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Global Macro Trading Journal
- Thread starter Daal
- Start date
Quote from Daal:
I should have known better than try to debate you. I tell you that your view of bernanke's beliefs are wrong then you start to quote fisher, classic. Get back to me when you consider Buffett a value investor than we can start to have a rational debate
I quoted Fisher merely to demonstrate that the Federal Reserve as an entity is aware of the arguments I am making -- because an individual within the inner circle is making those same arguments himself.
Bernanke surely disagrees with Fisher -- another "no shit sherlock" -- but he isn't deaf to the things his Fed Presidents are saying. The Fed may be set in its ways, but I think it is simplistic to perceive the Fed as unaware of the meaningful political risks embedded in outlier policy decisions.
Every time we clash I get the impression we're on different floors of a building. You're first level, I'm fourth level, and I keep urging you to use the stairs.
Quote from darkhorse:
Yeah, except if you believe that, you're not really paying attention...
Your scenario would be credible if we had a Republican incumbent in danger of being replaced by a Democrat.
But we have the reverse -- a fiscally liberal president, who is running against the economy moreso than his Republican opponent, and may lose badly if the economic situation does not improve.
Add to this the fact that Romney, a challenger who arguably has better than 50/50 odds of winning at this point, has been vocally and sharply critical of easy Fed policies in an effort to play to his base.
Then, for icing on the cake, consider the tea party has not gone away... that the Scott Walker Wisconsin result illustrates a surprisingly hard line attitude to fiscal issues... the popularity of cutters and slashers like Chris Christie... the ousting of longtime senate moderates like Dick Lugar by "hawks" like Richard Mourdock... and finally the reasonable observation that a large and vocal percentage of the American public, falling roughly between Romney and Ron Paul, believe Keynesianism is destroying the country.
The Fed, in other words, is playing to an increasingly hostile political audience. No way in hell they get carte blanche if things keep getting worse. If anything they get more blame, to a chorus of "we tried your Keynesian bullshit, now let's go back to good old fashioned free markets" etcetera.
Hmm that doesn't sound plausible. Romney and the Tea Party tighten fiscal and monetary policy (assuming they somehow manage to bully Bernanke, who isn't subject to a popular vote anytime soon), we get a 1937 rerun, the S&P hits 800, unemployment goes over 10% again - and this somehow *strengthens* popular support for tight money and austerity?? There's no way on earth that is going to be the reaction - you will see street riots, Romney will flip-flop immediately, and the Tea Party will be cast into the political wilderness for a generation.
Remember in the mid 1930s there were plenty of right-wingers talking about how FDR was taking the country to socialism, talking about gold and inflation and debasing the dollar. One recession was all it took to make them politically irrelevant for the next 40 years.
And by the way, re, Buffett -- WB is no longer a traditional / pure value investor by his own tacit admission, and hasn't been for quite a while.
He is now a private equity / GARP guy, who orchestrates buyouts at significant premiums, makes heavy capital investments in highly government regulated industries (then brags about it), and says shit no pure value investor would hold truck with, like "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
This too seems patently obvious (if one looks beyond labels, and / or recognizes that the present is not the past)...
He is now a private equity / GARP guy, who orchestrates buyouts at significant premiums, makes heavy capital investments in highly government regulated industries (then brags about it), and says shit no pure value investor would hold truck with, like "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
This too seems patently obvious (if one looks beyond labels, and / or recognizes that the present is not the past)...
Quote from Ghost of Cutten:
So in gold - Bernanke removed one bull point just now, and the market reaction was very negative so far. Scenarios:
I'd say Bernanke's behavior was somewhat expected. I can only remember 1 situation where he sorta 'guided' the FOMC to do something("the Federal Reserve will need to consider whether the current stance of policy remains appropriate" in 2008 post Lehman) in public, all the other times he gives his diplomatic 'well, according to our last statement' 'we will debate this on our next meeting'
What you have here is a market that constantly tries to front run the fed creating a momentum type rally that feeds unrealistic expectations, which then lead to disappointment. Thats why is so crucial to try to come up with the probabilities of fed easing and not rely on what the market is doing or how they are interpreting Hilsenrath etc. I realized that when it comes to central bank policy, markets makes too many silly mistakes
Quote from Ghost of Cutten:
Hmm that doesn't sound plausible. Romney and the Tea Party tighten fiscal and monetary policy (assuming they somehow manage to bully Bernanke, who isn't subject to a popular vote anytime soon), we get a 1937 rerun, the S&P hits 800, unemployment goes over 10% again - and this somehow *strengthens* popular support for tight money and austerity?? There's no way on earth that is going to be the reaction - you will see street riots, Romney will flip-flop immediately, and the Tea Party will be cast into the political wilderness for a generation.
