Fed och räntan

Samma mönster gäller TYX, 30 year yields

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

över 90% förväntar sig Att fed sänker räntan med 0,25%

Och 40% förväntar sig en sänkning med 0,50%

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

In 2005, Ben Bernanke, now chairman of the Federal Reserve, did his bit to bolster the cosy American myth that house prices were a one-way bet. According to the New York Times he said strong fundamentals were driving the housing market before adding the oft-repeated refrain: 'We've never had a decline in house prices on a nationwide basis' ... The trouble is, by luck or design, the money men have ended up in a strong position. By giving the average American easy access to financing - so they too could play the leveraged investment game - they have made life tougher for the Fed. If the central bank is too hard-nosed and does not cut rates, it risks collateral damage to homeowners who, sometimes without realising it, were among the headiest speculators of all ... With homeowners poised to discover that high leverage, which boosted their gains during the golden years, has a darker side, Mr Bernanke will not want to pile on the pain. If house price falls accelerate, there is a real risk that homeowners will start rebuilding their savings and cut back on their legendary consumption, which has helped fuel America's strong economic expansion. That concern, along with below-par US economic growth and relatively well-behaved inflation, will give the Fed an excuse to cut interest rates very soon ... Ironically, as housing enters possibly its worst downturn since the second world war, it could be the over-exuberance of homeowners during the boom that ensures a bail-out for Wall Street - by forcing the Fed into the rate cut investors are betting on so heavily."

(The Financial Times - "Homeowners may force Fed into action" - 9/7/07)

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Jag har följt Bernie Schaeffer skrivier i flera år men aldrig sett honom skriva på det sättet han gör nu angående Bernanke och räntan

# 3

Per the piece above, just 2 years ago Bernanke was clearly a believer in the invincibility American housing. Five years ago he was a believer that our economy faced a serious deflation risk. And until only a few weeks ago, inflation was his biggest concern. In other words, he has no more talent for forecasting than does the typical economist, Alan Greenspan included. But Greenspan did not have a tin ear for sensing economic distress and acting to mitigate it. Bernanke has yet to demonstrate the necessary auditory instincts.

Bernie Schaeffer

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Fed chairman Bernanke speaks from Germany tomorrow about "Global Imbalances: Recent Developments and Prospects" at 11:00.

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Jag är ordentligt tveksam till att fed ska sänka räntan. 

Där financial times har fel är att en sänkning skulle påverka huspriser eller foreclosures. Bostadsräntorna kommer endast påverkas marginellt för där är problemet likviditet och riskkompensation. Det område där en sämkning skulle slå igenom är inom Prime AAA dvs dom absolut mest kreditvärdiga. Och där har det ingen effekt på foreclosures eller priser.

Och samma gäller ju för credit crunchen, en räntesänkning gör ingen nytta.

Enda anledningen att sänka räntan är om Fed gjort en 180 graders sväng och nu oroar sig för ekonomin istället för inflationen. Och då håller jag med Schaeffer om dom gör det.

Fast å andra sidan har vi ju Bernankes odödliga uttalande från 2005: "There's No Housing Bubble to Go Bust."

According to The Guardian, a British newspaper, The OECD (the Organisation  for Economic Cooperation and Development) has decided in its half-yearly forecast to tell the U.S. Federal Reserve "to insure against the prospect of recession with an immediate cut in interest rates".

It also "expressed concerns about the knock-on impact on the world economy from the credit crunch triggered by the losses sustained by financial institutions as a result of defaults on home loans to Americans with poor borrowing records and said it could not rule out a recession if an imminent slowdown in the world's biggest economy turned out to be worse than expected.

The paper quoted Jean-Philippe Cotis, the OECD chief economist, as stating: "Downside risks have become more ominous." He added: "Our diagnosis is a slowdown. We cannot rule out a recession."

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Det är många bollar i luften som fed måste diskutera grundligt innan de fattar nån beslut om sänkning, oförändrad och varför inte kanske en höjning ( nej ingen tror på det??

 Akilles häll...!!!

Treasury Gain May Falter; Foreign Holders Flee Dollar

Sept. 10 (Bloomberg) -- Treasury investors basking in the biggest rally in four years have reason to fear for their profits: The largest owners of U.S. government debt are heading for the exit.

