<i>"As long as the United States continues to spend, spend, spend and have one of the lowest savings rates in the world ( the U.S. savings rate was NEGATIVE for the ENTIRE year of 2005, the first time since the Great Depression ) the economy will continue to depend on capital creation that comes from the FED."</i> For the minority percentage of U.S. workers who have a positive cashflow monthly, what incentive is there spurring them to save? No taxation of any kind on interest earned from savings? Switch to a flat tax across the board on income and/or the spending side, abolish taxes on all interest earned thru passive savings and investment. What might that do for a boost in savings rate here in the US?
<i>"Once the banking system shows signs of being revitalized and the economy shows first signs of stabilization (NFP, ISM, consumer confidence) the Fed will have to hike aggressively in order to avoid inflation creeping into unit labor costs..."</i> By the time this economy "recovers" or even stabilizes, inflation will have already been an issue for a couple of years. Too late for the rob Peter = pay Paul act.
Not to pull rank on a trading vet like you but I was trading in the Bond pit when Volker was still Chairman. You know as well as I do why 2's are expensive. If Trichet was Fed chairman what do you think 2yr yields would be?
I though about it for a few minutes... I don't know why the 2 Year yield is so low compared to fed funds. My only guess: bond markets are predicting a further fed funds rate reduction in the next 12-18 months. Am I right ?
Pardon the interruption. Guys you got to be kidding. Common. I like this poster but to nominate this for post of the year is akin to nominating Spitzer as Gov of the year. Fraud is fraud. Fraud has been committed at many levels by m,any factions in this unwinding of risk environment. let's take a st3ep back and see who is REALLY to blame. 1) Yen Carry Trade sloths. Went to the well too many times. 2) Rich investor5s seeking unusually high returns. 3) Dirty lenders who lend to people whop they know can't take it. 4) even more dirty brokers who pulled apart mortgage securities, re loaded them with junk and re sold the entire package overseas as tripple A. 5) the bond agencies themselves listed companies ( a mistake) turning a blind eye. 6) A federal reserve that kept rates too low for too long knowing the greed factor that is out there. ... There is no banking collapse that I can see just hedge fund collapsing and refusing to let people's money out and I would argue that here is the cleansing effect of the market working it's magic vs the yearn for a good ole' 30% drop. The fact is all of this chicanery is around the edges and on the cusp if not clearly criminal. So this " seizure " of lending we keep being told about by walls street types is of course a total myth. There is a seizer of bad lending and that's not half bad. I just got a second mortgage and I could play two institutions off each other it was me who screwed up the rate lock but that's another story. I borrowed 80% and only put up 20% and I'm paying 5.9% on the loan for ten years. I got this in the middle of the meltdown. The most important metric is small business lending and the new numbers are very encouraging if they are not seizing up and going under they are accessing money quite freely... so what's the problem? Well the banks aren't to willing to lend money to each other , they don't trust each other and that's how we know there is real fraud out there in bank land. The fed is helping banks lend to banks, holding their hands like children. Ben's moves have been on point to a degree he made one big blunder of not inter-meating cutting in a big way a ways back but as far as I can tell he is succeeding in lowering rates without completely devastating the dollar. So in a political season this all gets tricky. Who is really in favor of propping up the market here? Not the democrats right? Who is pulling the strings- you would think a ferocious Republican minded rally is upon us right now. But that January effect doesn't lie. Let's take a look at Washington Mutual and ask ourselves what is the other probblem out there because if there is not one how can this company not have been bought out already? Punk Ziegel notes that WM is now selling at 0.47x stated book value, and at 0.72x tangible book value and 0.75x estimated 2008 revenues. Firm notes that if 50% of its sub-prime loans were written off it would increase the cost of buying WM to $19 bln. This price would be 5.8% of assets!!!!! Hello even stoned investors have to wake up on that one. They note the thrift's free cash flow is $4.3 bln. Firm says the metrics look compelling and there is simply no other depository institution the U.S. that can provide an acquirer with quite the same market power. They say it is therefore difficult to understand why no bids are being made despite the co's earnings outlook. And I agree it's weird. This is a bad time folks foreigners are snatching up our assets left and right. It's a Japanese take over all over again but this time with Spanish, Irish ind Arabians getting all the prized possessions on the cheap. Weak dollar = weak America. Is this deflation? Then us American's catch inflation at home is there a word for that? Deinflation. (tm).... I think the original premise might be twisted to why are we trying so hard to forestall a recession this time.... and that gets back to the political... And when we take a big big picture view many many years from now- won't we look back at the stock market and say all this churning, all this criminal activity, backdating of options, all this risk taking, was it not started by turning a blind eye to excess dirrivative use. has anything really changed since LTCM? Where is the oversight? As I remember the early eighties about all we had top worry about was Mexico Peso crashing or eclectic foreign markets falling apart, at home we were patiently buying IBM and GM.... then the internet... dirrivitive use soaring.... and with the playing field of investing smoothed out by access to information by the masses, those in a position of power no longer could rely on their inside info and option trading boosts to shine, they had to go quant on us and give more and more control in to the machines and trust their own self rationalization less and less until the morals came out of the whole enterprise. It's sickening in a way. ~ stoney
peilthetraveler post is retarded one.. if fed is doing us a favor then y the hell gas is up to $3.50. fed is taking pistol form the old man hands and it giving to street children and homeless people and u can find those kind of people in dozens... milk is $1 in just six month... everything is going up because of this stupid fed policy...