The Credit Crisis Financial Stocks Short Journal

Quote from Daal:

Oil is adding $9 in 2 days and the rates markets seem quite comfortable with that
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Daal, remember in 08 and after all the deflationists screamed reflation attempts would be futile... Just look at Japan. They tried it for 20 years and their stockmarket is still 75% lower then it was back then.

You think they have been proven wrong and history will look upon the curent timeframe as proof reflation can be achieved or do you think the jury is still out on that?
 
Quote from Debaser82:

Daal, remember in 08 and after all the deflationists screamed reflation attempts would be futile... Just look at Japan. They tried it for 20 years and their stockmarket is still 75% lower then it was back then.

You think they have been proven wrong and history will look upon the curent timeframe as proof reflation can be achieved or do you think the jury is still out on that?
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In the end I believe the fed succeeds in creating inflation, I explained a few times, the deflation is unbeatable argument I believe is wrong, because QEs can affect M2 and iexpectations(which soared almost 1% after QE2). Scott Summer makes a good point that the BOJ acts as if they were targeting DEFLATION, thats not what they say but thats how they act.

Currently I'm just surprised that the Fed futures market is acting as if during stagflation the Fed is more likely to stay low for longer. I'm not sure that is correct, in this cycle I expect the Fed to care less about employment and more about inflation and iexpectations, this is due the balance sheet size. If the middle east explodes inflation might go back to target(headline will surely break it, core will get there faster than otherwise) and iexpectations are already on range, so it could break too. Employment might be hurt but if given a choice I'd say Fed picks inflation over employment
 
Sold a bit more of FF so far I cut about 50% of my position. I'm taking of advantage of the rally because its always emotionally harder to sell on a decline.
I will hold this defensive 50% position, till it becomes clear what is going to happen
 
For what it's worth, I think Brent above $100 and NYMEX crude above $94 gives Bernanke the political / economic cover to do QE3.

As we saw in 2008, oil above $100 acted as a drag on economic activity. Yes it does mean higher prices for energy products (gasoline, heating, airfares), but broadly speaking these "inflationary" effects mean that economic activity is reduced, especially for discretionary retail.
 
Quote from m22au:

For what it's worth, I think Brent above $100 and NYMEX crude above $94 gives Bernanke the political / economic cover to do QE3.

As we saw in 2008, oil above $100 acted as a drag on economic activity. Yes it does mean higher prices for energy products (gasoline, heating, airfares), but broadly speaking these "inflationary" effects mean that economic activity is reduced, especially for discretionary retail.
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This is true but if you look at what really correlated with past Fed balance sheet actions, two things stand out. iexpectations and M2
The Fed talks about employment all day but they dont act as if they cared. The UR hoved around 9%+ for months after QE1 and they did nothing, in fact they talked about exits quite a lot, when iexpectations tumbled during the double dip scare, they acted quite quickly
 
Not to mention that QE1 was set to end in late 2009 and all they did was slow the purchases and extend the time period, they did not increase even though the labor market was getting junked
 
Quote from Daal:

Not to mention that QE1 was set to end in late 2009 and all they did was slow the purchases and extend the time period, they did not increase even though the labor market was getting junked
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Yes you're right about i/r expectations.

Along this line of thought, with the financial markets knowing that the Bernanke put is well and truly in place, and knowing how loose the Fed is (and has been) with monetary policy, with oil at these levels, it's reasonable to expect the market to price in QE3 very quickly.
 
Quote from m22au:

Yes you're right about i/r expectations.

Along this line of thought, with the financial markets knowing that the Bernanke put is well and truly in place, and knowing how loose the Fed is (and has been) with monetary policy, with oil at these levels, it's reasonable to expect the market to price in QE3 very quickly.
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The higher oil goes I'd expect more and more speeches coming in the hawkish side. Just like the article I posted a few days ago that shows they tend to act when inflation data comes out higher than expected they speak like hawks

If anything, this will show the markets QE3 wont happen and the exit might come. I dont think QE3 is out for good though
As I said in the past the ultimate size of the balance sheet will depend on other factors such as bank lending, velocity,etc. If a certain factors happened the Fed would be forced to do QE3 but we are far from that right now
 
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