughout the financial system, thereby killing Democratic Capitalism which is the basis of the capital markets.
Today I’m going to explain what the “final outcome” for this process will be. The short version is what happens to a cancer patient who allows the disease to spread unchecked (death).
In the case of the Fed’s actions we will see a similar “death” of Democratic Capitalism and the subsequent death of the capital markets. I am, of course, talking in metaphors here: the world will not end, and commerce and business will continue, but the form of capital markets and Capitalism we are experiencing today will cease to exist as the Fed’s policies result in the market and economy eventually collapsing in such a fashion that what follows will bear little resemblance to that which we are experiencing now.
The focus of this “death” will not be stocks, but bonds, particularly sovereign bonds: the asset class against which all monetary policy and investment theory has been based for the last 80+ years.
Indeed, basic financial theory has proposed that sovereign bonds are essentially the only true “risk-free” investment in the world. While history shows this theory to be false (sovereign defaults have occurred throughout the 20th century) this has been the basic tenant for all investment models and indeed the financial system at large going back for 80 some odd years.
The reason for this is that the Treasury (US sovereign bond) market is the basis of the entire monetary system in the US and the Global financial system in general. Indeed, US Treasuries are the senior most assets on the Primary Dealers’ (world’s largest banks) balance sheets. To understand why this is as well as why the Fed’s policies will ultimately destroy this system, you first need to understand the Primary Dealer system that is the basis for the US banking system at large.
If you’re unfamiliar with the Primary Dealers, these are the 18 banks at the top of the US private banking system. They’re in charge of handling US Treasury Debt auctions and as such they have unprecedented access to US debt both in terms of pricing and monetary control.
The Primary Dealers are:
"Yesterday I noted that the “addict/ dealer” metaphor for the Fed’s intervention in the markets was in fact not accurate and that the Fed’s actions would be more appropriately described as permitted cancerous beliefs to spread throughout the financial system, thereby killing Democratic Capitalism which is the basis of the capital markets.
Today I’m going to explain what the “final outcome” for this process will be. The short version is what happens to a cancer patient who allows the disease to spread unchecked (death).
In the case of the Fed’s actions we will see a similar “death” of Democratic Capitalism and the subsequent death of the capital markets. I am, of course, talking in metaphors here: the world will not end, and commerce and business will continue, but the form of capital markets and Capitalism we are experiencing today will cease to exist as the Fed’s policies result in the market and economy eventually collapsing in such a fashion that what follows will bear little resemblance to that which we are experiencing now.
The focus of this “death” will not be stocks, but bonds, particularly sovereign bonds: the asset class against which all monetary policy and investment theory has been based for the last 80+ years.
Indeed, basic financial theory has proposed that sovereign bonds are essentially the only true “risk-free” investment in the world. While history shows this theory to be false (sovereign defaults have occurred throughout the 20th century) this has been the basic tenant for all investment models and indeed the financial system at large going back for 80 some odd years.
The reason for this is that the Treasury (US sovereign bond) market is the basis of the entire monetary system in the US and the Global financial system in general. Indeed, US Treasuries are the senior most assets on the Primary Dealers’ (world’s largest banks) balance sheets. To understand why this is as well as why the Fed’s policies will ultimately destroy this system, you first need to understand the Primary Dealer system that is the basis for the US banking system at large.
If you’re unfamiliar with the Primary Dealers, these are the 18 banks at the top of the US private banking system. They’re in charge of handling US Treasury Debt auctions and as such they have unprecedented access to US debt both in terms of pricing and monetary control.
The Primary Dealers are:
- Bank of America
- Barclays Capital Inc.
- BNP Paribas Securities Corp.
- Cantor Fitzgerald & Co.
- Citigroup Global Markets Inc.
- Credit Suisse Securities (USA) LLC
- Daiwa Securities America Inc.
- Deutsche Bank Securities Inc.
- Goldman, Sachs & Co.
- HSBC Securities (USA) Inc.
- J. P. Morgan Securities Inc.
- Jefferies & Company Inc.
- Mizuho Securities USA Inc.
- Morgan Stanley & Co. Incorporated
- Nomura Securities International Inc.
- RBC Capital Markets
- RBS Securities Inc.
- UBS Securities LLC.
Thursday, January 5, 2012
The Commodity Story Update: Bull Horns or Bear Tracks
Commodities are used in the production of economic activity around the
world, so a review of the markets that are sensitive to commodities helps to monitor the condition of important pieces in the global
economy. Federal
Reserve policy can influence prices of commodities, such as the price
inflation observed in 2011, created by excess liquidity (monetary policy) finding
value in commodities.
It's obvious that China has used their tremendous industrial and manufacturing capacity to increase employment and sustain the mandated GDP target of the government. The following comment, "Growth in China, the biggest user of everything from copper to cotton to coal, will slow to 8.5 percent this year, from 9.2 percent in 2011, the mean of 14 estimates shows" comes from a Bloomberg article discussing commodities. China is the largest customer of Australia, Brazil and other economies, including neighbor South Korea. The economy of South Korea provides an indirect window to their primary trade partner, China. The Kospi is a South Korean stock exchange and coincident proxy of economic change in China. It appears that the Kospi was hit hard in the beginning of August when Greece's debt default, and associated threat to the European banking system, became a reality. Prior to and since then, the trend has been slightly positive change.
