Category: Fed Policy

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Facebook & WhatsApp

 

  • Rags-To-Riches Tale Of How Jan Koum Built WhatsApp Into Facebook’s New $19B Baby http://t.co/bJs6kQrlMx Background on WhatsApp founders $$ Feb 22, 2014
  • WhatsApp Shows How Phone Carriers Lost Out on $33B http://t.co/3gOutvRDzK Perhaps consortium of telephone companies should have bot them $$ Feb 22, 2014
  • Whatsapp and $19B http://t.co/TWI44XfTOC Explains why $FB decided 2 get into mobile, & how WhatsApp may benefit their mobile push $$ $GOOG Feb 22, 2014
  • Zuckerberg Bonded With WhatsApp CEO Over Coffee and Dinners http://t.co/EZAR7rFAsG Promise made to respect the unique culture of WhatsApp $$ Feb 22, 2014
  • Facebook?s horrible, stroke-of-genius IPO @felixsalmon http://t.co/9HrdWMd0Fo Makes point that overvalued $FB stock can b currency 4deals $$ Feb 22, 2014
  • How Much Sequoia Made On WhatsApp http://t.co/SzzdcObDXJ The funny part is how Zuckerberg pranked Sequoia 10 yrs ago, & regretted it $$ $FB Feb 22, 2014
  • Facebook Investors Shrug Off Concerns About $19B Deal http://t.co/AwON4bV9tU also http://t.co/TItg9AIJfI & http://t.co/vgKAI4w1Ye $$ $FB Feb 21, 2014

 

US Politics & Policy

 

  • Companies bracing for 1-2 retirement punch http://t.co/bVBBRV1ytu Unlikely that Obama’s proposals would b enacted; hurts powerful people $$ Feb 22, 2014
  • White House to Propose New Limits on Overseas Corporate Tax Avoidance http://t.co/Me6p3WFG9U This will be difficult 2 enforce; complexity $$ Feb 22, 2014
  • Gold Rush Ghost Town Bodes Ill for California Power Flow http://t.co/fpor2Toct2 Interesting article on how the drought is affecting CA $$ Feb 22, 2014
  • Peggy Noonan: Whose Side Are We On? http://t.co/5l2dofDbpg We can have a “Cold War” vs those who hate democracy & human rights $$ $SPY $TLT Feb 22, 2014
  • NSA Official Warned About Threat 17 Years Before Snowden http://t.co/8utCDM2eug Warned computer system administrators had too much power $$ Feb 22, 2014
  • Fannie Mae Payments to US Will Exceed Bailout http://t.co/aT1Z8jlrW0 2 bad, b/c government owns $FNMA & will keep it as a piggy bank $$ Feb 22, 2014
  • An anti-tech backlash in San Francisco http://t.co/NYsVvWZUu7 Note to politicians: don’t bite the hand that feeds u 2 support malcontents $$ Feb 21, 2014
  • Good: Bumper profits threaten US ethanol support http://t.co/UVjiGT68Wr Time to free *all* energy sources from subsidies adj 4 pollution $$ Feb 21, 2014
  • Bottlenecks along the Industrial Revolution http://t.co/pzxGIC8GjL There is $$ 2b made in expanding energy infrastructure in America $$ Feb 21, 2014
  • CBO Is Right: Minimum Wage Hike Can Kill Jobs http://t.co/hKL64NzpJw Suggests raising the Earned Income Tax Credit, which would add jobs $$ Feb 21, 2014
  • Obama Keystone Pipeline Review Roiled by Nebraska Judge http://t.co/PiF9q1F4nE Governor & Legislature bypassed Public Services Commission $$ Feb 21, 2014
  • Obamacare’s Latest Surprise for Taxpayers? http://t.co/zirjEk1cP0 @Asymmetricinfo says Obama Admin may extend risk corridors past 3 years $$ Feb 19, 2014
  • Detroiters Without Cars Seek Jobs in Vain as City Shrinks http://t.co/x76RJvkgza Cities r organic & they can die, like Detroit. Give up $$ Feb 19, 2014
  • UAW’s Devastating Defeat at a Tennessee Volkswagen Plant: 4 Blunt Points http://t.co/ISoUdA2WBZ Give workers credit 4 rejecting bad deal $$ Feb 17, 2014

 

Market Impact

 

  • Frontier-Market Funds Pour in Boosted by Fixed Currencies http://t.co/YwDTW6bccU 2 much $$ flowing into immature mkts via ETFs; avoid $$ Feb 22, 2014
  • Learning From a Literary Legend: The Importance of History http://t.co/7QqQ9dkiZd Argues that 10-year stock returns will b below average $$ Feb 21, 2014
  • Income As The Outcome: Reframing the 401(k) Plan http://t.co/bEWsAPSuiK Int rates fall, 401(k) bond values rise, but future income falls $$ Feb 21, 2014
  • Wall Street Bond Dealers Renounce Treasuries That Lure Pimco http://t.co/uPxeIqN5uE This is a mess, &no one knows, but I remain long $TLT $$ Feb 19, 2014
  • FX Traders Facing Extinction as Computers Replace Humans http://t.co/CDqoLCjqsn True if all u r doing is matching trades not if profiting $$ Feb 19, 2014
  • Information asymmetry, bad incentives and Taibbi http://t.co/K9M8pI1vQR @izakaminska does an excellent takedown of Tabibi’s recent piece $$ Feb 15, 2014

 

Rest of the World

 

  • Japan Record Trade Gap Shows Risk of Abenomics Losing Steam http://t.co/Lfqgvay6KL High debts, trade deficit due 2 low yen, disaster $$ $FXY Feb 22, 2014
  • For Chinese, It’s Going to Cost More to Become Canadian http://t.co/OlBMh7ZpFv Pity those that want to escape China 2 Canada w/their loot $$ Feb 22, 2014
  • Nigeria’s Delta Oil Thieves Scrape Out a Precarious Living http://t.co/VxknSU5t3Q Long piece shows a vignette of the troubles in Nigeria $$ Feb 21, 2014
  • Foreign Investors Scoop Up New Treasuries Even as Fed Cuts Buying http://t.co/zgPmG1NIQu Weaken your currency. Help exporters. Buy US Tsys $$ Feb 21, 2014
  • India Hedging at Two-Year High as Polls Shroud Outlook http://t.co/mBfYH1HNky Fears of a minority govt have hedgers buying puts on Nifty $$ Feb 21, 2014
  • Samsung Investors May Discover World of Possibilities http://t.co/8DsBUYHKDu Pity about Sarbanes-Oxley. Samsung shares used 2 trade in US $$ Feb 21, 2014
  • Emerging Stocks Rise to Three-Week High on Record China Lending http://t.co/bukIP0bFPA W/China overlending already a problem, not helpful $$ Feb 21, 2014
  • Invading Switzerland? Try Before 8 or After 5 http://t.co/jgBHUG6m84 The Swiss Air Force likes to have the evenings off. War can wait $$ Feb 21, 2014
  • UN warns North Korea’s Kim Jong-un w/a strongly worded letter http://t.co/AlwVjivIO4 Few things crueler than making a Mom kill own child $$ Feb 21, 2014
  • Bank of Japan Surprises Markets http://t.co/BbVlwTMHVR Expands Loan Programs, Keeps Main Policy Unchanged, builds bigger debt bubble $$ $FXY Feb 21, 2014
  • Japan?s GPIF Should Own $600B of Stocks, Ito Says http://t.co/YCfIvErZfb Angling 4a nomination 2 the coveted “Putting in the top” award $$ Feb 21, 2014
  • As World’s Kids Get Fatter, Doctors Turn to the Knife http://t.co/VdTVjqXu0j Bariatric surgery on a 3-yo, as parents can’t say no re food $$ Feb 21, 2014
  • China Fund Shifts Focus Away From Energy to US, European Recovery Plays http://t.co/h10gQrGrEs CIC shifts out of power & into real estate $$ Feb 21, 2014
  • Japan Growth Figures Disappoint http://t.co/FsFtS5qaA5 GDP Increase Comes in Well Below Expectations, perhaps Abe will think twice $$ Feb 21, 2014
  • China Overtakes India as Gold Consumer http://t.co/XV9WA5p8sT When your property can b confiscated by gov’t, helpful 2 have gold 2 carry $$ Feb 21, 2014
  • US to Face G-20 Pressure Over Tapering http://t.co/dLYU5cbqKd If the emerging market nations are properly financed, US $$ policy won’t harm Feb 21, 2014
  • At Asia Air Show, Plenty of Competition for Sales of Drones http://t.co/UCxNe9jQP9 Many uses 4 drones to monitor areas that r hard 2get2 $$ Feb 21, 2014
  • Russians Return to Cyprus, a Favorite Tax Haven http://t.co/qxW0YkMqlK But they won’t put $$ is Cypriot banks after losing much of it b4 Feb 21, 2014
  • Billionaire Niel Trains Geeks to Fix France?s Talent Mismatch http://t.co/3jSO5yXExl Sets up a school in France that teaches programming $$ Feb 21, 2014
  • Elliott vs Argentina: 3 possible resolutions @felixsalmon http://t.co/LuxIKbslsj Sovereign immunity, pari passu & bondholders? ransom $$ Feb 20, 2014
  • Europe Mending as Markets Signal Even Portuguese Get Work http://t.co/OwqyCMKeGh Less clear than it seems, but Europe is getting better $$ Feb 20, 2014
  • Sochi Olympics: Vic Wild, American-Born Snowboarder Competing For Russia, Wins Gold http://t.co/uKlhwCdHP3 Far better he got a good wife $$ Feb 20, 2014
  • What the Heck Is Going on in Venezuela? (Could the Maduro Regime Fall?) http://t.co/JknNNCQpm6 Yes, it could fall, but what will replace? $$ Feb 19, 2014
  • China Digs Itself Deeper Into Dollar Trap http://t.co/VXRPJEt5o2 Buying Dollar assets supports the cronies of the party that export $$ $FXI Feb 19, 2014
  • Asia Has Crisis to Thank for Gains in Emerging Rout http://t.co/JMyYasAild Emerging Asia, minus China, in better shape than 1997-8 $$ $FXI Feb 19, 2014
  • Swiss Fault Lines Exposed as Villagers See Risk to Postcard Life http://t.co/55NLuUb7er Urban vs rural & the “last settler” syndrome $$ $FXF Feb 17, 2014
  • Salmond Says Forcing Scotland to Drop Pound to Hurt UK http://t.co/bQEK4xwTfY Seriously doubt UK would giveup the seigniorage if Scots go $$ Feb 17, 2014
  • A Rebuke to Japanese Nationalism http://t.co/iZfr1gfeYM Japan needs 2 give up any sense that what they did in WWII was honorable $$ Feb 17, 2014
  • Indonesia Says Australian Defense of Spying Is ?Mind Boggling? http://t.co/ykT06aSaxe My, but Snowden opened many cans of worms w/leaks $$ Feb 17, 2014
  • Saudis Agree to Provide Syrian Rebels With Mobile Antiaircraft Missiles http://t.co/vRawuKKAgj Proxy war between Wahabis & Shia continues $$ Feb 15, 2014

 

Financials & Personal Finance

 

