From Zero Hedge:
Fed and/or ECB intervention is coming: whether it is called LSAP, QEx, nominal GDP targeting, selling treasury puts, or what have you.
A regime that now exists only by central planning intervention, by definition, requires ever more central planning intervention to sustain itself, let alone grow further. Furthermore, the banks not only want QE, they need QE. And since central banks serve other banks, not the people, it is only a matter of time. Don't believe us? Read anything written by Bill Gross in the past year. So what to do ahead of QE3?
Luckily, SocGen has released a complete cheat sheet of not only the dates of the next steps, but what to buy and what to sell ahead of the announcement. In short - one should buy mortgage-backed securities (MBS), in order to "simply buy MBS before the Fed" - something Bill Gross knows too well and has been hoarding MBS relentlessly as a result, as reported here. More importantly - one should buy...
Read full article...
More on QE3 and the Federal Reserve:
Jim Rogers: This is what QE3 will do
The absolute must-read editorial of the week... of the month
Bond king Bill Gross: More "QE" could send interest rates soaring
View the original article here
Showing posts with label Quantitative Easing. Show all posts
Showing posts with label Quantitative Easing. Show all posts
Friday, January 6, 2012
Monday, May 23, 2011
Why "QE3" is guaranteed
From The Daily Capitalist:
... There are two factors which lead me to believe that it is more likely that we will see more quantitative easing (QE).
While Shostak concludes that the Fed is wary of price inflation (that they are causing) and that this will deter another round of money pumping, I think the primary motivation behind QE is unemployment, not price inflation.
The consequence of taking their foot off the money pedal will lead to higher unemployment and I do not think this is politically acceptable to the Fed or to the Administration. I think they will institute a new round of quantitative easing (QE3) because politicians will demand that the Fed "do something."
Which is, of course, the worst thing they could do. It will lead to...
Read full article...
More Cruxallaneous:
This should scare everyone in America
Pimco's El-Erian: "Financial repression" coming to the U.S. soon
Master contrarian Jim Grant: "There will be a panic and it'll seem as if the world's ending..."
View the original article here
... There are two factors which lead me to believe that it is more likely that we will see more quantitative easing (QE).
While Shostak concludes that the Fed is wary of price inflation (that they are causing) and that this will deter another round of money pumping, I think the primary motivation behind QE is unemployment, not price inflation.
The consequence of taking their foot off the money pedal will lead to higher unemployment and I do not think this is politically acceptable to the Fed or to the Administration. I think they will institute a new round of quantitative easing (QE3) because politicians will demand that the Fed "do something."
Which is, of course, the worst thing they could do. It will lead to...
Read full article...
More Cruxallaneous:
This should scare everyone in America
Pimco's El-Erian: "Financial repression" coming to the U.S. soon
Master contrarian Jim Grant: "There will be a panic and it'll seem as if the world's ending..."
View the original article here
Thursday, March 3, 2011
Inflation HORROR: "Helicopter Ben" Bernanke says more "quantitative easing" likely
Federal Reserve Chairman Ben S. Bernanke didn't rule out expanding the central bank's asset purchases aimed at stimulating the economy, saying he doesn't want to see the U.S. relapse into a recession.
Asked at a House Financial Services Committee hearing today what conditions would warrant a third round of so-called quantitative easing, Bernanke said that "what we'd like to see is a sustainable recovery. We don't want to see the economy falling back into a double dip or to a stall-out."
Bernanke's testimony today and yesterday signaled that he will keep the Fed on course to complete $600 billion of Treasury purchases through June under the second round of quantitative easing, a policy criticized by Republican lawmakers as risking an inflation surge. He's avoided saying what the central bank may do after that.
A third round of purchases "has to be a decision" of the Federal Open Market Committee, and "it depends again on our mandate" for stable prices and maximum employment, Bernanke said in response to Texas Representative Jeb Hensarling, the House panel's vice chairman and a critic of QE2.
"We're looking very closely at inflation both in terms of too low and too high," Bernanke said during the second day of semiannual testimony on monetary policy. "I want to be sure that you understand that I am very attentive to inflation and potential risks for inflation. That will certainly be a major consideration as we look to determine how to manage this policy."
Beige Book
Separately today, the Fed said in its regional Beige Book survey that the labor market improved throughout the country early this year, driven by increasing retail sales and "solid growth" in manufacturing.
