Financial topics

[jdcpapa]

Fed watchers will be looking for hints of a stronger easing move in Bernanke’s next speech on Aug. 26 at the central bank’s policy retreat in Jackson Hole, Wyo.


The goal posts are up.

..............short term head games! My analysis of the 2010 budget (reading the tea leaves) is the nail in the proverbial coffin, for me. In my view, what we are dealing with is a generational shift in the midst of a class struggle and a need for a renewed call for Americans to "step up to the plate". The classes have not quite connected with the end game. The "haves and the have nots" are "bickering"(while Rome burns?). It is different now in a down economy. But the fate of the US(and the world)tips in the balance.

There is no way the present "system of thought and self respect" will get us beyond this. Respectfully submitted.

[Higgenbotham]

Fed watchers will be looking for hints of a stronger easing move in Bernanke’s next speech on Aug. 26 at the central bank’s policy retreat in Jackson Hole, Wyo.


The goal posts are up.

..............short term head games!

True, I would say the crisis has more or less begun but the market will breathe in and out. The Fed will apparently play that for all it's worth, as they should.

This news indicates the fringe market watchers (like us) and the Fed have both spotted the hurricane and agree on when it might make landfall (August 26) and how much damage there might be (2 years worth). The Fed has put an action plan into place to minimize the damage. Whether it will work or not is unknown, but the new known is that the Fed is aware and moving. Notably, some market watchers are a bit shocked at the rabbit that the Fed pulled out of its hat because it smacks of desperation, and some on the Fed committee are dissenting. Dissent has been building inside the Fed for months, as we noted 7 or 8 months ago. Mr Plosser fired the opening salvo during a speech in Chile where he stated the Fed should not be trying to prop up real estate prices. He was a dissenter today.

http://www.philadelphiafed.org/publicat ... -chile.cfm

January 17, 2011 Speech

I believe we have come to expect too much from monetary policy. Indeed, broadening its scope can actually diminish its effectiveness. When monetary policy over-reaches and fails to deliver desired, but unattainable, outcomes, its credibility is undermined. That makes it more difficult to deliver on the goal it is actually capable of meeting. Moreover, when the central bank is asked to implement policies more appropriately assigned to fiscal authorities, the independence of monetary policy from the political process is put at risk, which also undercuts the effectiveness of monetary policy.

Nonetheless, the notion persists that activist monetary policy can help stabilize the macroeconomy against a wide array of shocks, such as a sharp rise in the price of oil or a sharp drop in the price of housing. In my view, monetary policy’s ability to neutralize the real economic consequences of such shocks is actually quite limited. Successfully implementing such an economic stabilization policy requires predicting the state of the economy more than a year in advance and anticipating the nature, timing, and likely impact of future shocks. The truth is that economists simply do not possess the knowledge to make such forecasts with the degree of precision that would be needed to offset the economic shocks. Attempts to stabilize the economy will, more likely than not, end up providing stimulus when none is needed, or vice versa. It also risks distorting price signals and thus resource allocations, adding to instability. So asking monetary policy to do what it cannot do with aggressive attempts at stabilization can actually increase economic instability rather than reduce it.

Therefore, in most cases the effects of shocks to the economy simply have to play out over time as markets adjust to a new equilibrium. Monetary policy is likely to have little ability to hasten that adjustment. In fact, policy actions could actually make things worse over time. For example, monetary policy cannot retrain a workforce or help reallocate jobs to lower unemployment. It cannot help keep gasoline prices at low levels when the price of crude oil rises to high levels. And monetary policy cannot reverse the sharp decline in house prices when the economy has significantly over-invested in housing. In all of these cases, monetary policy cannot eliminate the need for households or businesses to make the necessary real adjustments when such shocks occur.

Getting back to trading strategies, in my view, the assumption has to be made that the Fed can kick the can through the end of August and avoid a crash. I personally will not be shorting anytime soon in front of the locomotive that was unleashed today. The S&P futures moved up 9.5% from low to high today and sit near their high now. With the market down 20% in 2 weeks and already on hair trigger alert so to speak, it doesn't take much to trigger a buying panic.

[OLD1953]

Panic down, panic up, that amplification is about to break over to oscillation, IMHO.

Given that banks are now charging fees for large deposits, just how are we supposed to figure the FED has any more influence to use? That's what I don't understand. If companies are already paying negative interest on deposits, what makes anyone think they want to borrow? Or is this just a case of "all I can fire with a bow is an arrow, even if arrows won't stop the beast, all I have is a bow so I'm going to fire all the arrows I have and hope for the best".

Wishful thinking and jawboning are just not going to cut it any longer.

[Higgenbotham]

I posted this back in March. My view is it's still OK to make a comparison to 1929 as John is doing but with some modifications.

My view is today is October 7, 1929 and not October 22, 1929.