  • Wall Street Landlords Buy Bad Loans for Cheaper Homes http://t.co/hrf9Ph0RNq Color me skeptical; when investors own homes, mkt overvalued $$ Feb 22, 2014
  • Energy Holdings Nears Bankruptcy After Creditor Talks Falter http://t.co/MXMolWYXSg They overpaid & the debt was huge, even Buffett lost $$ Feb 22, 2014
  • Tender Offer for Insurer Divides a Boardroom http://t.co/uaNnWRYPfq $AFG ‘s offer for $NATL is more than generous, just tender yr shares $$ Feb 22, 2014
  • Putting Your 401(k) on Autopilot http://t.co/Mby8Yf9iQe Would b better if we made plans where employees could buy defined benefit units $$ Feb 22, 2014
  • The growing case against ETFs http://t.co/dV8fE2563o Makes same point that Jack Bogle & I make, ETFs get traded badly by most investors $$ Feb 22, 2014
  • Americans Ramp Up Borrowing http://t.co/qApFJ0KESP US Household Debt Posts Largest Quarterly Increase Since Before Recession $$ #seenthisb4 Feb 21, 2014
  • Has Small-Business Lending Really Improved? http://t.co/NujuTdfGtk Qty available may b high, but yields r steep @ nontraditional lenders $$ Feb 21, 2014
  • The Current Opportunity Set http://t.co/k1i9NS5nsD Valuation-sensitive mgrs see fewer & fewer places 2 put $$ 2 work, so cash balances grow Feb 21, 2014
  • These Wells Fargo robbers were also tellers http://t.co/ERo7JVe2X1 Comments, some think if banks r dishonest they should b stolen from $$ Feb 21, 2014
  • I, Claudius, caller of bank bonds http://t.co/tlXoiypnQV Memo 2 bond investors: if you buy an odd bond, b sure 2 read the prospectus $$ $TLT Feb 15, 2014
  • When One Spouse Saves and the Other Spends http://t.co/vtJfjX0W8P I do not get how this person can be a financial advice columnist $$ $TLT Feb 17, 2014
  • Debt-Market Chill May Leave Banks Out in the Cold–Heard on the Street http://t.co/MdpS2KOwSv No January bounceback 2 make up 4 December $$ Feb 15, 2014

Companies & Industries

 

  • 10-Gbit Google Fiber is already real, just not from $GOOG http://t.co/6d0nEU3ViN $VZ has tested it & others 2, coming 2 biz, not home $$ Feb 22, 2014
  • Charter Seen Eyeing Cox After Time Warner Loss http://t.co/S2YpktEr5x Cox family is pretty cagey; $CHTR would have 2 pay through the nose $$ Feb 21, 2014
  • ‘Candy Crush Saga’ Maker Files for an IPO http://t.co/TIUYMDKnIE Put King Digital in the “too hard” pile, hard to predict future success $$ Feb 21, 2014
  • Google to Push Its Fiber Rollout on Comcast’s Turf http://t.co/qStVon4gvq $GOOG experiments, $CMCSA will have hard time competing w/fiber $$ Feb 21, 2014
  • My Goldman Sachs Post-Traumatic Stress Disorder (And Why I’m Grateful) http://t.co/1cJJpQzreu Toughened her up, made her more cynical $$ Feb 21, 2014
  • Chevron’s Free Pizza Offer Only Feeds Public’s Distrust http://t.co/xXsFzIgqT4 It was a cheesy way 2 compensate people 4 their troubles $$ Feb 21, 2014
  • The Coal Plant an Illinois Town Couldn’t Give Away http://t.co/7tMYEXqV8u $AEE pays $DYN to take over a coal plant. Now $DYN wants 2leave $$ Feb 21, 2014
  • Rarest of Rare Iridium Gains as Growth Spurs Demand http://t.co/2X7P02FFBb Cheaper than gold, Iridium is used in industrial applications $$ Feb 21, 2014
  • Buffett?s Coca-Cola Complacency Warning Foretells Troubled Year http://t.co/MaoyseiN8O Listen to Buffett, his intuition is sharp $$ Feb 20, 2014
  • Steve Perlman’s Amazing Wireless Machine Is Finally Here http://t.co/BGpdOactlf If it works, it is a huge increase 4 mobile bandwidth $$ $T Feb 19, 2014
  • Actavis Agrees to Buy Forest Labs for $25 Billion http://t.co/bv6o4VtRM8 Kudos 2 @Carl_C_Icahn Quite a string of victories $FRX $ACT $IEP $$ Feb 18, 2014

 

Fed Notes

  • Fed Puts Rate Increase on the Radar http://t.co/IdvNVpEmDl Move Before 2015 Unlikely, but Minutes Suggest Some Inflation Hawks R Circling $$ Feb 21, 2014
  • The Key Passages in the Federal Reserve’s Minutes http://t.co/xUpUwu9IZZ Hawks start discussion on when the Fed Funds rate should rise $$ Feb 21, 2014
  • Yellen Leads Fed Damned Every Way by Emerging Market Angst http://t.co/TApq07VklJ Can’t win b/c developed mkt $$ policy swamps EM policies Feb 21, 2014

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US Economics

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  • Worsening US Divorce Rate Points to Improving Economy http://t.co/f5He5DrfuY “We’re finally doing well, honey. Now we can afford2divorce” $$ Feb 21, 2014
  • Citi’s Economic Surprise Index Hits Zero http://t.co/Z69Vy85Hfi As such, the economy is slowing & bond yields r falling. Who knew? $$ $TLT Feb 21, 2014

 

Other

 

  • ‘Downton Abbey’ Is Downright Un-American http://t.co/zGCbFHWzfY If a servant wrote book about how nice her employer was it wouldn’t sell $$ Feb 21, 2014
  • Go Ahead, Let Your Kids Fail http://t.co/kHSID4NgpT Fail & bounce back -> Kids gain skills & grit @asymmetricinfo is off on her book tour $$ Feb 21, 2014
  • I Took the GMAT With No Preparation. Here’s What Happened http://t.co/hXwdxNJiub Journalist gets score good enough 2 go 2 biz school $$ Feb 20, 2014
  • Friedman and Hanke on Bitcoin http://t.co/T4bK693dJ8 But what happens when 1 party gets cheated in a Bitcoin transaction? Caveat emptor? $$ Feb 20, 2014
  • The Official Forecast of the US Government Never Saw This Winter Coming http://t.co/w3RS18QJJd We don’t understand climate well $$ $TLT $SPY Feb 19, 2014

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Wrong

  • Wrong: In Buffett We Trust as Berkshire Annual Report Lacks Disclosure http://t.co/JP3U63bhnj There is more than adequate info in the 10K $$ Feb 21, 2014
  • Wrong: Cut Off Harvard to Save America http://t.co/ro9cIOe2ok When u mess w/what is a nonprofit & not, u can’t tell what will b the result $$ Feb 21, 2014
  • Wrong: Is China at Risk of a Debt Crisis? Not Really,Bank Says http://t.co/erURFnC3g1 China facing domestic banking crisis, like US 2008 $$ Feb 19, 2014

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Comments, Replies and Retweets

  • “From what I glean, Zuckerberg romanced them & told them $FB wouldn’t touch their baby. We’ll see” ? David_Merkel http://t.co/X25hjO1Fxo $$ Feb 20, 2014
  • “Well said. It is hard for China to give up forced investment and export promotion. It’s economic heroin” Merkel http://t.co/0eH1kgg0lo $$ Feb 19, 2014
  • Commented on StockTwits: This: http://t.co/D0mIcnLtIP and if I knew Spanish, could have seen it earlier:… http://t.co/lPajNQAc4w Feb 18, 2014

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Seigniorage to the People

Seigniorage to the People

Posted on by David Merkel

Who wants to make the Fed a hero?? And by the agency of the IRS?

This would require a change in the law, because the Fed must remit its profits in excess of what it pays its stockholders to the US Treasury.? What if they remitted the profits to the taxpayers, in proportion to their taxes paid?

Optically, this would look good for the Fed, as their activities would seemingly benefit average Americans.? Practically, there would be little difference, because taxes or borrowing would have to make up the loss to the US Treasury.

All for now, but maybe the Fed should consider what looks good, even if it doesn’t change much.

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Market Impact

 

  • Companies Squeeze 401K Plans From Facebook to JPMorgan http://t.co/2glTizHOjm This should not surprise, many companies shrink labor costs $$ Feb 15, 2014
  • Wells Fargo edges back into subprime as US mortgage market thaws http://t.co/s8AJCKuzOH Isn’t a problem now, problem comes w/imitators $$ Feb 15, 2014
  • Homebuyers Get Break as Loan Rates Defy Fed Tapering http://t.co/i7PdmGThdz Housing & general economy weakened, so mortgage rates fell $$ Feb 13, 2014
  • Pension politics http://t.co/3NaaI61AxM @felixsalmon points out how defined benefit plans r in general better 4 workers. Mind the PBGC $$ Feb 13, 2014
  • Colleges Raise Record $33.8B Exceeding US Peak in 2009 http://t.co/PRjlMrKM9i Donations always follow creation of unrealized cap gains $$ Feb 12, 2014
  • Some Lines Say Maybe the Stock Market Will Go Down http://t.co/FdkJdRT9qe @matt_levine correctly criticizes the 1928-9 $SPY graph overlay $$ Feb 13, 2014
  • 1929 Stock Market Crash Chart Is Garbage http://t.co/PyPIulerCH Unequal left & right scales make the relationship look tighter than it is $$ Feb 12, 2014
  • ?When to Ignore the Investment Experts http://t.co/K2vyHgb1gv ?When all the experts &forecasts agree ? something else is going 2 happen.? $$ Feb 11, 2014
  • Comparing Economic Recoveries http://t.co/5za6QtEFKD In 1984-2006, growth was borrowed from future by increasing debt levels-> #payback $$ Feb 11, 2014
  • Aluminum Lines Still Trouble the London Metal Exchange http://t.co/f5OyWC5EHC Aluminum inventories will b a prob, til short intrates rise $$ Feb 11, 2014
  • Top Anecdotal Signs of a Market Bubble http://t.co/MavPhxB6vZ Good piece, like one of mine: http://t.co/bON7nJJFfk Watch the credit cycle $$ Feb 11, 2014
  • Ten Stocks to Own During a Market Correction http://t.co/RzBdaNf1ff Good list. I own a few of them. $$ Feb 11, 2014
  • Does trend-chasing explain financial markets? http://t.co/3Mkg4R99dx Partly. Difference between investment IRR and total return is big $$ Feb 10, 2014
  • ?Security. Safety. Stability.? http://t.co/VfKVcGgMRJ from @reformedbroker Gold is useful at certain points, but only when it is hated $$ Feb 10, 2014
  • Flows Don?t Follow Value, They Follow Performance http://t.co/9oIJ4M7HMo @reformedbroker wrote this little gem. Learn & internalize it $$ Feb 10, 2014
  • Long Term Charts 2: Western Markets Since The Middle Ages http://t.co/lsBfIot8pi Interesting charts from very messy data at Zero Hedge $$ Feb 10, 2014
  • Most Expensive Place to Find Out Who You Are http://t.co/szQfeKFZxT @jasonzweigwsj : Your reaction 2 minor crisis shows yr risk tolerance $$ Feb 10, 2014

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Companies & Industries

 