Charts courtesy of StockCharts.com
Commodity markets are generally priced in US dollars. The dollar strengthened in September, hurting buyers of commodities, a condition that repeated in November and December. If the dollar is strengthening, then commodities will become more expensive and that will be inflationary on prices of goods and services. A sideways trend would provide some unexpected currency stability. A weaker dollar would be welcome relief for commodity buyers and relieve concerns about inflation, as well as supporting prices of many stocks and precious metals. The 10 week moving average (gold line) illustrates a strengthening in the trend. The Fed FOMC is not likely to allow a sustained strengthening move in the dollar index without intervening. What if they do allow it? That will signal risk-off and a move to perceived safety.
It's obvious that China has used their tremendous industrial and manufacturing capacity to increase employment and sustain the mandated GDP target of the government. The following comment, "Growth in China, the biggest user of everything from copper to cotton to coal, will slow to 8.5 percent this year, from 9.2 percent in 2011, the mean of 14 estimates shows" comes from a Bloomberg article discussing commodities. China is the largest customer of Australia, Brazil and other economies, including neighbor South Korea. The economy of South Korea provides an indirect window to their primary trade partner, China. The Kospi is a South Korean stock exchange and coincident proxy of economic change in China. It appears that the Kospi was hit hard in the beginning of August when Greece's debt default, and associated threat to the European banking system, became a reality. Prior to and since then, the trend has been slightly positive change.
Charts courtesy of StockCharts.com
Commodity markets are generally priced in US dollars. The dollar strengthened in September, hurting buyers of commodities, a condition that repeated in November and December. If the dollar is strengthening, then commodities will become more expensive and that will be inflationary on prices of goods and services. A sideways trend would provide some unexpected currency stability. A weaker dollar would be welcome relief for commodity buyers and relieve concerns about inflation, as well as supporting prices of many stocks and precious metals. The 10 week moving average (gold line) illustrates a strengthening in the trend. The Fed FOMC is not likely to allow a sustained strengthening move in the dollar index without intervening. What if they do allow it? That will signal risk-off and a move to perceived safety.
Sunday, November 27, 2011
The Commodity Story: Bull Horns or Bear Tracks
Commodities are used in the creation of economic activity around the world. So a review of the markets that are sensitive to commodities is one method of watching the condition of many pieces in the global economy and some individual markets. It is also worth noting how Federal Reserve policy can influence prices of commodites, such as the price inflation observed early this year created by excess liquidity finding value in commodites which are both a real asset and have scarcity.
The economy of South Korea provides an interesting window to their primary trade partner, China. The China economy is important for its consumption of commodities from Australia and Brazil and its purchase of material and services from other global economies. The Kospi is a South Korean stock exchange and coincident barometer of economic change in China. It appears that the Kospi was hit hard in the beginning of August. The timing suggests to Americans that the US Congress debt ceiling discussion impacted the Kospi. The weeks long discussion confirmed that the Congress is more dedicated to partisanship than to the good of the country and that may be part of the story. The beginning of August was also when Greece's debt default, and associated threat to the European banking system, became a serious outcome without intervention. That is a much larger economic threat for most of core Europe, at least at this point in time.
The commodity markets are generally priced in US dollars. Keeping the US dollar index in reference is helpful. The dollar strengthened in September, hurting users of commodities, a condition that appears to be repeating again in November. If the dollar is breaking out of resistance near 80, then commodities will become more expensive and that will be inflationary. A sideways trend would provide some currency stability that has been missing, and not a realistic expectation here. A weaker dollar would be welcome relief for commodity buyers and relieve concerns about inflation, supporting prices of many stocks and metals. The 10 week moving average illustrates the trend is suggesting a breakout through the 80 level. The Fed FOMC is also monitoring this movement. They are not likely to allow a big strengthening move in the dollar index with intervening. The problem is, what if they do allow it? That won't be fun to answer.
The economy of South Korea provides an interesting window to their primary trade partner, China. The China economy is important for its consumption of commodities from Australia and Brazil and its purchase of material and services from other global economies. The Kospi is a South Korean stock exchange and coincident barometer of economic change in China. It appears that the Kospi was hit hard in the beginning of August. The timing suggests to Americans that the US Congress debt ceiling discussion impacted the Kospi. The weeks long discussion confirmed that the Congress is more dedicated to partisanship than to the good of the country and that may be part of the story. The beginning of August was also when Greece's debt default, and associated threat to the European banking system, became a serious outcome without intervention. That is a much larger economic threat for most of core Europe, at least at this point in time.
The commodity markets are generally priced in US dollars. Keeping the US dollar index in reference is helpful. The dollar strengthened in September, hurting users of commodities, a condition that appears to be repeating again in November. If the dollar is breaking out of resistance near 80, then commodities will become more expensive and that will be inflationary. A sideways trend would provide some currency stability that has been missing, and not a realistic expectation here. A weaker dollar would be welcome relief for commodity buyers and relieve concerns about inflation, supporting prices of many stocks and metals. The 10 week moving average illustrates the trend is suggesting a breakout through the 80 level. The Fed FOMC is also monitoring this movement. They are not likely to allow a big strengthening move in the dollar index with intervening. The problem is, what if they do allow it? That won't be fun to answer.
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