(Credit Suisse data shows that there is now a 61% chance that the Bank of Japan will hike rates based on rate swaps vs a 54% chance following last week's release of GDP data). Some analysts are suggesting that the BoJ may raise rates by only 12bps to reaffirm their commitment to price stability without affecting consumer demand too dramatically. - Japanese press on the BoJ decision: Nikkei news reports that some Bank of Japan members believe that rates should be raised due to their belief that last summer's fall in personal consumption was temporary (some say the fall in personal consumption was caused by unusually wet weather in the summer).
Surprised to see the media so quiet about the ARMS resetting in 2007, nearly $2 Trillion worth of ARMS resetting this year seems to have no impact on consumer spending, retail sales, and the bull market. I'm simply amazed by this. 2/3 of consumer spending is based on GDP, with house prices dropping, where will the consumer borrow from now that they have no equity left in their house. To think the housing market is going to pick up in the next 2-3 months is foolish thinking, prices still have plenty of room to fall.
I had that conversation (bull market) recently with a 73 yo retiree playing the markets for 2 years now and giddy as hell he is killing it "risk free." He opined 4 more years up from what I hear. I replied where were you in 2000. Then had you put your money in hard assets and treasuries in 2000 you'd be way ahead. Comparatively speaking the feeling that you're wealthier is just that a feeling---you've actually watched at least half of your buying power evaporate. I thought he gonna have a heart attack. I felt bad reassured him he was an astute investor, wished him luck reached, in my pocket and gave him a rainbow-colored unicorn and a lollipop as I left wondering myself what to do next.
US RATE FUTURES-Timing of possible Fed cut inches closer "... chances of a June rate cut rose as high as 24 percent from 14 percent overnight and zero early this week. Chances of a cut in the third quarter traded as high as 88 percent before retreating to 76 percent." "Also on Friday January's core producer prices, stripped of food and energy, rose by 0.2 percent, as expected, pulling the year-on-year rate to 1.8 percent. " ------- More rate hikes...lol... plenty of room to cut with no inflation out there unless ya live in the cave with guns, bottled water and gold bars. Still on my wall from another thread : Treasuries to Climb Most in Five Years, Survey Shows -- consesus points to down year in rates on back of slower economy led by housing.
negative net outflow of treasuries in dec.... nobody is buying u.s. paper because it is exactly that...paper.actually , its not even paper, its electronic.... vapour.... how they gonna cut rates??
What happens to the equation when one keeps the FF rates steady but injects liquidity into the system? $ Devaluation for one, you would surmise. But what if it doesn't happen? Does that explain the private equity bubble? The housing bubble, and foreign assets in both developed and emerging markets at highs?
2/11/07 Bank of Japan Governor Toshihiko Fukui has proposed an interest rate hike at the bank's policy board meeting