  • AIG Takes $832 Million Charge on Death Bets as Hedge Funds Gain http://t.co/JmI7hBy9MH Life settlements should b illegal $$ $MET $AIG $PRU Feb 14, 2014
  • To Stop the Coffee Apocalypse, Starbucks Buys a Farm http://t.co/CPkyVAUnsR $SBUX helps create a variety of rust resistant Arabica trees $$ Feb 13, 2014
  • Former BlackRock Manager Finds Billions on Rice Energy http://t.co/aBPTo3u4Ky Few investment mgrs have operating talent; Daniel Rice does $$ Feb 13, 2014
  • Buffett’s Pal Munger Heads a Very Weird Company http://t.co/ztr3XizpKM Growth of $DJCO thru investing leads 2 # of growing pains & 13F $$ Feb 13, 2014
  • Here?s Why the Biggest Cable Company in the Country Thinks It Can Get Bigger http://t.co/04cdg1J9VP Feds tolerant of cable re antitrust $$ Feb 13, 2014
  • Why AOL ended up spending millions on ‘distressed babies’ http://t.co/d2lWs8eJit $AOL chose 2b in healthcare biz 4 its employees & lost $$ Feb 13, 2014
  • 3 High-Yielders To Buy On The Pullback http://t.co/8SUBI1M0ut In total $SNH issues more stock than it pays in divs. Divs -> cap losses $$ Feb 13, 2014
  • Who is John Thompson? A look at Microsoft’s new chairman http://t.co/W7SrXqxtwm May have right stuff to protect new CEO from meddling $$ Feb 10, 2014

 

US Politics & Policy

 

  • Runaway Drones Map Land, Film ‘Wolf,’ Knock Down People, FAA Gives Chase http://t.co/rcTnjug8w1 Drones r here 2 stay; time license them $$ Feb 15, 2014
  • Teacher Tenure Put to the Test in California Lawsuit http://t.co/XP5fx6HpR3 Tenure has outlived its usefulness; older teachers can b lazy $$ Feb 15, 2014
  • Lincoln’s Foreign Policy in Today’s World http://t.co/t2RELj7uRB Kept England & France from joining Civil War; otherwise pragmatic $$ $SPY Feb 15, 2014
  • What Would Lincoln Do? http://t.co/hi6n4Rb8hl A clever man w/principles, who did not cease to be pragmatic pursuing 1 main goal – Union $$ Feb 15, 2014
  • Harvard Professor Attacking Google Thrives as Web Sheriff http://t.co/g1W7KXH94K At some point, lack of disclosure will blow up on him $$ Feb 14, 2014
  • The $2.2B Bird-Scorching Solar Project http://t.co/hIYWhJpUwQ Get used 2 idea: almost every form of energy imposes environmental costs $$ Feb 13, 2014
  • Obamacare Damage-Control Teams Seek to Calm Complaints http://t.co/bPU95rVMxM Things r tough when u r trying to avoid media embarrassment $$ Feb 13, 2014
  • Billionaire Musk Gets Brownsville to Pay for SpaceX http://t.co/eoAiygs9mq Like a football owner bargaining 2 get taxpayers buy a stadium $$ Feb 13, 2014
  • Snowden Swiped Password From NSA Coworker http://t.co/1mJ5D6vGH3 & it cost him his job. Snowden denies it; NSA is Not Saying Anything $$ Feb 13, 2014
  • Puerto Rico Legislators Amend Bill Calling for Bank-Deposit Shift http://t.co/fMaCvMi7ab Provincial govt’s attempt 2raid cookie jar stopd $$ Feb 13, 2014
  • Obamacare Will, in Fact, Encourage Employers to Cut Jobs http://t.co/D3vaCFHOZY As the employer mandate comes into force, jobs will b cut $$ Feb 12, 2014
  • Tea Party Scorns Republicans as House Lifts Debt Ceiling http://t.co/fPohsF6Kbi t-party can b “pure” as Dems raise ceiling w/few GOP $$ $TLT Feb 12, 2014
  • A Lame Duckish Calm Falls Over the Capital http://t.co/u6bG2cg1nL Parties in DC act as if the next event is the November elections $$ $TLT Feb 12, 2014
  • Obama Rewrites ObamaCare http://t.co/Ym3CtHt3pI Another day, another lawless exemption, once again for business; WSJ bangs populist drum $$ Feb 11, 2014
  • The US Senate Again Insists on USPS Saturday Mail Delivery http://t.co/YnzmKE5Xrh 2 timid; end Wednesday & Saturday delivery $$ $UPS $FDX Feb 11, 2014
  • US firms ?paid effective tax rate of 2.2% in 2011? http://t.co/f2T5Qnrhri More than a tax haven, Ireland helps insurers shave reserves $$ Feb 11, 2014
  • No Honeymoon for Janet Yellen http://t.co/86QPfTcVE0 QE withdrawal will bite, & what will become of all the deposits? $$ Feb 11, 2014
  • Please Hold Your Bernanke Applause http://t.co/DCKPttFHNU Remember, when Greenspan left, he was viewed as a success, same as BB now $$ $TLT Feb 11, 2014
  • Sounding the Tax Alarm, to Little Applause http://t.co/r9JQmmaeLB IRS stiffs whistleblowers who often lose employability 4 being a tipper $$ Feb 10, 2014

 

Rest of the World

 

  • Putin is Playing a Game of His Own http://t.co/19Arh0aJOH Not so fast. Russia has significant resources & influence in Eastern H’sphere $$ Feb 15, 2014
  • Boy?s Life Hanging on 8-Hour Trip Shows Why Venezuelans Protest http://t.co/8G8CgGwGST Socialism is like a cancer that spreads til death $$ Feb 14, 2014
  • Let’s Watch Venezuela Destroy Itself http://t.co/g1Uy3zk1W3 Logical extreme of Socialism falls apart; pity that Chavez never lived 2c it $$ Feb 14, 2014
  • Chinese Join Winklevosses in L.A. Luxury Home Hedges http://t.co/TUdw4AItw8 Amazing what the wealthy will pay 4a fancy foreign retreat $$ Feb 14, 2014
  • Next crisis won?t come from the emerging markets http://t.co/Jei7oKJ8BD Argues France, Germany, Britain, Australia & Canada-> 2 much debt $$ Feb 13, 2014
  • Mister Donut, Pan Am and Friendster Found Alive and Well http://t.co/vDaGi33cEN Old brands never die, they just move overseas & make $$ $SPY Feb 13, 2014
  • Bank of England points to 2015 rate rise, blurs guidance http://t.co/AWhyd8GZmd More precision than 1 can know; the world is messy $$ $FXB Feb 13, 2014
  • Italy Pays Record Low to Sell 3-Year Debt at Auction http://t.co/PWmUhXufjb Let the leverage build for the next crisis $$ Feb 13, 2014
  • Fink to Mobius Touting Emerging Stocks Fails to Stem Outflow http://t.co/8PFKbOH8Lg A time 2 nibble, not a time 2 gulp $$ $EEM Be wary Feb 13, 2014
  • Greek Truckers Show Plight as Groceries Show Up Frozen http://t.co/XgAM737A7h Freeing up the labor market will work as attitudes change $$ Feb 13, 2014
  • Tunisians Bolt Doors Even After New Constitution Passed http://t.co/lBhXz8iqWb Constitutions cannot create cultural change; asks 2 much $$ Feb 13, 2014
  • Israel Desalination Shows California Not to Fear Drought http://t.co/BFidhnEF7S When resources r tight there are incentives 2 create tech $$ Feb 13, 2014
  • London Walkie Talkie Owners to Shield Car-Melting Beam http://t.co/76TP0u2tuT Reflective parabolic curve of building melts cars @ a spot $$ Feb 12, 2014
  • Rouhani Seeks Economic Fix as Iran Commemorates Revolution http://t.co/EDNL5WLOvB Will have to get the agreement of unelected true rulers $$ Feb 11, 2014
  • Argentina to Replace Bogus Inflation Index to Mend IMF Ties http://t.co/iSzQizrgnF Argentina tries 2 find cheapest way out of this mess $$ Feb 11, 2014
  • Who Should Pay for Trusts that Go Bust? http://t.co/aOXFbDltCZ If China is smart, protect depositors, but let banks & WMP holders fail $$ Feb 11, 2014
  • Iceland Girds for Fight as Suit Targets Half $14B GDP http://t.co/hX6M12PZ48 Icelandic taxpayer will refuse the bill; UK will b stiffed $$ Feb 11, 2014
  • Mobius Says Emerging-Market Rout Near End as Valuations Lure http://t.co/MMLjlAmN49 I dunno, a 4% earnings yield premium seems small $$ $EEM Feb 11, 2014
  • Rehabilitating Portugal http://t.co/tFy3GnIwRQ Long; Argues that a Greek-style bailout should b done, or Portugal will eventually default $$ Feb 11, 2014
  • Iranian TV Shows Rare Broadcast of Band Playing Music http://t.co/jTBFNcRsHJ Christianity has always been easier on music than Islam $$ Feb 11, 2014

 

Work Trends

 

  • Sheep-Shearing Wells Fargo Banker Bridges US Income Gap http://t.co/utMe1ekmir Sells coffeemakers too; many in US work multiple jobs $$ $TLT Feb 13, 2014
  • Workers Shed Caution, in a Healthy Sign for Labor Market http://t.co/zTq0NgbO0f When workers r willing 2 quit, labor mkt is healthy $$ $TLT Feb 11, 2014

 

Practical

 

  • A Little Valentine’s Day Straight Talk http://stks.co/j0I6p Sage counsel 2 younger women if they want to get married: start early $$ Feb 15, 2014
  • The Sex Question Readers Want Answered Most http://t.co/kRhYIgwI2Z Even Long-Married Happy Couples Ask, ‘How Can We Have Sex More Often?’ $$ Feb 11, 2014
  • Ten Ways You’re Probably Leaving Money on the Table http://t.co/KkjetkJsp9 Simple list of ways to save money for avg upper-middle class $$ Feb 11, 2014
  • Why Mom’s Time Is Different From Dad’s Time http://t.co/0Xr4IMsFfs Husbands, u can win if u reduce chaos for your overburdened wives $$ Feb 11, 2014

 

Other

 

  • US Scores Fusion-Power Breakthrough http://t.co/h6wDtXHcVj Bad news is Tritium very expensive @ $100K per gram; takes much energy 2 make $$ Feb 13, 2014
  • If Ocean Heat Pump Switches On, Expect to Feel It http://t.co/FlsYni5c62 Speculative; we don’t understand climate or hurricanes well $$ Feb 11, 2014
  • Who is Steven Reisman? Meet Hip-Hop VIPs’ Favorite Lawyer, The Man With The $2 Bills http://t.co/B3v87YDWrt Weird. Very, very weird $$ $SPY Feb 11, 2014
  • What Really Happened to Flappy Bird? http://t.co/3IiBxSIhYx Beware the success u wish 4? Also: http://t.co/ld6A2XaiKs Still a puzzle $$ $SPY Feb 11, 2014

 

Wrong, etc.

