Tag Archives: Federal Reserve

CNBC Has A Truthful Headline

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If you’re really wondering why the stock market is doing so well, I believe the headline from the following story pretty much sums it up.

Fed to Remain Wall Street’s Sugar Daddy: CNBC Survey

Yeah it’s pretty undignified but really, the market keeps going up because the market knows Helicopter Ben will take care of them and support them.

Every time there’s even a hint that the money train is slowing down causes a down day and then immediately the next day the cavalry comes out to reassure the market that Helicopter Ben isn’t going to act like an adult and cut off the purse strings.

Bernanke:Liar Or Fool?

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I saw the story first from Dr Duru’s tweet earlier today about Helicopter Ben testifying before congress.

“Gold is out there doing something different from the rest of the commodity group. I don’t fully understand movements in the gold price, but I do feel that there is a lot of uncertainty and anxiety in financial markets right now; and some people believe that holding gold will be a hedge against the fact that they view many other investments as being risky and hard to predict at this point.”

I don’t know about anyone else but, I find it amazing that the guy in charge of the Federal Reserve actually testified that he’s stumped about gold. Is he serious? Or is he playing a game with congress?

I agree with DrDuru as to his thoughts on Helicopter Ben.

So, when gold is just another commodity, Bernanke is confident he understands gold. But when it diverges to the upside and makes new highs, it becomes a conundrum. Bernanke can certainly point to current inflation numbers and insist that buyers of gold are simply “uncertain and anxious.” His claim that other investments appear “risky and hard to predict” to other people is useless.
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Bernanke cannot speculate much further on other fundamental reasons for gold’s rising popularity: more and more people are looking into the future and realizing that many Western governments can only afford to pay (service?) their tremendous loads of debt by printing money. Maybe not today or tomorrow, but eventually, the world will be awash in even more massive amounts of paper. This is always an available option in a world of near-zero interest rates.

So either Ben Bernanke is truly lying when he says he doesn’t understand the rise in gold and is a moron and shouldn’t be anywhere’s near the levers of power or he’s just lying through his teeth but won’t say anything as that would be a political bombshell. Neither option sounds good to me.

About Those Vaunted Goldman Traders

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While I certainly can understand the talent and dedication and technology that goes in with big banks like Goldman, when I read that there were other banks that had perfect quarters, it really reinforces that this nice run had less to do with talent and more to do with massaging the situation to their advantage.

But Bank of America , Citigroup, Goldman Sachs and JPMorgan Chase & Company produced the equivalent of four perfect games during the first quarter. Each one finished the period without losing money for even one day.

No seriously. I can certainly understand that Goldman and JP Morgan probably have more smarter people in their employ than I will ever even bump into on the T near Harvard. But am I really supposed to believe that both Bank of America and Citigroup also have that many geniuses on their trading desks?

And to find four different banks in the same quarter all made money each and every day and did not have a down say amongst them?

Puhlease, pull the other one, it’s got bells.

“This is not about hitting home runs,” said Jaidev Iyer, who runs his own risk management consulting firm, J-Risk Advisors. “This is just, as we call it, milking the market and your captive client base.”

And that’s about it. They used their own customers orders to make money for themselves at the expense of their customers. It is a zero sum game, after all? So if the big banks came out ahead, someone took the other side of that trade and most likely it was their own clients and customers.

I am so glad the S.E.C. and the Treasury and the Federal Reserve are all watching this and doing nothing. It helps to show that the game is rigged for and by the benefit of the big boys against anyone else, and the government is just along for the ride. Don’t ever forget that yes, they are out to take your money and you should do everything you can to not allow that to happen.

Don’t get me wrong, while I think that any one firm may have the best traders in the world, I find it highly suspicious that four of the largest firms are also the best in the world. To paraphrase, there can be only one, best in the world. Not four.

So Far The Market Likes It

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So far the Street likes what it sees.

Stocks rocketed higher and bond prices fell Monday after investors were reassured by a nearly $1 trillion plan to avoid a European debt crisis.

The Dow Jones industrial average rose about 390 points. The Dow and broader stock indexes rose more than 3 percent. Markets also barreled higher in Europe.

At this point it’s up 414 and change. We’ll see whether this will last thru the day and how the market closes. If the Europeans were trying to goose the market, they’ve certainly done that and more. We’ll see whether it really fixes the underlying problems.

And The Americans Get Involved Saving The Euro

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The Fed has decided it too wants in on saving the Euro.

The U.S. Federal Reserve will restart its emergency currency-swap tool by providing as many dollars as needed to European central banks to keep the continent’s sovereign-debt crisis from spreading.

The swaps with the European Central Bank, Bank of England and Swiss central bank will allow them to provide the “full allotment” of U.S. dollars as needed, the Fed said late yesterday in a statement in Washington.

Not sure if it’ll all help, but it’s obvious that everyone thinks there’s a problem in Europe. Of course they are again not fixing the underlying problems…

How Is The Fed Going To Know A Bubble?

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So the Fed has spoken. They know their low rates aren’t good but hey, don’t worry, they’ll be able to spot any bubbles and do something about it.

Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, for a second straight meeting was the sole member to oppose keeping that pledge. Analysts saw Hoenig as concerned that holding rates too low for too long could feed some new speculative bubble in assets such as stocks or commodities.

Fed members noted the importance of closely monitoring financial markets and institutions to help detect risks at an early stage. They cited, in particular, the need to monitor asset prices and loan levels.

Information collected by Fed staff hasn’t revealed significant threats in the financial markets or widespread high-risk-taking, the minutes concluded. Still, Fed officials said they would be on the watch for any such threats.

Does anyone at the Fed remember Alan Greenspan and his Irrational Exuberance speech? That was in 1996. I vividly remember the Fed stepping in an stopping the Tech Market bubble from happening. Oh wait. That never happened. The head of the Fed even said it was a bubble and they did nothing.

Housing market anyone? Anyone not believe that 2005 – 2008 wasn’t a housing bubble? The Fed controls interest rates and yet they too could not see that bubble happen.

The Fed has missed two of the largest bubbles of all time, which happened right under their noses. But now, this time’s different? Sorry, homey don’t play that game. I remember the tech bubble. They all said this time was different. It wasn’t. And this won’t be either.