Overall, the economy "continued to expand at a modest to moderate pace," the central bank said in Washington. Eleven of the Fed's 12 regional banks, including San Francisco and Philadelphia, described their regions as expanding, improving or experiencing moderate growth. Only Chicago reported growth "at a pace not quite as strong" as before.
The Standard & Poor's 500 Index rose 0.4% to 1,311.66 at 2:45 p.m. in New York after climbing 0.6% earlier.
Treasuries declined after a report earlier today showed the pace of employment growth is picking up before the Labor Department issues February jobs data March 4. The yield on the 10-year Treasury note rose to 3.46% from 3.39% yesterday.
'Extended Period'
Responding to a question from Representative Nydia Velazquez, a New York Democrat, Bernanke said the Fed's policy of keeping its benchmark rate near zero for an "extended period" helps provide support to the economy, "which in our judgment, it still needs."
"The economy's recovery is not firmly established, and we think monetary policy needs to be supportive," he said.
The second round of bond buying follows a $1.7 trillion first round of purchases of mortgage-backed debt and Treasuries.
Since August, when Bernanke signaled the Fed might buy securities to stimulate the economy, "downside risks to the recovery have receded, and the risk of deflation has become negligible," he said in testimony this week.
Many of the questions Bernanke fielded dealt with the outlook for the federal budget deficit, giving the Fed chief an opportunity to reiterate his call for Congress to come up with a long-term plan for reining in the national debt. Bernanke's statements resonated especially with House Republican lawmakers. The House passed a bill last month cutting $61 billion from 2011 government spending.
Debt, Deficit
"QE2 has given us some opportunity to act on our debt and deficit, and we have not taken advantage of that," panel Chairman Spencer Bachus, an Alabama Republican, said during today's hearing. "Any criticism directed at the chairman, you need to also sort of point that finger back at yourselves."
Bernanke got caught up in a debate over the extent to which House spending cuts would result in job losses. He told lawmakers the reductions may lead to about 200,000 fewer jobs over the next couple of years. That compares with the prediction of Mark Zandi, chief economist at Moody's Analytics, that the budget reductions would mean 700,000 fewer jobs in the U.S. by the end of 2012.
Last week, the Commerce Department reduced its estimate of fourth-quarter growth to a 2.8% annual pace. Consumer purchases rose at a 4.1% pace, the most since the same three months in 2006, compared with a 4.4% rate originally estimated.
Closely Monitor
Inflation is likely to remain low through 2013, Bernanke, 57, a former Princeton University economist, said in Senate testimony yesterday.
"We will continue to monitor these developments closely and are prepared to respond as necessary to best support the ongoing recovery in a context of price stability," he said.
At the same time, the labor market "has improved only slowly," and it may take "several years" for the unemployment rate to reach a "more normal level," he said. "The housing sector remains exceptionally weak," and "slow wage growth" is keeping labor costs in check, he said.
A report yesterday showed U.S. manufacturing accelerated in February to the fastest pace since May 2004. The Tempe, Arizona- based Institute for Supply Management's factory index increased to 61.4 from 60.8 a month earlier. Readings greater than 50 signal growth.
The Fed's preferred price gauge, which excludes food and fuel, rose 0.8% in January from a year earlier, matching December's year-over-year gain, the lowest in five decades of record-keeping. Fed officials aim for long-run overall inflation of 1.6% to 2%.
View the original article here
Asked at a House Financial Services Committee hearing today what conditions would warrant a third round of so-called quantitative easing, Bernanke said that "what we'd like to see is a sustainable recovery. We don't want to see the economy falling back into a double dip or to a stall-out."
Bernanke's testimony today and yesterday signaled that he will keep the Fed on course to complete $600 billion of Treasury purchases through June under the second round of quantitative easing, a policy criticized by Republican lawmakers as risking an inflation surge. He's avoided saying what the central bank may do after that.
A third round of purchases "has to be a decision" of the Federal Open Market Committee, and "it depends again on our mandate" for stable prices and maximum employment, Bernanke said in response to Texas Representative Jeb Hensarling, the House panel's vice chairman and a critic of QE2.
"We're looking very closely at inflation both in terms of too low and too high," Bernanke said during the second day of semiannual testimony on monetary policy. "I want to be sure that you understand that I am very attentive to inflation and potential risks for inflation. That will certainly be a major consideration as we look to determine how to manage this policy."
Beige Book
Separately today, the Fed said in its regional Beige Book survey that the labor market improved throughout the country early this year, driven by increasing retail sales and "solid growth" in manufacturing.