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  • Skeptical: Blackstone-Fueled Single-Family Home Boom Lifts Chicago http://t.co/sETcWifBGx In past hi levels of investor ownership bearish $$ Feb 15, 2014
  • Wrong: Pros Panic, Retail Investors Stay Cool on Emerging Markets http://t.co/QXXpOcqKYw Too short a period time to judge $$ Feb 14, 2014
  • Wrong: Social norms: The indignity of no work http://t.co/6isHJo9fkw New technologies will create new jobs & make the whole world better $$ Feb 13, 2014
  • Wrong: Warren Buffett is laughing at you for selling http://t.co/S5LFS3jUk5 Poorly thought-out piece glues 2unrelated ideas together $$ $EEM Feb 13, 2014
  • Wrong: The #1 High-Yield Investment Of America’s Elite http://t.co/FUVyBblQpZ Spammy article that talks about REITs as if they r a secret $$ Feb 11, 2014

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Replies, Retweets & Comments

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  • 10 miles west of Baltimore, MD, we got ~15 inches of snow over the last last 2 days. #snow #weather #pax $$ Feb 14, 2014
  • “I made this comment six months ago: http://t.co/a82j8TRxm1… & then, I tipped the SEC. ?” ? David_Merkel http://t.co/gthPe5eQoA $$ $DJCO Feb 13, 2014
  • “Administrative Services Only” plus individual stop loss protection is in general the smart way2?” ? David_Merkel http://t.co/fPV6fQo1i1 $$ Feb 13, 2014
  • “This is a common confusion in statistics — you can have a high correlation and a low beta. Second?” ? Merkel http://t.co/sa6PLqEhdU $$ Feb 13, 2014
  • RT @Pawelmorski: Scary parallel my foot. http://t.co/omyovAKQaX Feb 12, 2014
  • @davidgaffen that would only be a temporary fix. I wrote this 3.5 yrs ago on the topic: http://t.co/q3lbyELN9d The internet eats USPS Feb 11, 2014
  • @quakkelaar I miss you too. If you are ever near Baltimore/DC, let me know; we can get together, brother. Last few years have been hard Feb 11, 2014
  • RT @ReformedBroker: Please explain how the wording of this investment advertisement on the Washington Post site could be legal: http://t.co? Feb 10, 2014
  • ‘ @quakkelaar Hail old friend. Yes, same old mistakes, b/c those wishing to retire are making the money sweat, until it rebels on them $$ Feb 09, 2014

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Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

The Volatility Machine, or, Developed Markets Sneeze and Emerging Markets Catch a Cold

 

  • Record Cash Leaves Emerging Market ETFs on Lira Drop http://t.co/KSVS4qlrGb Sold mine b4 the 1st Fed taper; China’s fin’l sys vulnerable $$ Feb 01, 2014
  • Calm Broken in Markets Amid Concern of Emerging Contagion http://t.co/VnMtRrqXgs Emerging mkts decoupling from developed mkts wrong way $$ Feb 01, 2014
  • Basci No Rebel as Elections to Dictate Turkish Rate Moves http://t.co/EFVGB1LbMD Raise rates to defend the lira, watch exporters sag $$ Feb 01, 2014
  • Rajan Warns of Policy Breakdown as Emerging Markets Fall http://t.co/zW9QR49nRu Good guy, but fighting from a weak position $$ Feb 01, 2014
  • Argentina 105% Stock Return Proves Illusory as Peso Sinks http://t.co/4T0LdDhPM7 Make high returns in Arg pesos, but what can they buy? $$ Feb 01, 2014
  • Fragile-Five Selloff Cuts Rupee Issues to ?07 Low http://t.co/7anEAHc6Qd Volatility machine feeds tightening policy to weakest emerg mkts $$ Feb 01, 2014
  • The Price of Argentina’s Devaluation http://t.co/WwCrpf8urI More devaluation 2 come, black market price of $$ 50% above official price $IRS Jan 30, 2014
  • China Bank Regulator Said to Issue Alert on Coal Loans http://t.co/9w51A1v6RS Wealth management products embed significant credit risks $$ Jan 26, 2014
  • Fernandez Ditches Argentina for Cuba Summit Amid Crisis http://t.co/3nH9dIC0vT May what happened to Khrushchev happen to Fernandez $$ $IRS Jan 26, 2014

 

Companies & Industries

 

  • Amazon?s Boundless Spending Tested as Sales Growth Slows http://t.co/HPMVaVRDpV & http://t.co/ByiTZvlPLj $AMZN needs to raise its prices $$ Feb 01, 2014
  • How IKEA Protects the Environment and Sofa Margins http://t.co/x1rGegBzm5 IKEA is a very clever company that sells furniture cheaply $$ $FBN Jan 30, 2014
  • Walmart Expands Same-Day Grocery Delivery Test to Denver http://t.co/YrsuV006Zs Will b interesting 2c if this works profitably $$ $WMY $KR Jan 29, 2014
  • Billionaires Fuming Over Market Selloff That Sinks Magnit http://t.co/ZD1uUx0J0M Never confuse trading value w/intrinsic value $$ $SPY $TLT Jan 29, 2014
  • Branson?s Butanol Heading to U.S. as Ethanol Substitute http://t.co/8JAturnMXg I’ve been waiting for this; this is big & good. $$ $SPY $XLE Jan 29, 2014
  • Ethanol Exporters Search for a Port http://t.co/h9oUb7aRne Key Problem: Industry’s Distribution Network, Built Around Domestic Market $$ Jan 29, 2014
  • Apple’s $160B Mystery http://t.co/emZzU9mJ4d It is a mystery. What could you buy for $160B that would yield something like 10%? $AAPL $$ Jan 29, 2014
  • With a Shortage of STEM Graduates, Accenture Hopes to Grab Them Early http://t.co/lH3cam3h9U Clever idea by $ACN getting real thinkers $$ Jan 26, 2014

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Financial Sector

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  • Mortgage Volumes Hit Five Year Low http://t.co/IdgUULArJf Once policy accommodation ebbs, the housing mkt normalizes. 2 many houses $$ Feb 01, 2014
  • Futures industry: A story of crisis and opportunity http://t.co/CGShQoC93M Interesting history of how the Chicago futures exchanges grew $$ Feb 01, 2014
  • Sudden Swings in HSBC, Diageo Spur Trading Error Concern http://t.co/1Krn50FkYx “Fat fingers” can be a problem in computerized markets $$ Jan 30, 2014
  • Wall Street Attracts Chop Shops 20 Years After ?Wolf? http://t.co/qkYgenUF49 This isn’t as large as it used 2b. Now more fraud online $$ Jan 30, 2014
  • Companies Shift Strategies as Pension Funding Improves http://t.co/MhGhBFABc6 Smart to immunize pension liabilities when fully funded $$ Jan 30, 2014
  • Friday Was a 90/90 Day and What It Means?http://t.co/lhm2LQeWN0 @Ritholtz tells us there has been a sea change & this is a correction $$ Jan 29, 2014
  • Delinquent Debt Seized by Lehman Alum Seeing Recovery http://t.co/SsbGLA5Lh2 Hedgefund doesn’t own homes, but owns debt interest on homes $$ Jan 29, 2014
  • The Hidden Risks of Bank Loan Funds http://t.co/AEe7kicHul A good piece by the estimable @davidschawel . U might need 2play defense $$ $BKLN Jan 29, 2014
  • How the Safe Havens Stack Up http://t.co/csOSokPPWR For now nothing beats long US Treasury bonds FD: Long $TLT Jan 29, 2014
  • SEC Accuses Legg Mason of Some Accidental Fraud http://t.co/5Gl2I0B0S9 Given the complexity of law, much fraud is boring $$ $LM $SPY $MDY Jan 29, 2014
  • Puzzle for CFOs: Fixed or Floating-Rate Debt? http://t.co/vWxLEq6k8d Here’s the easy answer, do half fixed & half floating. Easy. $$ $BKLN Jan 29, 2014
  • Mary Jo White Wants SEC to ?Rethink? Corporate Disclosures http://t.co/VFLKGGnTfM Overthinking it; many people don’t read risk factors $$ Jan 29, 2014
  • BlackRock?s Fink Warns of ?Too Much Optimism? in Markets http://t.co/lkZYCY32HQ Fink is on target, vs the wishful thinking of bureaucrats $$ Jan 26, 2014
  • Former Phone Psychic Fit Right in as a Quant Trader http://t.co/Eq8iyYE2Tv Very weird. Making money by selling illusions can b profitable $$ Jan 26, 2014
  • Gold Mint Runs Overtime in Race to Meet World Coin Demand http://t.co/R7tjxZfTU3 Notable demand 4 physical gold amid falling prices $$ $GLD Jan 25, 2014
  • Is Momentum on Your Side? http://t.co/x0Z3r64Lix This strategy works well, if u can handle the volatility. 2007-2008 flameout. $$ $SPY $MDY Jan 25, 2014
  • How to Fine-Tune Your 401(k) Account http://t.co/0Q6N5NG0JP Worth a read if u have a 401(k). Consolidate, review allocations & savings % $$ Jan 25, 2014
  • That last article is one reason interest rates should remain LOW. Retiring baby boomers turning assets into streams of income. $$ $TLT $TBT Jan 25, 2014
  • Two Words: Private Equity http://t.co/E485SlKnn1 Private equity is still a risk asset, and goes through booms & busts, stick w/quality $$ Jan 25, 2014

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US Politics & Policy

 

  • Christie Knew About Lane Closings on Bridge, Ex-Ally Says http://t.co/2YLuAOewGb If true, Chris Christie is toast, in the US & New Jersey $$ Feb 01, 2014
  • Meanwhile, Back in America… http://t.co/J8LsjPtWNw It feels more like grief, Like the loss of something you never thought you’d lose $$ Feb 01, 2014
  • The Republican Presidential Contender Everyone?s Overlooking http://t.co/FVMViawn5b I find John Kasich 2b unlikely, but so are the others $$ Jan 30, 2014
  • Only the Foolish Pay the 45% Estate Tax http://t.co/bnMuQp6P55 @ritholtz tells truth on estate tax, rewards accntnts, lawyers, actuaries $$ Jan 30, 2014
  • Minimum Wage Laws Kill Jobs http://t.co/Rfc8Ef174z Sad but true. From first principles this should be obvious 2 all $$ Jan 30, 2014
  • The Unspoken Reason Obama Can’t Raise the Minimum Wage http://t.co/WlqxZtBxK3 Public opinion does not think poverty is important $$ $SPY Jan 29, 2014
  • No Babies, No Stimulus http://t.co/4995BoqbER @asymmetricinfo says it well; if your population gets older, policy should be more austere $$ Jan 26, 2014
  • How the U.S. Helped Win World War I http://t.co/X4nLdNHZcj Intensified our bad habit of meddling in conflicts that are not ours $$ Jan 25, 2014

Rest of the World

 

  • For Europe?s Youth, Minimum Wages Mean Minimal Employment http://t.co/T9ZfsM8oGu Youth unemployment is higher in nations w/minimum wages $$ Feb 01, 2014
  • El Nino May Return as Models Signal Warming of Pacific Ocean http://t.co/YAbrSpm3Tx El Nino – the adult version of the boogeyman $$ $SPY Jan 29, 2014
  • Snowden Nominated by Norway Lawmakers for Nobel Peace Prize http://t.co/PShW1dmpv9 Well deserved. He ruined his life 4 the good of all $$ Jan 29, 2014
  • Slop-Bucket Reality for Aboriginals Missing Canada Boom http://t.co/pNftiUwjsZ Tribal cultures tend to fail in a capitalistic world $$ $SPY Jan 29, 2014
  • Japan Beyond Tokyo Luring BlackRock With Overseas Money http://t.co/r2YOyDyvMw Abenomics will fail, & Japan will b the first casualty $$ Jan 29, 2014
  • South Sudan Military Says Rebels Breach Cease-fire http://t.co/1YYa7rLVi7 After separating from the North, tribal animosities dominate $$ Jan 25, 2014

 

Other

 