Two-year Treasuries returned 1.09 percent in August, the best monthly performance since 2003, according to indexes compiled by Merrill Lynch & Co. At the same time, holdings of U.S. bonds by governments and central banks at the Federal Reserve fell 3.8 percent, the steepest decline since 1992.

The dollar's slump to a 15-year low against six of its most actively traded peers is turning the gains into losses for international bondholders, prompting China, Japan and Taiwan to sell. Overseas investors own more than half of the $4.4 trillion in marketable U.S. government debt outstanding, up from a third in 2001, according to data compiled by the Treasury Department.

mer här

http://www.bloomberg.com/apps/news?pid=20601103&sid=aLv4kVv3l.j8&refer=us

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Inlägget är redigerat av författaren.

Speech to the National Association for Business Economics
San Francisco, California
By Janet L. Yellen, President and CEO, Federal Reserve Bank of
San Francisco
For delivery September 10, 2007, 8:00 AM Pacific, 11:00 AM Eastern

Recent Financial Developments and the U.S. Economic Outlook 1

To sum up the story on the outlook for aggregate demand, I see significant downward pressure based on recent data indicating further weakening in the housing sector and the tightening of financial markets,"

eller

"Financial market turmoil seems likely to intensify the downturn in housing,"

Yellen is not a voter on this year's Federal Open Market Committee

Vet  hur fed kommer att rösta den 18 sep.

I believe it is critical to take a forward-looking approach -- gauging the effects of recent developments on the outlook, and, importantly, the risks to that outlook.

http://www.frbsf.org/news/speeches/2007/0910.html




" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

September 10, 2007

Waiting for the Witch Doctor

Given Friday's substantially weak employment report, the universal and unrelenting topic on Wall Street is whether the Fed will ease monetary policy in its September meeting, and by how much. This is an amazing exercise in superstition. This is not to say that the Fed's actions will be unimportant. It's just that whatever the Fed does, the impact will be almost entirely psychological. I've written about superstition and the Fed before, but given the dominating focus on the Federal Reserve here, it's important to refresh those comments.

http://www.hussmanfunds.com/wmc/wmc070910.htm

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Teton Reflections


Global Central Bank Focus
Paul McCulley | August/September 2007

Thus, the Fed needs to ease and will ease, substantially I firmly believe, not to bail out Wall Street but to make certain that weaker growth on Main Street does not morph into recession, which would carry serious debt-deflation consequences. It's a risk management world: recession may be a low risk (though not as low as only a few months ago), but the consequences would be very severe. It's a fat macroeconomic tail that the Fed must, and will, cut off.

And that's a much bigger, and more important, job than running a roto rooter snake through the financial system's plumbing. Here's saying a prayer that 100 basis points of Fed funds cuts, by the end of 2007, will not be too late for the sky.

http://www.investorsinsight.com/otb_va_print.aspx?EditionID=583



" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Rate outlook drives dollar to fresh low against euro

"The dollar has gone from being a safe-haven currency to a U.S.-centric currency," said Mitul Kotecha, head of currency strategy at Calyon London. "The issues with the jobs numbers and weaker data in general have raised a lot of concerns about the impact of U.S. growth, and that has hit the dollar."

http://www.iht.com/articles/2007/09/10/bloomberg/bxbux.php

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Yellen's tal har ju ett par intressanta delar i sig (inte minst med tanke på hennes roll).

Från den financiella sidan tar hon ju upp både ökande räntenivåer samt större svårigheter att få vissa typer av lån pga ökande risk obenägenhet. Som kommer att ha en negativ påverkan på housing och i sin tur kan komma att påverka consumtionen.

"In the mortgage market, increased aversion to risk has been particularly apparent, with spreads above Treasuries increasing for mortgages of all types.......mortgage rates have risen, including those available to some borrowers with high credit ratings."

In the mortgage market, lenders have tightened credit standards, making nonprime and jumbo mortgages available to fewer borrowers.

"Indeed, in the new environment of higher rates and tighter terms on mortgages, we may see other negative impacts on consumer spending."

Det intressanta här är ju att inget av detta är nytt. Alla dom här tecknen på ökande kreditstandader, högre riskräntor samt att nya sub prime lån mer eller mindre försvunnit (och till del alt A och second liens) fanns ju långt innan kreditoron i augusti. Den här utvecklingen började ju redan i mars och har sen bara ökat.

