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Dear readers, I have accepted a new position which, combined with graduate school, will likely consume most of my time for the foreseeable future. As such, this blog will no longer be updated. I feel very fortunate to have been presented with a wonderful new opportunity. That said, I am also very grateful to everyone for following and reading these past two years. As always, feel free to contact me at firstname.lastname@example.org
Is it fair to say that a story is "late" if the general investing public is still largely in the dark regarding the topic under consideration? I'll leave that for readers to judge once they have taken the time to review the following piece. On December 28, 2011, an article appeared in the Wall Street Journal entitled "The Federal Reserve's Covert Bailout Of Europe." The piece was written by Gerald P. O'Driscoll a former vice president at the Dallas Fed and it represented a rare moment of candor emanating from one of the world's most mainstream sources of financial news. The point of the article was to ...click here to read the full article on SeekingAlpha
Another day, another all time nominal stock market high. Stocks rose by more than 2% across the board during the first full week of trading in March as the Dow closed near 14,400 on the strength of a better than expected February non farm payrolls report. The U.S. economy added 236,000 jobs last month as the unemployment rate hit a four year low of 7.7%. The numbers were quite a bit better than expectations as the establishment survey figure topped even the highest estimates and the household survey printed well below forecasts of 7.9%. What isn't truehowever is the following ...click here to read the full article on SeekingAlpha
If you follow the Financial Times' FTalphaville blog you might have seen the graphic presented below. However, it is worth reiterating the sheer absurdity inherent in JPMorgan's estimates of how well it would perform under the so-called "adverse scenario" posited by the Fed's stress tests which, (surprise, surprise), 17 out of 18 U.S. banks passed. According to ... well, according to itself, JPMorgan would swing to a net loss of just $200 million in the event the stock market fell by 50%, home prices dropped by 20%, GDP contracted by a full 5%, and -- get this -- the VIX rose to 70. Must be all those well placed hedges at CIO...
As Mark Grant so poignantly reminded
us yesterday, the Fed is printing $188 million per hour. That is the
cost of Dow 14,000 -- that is the price we pay to see the mainstream financial media consecrate the new bull market via impromptu CNBC specials. This
hourly rate is of course implied by the $85 billion of assets the Fed
now buys each and every month. Why $85 billion? The official answer is
that given by the FOMC in December ...click here to read the full article on ZeroHedge
Last week, the Dow closed within 100 points of its all-time closing high which seems fitting for a week which saw the Fed Chairman insist in his Congressional testimony that he saw "no sign of a bubble in equities." Bernanke also claimed in his prepared remarks to the Senate banking committee that "in the current economic environment, the benefits of asset purchases are clear." ...click here to read the full article on SeekingAlpha
Submitted by: Colin Lokey
Below, find the full text of Bernanke's latest speech delivered in San Francisco on March 1. Essentially this is the Chairman defending the FOMC's policies again and repeating the idea that although the Committee takes very seriously the possibility that its policies are facilitating excessive risk taking, the benefits of LSAP far outweigh the risks. Also, Bernanke notes that over the long-term, monetary policy has less influence over rates than in the short-term and he essentially uses this logic to dismiss critics of his seemingly contradictory claim (discussed here) that the only way to get rates back up for savers is to keep rates low. There is an informative discussion about the three components that make up long-term rates and a few charts which show the 10-year yield decomposed. I've included one of those charts below. Note also the following passage about the connection between the reach for yield, duration risk, and capital losses:
"Of course, the two risks may very well be mutually reinforcing: Taking on duration risk is one way investors may reach for yield, and the losses resulting from a sharp rise in longer-term rates will be greater if investors have done so."
As many readers are no doubt aware, Fed Chairman Ben Bernanke appeared
before the Senate banking committee on Tuesday to testify and to deliver
his semiannual report on monetary policy (the full text of the prepared
remarks is here and the full video of the testimony is here).
To those who have kept track of Bernanke's relationship with Congress,
it was easy to predict when the fireworks (and hilarity) would ensue: as
soon as Tennessee Senator Bob Corker got the mic. A bit of background
information is necessary here for those who might be unfamiliar with the
history between Corker and Bernanke. Here's a quick recap excerpted from a piece I wrote ...click here to read the full article on SeekingAlpha
Submitted by: Colin Lokey
Here's the full text of the Chairman's semiannual report to Congress on monetary policy. It's full of great one-liners like "The pause in GDP growth does not appear to reflect a pause in the recovery" and "economic activity was restrained by weather-related disruptions"... yes, he seriously said that...