  • Food Festival Pageants Open Up Competitions to Attract Candidates http://t.co/8Zcv61Znor Offering larger scholarships to food ambassadors $$ Feb 01, 2014
  • Why National Football League players go from rich to broke http://t.co/oIsMpnxgis Injuries shorten careers & fancy living depletes the $$ Feb 01, 2014
  • Super Bowl Prostitution Digitally Mapped by Data Trackers http://t.co/ivD5pKBVBM Wonder how many female slaves they can help to free? $$ Feb 01, 2014
  • The Employee of the Month Has a Battery http://t.co/zrmb0TgqS1 Minimum wage hikes r accelerating trend toward automation & fewer workers $$ Jan 30, 2014
  • Bitcoin Figure Is Accused of Conspiring to Launder Money http://t.co/MuFqZLMABH Governments care if u r trading w/evil people $$ $TLT $SPY Jan 29, 2014
  • Infertility, Diabetes, Obesity and the Mystery of PCOS http://t.co/tylcTdjKET Messy. Overweight & Diabetes correlated with infertility $$ Jan 29, 2014
  • How You Might Be Tracked for Ads in a Post-Cookie World http://t.co/cYhBKa5oS7 Worth a read. After all, you want to protect your privacy $$ Jan 29, 2014
  • Frigid Super Bowl Recalls Ref in Wet Suit With Few Penalties http://t.co/k9EeVc1WI3 When u r struggling 2 survive, few penalties issued $$ Jan 29, 2014
  • Burning Question: Does Rinsing Fruit Make a Difference? http://t.co/Xr4lNk8lCq If organic, YES! If not organic, yes. $$ #microorganisms Jan 29, 2014
  • 4 things to know about Warren Buffett adviser http://t.co/jRlt81kULk Tracy Britt Cool is slow beginning of more centralized operations $$ Jan 28, 2014
  • Pregnant Texas Woman, Marlise Mu?oz, Removed From Life Support http://t.co/esBxk1xLdz Many people would have adopted the child $$ Jan 27, 2014
  • Maryland Shopping Mall Shooting Leaves 3 Dead, Police Say http://t.co/FGcrU7q3sn Biggest Mall near me. I’ve shopped at the Sears there $$ Jan 25, 2014

 

Wrong

  • Wrong: China PMI Ascends as Global Barometer With Market Sway http://t.co/gSD8QQewZy Should examine China’s financial system soundness $$ Feb 01, 2014
  • Dumb: Obama Announces New Retirement Accounts http://t.co/E20AA2F3vX Providing investment options 2 those who don’t invest is a waste $$ Jan 30, 2014
  • Weak arg: Congress Has Never Allowed Unemployment Insurance Extensions 2Expire With Long-Term Unemployment So High http://t.co/2IVPLXTDKr $$ Jan 29, 2014
  • Wrong: Obama Offering Retirement-Savings Plan for Workers http://t.co/jpOEBTeT66 Getting poor people 2 invest in Treasuries is criminal $$ Jan 29, 2014
  • Wrong: Yellen Faces Test Bernanke Failed: Ease Bubbles http://t.co/ys4I4iOFWy That is not her inclination; she will inflate bubbles $$ $SPY Jan 29, 2014
  • Wrong: Senator Schumer pushes plan to undercut tea party http://t.co/cpN3PQKBid Far better to end gerrymandering http://t.co/uQx2ZdtSlF $$ Jan 27, 2014
  • Wrong: What?s Behind the Emerging-Market Meltdown http://t.co/FoG5yOAUpW Kooky Keynesian prescriptions: ruin long-run 2 help short-run $$ Jan 26, 2014

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Comments, Replies & Retweets

  • Reading: Whatever happened to the feature which allowed us to customize news sources for stock portfolios? http://t.co/8sdnIF0FeS $$ $YHOO Feb 01, 2014
  • Whatever happened to the feature which allowed us to customize news sources for stock portfolios? http://t.co/vnmO5Hlhnt #YahooAnswers $$ Jan 31, 2014
  • Commented on StockTwits: Clever, thanks. http://t.co/YweRBtoTe8 Jan 29, 2014
  • RT @Pawelmorski: Financial media basically rubbish at covering EM. Jan 29, 2014
  • Commented on StockTwits: The word was “tend” not “must? http://t.co/r11cBZsTRp Jan 29, 2014
  • @TTownsend4969 Blessed are you, Tina Townsend. May you always be grateful for the work that Jesus has done in you. Jan 29, 2014
  • RT @M_C_Klein: .@mark_dow on EM: “Don?t try and fight the old school and their anachronistic biases. They are bigger than you are.” http://? Jan 28, 2014
  • @pdacosta @bySamRo Grateful I exited my closed-end EM funds in November prior to the first taper. Michael Pettis’ volatility machine runs $$ Jan 26, 2014
  • RT @StephenKing: Memo to Justin Bieber: For the young celeb, life is a banquet of free food. What they don’t tell you is that you are often? Jan 26, 2014

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Redacted Version of the January 2014 FOMC Statement

Redacted Version of the January 2014 FOMC Statement

Posted on by David Merkel
December 2013 January 2014 Comments
Information received since the Federal Open Market Committee met in October indicates that economic activity is expanding at a moderate pace. Information received since the Federal Open Market Committee met in December indicates that growth in economic activity picked up in recent quarters. Shades their view up, but I don?t see much to support it.? Most of the growth is inventories.
Labor market conditions have shown further improvement; the unemployment rate has declined but remains elevated. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate declined but remains elevated. Shows less confidence as labor force participation falls.
Household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months. Household spending and business fixed investment advanced more quickly in recent months, while the recovery in the housing sector slowed somewhat. Shades their views of household spending and business fixed investment up.
Fiscal policy is restraining economic growth, although the extent of restraint may be diminishing. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. No change.? Funny that they don?t call their tapering a ?restraint.?
Inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable. Inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable. No change.? TIPS are showing slightly lower inflation expectations since the last meeting. 5y forward 5y inflation implied from TIPS is near 2.54%, down 0.10% from December.? Treasuries have rallied versus TIPS since the emerging markets crashed partially due to the taper.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.

 

 No change. Any time they mention the ?statutory mandate,? it is to excuse bad policy.
The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. No change. ?Monetary policy is omnipotent on the asset side, right?
The Committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced. The Committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced. No change.
The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term. No change.? CPI is at 1.5% now, yoy.
Taking into account the extent of federal fiscal retrenchment since the inception of its current asset purchase program, the Committee sees the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy. Taking into account the extent of federal fiscal retrenchment since the inception of its current asset purchase program, the Committee continues to see the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy. No change.? They have a deficient model of what deficit spending does for the economy.
In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to modestly reduce the pace of its asset purchases. Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in February, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $30 billion per month rather than $35 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $35 billion per month rather than $40 billion per month. Reduces the purchase rate by $5 billion each on Treasuries and MBS

 
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. No change
The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate. The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate. No change.? But it has little impact on interest rates on the long end, which are rallying into a weakening global economy.
The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. No change. Useless paragraph.
If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. Says that purchases will likely continue to decline if the economy continues to improve.
However, asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases. However, asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases. No change.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. No change.
The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. Not a time limit but economic limits from inflation and employment.

Just ran the calculation ? TIPS implied forward inflation one year forward for one year ? i.e., a rough forecast for 2015, is currently 1.80%, up 8 bps since the last meeting.? Here?s the graph.? The FOMC has less than 1% of margin in their calculation.
In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. No change.
The Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal. The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal. No change. Repetitive.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. No change.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Charles L. Evans; Esther L. George; Jerome H. Powell; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Richard W. Fisher; Narayana Kocherlakota; Sandra Pianalto; Charles I. Plosser; Jerome H. Powell; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen.

 

 The names change, but the vote is largely the same ? why no hawks urging for a faster end to QE?
Voting against the action was Eric S. Rosengren, who believes that, with the unemployment rate still elevated and the inflation rate well below the target, changes in the purchase program are premature until incoming data more clearly indicate that economic growth is likely to be sustained above its potential rate.   Rosengren is no longer a voting member.? Good.

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Comments

  • Small $10 B/month taper.? Equities flat and long bonds rise.? Commodities do nothing.? The FOMC says that any future change to policy is contingent on almost everything.
  • Shades their views of GDP household spending and business fixed investment up, and their views on labor force participation down.
  • They think that if they use more words, they will be clearer.? Longer statements are harder to parse and understand.? They need to clean up the statement.? There are many sentences that could be eliminated with no loss of meaning.
  • Current proposed policy is an exercise in wishful thinking.? Monetary policy does not work in reducing unemployment, and I think we should end the charade.
  • In the past I have said, ?When [holding down longer-term rates on the highest-quality debt] doesn?t work, what will they do?? I have to imagine that they are wondering whether QE works at all, given the recent rise and fall in long rates.? The Fed is playing with forces bigger than themselves, and it isn?t dawning on them yet.
  • The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.? As a result, the FOMC ain?t moving rates up, absent increases in employment, or a US Dollar crisis.? Labor employment is the key metric.
  • GDP growth is not improving much if at all, and much of the unemployment rate improvement comes more from discouraged workers, and part-time workers.
Warm up the Helicopter of Happiness

Warm up the Helicopter of Happiness

Posted on by David Merkel

Here is a letter from a reader:

Hi David,

?Long-time reader of yours.? You put out some of the best blog content on the web and I am grateful for that.

I?ve got a question I?d hope you consider answering in the blog.? I?m almost embarrassed to ask it, for fear of appearing facile, but here goes:

Our economy is struggling with a lack of aggregate demand, low monetary velocity, and a whiff of deflation.? QE does not seem to be transmitting its monetary effects to the real economy, just helping to inflate asset prices instead.? So why wouldn?t we consider sending direct stimulus to households, similar to what we did in 2008-09, only on a much bigger scale?? Say there are 120MM households.? Send each one a $5k check, and if I?ve got the zeroes right, that?s a ?mere? $600B we?re borrowing to disburse ? about 60% of what the Fed is doing annually with QE.? Most of the money would recycle and multiply quickly to the economy (net of what gets allocated to debt paydown, and what gets banked by the well-off).? And due to some current one-times in the Federal budget, we?ve actually got a better balance sheet in the moment to do something with added borrowing/spending.?

Crazy thought, but these are uncommon times.? Curious what you think.?

Dear friend, I think about this in two ways: ethics and metaphysics.? The metaphysics are easy — yeah, let the Fed remit all of its seigniorage to the people rather than to the Treasury.? Far better than letting the government spend it.

But the ethics are touchy.? How do we define ethical taxation systems?? My view is that people should be taxed according to their increase in net worth, and at a flat rate, but with no ability to defer income from taxation.? Most wealthy people don’t care about tax rates because they can find ways to defer/reduce taxable income.? This is a major reason why you should distrust the Democrats, because their desire to raise tax rates would do little.? This is also a reason to distrust the GOP, because there is no decent reason to decrease tax rates.

We need to tighten up the definition of income in the US, and no longer allow citizens and businesses to defer income.? If we taxed all economic activity as it occurred we would have balanced budgets.

The rich aren’t paying enough in the US, not because of tax rates, but because they can hide their income.? That is the way that policy should proceed, to make the wealthy pay according to their increase in net worth.

I’ll write about this more later, but the main idea is to tax people proportionate to their increase in wealth.? That is the Bible’s solution for how people should give.