Overall, the economy "continued to expand at a modest to moderate pace," the central bank said in Washington. Eleven of the Fed's 12 regional banks, including San Francisco and Philadelphia, described their regions as expanding, improving or experiencing moderate growth. Only Chicago reported growth "at a pace not quite as strong" as before.
The Standard & Poor's 500 Index rose 0.4% to 1,311.66 at 2:45 p.m. in New York after climbing 0.6% earlier.
Treasuries declined after a report earlier today showed the pace of employment growth is picking up before the Labor Department issues February jobs data March 4. The yield on the 10-year Treasury note rose to 3.46% from 3.39% yesterday.
'Extended Period'
Responding to a question from Representative Nydia Velazquez, a New York Democrat, Bernanke said the Fed's policy of keeping its benchmark rate near zero for an "extended period" helps provide support to the economy, "which in our judgment, it still needs."
"The economy's recovery is not firmly established, and we think monetary policy needs to be supportive," he said.
The second round of bond buying follows a $1.7 trillion first round of purchases of mortgage-backed debt and Treasuries.
Since August, when Bernanke signaled the Fed might buy securities to stimulate the economy, "downside risks to the recovery have receded, and the risk of deflation has become negligible," he said in testimony this week.
Many of the questions Bernanke fielded dealt with the outlook for the federal budget deficit, giving the Fed chief an opportunity to reiterate his call for Congress to come up with a long-term plan for reining in the national debt. Bernanke's statements resonated especially with House Republican lawmakers. The House passed a bill last month cutting $61 billion from 2011 government spending.
Debt, Deficit
"QE2 has given us some opportunity to act on our debt and deficit, and we have not taken advantage of that," panel Chairman Spencer Bachus, an Alabama Republican, said during today's hearing. "Any criticism directed at the chairman, you need to also sort of point that finger back at yourselves."
Bernanke got caught up in a debate over the extent to which House spending cuts would result in job losses. He told lawmakers the reductions may lead to about 200,000 fewer jobs over the next couple of years. That compares with the prediction of Mark Zandi, chief economist at Moody's Analytics, that the budget reductions would mean 700,000 fewer jobs in the U.S. by the end of 2012.
Last week, the Commerce Department reduced its estimate of fourth-quarter growth to a 2.8% annual pace. Consumer purchases rose at a 4.1% pace, the most since the same three months in 2006, compared with a 4.4% rate originally estimated.
Closely Monitor
Inflation is likely to remain low through 2013, Bernanke, 57, a former Princeton University economist, said in Senate testimony yesterday.
"We will continue to monitor these developments closely and are prepared to respond as necessary to best support the ongoing recovery in a context of price stability," he said.
At the same time, the labor market "has improved only slowly," and it may take "several years" for the unemployment rate to reach a "more normal level," he said. "The housing sector remains exceptionally weak," and "slow wage growth" is keeping labor costs in check, he said.
A report yesterday showed U.S. manufacturing accelerated in February to the fastest pace since May 2004. The Tempe, Arizona- based Institute for Supply Management's factory index increased to 61.4 from 60.8 a month earlier. Readings greater than 50 signal growth.
The Fed's preferred price gauge, which excludes food and fuel, rose 0.8% in January from a year earlier, matching December's year-over-year gain, the lowest in five decades of record-keeping. Fed officials aim for long-run overall inflation of 1.6% to 2%.
View the original article here
Thursday, January 6, 2011
Warren Buffett is making a big bet on higher interest rates
Warren Buffett's Berkshire Hathaway Inc. sold $1.5 billion of mostly fixed-rate debt to retire floating-rate notes at a time when government bond yields are rising and the U.S. is showing signs of economic improvement.
A unit of Buffett's Omaha, Nebraska-based holding company issued $750 million of 4.25%, 10-year notes yesterday priced to yield 95 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. It also sold $375 million of 3-year, 1.5% notes and the same amount of floating-rate debt yielding 33 basis points more than the 3-month London interbank offered rate, the data show.
"The market scrutinizes Buffett's moves very closely and this would indicate he's thinking interest rates in the longer term may go up," Vijay Chander, Hong Kong-based head of credit strategy at Standard Chartered Plc, said in a phone interview. "That's consistent with our house view that the U.S. economy is improving."
The world's most successful investor locked in interest payments on most of the debt as a report showed U.S. manufacturing expanded in December at the fastest pace in seven months, spurring confidence the world's biggest economy is gaining momentum. Former Federal Reserve Governor Frederic Mishkin said yesterday that while the central bank will complete its $600 billion bond-purchase program, a third round of so- called quantitative easing to spur growth is unlikely.
