Kudos to MMs

nitro · Jun 23, 2009

Quote from Daal:

Then I suppose we are on the same page. Since I'm speculating on fed futures I'm not very concerned about long-term rates and worries about exit strategy, I accept that bernanke will overdo easing, thats why I was amazed when fed futures tumbled, I loaded up there, I should have bought more though
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Well, I have not read the paper you linked me yet.

At what price may I ask did you buy FFFs and what month(s)?

Daal · Jun 23, 2009

Quote from nitro:

Well, I have not read the paper you linked me yet.

At what price may I ask did you buy FFFs and what month(s)?
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Early 2010 contracts after the crash 99.15 for feb IIRC, some others are well. About the only V shaped recovery these green shooters will see is on fed futures chart

nitro · Jun 23, 2009

Quote from Daal:

Early 2010 contracts after the crash 99.15 for feb IIRC, some others are well. About the only V shaped recovery these green shooters will see is on fed futures chart
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Well, that is certainly a good trade as of this moment. Would you add here?

I strongly disagree with the premise that by then that short term rates won't be .50+, but that is what makes a market.

Daal · Jun 23, 2009

Quote from nitro:

Well, that is certainly a good trade as of this moment. Would you add here?

I strongly disagree with the premise that by then that short term rates won't be .50+, but that is what makes a market.
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I'm already quite long going into a fed meeting so I'm holding off adding anything to see what the statement says, they might even go down if the fed adds a condition like "0% for extendend period as a long X" but I'm sure bernanke ain't raising rates before being reapointed and job growth to come back strongly

nitro · Jun 23, 2009

Federal Reserve State of Play - By Steve Beckner - 23 June'09

The Federal Reserve's policymaking Federal Open Market Committee
has convened its two-day, mid-year meeting Tuesday. A chief task of the
FOMC is to construct a fresh economic forecast in preparation for
Chairman Ben Bernanke's mid-year Monetary Policy Report to Congress next
month. A recent Fed survey found signs of improvement in the economy,
but not likely enough for the FOMC to retreat from its unprecedented
efforts to stimulate growth through credit easing.

The Fed has held the federal funds rate near zero since December
and is in the process of buying up to $1.75 trillion in Treasury and
other bonds in an effort to hold down longer term rates, including up to
$300 billion in Treasuries. It will be considering whether to expand or
extend those purchases.

In morning trading before the meeting, the yield on the 10-year
Treasury note was trading at 3.64%. That's down roughly 36 basis points
from its recent peak a couple of weeks ago. Also spreads between
Treasury yields and mortgage rates have narrowed. So the pressure would
seem to be off of the FOMC to increase its purchases of Treasury or
other longer term securities, if that was ever really in the cards. The
issue will no doubt be addressed in Wednesday afternoon's policy
announcement, but the Fed seems likely to leave its asset purchase
program essentially alone, while giving itself flexibility to make
future adjustments.

Not to be forgotten is that the Fed's Term Asset-Backed Securities
Loan Facility (TALF), which is already financing purchases of an array
of asset backed securities (ABS) backed by consumer and small business
loans, is gearing up to finance sizable purchases of commercial mortgage
backed securities (CMBS).

The FOMC is also expected to have an extensive discussion of "exit
strategies" -- how the Fed will eventually withdraw all the money it has
pumped into the system to contain inflation. An intriguing possibility
which some officials have suggested is that, by using its power to pay
interest on reserves to put a floor under the federal funds rate, the
Fed could at some point decide to continue running an expansive
quantitative policy while starting to nudge up the funds rate.

However, there is no realistic likelihood that the Fed will begin
implementing any type of exit strategy anytime soon. Even more hawkish
Fed policymakers have indicated that they think monetary policy needs to
remain accommodative until probably next year some time. And so the FOMC
is likely to reiterate its intention, as in the April 29 statement, to
"employ all available tools to promote economic recovery," to keep
the funds rate target in the 0% to 0.25% range and to keep that rate
"exceptionally low ... for an extended period."
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nitro · Jun 24, 2009

"FV" ~880

News: MBA purchase applications, Durable Goods Orders, New Home Sales, Petroleum inventories, FOMC announcement

IRs: 5-Year note auction

Oil futures seem decoupled from equities. In the very recent past, oil has been a better predictor of overall short term market action than the market itself. Imo once again gold gets it wrong and oil does not. See below.

Interestingly, Gold futures not reacting to the dollar news which I expand on below. In fact, it goes in the face of it.

Imo the news of the day is that there appears to be intervention in the Swiss Frank. This sent the dollar higher against most currencies, at least initially. So why aren't oil and gold both down? The timing of this can't be an accident. Can the EU be trying to send a message to the FED that it's policies and indirect results of sending the dollar plunging is unacceptable to the EU?

Imo, the FED says very little different in the FOMC decision this afternoon. It may introduce some new language about an exit strategy, but if anything, they will reinforce that downside risks to markets are far greater than upside inflation, in the near term.

trader3cnd · Jun 24, 2009

Don't assume that the FED knows what to do or what will happen in the future. Stagflation is the most probable scenario. Too much money around and no investments to absorb it. Sooner or later people will start spending it. Pray this day will never come.

nitro · Jun 24, 2009

Quote from trader3cnd:

Don't assume that the FED knows what to do or what will happen in the future. Stagflation is the most probable scenario. Too much money around and no investments to absorb it. Sooner or later people will start spending it. Pray this day will never come.
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The Swiss Franc continues to get clobbered. The dollar is showing signs that is wants higher.

I don't know, this could turn out to be a massively volatile last two hours after the FOMC announcement, volatile in the sense of wild back and forth swings. There are some really strange cross currents here.

trefoil · Jun 24, 2009

I'm short against gold going in. Feels like they're pushing it higher to get out at a decent price after the falls of the past week or two, then going to clobber it right after the announcement. You're right that the action is odd given the very blunt message that intervention to move the dollar higher is in the air. Bloomberg this morning said we were at a "tense" moment in the currency markets.
We shall see...

nitro · Jun 24, 2009

I have been thinking about the theoretical aspects of wage inflation, and I think I have a better take on why I think the FED will get it wrong.

AFAIK, the FED is only looking at domestic wage pressures. So, if through low US IRs, we as a side effect create two million jobs in Africa, and one million jobs in India, and three million jobs in China, Brazil Russia etc, we don't count that. You might say, who cares, since those people get paid in dollars. Perhaps. My point is that American corporations set up in BRIC etc to do business will reap these rewards in higher profits (because those countries have more $ to spend both discretionary and not), and it will not show up in our statistics.

I guess what I am saying is that we may very well see a US jobless recovery for business, but not for the typical US citizen.

It is funny, but imo the best statistic there is to measure global consumption/expansion is, you will never guess: The global temperature of the oceans and it's history. Think about it.