Comments on: Entering the Endgame for Monetary Policy

By: David Merkel

David Merkel — Wed, 22 Oct 2008 16:35:16 +0000

Dear Mom,
My post http://alephblog.com/2008/10/18/picking-some-stocks-to-survive-the-market/ was my attempt to give an answer. Not a fast answer, but I had so many irons in the fire that I had a hard time focusing. With the crises in the lending markets, time and focus have been scarce – I’ll have a post up on my new purchases soon.

By: Janet M Merkel

Janet M Merkel — Tue, 30 Sep 2008 07:58:59 +0000

If you are considering re-aligning your portfolio,
what then, would you suggest your mother do or others who are retired and depend upon either their stock portfolio or 401 K plans for part of their income.

And how would you realign your portfolio? What kind of massive changes would you make?

Mom

By: wolfers

wolfers — Mon, 29 Sep 2008 14:23:28 +0000

David:

As a former manager of a credit hedge fund that didn’t make it, I would advise you to heed your “inner voice” telling you to alter your portfolio. I didn’t heed mine, as the thought at the time seemed completely contrary to everything I had learned to date in my 15 year career. But alas, different markets call for different game plans, and this is definitely a different market.

By: Brian

Brian — Sat, 27 Sep 2008 12:06:15 +0000

I agree with Tim. I’d like more clarification about your ideas for realignment. I’m thinking of doing the same but everywhere I look globally I see overleverage and deflation. With T-bill yields being crushed doesn’t that mean people are fleeing to safety. I don’t know what to make of the situation at this point.

By: Tim

Tim — Fri, 26 Sep 2008 22:12:36 +0000

So, David, what do you mean by “massive re-alignment”? Are you thinking of expatriating your money? Are you thinking of investing it in securities denominated in other currencies? If so, what? I have these thoughts as well, but the thing I keep coming back to is, if not the USA, where? People keep bringing up the Great Depression, but the thing nobody mentions about the GD is that practically every country in the world defaulted *except* the USA!

By: matt

matt — Fri, 26 Sep 2008 21:13:06 +0000

I have watched in terror this year as the Fed has junked the balance sheet with loose RP/loan collateral. As I understand it, the Fed’s assets are effectively the collateral for these green notes that I hold in my wallet. Even though they are worth more now than they were in July, I perceive them to be worth less: there are more of them and they are “secured” by worse assets.

I see the NYFED has made a few… err, I’m not even sure what to call it–the agency equivalent of a bill pass–in the permanent open market operations. As I understand it, this is the 2008 equivalent of printing money. Wait until those crazy gold bugs notice.

So, they sold Treasuries earlier this year, and now are replacing them with Agencies (which are the same thing, as far as I’m concerned). Weird.

By: Robert Groden

Robert Groden — Fri, 26 Sep 2008 21:11:31 +0000

you are misinterpreting the size of increase in high powered money. as part of this operation, the treasury sold $200 billion of short term bills and deposited the proceeds with the fed. this portion is just a transfer not a fresh injection. the treasury drained the $200 bil and now the fed has it. i agree with you that even taking that out, it is still a big increase in the fed’s balance sheet but not as big as what you are suggesting.