I'm Confused...
What is the Fed doing?
The markets got hammered all of the past 2 weeks and on Monday. Today and yesterday the markets went gang busters on the way up!
Several factors are at play to explain the sharp upswings that we are experiencing. One being the mini-correction on the price of oil that may or may not continue. I know that one of my colleagues that is looking for a correction all the way back to $70/barrel before bouncing back. He may get help in that prediction from OPEC which is starting to discuss increasing production. Increased production equals lower prices. I feel that a correction is due, but the days of cheap oil are over. If not now, the next bounce from the price of oil WILL get the price up and over $100/barrel.
Another factor are the sovereign funds (surplus funds of a country used for investment) and foreign corporate investors are actively looking to purchase assets here in the U.S. Just look at Royal Bank of Canada's buy out of Commerce Bank and the recently 4.9% stake that the government of Abu Dhabi has purchased in Citigroup.
But the big reason is the Fed. Fed Vice Chairman (B-squareds right hand man) Donald Kohn was speaking in front of the Council on Foreign Relations that the recent financial volatility has reversed the improvement seen by the markets in recent weeks and could eventually squeeze credit for individuals and businesses and that "the tight financial conditions of the banks may merit offsetting policy from the central bank."
In English what he just said was that the down swing of the market in recent weeks offset the improvements that the markets made from the February drop AND that the tighter policies that the banks are putting on loans may require that the Fed lower rates.
Basically, the Fed is more interested in propping up the financial markets (particularly the stock market) and preventing a recession than in keeping the consumer from racking up higher debt loads and from rising inflation.
This is nutso thinking!!!!!!!!!
Now, while it is each individual's personal responsibility to stay out of bad debt, it is absolutely ludicrous to purposely inflate the price of goods in order to prevent recession.
Why? You might ask.
Because by triggering inflation through the printing of money (which essentially is what the Fed is doing by lowering rates) the Fed may cause a short-term spike in the prices of financial assets such as stocks, in the long run it will cause an even greater recession than if it would have just let the recession happen!!!!
Besides, isn't the loosening of the reigns of the printing presses and of credit what got this country in the condition it is in right now!?!?!?!
You know the whole "credit crunch" "mortgage mess" thingy!
Laissez faire (let the economy run its course) is a thing of the past both literally and rhetorically...Oh, those were the days.
The micromanaging of the Fed is going to make things worse not better. And even though it is now Ben Bernanke at the reigns...it will be Alan Greenspan's lasting legacy.
Notes from the Underground:
Dow - 13,212.47 +254.03
Gold - 802.50 -11.50
Silver - 14.40 -0.16
Oil - 92.04 -2.38
To Your Investing Success,
Patrick
The markets got hammered all of the past 2 weeks and on Monday. Today and yesterday the markets went gang busters on the way up!
Several factors are at play to explain the sharp upswings that we are experiencing. One being the mini-correction on the price of oil that may or may not continue. I know that one of my colleagues that is looking for a correction all the way back to $70/barrel before bouncing back. He may get help in that prediction from OPEC which is starting to discuss increasing production. Increased production equals lower prices. I feel that a correction is due, but the days of cheap oil are over. If not now, the next bounce from the price of oil WILL get the price up and over $100/barrel.
Another factor are the sovereign funds (surplus funds of a country used for investment) and foreign corporate investors are actively looking to purchase assets here in the U.S. Just look at Royal Bank of Canada's buy out of Commerce Bank and the recently 4.9% stake that the government of Abu Dhabi has purchased in Citigroup.
But the big reason is the Fed. Fed Vice Chairman (B-squareds right hand man) Donald Kohn was speaking in front of the Council on Foreign Relations that the recent financial volatility has reversed the improvement seen by the markets in recent weeks and could eventually squeeze credit for individuals and businesses and that "the tight financial conditions of the banks may merit offsetting policy from the central bank."
In English what he just said was that the down swing of the market in recent weeks offset the improvements that the markets made from the February drop AND that the tighter policies that the banks are putting on loans may require that the Fed lower rates.
Basically, the Fed is more interested in propping up the financial markets (particularly the stock market) and preventing a recession than in keeping the consumer from racking up higher debt loads and from rising inflation.
This is nutso thinking!!!!!!!!!
Now, while it is each individual's personal responsibility to stay out of bad debt, it is absolutely ludicrous to purposely inflate the price of goods in order to prevent recession.
Why? You might ask.
Because by triggering inflation through the printing of money (which essentially is what the Fed is doing by lowering rates) the Fed may cause a short-term spike in the prices of financial assets such as stocks, in the long run it will cause an even greater recession than if it would have just let the recession happen!!!!
Besides, isn't the loosening of the reigns of the printing presses and of credit what got this country in the condition it is in right now!?!?!?!
You know the whole "credit crunch" "mortgage mess" thingy!
Laissez faire (let the economy run its course) is a thing of the past both literally and rhetorically...Oh, those were the days.
The micromanaging of the Fed is going to make things worse not better. And even though it is now Ben Bernanke at the reigns...it will be Alan Greenspan's lasting legacy.
Notes from the Underground:
Dow - 13,212.47 +254.03
Gold - 802.50 -11.50
Silver - 14.40 -0.16
Oil - 92.04 -2.38
To Your Investing Success,
Patrick
Labels: Fed, Federal Reserve
posted by Dusan at
6:54 AM
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