Numbers

[nitro]

Quote from ElectricSavant:

...What would that do to the dollar?

You already know the answer.

nitro

 

[ElectricSavant]

so in supply-side economics...the lesser of two evils may in fact be to increase interest rates...rather than letting the free market run amuck...

hey maybe we can come up with a 52 state United States Union...and let states like Tennessee and Louisana join...

 

[Bernard111]

Quote from FuturesTrader71:

I was just teasing. You are right. There is a supply side problem with this that has nothing to do with the cost of money. I wanted to throw that in anyway.

 

[2cents]

Quote from nitro:

From Barron's this weekend. This realization is so devilishly obvious I completetly missed it:

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Warning: Sticker Shock Ahead
June 21: The latest official annual rate of inflation is 4.2%. Four point two percent! [that's the best they can get] even after rubbing and scrubbing...raw price-inflation numbers and adjusting the contents of the market...And total nominal retail sales [were] up a scanty 0.1% in May...

If you think that gingerly raising interest rates will stop rising inflation, you are wrong. Until rates get so high that they cripple the economy, higher interest rates only produce higher prices, which is defacto inflation: As producers of goods and services borrow money to finance ongoing business, the higher costs of that borrowing have to be figured into the higher prices of the final output of goods and services, so that businesses can make profits.

So in the short run, higher interest rates ACTUALLY CAUSE HIGHER PRICES [!!!! my emphasis] And that's another compelling reason, as if you needed any more reasons, not to let inflation in prices get started by letting inflation in the money supply get started. The only thing that will stop inflation is the inability or unwillingness (or both) of consumers to consume goods and services at those higher prices. This will cause economic contraction.

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So the FED is actually responsible in the short term for creating inflationary pressures, the very thing it is trying to fight!!!! Too funny, but deadly serious.

nitro

alternative opinion: the Fed's actually responsible for avoiding a worldwide depression after the Nasdaq/internet bubble burst, followed by 9/11 and the Enron/WorldCom & other Corporate America type debacles... how did they do that? by encouraging activity... how do you do that when you are the Fed? well, you know that...

as for higher rates causing higher prices, thats complete bollox... on the supply side of the equation, prices are set by the firms that have the most staying power, typically the less leveraged, i.e. the less-impacted by rates... what you can expect though is more highly-leveraged firms throwing the towel... not an unhealthy prospect...

 

[nitro]

I love these people that keep saying the FED will stop tightening at a given number. I don't know what it will take for the boneheads to get through their head:

For example, if QM goes to $80 a barrel or anywhere near it, the FED tightens. Why would anyone say otherwise in the face of what Bernanke has said repeatedly?

Sheeesh

nitro

 

[nitro]

I estimate 50% chance of raise.

I find it interesting that markets may prefer a hike and a dovish statement, than a pause and a hawkish statement. The latter creates more uncertainty than the former.

QM is at high 70s, but seems as if about $5 of that is Prudhoe Bay, so hard to assess how FED will view that....

nitro

 

[Dogfish]

if you look at the minutes of of May 20th '97 after the hiking pause, the fed thought they'd need to hike again but didn't. Its next move was to ease in the fall of 98.

and

In the minutes of 27/28 june 2000 the fed thought it would have to tighten again but it didn't it eased in jan '01

The fed thought it was just pausing in those two meetings and accompanied them with hawkish statements.

The question is are they really are just pausing or stopping? They didn't even know themselves on those previous occasions, maybe history will repeat itself. I've read quite a few bank research articles suggesting buying dips in treasuries on the back of this

 

[2cents]

prudhoe bay is a non-issue imo, short term spike...

fed shld decrease the pace of rate hikes to allow for a better assessment as to whether the cpi, pce etc higher-than-desired figures are just 'temporary'... going for a 2-3 monthly review of rates makes sense and Ben's implied that back in April-May although it was happily misinterpreted by "pause = stop" type dumbos, and again recently...

oil at $75 is bad, but both for growth and inflation, therefore not obvious for anybody how things shld pan out shld oil remain at such levels for v.long or jump higher... plus there's nothing much the fed can do regarding existing geopolitical tensions... methinks a stronger grassroots momentum switch & political push towards alt. energies shld provide both long term growth opportunities, jobs and have a positive impact on real GDP growth expectations, but thats just me ;-)

good luck with yr 50/50 bet though, there could always be a surprise!

 

[nitro]

FFFs once again incredibly accurate. It gave one in five chance of rate hike. There are five voting members and only one dessented.

Looks like markets are very accurate at modeling each voting member.

nitro

 

[nitro]

As usual the media is giving greater weight on what the stock market is telling them instead of what the bond market is telling them.

The bond market by having a deeper inverted yield curve, imo is representing that this economy is in deep shit and that recession is imminent. Will the FED have to shift course hard and start cutting short term rates soon, and that it has gone too far by raising short term rates to what appears to be a neutral 5 1/4% ? Or will the bond market have to do a 180 and admit (price in) that the FED has everything under control?

This is exactly what stock markets dont want to see:

http://finance.yahoo.com/video/time

and click on the video: "Foreclosures skyrocketing"

The question, is the stock market trading now with this scenario (hard landing) priced in already? I can't believe that is true, but it is possible that a hard landing is priced in and markets are trading beyond that?

nitro

Disclaimer: I am now short US SIFs, and my writing likely has that prejudice built in.