 

 

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Monetary Policy

 

  • The theory of money entanglement (Part 1) http://t.co/zfCM2rPxBx The effects of monetary policy vary w/finl institutions need for credit $$ Dec 20, 2013
  • Repo market as a form of free banking http://t.co/4m3PSuFViG? @isakaminska describes a hybrid credit system where central banks r weak $$ Dec 20, 2013
  • Why Do So Many People Hate QE? http://t.co/ZpcQhSrSpH Basic reason is fairness. Y can the Fed create credit out of thin air, & we can’t? $$ Dec 19, 2013
  • Visualizing the Fed | The Big Picture http://t.co/J7K15MIDdZ @ritholtz shares a cool interactive graphic on the Fed’s Balance Sheet $$ $TLT Dec 19, 2013
  • ‘Was The Fed A Good Idea?’ How Cato Cleans Keynesian Clock http://t.co/qaalFGBvML Economies grow faster when currency stores real value $$ Dec 17, 2013

?? TIPS Wipeout Signals Fed Losing Fight Against Disinflation http://t.co/3GeeSDpZAv Implied inflation rising across TIPS curve $$ $TIP $TLT Dec 17, 2013

 

FOMC & Data

 

  • Fed Seen Tapering QE in $10B Steps in Next Seven Meetings http://t.co/gvmopTBufm Y do economists assume that things follow a simple path? $$ Dec 20, 2013
  • Fascinating Bernanke can call Fiscal policy restrictive when deficit huge & shrinking a little, doesn’t apply same logic 2 LSAP shrinking $$ Dec 18, 2013
  • FOMC Central Tendency for Fed funds rate 2013-6 &long-run 0.25%, 0.34%, 1.06%, 2.18%, 3.88% Change 0.00%, -0.06%, -0.19%, -0.09%, -0.04% $$ Dec 18, 2013
  • FOMC Central Tendency for Fed Tightening — January 2016, 25 months away vs 27 last September, one month further out $$ Dec 18, 2013
  • FOMC Central Tendency for PCE Inflation 2013-6 & long-run 0.99%,1.52%, 1.79%, 1.87%, 2.00% Change -0.21%, -0.01%, -0.10%, 0.00%, 0.00% $$ Dec 18, 2013
  • FOMC Central Tendency for Unemployment 2013-6 & long-run 7.05%, 6.45%, 5.91%, 5.53%, 5.54% Change -0.11%, -0.13%, -0.12%, -0.10%, 0.04% $$ Dec 18, 2013
  • FOMC Central Tendency for real GDP 2013-6 & long-run 2.27%, 2.91%, 3.09%, 2.83%, 2.25% Change 0.14%, 0.00%, -0.07%, -0.05%, -0.09% $$ Dec 18, 2013
  • Someone ask Ben Bernanke if they would issue fed funds at longer terms/tenors Dec 18, 2013
  • @AlephBlog wrong again, David — decrease of $10B, $5B each of Treasuries and MBS Dec 18, 2013
  • @AlephBlog sorry — $5b/month change Dec 18, 2013
  • RT @NickTimiraos: MBS issuance has plunged since Sept, so a $5 billion taper of MBS doesn’t mean the Fed will decrease its *share* of MBS p? Dec 18, 2013
  • Statement Regarding Purchases of Treasury Securities &Agency Mortgage-Backed Securities http://t.co/97DNRGXJFQ Pares MBS buys by $10B/mo $$ Dec 18, 2013
  • An Opiate for Underachievement: Bernanke Says Fed in ?Finest Hours? Stood Up to Pressure http://t.co/soQDjBHZea Rather, they caved & hid $$ Dec 17, 2013
  • The One Thing Bernanke Must Not Do Tomorrow http://t.co/AvDcElOHTY Saying & not doing loses credibility 4the Fed. Don’t say wut u wont do $$ Dec 17, 2013

 

Companies & Industries

 

  • The Buffett difference, derivatives edition http://t.co/5VUI7WxOUB Soft collateral reqs, tolerated earnings vol, bot in size w/variety $$ Dec 20, 2013
  • Target Data Breach Has Become a Card Data Fire Sale http://t.co/jUxgOpv7SP B especially wary here because it can b used as a debit card $$ Dec 20, 2013
  • Buffett’s massive wind-power order shows wind energy becoming cheaper http://t.co/0lOSGp3NQi Wind power becomes economical, end subsidies $$ Dec 20, 2013
  • Facebook Is Selling Stock For Some Reason http://t.co/x9LsnLUMNb $FB makes it easier 4 index buyers to get shares as it enters the S&P500 $$ Dec 19, 2013
  • Facebook, Zuckerberg to Sell Stock Worth Nearly $4 Billion http://t.co/B4joZJZYR9 Note $FB compny selling shares; not usually a good sign $$ Dec 19, 2013
  • Regional Shippers Pose New Threat to UPS, FedEx http://t.co/RNUpcBrL3Y And USPS too. Regionals can get it there the next day $$ $FDX $UPS Dec 19, 2013
  • AT&T Sells Wireline Assets To Frontier Communications http://t.co/or1n1lWqbD Interesting 2c $T sell off rural wireline customers 2 $FTR $$ Dec 18, 2013
  • Gold Town Turns to Dust as Metal Decline Shutters Mines http://t.co/unN2Mi97A3 Life at high-cost mines is very cyclical. Boom-bust $$ $GLD Dec 18, 2013
  • Dodge CVT Animation http://t.co/cfEWG0Y9jQ Cool 82-second video of how a continuously variable transmission works $$ $GM $F $TM $HMC Dec 18, 2013
  • How Good Old Car Engines Got So Efficient http://t.co/hM5ZmjdXpK Most progress w/energy has come by using hydrocarbons more efficiently $$ Dec 18, 2013
  • Delta Battles Tiny Upstart Airport http://t.co/HbalfXKYc3 B careful of small airports near big cities, u don’t want 2create the next $LUV $$ Dec 18, 2013
  • Poor Americans Lead Movement to Abandon Landlines http://t.co/MmUfqiljPa Landlines r dying; I’m thinking of getting rid of mine $$ $SPY $VZ Dec 18, 2013
  • Pizzerias Try to Apply Chipotle Formula http://t.co/afyCN5xi2u Creating Fast, Custom & Inexpensive 4 pizza; many r trying, who will win? $$ Dec 18, 2013
  • Campbell Seen as Next Buffett Target Post-Heinz http://t.co/zryODDWpRs Likely wishful thinking; soup shrinking; PE high, no growth $$ $CPB Dec 17, 2013
  • Wind Power Rivals Coal With $1B Order From Buffett http://t.co/WXJfEAHmrn Wind power gets competitive on price; can we end the subsidies? $$ Dec 17, 2013
  • Google Just Bought a Mechinized Cheetah and Other Military Robots http://t.co/5ZO3XXzcNF 1st internet search now robotic world domination $$ Dec 17, 2013
  • Google, Facebook Push to Control Web’s Pipes http://t.co/nmDzeospON Content companies want more control over their delivery over the web $$ Dec 17, 2013

 

Market Impact

 

  • Three things long/short hedge funds cannot do (well) http://t.co/zyiE65FcAZ Manage risk, Short stocks on a systematic basis &stop trading $$ Dec 20, 2013
  • Investors should abandon long-term commodity bets http://t.co/5rGgYXj5fy End of supercycle, no income, correlated w/equity returns $$ $GLD Dec 20, 2013
  • DJIA Rises to Inflation-Adjusted Record High http://t.co/nseI2H9eF4 Closes at 16,221. Guess I have 2 eat my words: http://t.co/A6kJoniqG5 $$ Dec 20, 2013
  • The FOMC- SCR Factors- Bullish SP500? http://t.co/pI3A04XM71 The TINA effect: TINA stands 4 There Is No Alternative.(to Stock investing) $$ Dec 19, 2013
  • Investor Hunger 4US Corporate Bonds Signals Confidence http://t.co/PsCIMa25A9 Retweet after me:Credit spreads r free $$, credit spreads r… Dec 17, 2013
  • Want to invest like Buffett? Here?s how http://t.co/3CIqNByFVU Focus on cheap, high-quality stocks w/moats, lever using ins float $$ $BRK-B Dec 17, 2013
  • Corn Plummeting Spurs Talk of ?80s US Farmland Bust http://t.co/QoO5lVTXSx Will b interesting 2c how many recent buyers get inverted $$ $SPY Dec 17, 2013

 

Financial Sector

 

  • US Credit Markets: US Lite Covenant: Freshness without Protection ? http://t.co/F2HguklHFM Credit protections getting worse 4 bank debt $$ Dec 20, 2013
  • OCC believes banks might be gambling again http://t.co/lMG9YG24dj The OCC is seeing looser underwriting, reminds them of 2007 $$ #toosevere Dec 20, 2013
  • Man Who Said No to Soros Builds BlueCrest Into Empire http://t.co/UNksM1mSvl Borrowed $750M to hire 25 equity mgrs 4 his hedge funds $$ $SPY Dec 20, 2013
  • Secret Currency Traders? Club Devised Biggest Market?s Rates http://t.co/dtBfuqR48w There is no human system that cannot b gamed $$ $SPY Dec 19, 2013
  • New Mortgages to Get Pricier Next Year http://t.co/oNfGLJeZCC About time F&F raised fees; dodgy mtges have much higher loss rates $$ $FNMA Dec 18, 2013
  • Volcker Rule Shows Its Wide Reach http://t.co/MOZMjUFoj8 Securitized assets, when they default, most frequently default w/zero recovery $$ Dec 17, 2013
  • First Volcker Victim? Zions Dumping Its Hedge Funds http://t.co/Kj8uYfltTn $ZION cleans up the trash w/now-sufficient capital $$ Dec 17, 2013

 

PPACA / Obamacare

 

  • Obamacare Initiates Self-Destruction Sequence http://t.co/VkbqqPzMYb @asymmeticinfo asks what will Obama do next year on indiv mandate? $$ Dec 20, 2013
  • Obama Lifts Health Mandate for Those With Canceled Plans http://t.co/aCYJLzaOZz Must b nice 2b able 2alter laws by presidential fiat $$ Dec 20, 2013
  • More Obamacare Delays. Surprised? http://t.co/keWUsmLvay @asymmetricinfo thinks the law will survive b/c insurers benefit in long-run $$ Dec 19, 2013
  • A Medicaid Bet in Wisconsin http://t.co/Ejgbmbd61B Scott Walker Says He Wants to Protect the Poorest; Critics Assail 4Not Taking US Funds $$ Dec 19, 2013
  • National Lampoon’s ObamaCare Vacation http://t.co/Vzp636uMCW Interesting to hear how poorly Maryland is doing w/its healthcare website $$ Dec 19, 2013
  • Half of Uninsured Say Health Law Is Bad Idea http://t.co/BEWOeZg1gK When those that u r trying 2 benefit don’t like it, u know it is bad $$ Dec 18, 2013
  • Is Obamacare Really an Improvement on the Status Quo? http://t.co/Zc1umGhp1l More people lose insurance than gain it; status quo better $$ Dec 18, 2013
  • Insurers Fight Hospitals’ Paying Premiums for Poor http://t.co/WnuoAo481T Hospitals pay to get sick people insured, so they can make $$ $SPY Dec 17, 2013
  • Errors Continue 2Plague Government Health Site http://t.co/5j6OZRqkqZ Flaws Include Missing Customers & Erring Eligibility Determinations $$ Dec 14, 2013

 

Rest of the World

?