Det som hände i augusti var ju bara att utvecklingen kom till "marknadens" kännedom genom att ett antal fonder fick problem pga av dom ökande kreditförlusterna vilket resulterade i marknadens normala överreaktion. Men förlusterna i kreditbolagen (och att en del stängde), ökande riskräntor, obefintliga subprimelån etc.etc fanns ju redan innan dess.

Antingen så har Yellen en annan syn än dom röstande medlemmarna i fed och framför här sin syn, eller så säger hon att fed inte haft någon kontroll, analys eller kunskap om vad som skett på mortgagemarknaden och togs lika mycket på sängen som resten av marknaden.

Om fed sänker räntan av dom andledningar som Yellen tar upp så säger det att fed har haft noll koll på vad som hänt och att dom blev lika överraskade av problemen på mortgagemarknaden som alla andra,  vilket är rätt skrämmande. För fundamentalt så har inget förändrats från Juli mötet tills nu. Det är bara det att kännedommen om problemen blivit mer aktuella, plus att vi fick en kort likviditetskris (som fed åtgärdade). 

Många andra av dom ekonomiska indikatorerna har ju varit positiva: "However, recent data on manufacturing output and on orders and shipments for core capital goods have been upbeat, and business investment in equipment and software promises to be a bright spot."

Så fundamentalt har inget skett som skulle motivera en sänkning och normalt sett borde fed gå från "inflationen är största problemet" till "neutral" (och ev "ekonomin är största problemet") ett eller flera möten innan en räntesänkning.

Skulle fed sänka räntan nu så gör dom det antingen för att minska oron på marknaden (vilket är felaktigt) eller så gör dom det av Yellens anledningar vilket visar på att dom inte hade en aning om vad som skedde på mortgagemarknaden.

Och ska man sänka räntan av dom anledningar som Yellen tar upp (inte minst wealth aspekterna) så pratar vi ju inte om 25 eller 50 punkter, då talar vi om 1-2 procent över tid för att få någon effekt.

Det är dock möjligt att Yellen står för en avvikande syn än resten av fed för hon har en besynnerlig passage med i talet:

However, some of these delinquencies arguably resulted from environmental changes, rising market interest rates, as the Fed removed accommodation in the stance of policy, and intensifying weakness in housing markets, which slowed or reversed the long-standing trend of significant house-price appreciation.

In this new environment, borrowers with variable-rate mortgages have started to see their rates reset much higher than they may have expected, and most borrowers have seen their home equity building up much more slowly than expected or even shrinking.

For many of these borrowers, particularly those who bought homes during 2005 and 2006, the environmental changes have been enough to push them to delinquency or default. 

Det man ska lägga märke till här är att feds "removed accommodation" skedde
fram till juni 2006. Dvs hon lägger en del av orsaken till delinquency (och i steg två risk för lägre konsumtion) på att fed höjde räntorna för mycket! Det är en rätt anmärkningsvärd kommentar. 

Och har man den synen så är det klart att man ska sänka räntan.

Inlägget är redigerat av författaren.

Inlägget är redigerat av författaren.

Greenspan Says He Failed to Foresee Subprime Rout

The former Fed chief, who led the central bank for 18 years, said inflation is a bigger concern now than when policy makers cut the target rate for overnight loans between banks in 1998, CBS said.

``We were dealing in an environment back there where inflation was easing,'' Greenspan said, according to the excerpts. ``We could have acted without the fear of stoking inflationary pressures. You can't do that anymore.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=ao0WxIs3254U&refer=home

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

It is pointless to resist

By my estimation, the Fed should cut rates down to the 3.75% area based on current data. Will this happen? Historically, this model is pretty accurate in guessing whether the Fed would hike or cut, but not much accuracy on the degree. Again, I think this has a lot to do with the variability of the data. But it also has to do with how Fed activity today impacts the future. If I think current conditions warrant 3.75%, it may be that the Fed cuts to 4.50% and that alone causes inflation or growth to tick up. So instead of putting a lot of weight in the estimated level, I interpret the 3.75% signal as indicating a strong likely hood of more than one Fed cut.

http://accruedint.blogspot.com/2007/09/it-is-pointless-to-resist.html

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

I fredags såg marknadens förväntningar ut så här:

US RATE EXPECTATIONS

Derived from 3 Month Eurodollar
(Källa: CNBC News)

Enligt sammanställningen så förväntar sig marknaden alltså i nuläget räntesänkningar på sammanlagt nästan 1,00 % det närmaste halvåret i USA. Är det rätt och rimligt ?