Treasury Yields
The yield on the benchmark 10-year Treasury note was at 3.35% today after falling to as low as 2.33 in October, according to data compiled by Bloomberg. It will advance to 3.53% by year-end, according to a Bloomberg survey of 66 banks and securities companies, with the most recent forecasts given the heaviest weightings.
Berkshire issued the debt through its Berkshire Hathaway Finance Corp. unit and plans to use the proceeds to repay floating-rate notes maturing this year, it said in a regulatory filing yesterday. It has $1.5 billion due on Jan. 11, Bloomberg data show. Buffett didn't immediately respond to a request for comment e-mailed to his assistant, Carrie Kizer, outside normal business hours in the U.S.
Berkshire guarantees all of Berkshire Hathaway Finance's debt, Moody's Investors Service said in a statement yesterday.
The company, whose holdings range from Burlington Northern Santa Fe Corp. to General Re Corp. and Fruit of the Loom Ltd., last sold public debt in December when it issued $500 million of 2.45%, five-year notes at a spread of 85 basis points, or 0.85 percentage point, according to data compiled by Bloomberg.
Floating Versus Fixed
In the floating-rate portion of the new debt Berkshire is paying 10 basis points less than in its last benchmark sale of similar-tenor securities. The company sold $2 billion of one- year securities, $1.1 billion of two-year notes and $1.2 billion of three-year debt in February, the data show. The 2013 notes, which priced at a spread of 43 basis points more than three- month Libor, traded at 100.55 cents on the dollar yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
When Buffett announced the $26 billion acquisition of Burlington Northern Santa Fe in November 2009, he described the railroad company as an "all-in wager" on the U.S. economy.
"Management believes that the credit crisis has abated and as a result, interest rates for investment grade issuers relative to government obligations have declined," Berkshire Hathaway said Nov. 5 in a filing with the Securities and Exchange Commission.
Stock Rally
Yesterday the Standard & Poor's 500 Index rallied to its highest close since Sept. 3, 2008 after the Institute for Supply Management said its manufacturing index climbed to 57 last month from 56.6 in November. Increased spending by American consumers and business investment is helping drive production gains at factories that make up about 11% of the U.S. economy.
Investors demand 166 basis points of extra yield to hold U.S. corporate debt instead of government securities, according to Bank of America Merrill Lynch's U.S. Corporate Master Index.
Goldman Sachs Group Inc., JPMorgan Chase & Co. and Wells Fargo & Co. managed yesterday's bond sale, Berkshire said in its regulatory filing.
View the original article here
A unit of Buffett's Omaha, Nebraska-based holding company issued $750 million of 4.25%, 10-year notes yesterday priced to yield 95 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. It also sold $375 million of 3-year, 1.5% notes and the same amount of floating-rate debt yielding 33 basis points more than the 3-month London interbank offered rate, the data show.
"The market scrutinizes Buffett's moves very closely and this would indicate he's thinking interest rates in the longer term may go up," Vijay Chander, Hong Kong-based head of credit strategy at Standard Chartered Plc, said in a phone interview. "That's consistent with our house view that the U.S. economy is improving."
The world's most successful investor locked in interest payments on most of the debt as a report showed U.S. manufacturing expanded in December at the fastest pace in seven months, spurring confidence the world's biggest economy is gaining momentum. Former Federal Reserve Governor Frederic Mishkin said yesterday that while the central bank will complete its $600 billion bond-purchase program, a third round of so- called quantitative easing to spur growth is unlikely.
Treasury Yields
The yield on the benchmark 10-year Treasury note was at 3.35% today after falling to as low as 2.33 in October, according to data compiled by Bloomberg. It will advance to 3.53% by year-end, according to a Bloomberg survey of 66 banks and securities companies, with the most recent forecasts given the heaviest weightings.
Berkshire issued the debt through its Berkshire Hathaway Finance Corp. unit and plans to use the proceeds to repay floating-rate notes maturing this year, it said in a regulatory filing yesterday. It has $1.5 billion due on Jan. 11, Bloomberg data show. Buffett didn't immediately respond to a request for comment e-mailed to his assistant, Carrie Kizer, outside normal business hours in the U.S.
Berkshire guarantees all of Berkshire Hathaway Finance's debt, Moody's Investors Service said in a statement yesterday.
