The Credit Crisis Financial Stocks Short Journal

New York Times headline "Vice Chairman of Fed to Retire, Letting Obama Reshape Board"

http://www.nytimes.com/2010/03/02/business/economy/02fed.html?ref=business

This is true, after the appointments Obama will have choosen the entire Fed's board(except Liz duke), 5 votes at the FOMC that were influenced by him to some degree(Bernanke and Tarullo plus the 3 new names)

The article even says "The board of governors has historically tended to be somewhat less hawkish on inflation than the presidents of the 12 regional Fed banks, said Michael D. Bordo, an economist at Rutgers"

With the UR so high and Obama dropping in the polls we know it wont be Richard Fisher or some other hawk who will take the seats
The White House will effectively influence the timing of the exit strategy, what I dont understand is what is Obama waiting for to fill up the vacancies at the Fed's Board
 
The folks over MS macro team might want to take a look at this bit from Rosenberg

"Look at the employment backdrop too — we are already in the mother of all jobless recoveries. Here we are seven months off the lows in real output and yet nonfarm payrolls are down 1.1 million — this has never happened before. In the last two jobless recoveries the level of employment was down 528,000 (2002) and 237,000 (1991) and both times the Fed did not tighten for well over about two years after the recession statistically came to an end. Historically, the number of jobs created through the first seven months of recovery comes to a cool one million — so for those who think that the Fed should be responding in a normal fashion to an abnormal recovery that followed an abnormal recession may want to check out the extent of their normality."
 
I'm sure they have noted Rosie's arguments for some time now. This is shaping up like 2008 when strong equity and commodity markets (and an employment market that was not getting weaker) seemed to mask the underlying deterioration elsewhere. Like then, the Fed will be under pressure to tighten. Unless you feel that there is another Fannie/Freddie/Lehman/AIG/world financial meltdown coming, there won't be anything to change the strong equity and commodity dynamic. The pressure could get great enough to force the Fed's hand.

Right now, the short end seems blissfully unaware of all this, which is fine by me. I would note again that the underlying GE futures continue to hit new highs, but that the call options are still stuck at their Thanksgiving levels. There is an asymetric risk anyone holding these calls is now bearing. At best, they can just eke up a couple of points a month from here, but one statement, or speech, or real strong employment report can send them hurtling towards zero in a heartbeat
 
Hoenig on CNBC
http://www.cnbc.com/id/15840232?video=1429256844&play=1

It appears to me that he just laid out himself the argument agains the 'lets hike once or twice and stop', he says policy expectations would change and behavior would change, people would think a new cycle has begun. So Greenlaw might be incorrect in his thesis the fed hikes a bit by September

Specially given that the king hawk Hoenig wants to REMOVE the extended period statement in order to 'leave the option' for the fed to hike rates, no one in the right mind can think the fed might hike with the statement in and if they do, Hoenig would disagree!
 
I'm trying to find a way to bet against the euro Taleb style. But it seems that the options at the euro futures contract only goes to Dec 2010 and that might be too early. The big boys dont have much trouble calling GS and getting some kind of derivative, but for the average IB trader its hard

The thesis here is all the government debt overload they have will lead to many problems and the euro is going down on those issues, if it should or not I believe that is irrelevant, the market goes down on bad news from EU members and the bad news should keep coming as many countries had tough banking crisis and are likely to suffer sovereign debt crises. I accept the theory that is not in the interest of the members to pull out of the euro but it seems that even if that doesnt happen the market wont allow the euro experiment to continue. Perhaps the trade here is to short EUR/CHF but more thought is needed
 
One small detail about the FOMC which I was not aware
"All of the Reserve Bank presidents, even those who are not currently voting members of the FOMC, attend Committee meetings, participate in discussions, and contribute to the Committee's assessment of the economy and policy options. The Committee meets eight times a year, approximately once every six weeks."

This means that Hoenig has been yelling at other members for the entire year of 2009 and yet that did not had an impact. I thought he started to attend this year and could influence people there, that looks unlikely, the guy is likely just a lonewolf that gets ignored
 
This article was posted on another thread, but I thought I'd post it here as well. As someone w/a significant bet that the economy will remain weak and that short rates stay close to zero, pieces like this scare me. They are usually published right in time for a hiring boom to begin.

http://www.theatlantic.com/magazine...-new-jobless-era-will-transform-america/7919/


How a New Jobless Era Will Transform America

The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.

By Don Peck

How should we characterize the economic period we have now entered? After nearly two brutal years, the Great Recession appears to be over, at least technically. Yet a return to normalcy seems far off. By some measures, each recession since the 1980s has retreated more slowly than the one before it. In one sense, we never fully recovered from the last one, in 2001: the share of the civilian population with a job never returned to its previous peak before this downturn began, and incomes were stagnant throughout the decade. Still, the weakness that lingered through much of the 2000s shouldn’t be confused with the trauma of the past two years, a trauma that will remain heavy for quite some time.

Very long article, click the link for the whole thing ...
 
Quote from ralph00:

This article was posted on another thread, but I thought I'd post it here as well. As someone w/a significant bet that the economy will remain weak and that short rates stay close to zero, pieces like this scare me. They are usually published right in time for a hiring boom to begin.
More...

Everyone and their mothers(including tons here at ET) were calling for a recession in 2007, some said 'If there is a recession this will be one of the most antecipated recessions ever, I dont buy it'. Contrarianism works, then it doesnt work, it resembles flipping a coin. VN would argue the coin is a bit biased against the crowd though
 
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