There is nothing here to comfort risk markets. The Fed is going to buy more Treasuries as a means to ease “if needed”. He presented 4 possible easing choices - 3 of which are basically worthless in my opinion: buying more USTs, communication (i.e. moving to a “really...
I want to start with a quote from Ben in 2003 that I used in yesterday’s commentary. I’m repeating it today because it is VERY important – “when nominal interest rates are at or near zero, the central bank can lower the real rate of interest only by creating...
I think the August 10th FOMC meeting will go down as one of the top 10 mistakes in Fed history! The move to make Treasury replacements of MBS pay downs was one of the poorest signaling moves I can ever remember. It is still unclear to me what they were trying to...
US Corporates, US Banks and most foreign institutions are borrowing dollars at rates that are many hundreds of basis points lower than they were pre-crisis. There is however one funding rate that remains unchanged throughout this period. I highlighted it in the August...
Suppose the Congress controlled the production of all the lemons in US. Then assume the Federal Reserve decided that it was going to use its balance sheet to buy lemons as a means of adding liquidity into the market when times were tough. While the government ramped...
I constantly read how things are more correlated than ever - risk on/risk off is the usual way commentators describe a typical trading day. I want to take a strong objection to this statement. I think things are about as uncorrelated as I can ever remember! Over the...
Yesterday’s “Stirring the Pot” commentary created what I could only describe as a boil over effect! Based on the comments I received yesterday, one thing I can say for sure is that there are a lot of angry folks out there who are not interested in seeing their 6%...
So I didn’t get much time to catch up on markets after I sent out yesterday's commentary. I was bombarded by clients who wanted to dig deeper into this idea that the Fed move to reinvest the proceeds of mbs pay downs was less about a policy shift and more about a...
I arrived back stateside late last night so I am just gathering my thoughts. I certainly did not expect a blatant shift to balance sheet targeting by the FOMC and I am trying to look through to motivations. Yes the data have been poor, but all indications from...
Jim Bullard has actually thrown a great paper out there for all of us to think about (http://research.stlouisfed.org/econ/bullard/pdf/SevenFacesFinalJul28.pdf). The simple premise is that using “extended period” style language creates unintended negative consequences...
Jim Bullard has actually thrown a great paper out there for all of us to think about (http://research.stlouisfed.org/econ/bullard/pdf/SevenFacesFinalJul28.pdf). The simple premise is that using “extended period” style language creates unintended negative consequences for the economy. If your central bank runs around telling you rates are on hold forever, then it starts to reinforce deflationary expectations, […]