  • Putin Bets $15B to Capture Junk-Rated Ukraine Vassal http://t.co/vjxhVcT8gv Rebuilding the USSR is tough work for a tough man to do $$ Dec 19, 2013
  • South Sudan Rebels Take Key Town of Bor http://t.co/MMQumSSIHZ It’s in the center of the country, kind of a crossroads 4 commerce/travel $$ Dec 19, 2013
  • Vatican Hires Global Firms to Modernize Communications, Accounting http://t.co/1CRwzMDbs8 Humility arrives at the Vatican, expertise 2 $$ Dec 19, 2013
  • Russian Amnesty Includes Greenpeace as Well as Pussy Riot http://t.co/b8FNVgaQx6 Is Russia getting soft? 😉 Courting international favor $$ Dec 18, 2013
  • Mom Can?t Visit Daughter as Airlines Shun Venezuela Cash http://t.co/1uds13LW3t Such is life 4those under currency controls; freedom goes $$ Dec 18, 2013
  • North America to Drown in Oil as Mexico Ends Monopoly http://t.co/5bV35xIc7o Oil is no good to Mexico if can’t get it out of ground $$ #tech Dec 18, 2013
  • South Sudan Puts Down ‘Attempted Coup’ http://t.co/19KfhoRdVJ A young nation, very experienced in corruption; attempted coup unsurprising $$ Dec 17, 2013

?

China

 

  • China s Stealth Tightening? http://t.co/tuW7JvVhFI A new squeeze hits the China Interbank market & the authorities aren’t doing much $$ $FXI Dec 20, 2013
  • Why Are the Chinese Scared of American Corn?? http://t.co/lEGbWgh2r4 Probably some Party bigwig who sells domestic corn complaining $$ Dec 19, 2013
  • Can China Teach North Korea to Grow Up? http://t.co/J6Ba2jpzVz If N Koreans had as much freedom as the Chinese do, Kim would b overthrown $$ Dec 17, 2013
  • China’s Cities Chop Down Hills for Industrial Land http://t.co/KTpYOwgXNK Wonder what the secondary effect will b from this terraforming? $$ Dec 17, 2013

 

US Politics & Policy

 

  • The Trouble With Populism? It Isn?t That Popular http://t.co/RXSmHLDWTu All sorts of extreme positions, mine included, r never popular $$ Dec 19, 2013
  • Republicans Block Symbolic Step to Extend Tax Breaks http://t.co/mxUZ31R7GZ Rationality. Maybe temporary tax breaks will b temporary? $$ Dec 19, 2013
  • Obama?s own panel rips NSA spying on phone calls of Americans http://t.co/QYx1lJXLfc The consensus is that the NSA has gone too far $$ Dec 19, 2013
  • John Podesta eats crow: ?I apologize to Speaker Boehner? http://t.co/XyCLBNrjWs Don’t blame Podesta, he just drank his own Kool-aid $$ 😉 Dec 19, 2013
  • At 61 She Lives in Basement While 87-Year-Old Dad Travels http://t.co/KTF0YCOpWx Each generation does successively less well on average $$ Dec 18, 2013
  • That’s the nature of all of the fixed payment plans devised by the “Greatest Generation.” They borrowed from children & grandchildren $$ Dec 18, 2013
  • Top Democrats reject court ruling over NSA spying on Americans http://t.co/wnNGQmJwys Interesting 2c varying opinions in both parties $$ Dec 18, 2013
  • Unmasking the Mortgage Interest Deduction: Who Benefits and by How Much? http://t.co/4PzAbpa7rs Benefits the well-off; end & balance bdgt $$ Dec 18, 2013
  • Hidden Danger in Public Pension Funds http://t.co/lBgACsI12P Low Funded status, high amounts in risky assets, bonds offer little yield $$ Dec 18, 2013
  • Disarming Surveillance http://t.co/70nAEtNTJA The opposite danger is that by snooping on others intensively they grow to resent the US $$ Dec 17, 2013
  • NSA Phone Spying ‘Almost Certainly’ Unconstitutional, Judge Says http://t.co/cnqxDbGXrW Probably won’t b upheld, good 2try overturning $$ Dec 17, 2013
  • The truth about the NSA’s bogus malware apocalypse http://t.co/nJ3hMCrcwq Most mass attacks r hard 2pull off w/any significant force $$ $TLT Dec 17, 2013
  • In Bankrupt Detroit, the Bills Are Piling Up http://t.co/eJrX6tgIgO One tough part of a muni b/k – who gets paid & what r reasonable fees $$ Dec 17, 2013
  • Accidental Tax Break Saves Wealthiest Americans $100B http://t.co/RU6y8vCNZc ?I?ve done a lot4 Democratic contributors,? he sez w/a smile $$ Dec 17, 2013
  • Look How Easy It Is 2 Game Estate Taxes http://t.co/u3YGvZ491l Y the estate tax needs 2b replaced & income taxes disallow income deferral $$ Dec 17, 2013

 

US Economics

 

  • GDP Grows 4.1% in Third Quarter, Biggest Gain Since 2011 http://t.co/tUCz0bQViw Guess I have to eat more of my words, US looks good 4 now $$ Dec 20, 2013
  • Boomers as Retail Clerks Shows Y Greenspan Saw Low Growth Era http://t.co/phoiELeks2 Long good article how aging populace changes economy $$ Dec 19, 2013

 

Other

 

  • Finished the #GoogleCrossword http://t.co/VtaoYkaQdt Haven’t done a crossword in years $GOOG #fun Dec 21, 2013
  • Why Successful CEOs Get Fired http://t.co/KehYfcljKv Founding CEOs get fired when tasks get larger than them, &the board loses confidence $$ Dec 19, 2013
  • Doctors Eye Cancer Risk in Uterine Procedure http://t.co/CD5OKwWs2I Grinding up fibroid in the uterus may increase the risk of cancer $$ Dec 18, 2013
  • Top Products in Two Decades of Tech Reviews http://t.co/GQjGsMR1Xz Walter Mossberg’s last column @ WSJ; a joy 2 read, will still b on web $$ Dec 18, 2013
  • Youthful Migrants Lured by Perks to Shrinking US Areas http://t.co/jxFNa41ftZ Promising idea to create urban jobs in rural areas $$ #winwin Dec 18, 2013
  • How Dogs Might Protect Kids Against Asthma: Gut Bacteria http://t.co/HaWa0goqdn Fascinating that dogs may aid kids w/immunity to asthma $$ Dec 17, 2013
  • Multivitamins Found to Have Little Benefit http://t.co/5o8jUZGkYc The controversy will continue; nothing this profitable ever dies $$ $SPY Dec 17, 2013
  • Vonn Rivals Schuss From Slope to Boardroom for Funding http://t.co/GaJHLVAyob Olympians r little corporations seeking sponsors, donations $$ Dec 17, 2013
  • Stocks That Still Have Perks http://t.co/k93IaeQlgl From discounts on cars&computers 2cruise bounty, here’s where 2find shareholder perks $$ Dec 14, 2013
  • The Tsarnaevs and the Boston Bombing http://t.co/Pz8MxYQXEf A decade ago, WSJ reporter happened to befriend the Tsarnaevs- an inside view $$ Dec 14, 2013
  • Mike Tyson Explores Kierkegaard http://t.co/n2mrAx1KuW Philosophy is a dead end; no truth to their views of existence, knowledge &ethics $$ Dec 14, 2013

 

Wrong

 

comment from a guy who doesn’t understand how banks work $$ Dec 19, 2013

  • What Bible is Pope Francis reading? http://t.co/EvnvIDNZlo Jesus never questioned property rights in his teaching, w/charity voluntary $$ Dec 19, 2013
  • How Pope Francis Misunderstands the Free Market http://t.co/Ksmn5DzS0O Simpler than that; he is unstudied, engages in wishful thinking $$ Dec 18, 2013
  • Wrong: Technology Adoption Discrepancy Btw Individuals & Institutions http://t.co/YkLJscgP7S Tries 2 connect falling ROA & Social Media $$ Dec 14, 2013

Comments

  • “Artificially forcing down Treasury yields via QE has 4 major bad effects?” ? David_Merkel http://t.co/z9nLhQSknr $$ $TLT $IEF $SHY Dec 19, 2013
  • Commented on StockTwits: but the company is selling; it needs cash more than shares — good companies typically s… http://t.co/AkpvtYiijw Dec 19, 2013
  • Commented on The Economist | Daily chart: Doomsdays http://t.co/21NoGGuzuD Dec 18, 2013
  • “I analyzed TRUP CDOs 4a bank in 2008 and 2009 — built a special model that could dig into the?” ? David_Merkel http://t.co/tRm5NtJ0mk $$ Dec 17, 2013
  • Commented on StockTwits: ‘ @MMula534 A lot. Most of the best investors r lifelong learners, & they c patterns whe… http://t.co/5pQzWca6Nm Dec 17, 2013

 

Give Them a Small Bank

Give Them a Small Bank

Posted on by David Merkel

It takes a thief to catch a thief. ?Thus I have a modest proposal for bank regulation. ?This could be applied more broadly to other forms of financial regulation also.

Why not require that all regulators spend time managing banks before they are appointed to be regulators? ?I think this would be very instructive to those who would become regulators, because they would see how issues at banks appear from the other side.

I am not suggesting that potential regulators “go native” and become sympathetic to banks. ?Working inside a financial institution can do the very opposite, and inform a regulator on what to be careful about. ?I want regulators to have the smarts that an insider perspective gives.

Think of me for a moment. ?I am not a fan of the insurance industry; I also don’t hate it, but I know it well. ?I know where the warts are. ?If I were a regulator, I would be feared by the industry, because there is almost nothing that I don’t know about insurance in broad. ?(I.e., I am not trying to brag, but I think that I am competent in analyzing insurers.)

My point is that we want intelligent regulators that cannot be bamboozled. ?That only comes with significant industry experience.

But industry experience isn’t enough. ?You want people who are intelligent critics, who can look at the industry and say that certain practices are wrong from a solvency or market conduct standpoint.

And thus I say, “Give them a small bank.” ?Let the Federal Government set up a bunch of small banks for prospective regulators to help manage for a few years. ?Being part of a senior management team would cue them into a wide number of problems as they try to make money in a competitive market. ?Let them interact with their regulators as well.

I write this because when I read what most broad bank regulators at the highest levels say, I think, “All you can do is suggest things should be tighter, but you have no good reasoning for what or why. ?Would that you understood the industry you are regulating.”

In general, it is a bad idea to have academic economists in regulatory positions, because they do not understand what they are doing, but merely follow their ideology. ?Far better to have practitioners that are skeptics be regulators, because they really know what is going on, and will not spare the industry over abuses.

As a dear friend of mine once said, “To truly loathe the public schools, you have to be one of the teachers.” ?In the same way, I say make the regulators work for the banks before they regulate them, so that they can properly loathe them.

Movie Review: Money for Nothing

Movie Review: Money for Nothing

Posted on by David Merkel

Movie Review: Money for Nothing

Why will you like this film?

You get to meet clever traders, investors, and business thinkers, policymakers, historians, and Fed Governors ? some who have doubts, and many that are still true believers.? The contrasts are considerable.