Att patienten är sjuk börjar nu accepteras, men diagnosen är fortfarande tveksam, liksom om en räntesänkning löser eller förvärrar problemen på sikt.

Mvh // Philou

"Nyckeln till framgång är inte att ha rätt hela tiden,
utan att förlora så lite som möjligt varje gång man har fel."
(William O´Neil)

SE BILD BILD:-))

THE chart plots the Y/Y change in F52W EPS (blue line) along with the Y/Y change in the Effective Fed Funds Rate (red line). (Note: The +10.5% figure 2 paragraphs up is F52W EPS relative to T52W EPS?the blue line in the chart above relative to the yellow line. The blue line below represents the Y/Y change in the blue line in the chart above.)

Historically there is a very strong correlation between the blue and red lines on this chart. That said, the green highlighted area shows where the Fed remained accommodative for longer than normal. The pink highlighted area shows where the Fed remained restrictive for longer than normal (making up for the over-accommodativeness during the green period).

Given that the blue line on this chart remains above trend, under normal conditions I would expect the Fed to leave rates where they are until such time as the blue line drops down to the +7% area or below. However, a more proactive, preemptive Fed, which the Bernanke Fed appears to be relative to the Greenspan Fed, will likely make good on what it has led the market to expect and cut rates on Tuesday.

That said, with the blue line still above the long-term trend, it would be surprising to see the Fed cut by 50 beeps all at once.

Adam Oliensis
The Agile Trader



" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Bara jag som tror att det inte blir någon sänkning alls? 

#18 Kan nog bli så! Stora frågan oavsett om det blir sänkning (och hur stor) eller ej är förstås ändå hur marknaden kommer agera.

September 17, 2007
The Fed: Magical Fairies and Pixie Dust

While the Fed has purchased a total of $240.7 billion in U.S. government securities since 2000, mostly to create currency, foreign investors have purchased $1,185.8 billion in Treasuries alone. Indeed, foreign purchases have absorbed all of the increase in U.S. Treasury debt over the past year (and then some). It makes a great deal of sense to pay attention to foreign capital flows and the U.S. current account. In contrast, except for the psychological effect on investors, it is a mistake to believe that Federal Reserve operations control the economy.

The Fed is, at best, a square-dance caller - the guy who by mutual consent gets to holler out when to swing your partner and when to do-si-do. The Fed provides coordination, but it is a mistake to think it has power. When the barn is on fire and people no longer find it in their best interests to follow along, you can bet they'll dance to their own tune (as we're starting to see in the Eurocurrency market, where LIBOR has significantly diverged from thee Fed Funds rate being "called out"). The Fed can provide a modest amount of liquidity to the banking system, but it can't provide solvency to the mortgage market. It's dangerous to believe that a reduction in the Fed Funds rate or the Discount Rate will materially change credit conditions here.

Still, we'll all be gathered there under Ben's helicopter on Tuesday, hoping for a sprinkling of magical pixie dust.

http://www.hussmanfunds.com/wmc/wmc070917.htm

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

Too Much Hope
May Be Pinned
On Rate Cut

The bounce-back in the financial markets is probably going to be smaller than it was in 1998," when the Dow Jones industrials surged 20% from its close on Oct. 1 through the end of the year, says Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. "We should expect further problems in the financial markets from the housing troubles."

"In 1998, it was things that were happening halfway around the world. The crisis today is a reflection of a problem that is at the heart of the U.S. economy," Mr. Hatzius says. Today's trouble "is more serious than 1998, by a significant margin."

http://online.wsj.com/article/SB118998118233229036.html?mod=todays_us_page_one

" When your hairdresser starts giving you stock tips, get out quick and wait..." mvh SPX 970

från chart of the day:

With the Fed widely expected to cut rates during their next meeting on September 18th, today's chart provides some long-term perspective in regards to the fed funds rate. As today's chart illustrates, the fed funds rate remains within the confines of a long-term downtrend. Another point of interest is that while investors expect that the target fed funds rate will be cut from 5.25% to 5.0%, the effective fed funds rate is already there. In fact, the effective fed funds rate has been significantly below the current target of 5.25% for the majority of the past month.