Financial topics

[John]

Dear Richard,

> You are welcome to joke about gold, John, but there is a serious
> side as well.

In a sense I was joking about gold, but what I was also joking about
was stocks. You can take that paragraph and change "gold" to
"stocks," and it's what you hear on CNBC and Bloomberg tv many times a
day. And it's still a joke.

John

[Higgenbotham]

If Chairman Bernanke announces actual QE3, or hints strongly of some form of QE3, in his speech on Friday, the odds this Wall cycle will run normal or slightly long increase. If no additional QE is announced or hinted at, then odds will rise that this Wall cycle will run short. It will undergo partial bifurcation halving, running shorter than the ideal. QE1, QE2 and QE Lite have not worked to stimulate an economy in a long wave bust, but they did serve to lengthen the cycles, which pushes a complex system toward chaos, not order. Long wave field collapse will lead to order, restoring the pricing mechanism of global markets, which has been badly distorted in recent years.

This is from David's comment last night. Precisely correct in my opinion.

[richard5za]

This is from David's comment last night. Precisely correct in my opinion.

Just thinking:
The problem with the QE's is that they have not stimulated the real economy; the banks are not lending money for genuinely productive economic purposes. If I was Benanke I would be asking myself "what set of circummstances would create the desired effect?"
Candidate Perry has been using words like "treason" with regard to Benanke's QE's so from a 2012 re-election perspective I would suspect that another QE might be 'off limits'
So I am wondering whether he might not be looking at some sort of interest rate manipulation to make Treasuries much less attractive to hold in order to incentivise banks into lending to business projects with better returns.
Richard

[Higgenbotham]

Candidate Perry has been using words like "treason" with regard to Benanke's QE's so from a 2012 re-election perspective I would suspect that another QE might be 'off limits'

So I am wondering whether he might not be looking at some sort of interest rate manipulation to make Treasuries much less attractive to hold in order to incentivise banks into lending to business projects with better returns.
Richard

I think the key with Perry's statement is it came from the frontrunner and now he is polling ahead of Obama in a direct matchup. So I have the same suspicions you do.

The Fed could take their pot of treasuries on the balance sheet and sell short dated to buy long dated to try to drive rates down. I think they have plenty of stuff in the 3-7 year range and maybe purchasing that was done to keep the door open to an Operation Twist 2 if all else failed. If I had to guess, the effect of that would be to create a second bond bubble (greater than 2008 I mean), which would then lead to a bust down the road. Very dangerous but I put nothing past Bernanke; the more dangerous and destructive it is long term probably the more likely he is to do it.

[jdcpapa]

I just did a quick "get up to speed" on long wave analyis. If "the Bernanke" tinkers around anymore, it will accelerate the wave. If my understanding is correct, under this theory the whole world has placed itself into the path of this wave. An entire purging and re-birth (golden age) of the worldwide system is inevitable. The timing of which interestingly enough coincides with the Mayan calendar (predicting an end to the world ie 5,000 year cycle) and the US elections (give or take).

[Higgenbotham]

If "the Bernanke" tinkers around anymore, it will accelerate the wave.

That's my understanding too. The tinkering will hold the wave off but then when the downward phase comes the tinkering will cause the collapse to be faster and deeper.

There's already one example of that. The wave was held off in 2007 and the market made a higher high in October 2007. That higher high may have possibly led to the deeper selloff in the market after 2008. Had no tinkering occurred, October or November 2008 might have been the bottom of the wave but it was extended to March 2009.

[aedens]

Higg, In 1983 Ben had already written his book on the issues and solution they are pursueing.
NBER did convey very lucid points also that were incorporated.
We have a time line in the forums and Ben did clarify to duration and asset reintroduction.
Perry and Ben are both very smart guys. Ben wants to pursue his thesis uninterupted and Perry is smart enough
to know this. The Fed does not care who is in office. I am under the observed conviction they knew
this was coming just as clear as GD did. Ben, more then Perry does not interupt the point that Perry does not
need another Democratic induced poison pill from the Fed. Treasury will suffer the effect as will we as the Obama factions
plot this myopic wreck. The pattern over a few political cycles has been to leave no room to operate from spite and overall stupidity
to preserve the percieved Empire of partizan entrenchments. Both failed since the Voter failed....
The term Perry verbally stumbled with was from Ben's very own book Book on the topic.
The Intellectual Hubris continues.

[jdcpapa]

If "the Bernanke" tinkers around anymore, it will accelerate the wave.

That's my understanding too. The tinkering will hold the wave off but then when the downward phase comes the tinkering will cause the collapse to be faster and deeper.

I liken that to a roller coaster ride; that last unexpected drop is quite a rush! Eeeha!

[Higgenbotham]

Higg, In 1983 Ben had already written his book on the issues and solution they are pursuing.

Ben had to be flown out to Newport Beach in August 2007 to get tutoring from El Erian et al at Pimco because he did not properly understand the ramifications of the new derivatives and he remains behind the curve due to his failure to contain the subprime collapse. Similar to Europe. He can try to continue but the market checkmated him 4 years ago. The genie is out of the bottle and chaos will grow. Also, I believe the MBS purchases were improvisations that resulted due to the subprime collapse; that was not in the original plan so far as I am aware.

With regard to his political role, I can remember his comment at the ceremony when Bush installed him, but not the exact quote. It was something to the effect that he would try his best to serve the President. This guy is a political hack if there ever was one. He met with damn near every senator in Washington before his reconfirmation.

One last comment: Due to the recent continuation of the real estate price collapse the Fed's balance sheet may be borderline insolvent. It becomes political.

[OLD1953]

But was there anything Bernake could do, in the real world, to prevent these problems from coming to the fore? Nothing that I can see, when he got the job it was already too late for any effective action to be taken, everything he's done has been holding actions against the coming drop. As I've said, he did manage to give companies enough time to buy back their stocks to a large extent, so they will not fall as far as they would have otherwise, but apart from propping up the market, he's done nothing. What else could he do?

Undoubtedly, after the big drop, it will become very popular to prosecute the "villians" of Wall Street, and we'll see thousands of them hauled off to jail for market fraud and manipulation, but that will happen after the drop, not before. Had the laws been enforced, had the other laws not been gutted, had Greenspan not acted to move the markets up for his entire term, rather than letting them drop, the world would be a different place for Bernake. Of course, that would have meant a Fed and an SEC run by a wholly different generation, which is impossible. (One does wonder what the eventual result of life extension technology will be, and I do also wonder how we can have an "economy" when machines have all the jobs. My wife laughed when I told her the Japanese were even working on a robot prostitute, but they are and in 30 years or less even that avenue will be taken by machines. How do you have an "economy" then? Whatever it is, it won't resemble what we have now any more than an oyster resembles a peach.)