The company, whose holdings range from Burlington Northern Santa Fe Corp. to General Re Corp. and Fruit of the Loom Ltd., last sold public debt in December when it issued $500 million of 2.45%, five-year notes at a spread of 85 basis points, or 0.85 percentage point, according to data compiled by Bloomberg.
Floating Versus Fixed
In the floating-rate portion of the new debt Berkshire is paying 10 basis points less than in its last benchmark sale of similar-tenor securities. The company sold $2 billion of one- year securities, $1.1 billion of two-year notes and $1.2 billion of three-year debt in February, the data show. The 2013 notes, which priced at a spread of 43 basis points more than three- month Libor, traded at 100.55 cents on the dollar yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
When Buffett announced the $26 billion acquisition of Burlington Northern Santa Fe in November 2009, he described the railroad company as an "all-in wager" on the U.S. economy.
"Management believes that the credit crisis has abated and as a result, interest rates for investment grade issuers relative to government obligations have declined," Berkshire Hathaway said Nov. 5 in a filing with the Securities and Exchange Commission.
Stock Rally
Yesterday the Standard & Poor's 500 Index rallied to its highest close since Sept. 3, 2008 after the Institute for Supply Management said its manufacturing index climbed to 57 last month from 56.6 in November. Increased spending by American consumers and business investment is helping drive production gains at factories that make up about 11% of the U.S. economy.
Investors demand 166 basis points of extra yield to hold U.S. corporate debt instead of government securities, according to Bank of America Merrill Lynch's U.S. Corporate Master Index.
Goldman Sachs Group Inc., JPMorgan Chase & Co. and Wells Fargo & Co. managed yesterday's bond sale, Berkshire said in its regulatory filing.
View the original article here
Tuesday, December 7, 2010
Top currrency hedge fund: Euro crash could resume TOMORROW
From Zero Hedge:
John Taylor appeared earlier on the 2011 Reuters Investment Outlook Summit, and among various interesting things (namely another call for EUR-USD parity, and that he would "love to be owning gold right here"), he said that the U.S. is imminently headed for another recession, a development that will boost the USD and weigh on commodities.
Yet what is more interesting is that in his latest "Chairman's View", Taylor put down a specific date for the end of the recent recovery in European currencies: the date is tomorrow, the day of the Irish Budget decision, and also the day when Europe may see a coordinated effort for a bank run. Taylor also notes that...
Read full article...
More on the euro crisis:
Top currency hedge fund: Nothing can stop the euro crash
Forget Greece and Ireland, this is the only country that matters
This simple chart shows why the euro bailout is guaranteed to fail
View the original article here
John Taylor appeared earlier on the 2011 Reuters Investment Outlook Summit, and among various interesting things (namely another call for EUR-USD parity, and that he would "love to be owning gold right here"), he said that the U.S. is imminently headed for another recession, a development that will boost the USD and weigh on commodities.
Yet what is more interesting is that in his latest "Chairman's View", Taylor put down a specific date for the end of the recent recovery in European currencies: the date is tomorrow, the day of the Irish Budget decision, and also the day when Europe may see a coordinated effort for a bank run. Taylor also notes that...
Read full article...
More on the euro crisis:
Top currency hedge fund: Nothing can stop the euro crash
Forget Greece and Ireland, this is the only country that matters
This simple chart shows why the euro bailout is guaranteed to fail
View the original article here
Sunday, November 28, 2010
Today's entertainment: The Fed's "Quantitative Easing" is finally explained
By The Daily Crux:
Many readers enjoyed the animated "movie" - created by our colleague Porter Stansberry - we passed along a couple of weeks ago... So today we're passing along another homemade video you don't want to miss.
This one is an amusing animation that explains the Federal Reserve's so-called "Quantitative Easing" in a way that even a child could understand.
Today's entertainment: Must-see video of the week
Today's entertainment: U.S. gov't to save $300 billion by cutting wasteful program
Today's entertainment: White House jester beheaded for making fun of the National Debt
View the original article here
Many readers enjoyed the animated "movie" - created by our colleague Porter Stansberry - we passed along a couple of weeks ago... So today we're passing along another homemade video you don't want to miss.
This one is an amusing animation that explains the Federal Reserve's so-called "Quantitative Easing" in a way that even a child could understand.
Today's entertainment: Must-see video of the week
Today's entertainment: U.S. gov't to save $300 billion by cutting wasteful program
Today's entertainment: White House jester beheaded for making fun of the National Debt
View the original article here
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