I posted two new polls. One serious, one not so serious. We got horrible turnout on the last poll (Q: Best quote for the current stock market... most popular answer: "They've gone to plaid!"). First new poll is on when the Fed finally hikes. Just want to know your opinion on the very first hike.
Second poll is on the best pairing of a CNBC personality cast as a Star Wars character.
1) Charlie Gasparino as Greedo. High opinion of himself but ultimately not a very important character.
2) Rick Santelli as Salacious Crumb. Kind of funny but everything that comes out of his mouth is just noise.
3) Bob Passani as Moff Jerjerrod. Promised Darth Vader that the Second Death Star would be operational on schedule when he knew full well that he needed higher employment figures.
4) Mark Haines as Sio Bibble. Sour old man. Where are the chancellors ambassadors? Communication interruption must mean invasion! Bartiromo gets all the good interviews... blah blah blah...
26 comments:
first fed hike will be 2011
You really have some serious star wars issues!! :)
Have you seen the Star Wars uncut trailer?
P.S. The name is "Nemo". Blogger.com has a bug with its handling of OpenID.
I am with Frank, see you in 2011.
Anon,
there is simply no such thing as "serious star wars issues" and I am not biased in any way, shape or form.
PS. Nov 14th Star Wars in concert here in Boston.
1. 2012
2. El erian or Bill Gross muttering incoherent nonsense = Obi Wan Kenobi
Ben Bernanke is a man who has spent his life studying the Great Depression. In one sense that made him the right man during the dark days of Sept-Nov 2008. He may well have saved Wall Street and the nation’s financial infrastructure from a nuclear melt down.
OK enough of the nicey nice.
The problem with Ben is that the situation right now is not what it was in 1933 and I don't think he realizes that. Yes we are in a depression (not a recession). But it's not the Big One. It’s more like your garden variety depression we used to have back in the days before 1930. The really major difference however is the state of our finances.
When FDR took office in March of '33 the Depression was at its peak. But the national treasury was sound, as was our currency. We were a creditor nation with money backed by gold. In 2008 the public treasury was empty, having been depleted by two wars and massive domestic governmental expansion coupled with irresponsible tax cuts mainly benefiting the very wealthy. Our money has been made of paper and backed by nothing more than the word of our government and a great deal of wishful thinking for roughly 40 years. The FED has had an extremely accommodating policy designed to promote easy credit and lots of consumption for the last 15 years at the least.
In short FDR walked into a disaster reasonably well armed to deal with the crisis. Ben on the other hand has only one weapon, and that's the printing press at a time when it has been in heavy use for far too long already. Note gold did not start going up in March. It's been rising for most of this decade signaling a steady decline in confidence in our money.
The question is when will Ben hike interest rates? Given his background and that he is haunted by the specter of the brutal deflation of the 30's, I believe he will not even think about it until there has been a statistically significant improvement in employment for 2 consecutive quarters. For good or ill Ben still sees this as a replay of 1933 and believes that it is imperative we keep the money spigot wide open.
Continued below...
(Continued from previous post)
Unfortunately, no employment improvement is likely before early 2011. Mind I am not saying there will be no hikes before then. But I believe strongly that he will keep rates very (read dangerously) low until he perceives employment as improving and I do not see that anytime in the near term.
The next logical question is will he act if we begin to see a sharp rise in the CPI? My gut says no unless/until it rises above 5% when he may have his hand forced. But by then of course it will be too late.
The tip of the inflation iceberg is already visible in the financial markets with commodities, equities and bonds all moving up together. That by itself is a giant neon sign flashing a one word warning: “DANGER!”
There is an ocean of liquidity out there that is looking for a place to go. Depression level unemployment and widespread consumer deleveraging are keeping the liquidity from flooding the consumer market... for now. But pressure is building. Once this liquidity starts to move I suspect we will see a tsunami and I don't think the FED will be able to put this genie back in its bottle for several years. For an idea of how painful and difficult it is to break inflation once it gets loose take a look at what we went through in the early 80's.
I am extremely pessimistic about the macro economic outlook for the foreseeable future.
Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.
Of course, the U.S. government is not going to print money and distribute it willy-nilly
-Ben Bernanke from a speech in 2002 entitled... Deflation: "Making Sure “It” Doesn’t Happen Here”.
The economy is weak, but not destroyed. The financial and economic infrastructure is sound. What would you have us do, John? Precipitate a war in Asia between a couple major powers and then not participate? That would get our trade balance positive again.
The financial panic of 2008 (brought on by the correction of a housing bubble) destroyed output and left us with a legacy of overcapacity. There will not be significant inflation until that capacity is diminished.
Inflation may be too many dollars chasing too few goods, but the active verb is "chasing." Right now we live in a "chastened" economy. Nobody's chasing anything.
Clearly, the Administration has to get the Federal govt's fiscal picture into a sustainable frame. Current trends are not. But I take heart from Stein's Law: if something cannot continue it will stop. The key is choosing *how* it will stop.
March, then again in Oct.
The FED's technical staff inadvertently camouflages any of the data in this quirky comos that would be required by a ^bond trader^, or even their “trading desk”, to make even a fortuitous guess (of real-gdp & inflation).
Actually monetary flow(s) (MVt), our means-of-payment money, times its rate of turnover, historically, are two of the fundamental constants of nature.
The proxies for real-growth & inflation are fixed in length, their crests and troughs ripple harmoniously, up until the exact month (always), even the exact week (most of the time), and sometimes, historically, the exact day (Black Monday).
It is Dr. Leland James Pritchard’s (Ph.D, Economics, Chicago 1933, MS, Masters, Syracuse), transactions velocity of money. It is not Dr. John Maynard Keynes’ income velocity. “History is full of bad jokes” -- Albert Einstein.
Awesome post! Keep up the superlative work!!!
COMMON CENTS
http://www.commoncts.blogspot.com
ps. Link Exchange??
Note that March & Oct are guesses. The numbers are inconclusive.
There won't be any price relief until next year. I.e, selling pressure will last until the end of Feb, 2010.
You can then go long, for about 1 month (in late FEB), then selling pressure will reassert itself.
Pressure will persist until SEPT. 2010. Then you can make one more trade from the long side. After that selling pressure will last for an indefinite time.
Hike probably Sep 2010.
Star Wars absolutely number three
June 23, 2010 +50bps
From Fed futures spread, earliest seems to be May 2010 onwards
Nien
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