Here is the cast list, shamelessly copied from Wikipedia:

Federal Reserve Officials

  • Paul Volcker – Chairman of the Federal Reserve (1979?1987)
  • Janet Yellen – Vice Chair of the Federal Reserve (2010?Present), President, Federal Reserve Bank of San Francisco (2004?2010)
  • Alice Rivlin – Vice Chair of the Federal Reserve (1996?1999)
  • Alan Blinder – Vice Chairman of the Federal Reserve (1994?1996)
  • Peter Fisher – Undersecretary of the Treasury (2001?2003), Executive V.P. of the New York Fed (1994?2001)
  • Richard Fisher – President, Federal Reserve Bank of Dallas (2005?Present)
  • Thomas Hoenig – President, Federal Reserve Bank of Kansas City (1991?2011)
  • Jeffrey Lacker – President, Federal Reserve Bank of Richmond (2004?Present)
  • Charles Plosser – President, Federal Reserve Bank of Philadelphia (2006?Present)
  • William Poole – Economist, President, Federal Reserve Bank of St. Louis (1998?2008)
  • Laurence Meyer – Economist, Governor of the Federal Reserve Board (1996?2002)
  • Marvin Goodfriend – Senior V.P., Federal Reserve Bank of Richmond (1993?2005)

Economists and Financial Historians

  • Michael Bordo – Economist, Rutgers University Professor, Director, Center for Monetary and Financial History
  • David Colander – Economist, Middlebury College Professor
  • James Grant – Economist, Editor – Grant’s Interest Rate Observer
  • Martin Mayer – Scholar – The Brookings Institution, Author – The Fed
  • Allan Meltzer – Economist, Author of “A History of the Federal Reserve”, Carnegie-Mellon University Professor
  • Raghuram Rajan – Chief Economist – International Monetary Fund(2003 ? 2007), University of Chicago Professor
  • Richard Sylla – Economist, New York University Professor, Chairman – Museum of American Finance
  • Bill White – Chief Economist, Bank for International Settlements, (B.I.S.) (1995 ? 2008)

Traders and Investors

  • Peter Atwater – President and CEO – Financial Insyghts, LLC, Former Head of Asset Finance – J.P. Morgan
  • Tony Boeckh – Economist, Chairman – B.C.A. Research (1968?2002), Founder – The Boeckh Investment Letter
  • Jeremy Grantham – Investor, Financial Historian, Chairman – Grantham, Mayo Van Otterloo
  • Todd Harrison – Derivatives Trader, Hedge Fund Manager, Founder and CEO – Minyanville.com
  • John Mauldin – President – Millennium Wave Advisors, Author ? Endgame
  • Barry Ritholtz – Washington Post columnist, Author – Bailout Nation, CEO – Fusion IQ
  • Gary Shilling – Economist, Forbes columnist, Author, President – A. Gary Shilling & Co.
  • John Succo – Derivatives Expert, Hedge Fund Manager

A Rough Outline of the Film

Why is the Fed controversial?

It?s controversial because those who run it are appointed rather than elected, and so their actions are shielded from direct action by voters.? It is also a secretive institution, which does not reveal its actions/discussions rapidly.

Why was the Fed created?

The Panic of 1907 unnerved people, and led politicians to argue for a central bank.? It would have been smarter to tighten regulation of banks, but that is water under the bridge.? Most crises are due to misregulation of banks ? too much leverage, bad credit risks, and borrowing short to lend long.

What was the initial impact of the Fed?

Not much impact in WWI. When the Roaring ?20s came into existence, it was driven by loose monetary policy from the Fed, which led to?

The Great Depression

When debt grows rapidly, an eventual correction will come ? this one was sharp.? Like today, not sure the Fed could do anything to make things better, aside from not having been loose previously.

WWII to the End of the Gold Standard

The Bretton Woods conference linked the currencies of the developed world to the Dollar, which in turn was linked to gold.? Sadly, the Fed adopted a dual mandate, which said it must focus on consumer price inflation, and labor unemployment.? It didn?t work well then, and it works less well now ? the link between goods price and wage inflation is a weak one.

The link of the US Dollar to Gold worked will until the mid-?60s, when the pressures from fighting in Vietnam plus trying to create the Great Society stretched resources too thin.? William McChesney Martin caved when LBJ pushed him (perhaps beat him physically), and lowered rates in 1965, leading to inflation.

Over the ?60s and into the very early ?70s, as inflation in the US rose, foreign central banks, particularly the French, began to request gold rather than dollars.? Eventually in 1971 Nixon ended Bretton Woods, ceasing redemption of US Dollars for gold internationally.? And all of this led to?

The Great Inflation

Nixon leaned on the Fed to be loose, and Arthur Burns facilitated it.? William Miller continued it in the Carter Administration, leading to higher inflation.? Volcker was appointed by Carter, and as he pointed out in the movie, what he would do would be painful.? He resisted pressures to be easy and started inflation on a downward course by reducing growth of the money supply.? (Do you remember the news networks flashing the M-numbers on the screen each week, and the newspapers featuring them near the top of the business section?? You are old, like me.)? Volcker was not reappointed by Reagan in 1986 because he was viewed as an independent player (good), and not submissive to the administration.? Thus we got the toady Greenspan, who led to?

The Great Moderation

No one could have predicted that Greenspan would be such a political compromiser. But in 1987, after the crash, he assured liquidity to financial firms that might have been impaired from a 22% drop in the Dow.? This led to the concept of the Greenspan put.? Bad news?? Greenspan has your back, willing to inject liquidity when times are bad.

You can look at the pattern of interest rates over the period of his chairmanship.? Rates kept making lower lows, amid rapidly growing private debts.

Then we had a series of crises: Long Term Capital Management, where Lehman also almost went under.? The NASDAQ soared and fell hard 1998-2002.? Low interest/mortgage rates from 2002-2007 further encouraged a Debt/Housing Bubble.? ?The Fed was never a great regulator of the banks or mortgages.? They assumed the lesser regulators would do the job. But deregulation gutted the regulators, particularly because banks could choose their own regulators.? Hubris permeated the Fed, and Mortgage Equity Withdrawal fueled consumers, until there was nothing more to borrow against, leading to?

The Great Recession

Why did the Fed act as they did once the crisis broke?? Part of it was due to the dual mandate.? Another part was that Fed models were weak because they did not model the financial sector.? As James Grant would point out they were fixing prices via interest rates.? Once they started QE the Fed pushed the private sector to take risk because of a lack of safe assets with decent yield.? Other points:

  • Inflation is difficult to measure
  • Hubris
  • Insufficient skepticism, according to Hoenig

Hoenig comes off as an honest dealer versus the rest of the Fed, suggesting that many errors were made under pressure.

My Disagreements with the Movie

1) Bailouts were not needed in the way they were done

We could have rescued the operating subsidiaries that matter to average people, and let the holding companies fail.? Instead, we did the worst thing, and bought the equity of firms that were bankrupt.

2) Derivatives played no role in 1987

Unless you are willing to call futures derivatives, then derivatives played no role in the 1987 crash.

3) The net capital rule really wasn?t an issue.

4) Yes, the Fed has been monetizing the debt, and it will bite us eventually, when the demographics shift from saving to spending.? It will come in the next ten years.

Would you like the Movie?

I think most people would like the movie.? It gives the establishment sorts enough room to defend their actions, while offering wiser men the ability to say that the Fed was utterly wrong, and obviously so.

Twice before in our republic, we have eliminated a central bank.? Let us have the courage of our predecessors and eliminate the Fed.? It would be hard to do worse than the Fed did; they amplified economic shocks ? they did not mute them.

Redacted Version of the December 2013 FOMC Statement

Redacted Version of the December 2013 FOMC Statement

Posted on by David Merkel
October 2013 December 2013 Comments
Information received since the Federal Open Market Committee met in September generally suggests that economic activity has continued to expand at a moderate pace. Information received since the Federal Open Market Committee met in October indicates that economic activity is expanding at a moderate pace. Shades their view up, but I don?t see much to support it.
Indicators of labor market conditions have shown some further improvement, but the unemployment rate remains elevated. Labor market conditions have shown further improvement; the unemployment rate has declined but remains elevated. Weasel words because the participation rate is falling, and wages are stagnant.
Available data suggest that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months. Household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months. No real change.? Language clearer.
Fiscal policy is restraining economic growth. Fiscal policy is restraining economic growth, although the extent of restraint may be diminishing. Shades fiscal drag down, but the deficit is shrinking, so where do they get this?
Apart from fluctuations due to changes in energy prices, inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable. Inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable. Calls energy special, but it plays into all we do.? TIPS are showing slightly higher inflation expectations since the last meeting. 5y forward 5y inflation implied from TIPS is near 2.65%, up 0.08% from September.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. No change. Any time they mention the ?statutory mandate,? it is to excuse bad policy.
The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. No change. ?Monetary policy is omnipotent on the asset side, right?
The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall. The Committee sees the risks to the outlook for the economy and the labor market as having become more nearly balanced. Financial conditions are looser.? That?s largely due to the loose monetary policy globally.
The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term. Shades their view on inflation down.? CPI is at 1.2% now, yoy.
Taking into account the extent of federal fiscal retrenchment over the past year, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program as consistent with growing underlying strength in the broader economy. Taking into account the extent of federal fiscal retrenchment since the inception of its current asset purchase program, the Committee sees the improvement in economic activity and labor market conditions over that period as consistent with growing underlying strength in the broader economy. No significant change, but switches the spotlight to the asset purchase program, suggesting that it has helped.
However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases. Worthless sentence eliminated.
Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to modestly reduce the pace of its asset purchases. Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month. Reduces the purchase rate by $5 billion each on Treasuries and MBS 
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. No change
Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate. The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate. No real change.
The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. No change. Useless paragraph.
In judging when to moderate the pace of asset purchases, the Committee will, at its coming meetings, assess whether incoming information continues to support the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective. If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. Says that purchases will likely continue to decline if the economy continues to improve.
Asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s economic outlook as well as its assessment of the likely efficacy and costs of such purchases. However, asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases. No change.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. No change.Promises that they won?t change until the economy strengthens.? Good luck with that.
In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. The Committee also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0 to 1/4 percent will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. Not a time limit but economic limits from inflation and employment.Just ran the calculation ? TIPS implied forward inflation one year forward for one year ? i.e., a rough forecast for 2015, is currently 1.72%, down 6 bps since the last meeting.? Here?s the graph.? The FOMC has only ~1% of margin in their calculation.
In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. No change.
The Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal. New sentence.? Repetitive.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. No change.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Charles L. Evans; Jerome H. Powell; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Charles L. Evans; Esther L. George; Jerome H. Powell; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. No change
Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations. Voting against the action was Eric S. Rosengren, who believes that, with the unemployment rate still elevated and the inflation rate well below the target, changes in the purchase program are premature until incoming data more clearly indicate that economic growth is likely to be sustained above its potential rate. George in, Rosengren out.? Rosengren thinks any tapering is premature.

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Comments

  • Small $10 B/month taper.? Equities rise, and long bonds fall.? Commodities do nothing.? The FOMC says that any future change to policy is contingent on almost everything.
  • Shades their views of GDP up and Inflation and fiscal drag down.
  • They think that if they use more words, they will be clearer.? Longer statements are harder to parse and understand.
  • Current proposed policy is an exercise in wishful thinking.? Monetary policy does not work in reducing unemployment, and I think we should end the charade.
  • In the past I have said, ?When [holding down longer-term rates on the highest-quality debt] doesn?t work, what will they do?? I have to imagine that they are wondering whether QE works at all, given the recent rise in long rates.? The Fed is playing with forces bigger than themselves, and it isn?t dawning on them yet.
  • The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.? As a result, the FOMC ain?t moving rates up, absent increases in employment, or a US Dollar crisis.? Labor employment is the key metric.
  • GDP growth is not improving much if at all, and much of the unemployment rate improvement comes more from discouraged workers, and part-time workers.
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