Counting down 23 trading days from the September 3, 1929 high is the early October low. From there, a sharp retracement ensued that took out 60% of the 23 day fall. This is typical of all market crashes. After the flash crash, 70% of the fall was retraced.

On our present chart, a day count should be done from a comparable high, one of which is July 7. The market completed a 23 trading day fall from July 7 this morning. To meet with a comparable pattern from 1929, there will be a sharp 5 day retracement (at least) to approximately 1275 on the S&P. In my opinion, the retracement will last longer and be steeper than 1929 due to Fed and HFT actions.

October 07, 1929 = August 10, 2011
October 11, 1929 = August 16, 2011 (we are counting trading days)
October 23, 1929 - August 26, 2011 (key potential crash date which correlates well to 1929)
October 24, 1929 = August 29, 2011
October 29, 1929 = September 01, 2011

[aedens]

Margin calls who got caught. We will see. We seen the effect on risk pools. There smart people or there gone...

TF Market Advisors:
Asking almost any credit trader how their market is trading, and the most common answer is broken. Yesterday, a few people would have said bidless, or ugly, but today, its just broken. Liquidity is extremely low. Every trade resets the market. Trades are being driven by fear and fear alone. Fear of a further sell-off. Fear of whipsaw. Sovereign debt trading was the first to be hit, and it has now hit all the credit markets. Even equities seem to have seen a complete breakdown, with big air pockets. ZH

Why I avoid pools. Some pages back we noted the shot gun marriage of the FED and Washington. I do not agree or disagree since it is just what it is.
http://www-stat.wharton.upenn.edu/~stee ... verage.pdf
It is a predation process since Government is the derivitive market by a shot gun marriage. We did note tearups early on contracts in the forums since they could not funtion under the scope of inquiry in the Legislation process even befor this reality. ----> http://generationaldynamics.com/forum/v ... 3610#p9166

I do not pick up nickols in front of a steam roller we also read did we not?

http://finance.yahoo.com/news/Obama-Boe ... 3.html?x=0

Sample forum's elsewhere:
Obama knows that his re-election hinges on healthy 401k's. I voted for him, and it was the worst mistake I ever made.

Wall Street doesn't care nor do they respond to the economy. It rocketed because taxpayers will continue to provide FREE money to the 19 banks at least another 2 and a half years.

[RDRUNR]

October 07, 1929 = August 10, 2011
October 11, 1929 = August 16, 2011 (we are counting trading days)
October 23, 1929 - August 26, 2011 (key potential crash date which correlates well to 1929)
October 24, 1929 = August 29, 2011
October 29, 1929 = September 01, 2011

I'm always amazed at your analysis, keep up the great work. (Inc. John too). I always enjoy seeing history applied to the present. Great stuff.

[aedens]

The Dow Jones Industrial Average went from a low of 191 in early 1928 to a high of 300 in December, 1928 and peaked at 381 in September 1929. Due to the anticipation of continued increases in earnings and dividends,Price/Earnings ratios rose from a conservative 10 or 12 to 20, and higher for the market's favorite stocks. Many observers believed that stock market prices in the first six months of 1929 were overpriced, while some perceived that stocks were cheap. On October 3, the Dow began to drop, declining throughout the week of October 14. The night of Mondy October 21,1929, margin calls were heavy, and numerous Dutch and German sell calls came in overnight for the Tuesday morning opening. On Tuesday morning, out-of-town banks and corporations called in $150 million of call loans, and Wall Street was in a panic before the New York Stock Exchange opened.

Other well-known dates in that fateful October are “Black Thursday” (October 24, 1929) and “Black Monday” (October 28, 1929), which were horrible dates for investors. It would take 27 years for the stock market to recover and surpass its pre-crash level.

During the stock market crash of 1929, 4,000 banks failed because depositors fought to reach teller windows before the money ran out and their savings disappeared forever. Four years later, Congress passed the Glass-Steagall Act, which banned any connection between commercial banks and investment banking, to ensure that such a tragedy would never be repeated in the belief that the banks' collapse was due to their stock market speculation.

http://www.thegreatdepressioncauses.com/timelines.html

[John]

At this moment, the Dow futures are down 254 and falling like a rock.

I vote for Oct 23, 1929, Higgie.

john

[Higgenbotham]

At this moment, the Dow futures are down 254 and falling like a rock.

I vote for Oct 23, 1929, Higgie.

john

The S&P futures made a low August 8 around 9 pm at 1077.

Yesterday afternoon's high was 1179.

Current price is 1136.

October 7 still fits, but the market can't go much lower before it will be deviating.

My conclusion is if the market begins to crash from here, it's worse than 1929 because it couldn't bounce up as much after the initial 23 day ~20% fall.

[vincecate]

At this moment, the Dow futures are down 254 and falling like a rock.

I vote for Oct 23, 1929, Higgie.

john

My guess is that things crash before Aug 26th.