Remember in the mid 1930s there were plenty of right-wingers talking about how FDR was taking the country to socialism, talking about gold and inflation and debasing the dollar. One recession was all it took to make them politically irrelevant for the next 40 years.
Yeah but look how you shifted the scenario. I said that the Fed is heading into an increasingly hostile political climate, and that if things get bad, the cry will be "loose policies haven't worked."
What you just describe is the potential result of what happens AFTER the conservatives take the reins and say "okay, our turn," and then fuck everything up via an embrace of Mellonist policies.
But that wouldn't happen overnight, the transition would take a good bit longer, and meanwhile the main point stands that there would likely be a transition period:
* Fed entering increasingly hostile political environment with conservatives on rise
* Fed policy not immediately changed or challenged by Romney, but tone in Washington growing more hostile, perhaps even aggressively hostile, to more easing policies
* QE3 implementation leading to more failure, loss of Fed faith, angry conservatives saying "Ok, our turn," possibly exploiting / accelerating a new "end / neuter the Fed" movement
All of the above taking a significant amount of time to play out --- six months, twelve months, eighteen? -- and only THEN the potential 1937 style fallout, in which the big Mellonist reembrace wrecks conservatives and invites neo-Keynesian resurgence.
The timeframe is also what presents a political danger to the Fed because, even if the conservatives end up screwing themselves in the longer term -- a result that might take 2 to 3 years or more to crystallize politically -- they could conceivably take the upper hand long enough to threaten the Fed's independence first.
Quote from darkhorse:
The Fed, in other words, is playing to an increasingly hostile political audience. No way in hell they get carte blanche if things keep getting worse. If anything they get more blame, to a chorus of "we tried your Keynesian bullshit, now let's go back to good old fashioned free markets" etcetera.
I really, really doubt it. Ron Paul got precisely nowhere and the utter failure of his ideas to gain any significant traction (message board warriors notwithstanding) exceeded my worst fears. Republicans, with perhaps a tiny handful of exceptions, have been even more profligate spenders than Democrats. Greenspan and Bernanke were both appointed by Republican presidents, etc. All the anti-Fed, anti-spending rhetoric is just propaganda and will result in at most only cosmetic changes.
It'll be just like the TARP vote: a day or two of -5% in the Dow with ominous rumblings from Wall Street and Congress will be practically begging Bernanke to print.
While I agree there is at least some flicker of a free market tradition left in the American public, it's the sort of thing that's likely to come into play when we're picking through the wreckage and rebuilding the system a decade or two hence.
Quote from Ghost of Cutten:
So in gold - Bernanke removed one bull point just now, and the market reaction was very negative so far. Scenarios:
i) it's a shakeout. Market should stabilise in a couple of days, then rebound strongly and move to new highs in a couple of weeks. Be long (moderate size) on the first major up day after today, add on a true breakout above the recent highs.
ii) the rally is over, and we're in a trading range until more clarity arrives. Market should fail to rally significantly within the next few days, but not collapse to new lows either, just chop around. Be flat.
iii) the bear market is intact, and this was just a sucker rally. The market should close weak and have another down day tomorrow, and break to new lows (below 1525) within the next 2-3 weeks at most. Short bounces and add to shorts on a break below 1525 on a closing basis.
Thoughts?
So it will go up, sideways or down?
Frankly I don't understand how you can be confidently predicting the price of an asset to literally double one minute, and then a couple of hours later do a complete 180 based on a 1-2% decline in price.
And regardless of what Bernanke says I don't believe for a second they are done printing. If gold breaks the recent triple bottom I will exit the additional speculative/trading positions I put on last month, but certainly hold my investment position.
Quote from Specterx:
I really, really doubt it. Ron Paul got precisely nowhere and the utter failure of his ideas to gain any significant traction (message board warriors notwithstanding) exceeded my worst fears. Republicans, with perhaps a tiny handful of exceptions, have been even more profligate spenders than Democrats. Greenspan and Bernanke were both appointed by Republican presidents, etc. All the anti-Fed, anti-spending rhetoric is just propaganda and will result in at most only cosmetic changes.
We can agree to disagree... totally true that Repubs are profligate spenders, but they are also world class hypocrites, re, hammering fiscal discipline platforms, and the tea party influence is so rabidly anti-government -- with plenty of anti-Fed, anti-Keynesian rhetoric roots in the main party -- that a Keynesian "witch hunt" could gain traction as a viable political movement (red meat to the base). If Bernanke is a witch doctor, then the Repubs are more likely to go after him with pitchforks in renewed fiscal crisis than to treat him as revered shaman. Ron Paul is still more fringe than mainstream but it's his trend more than his destination that is telling imho.
Of course price will ultimately determine who is right, but I offer this view neutrally (neither long nor short PMs at moment, with willingness to go either way depending on resolution of the current test -- or to possibly maintain no position at all)
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