PDA

View Full Version : Don't fight the Fed


Doobie Keebler[_2_]
March 19th 09, 01:15 PM
Yesterday the Fed announced it would buy as much as $300 billion in
longer Treasury bonds (2-10 years and perhaps as long as 30 years)
plus another $850 billion of mortgage securities in order to bring
down rates at the far end of the yield curve and thus make borrowing
cheaper for mortgage seekers and corporations looking to issue debt.

Any of you old geezers remember Operation Twist? In 1961, the Fed
stepped directly into the long term securities markets with the
express purpose of lowering long term borrowing costs, including
mortgage costs, to ignite economic growth. The Fed does not normally
venture out beyond money market instruments with maturity of up to 12
months. There are two reasons it is doing so:

1. The Fed wants to replace "private" money destroyed by loan defaults
with "public" money it creates itself, effectively out of thin air and
at will. Mr. Bernanke has explicitly stated that he will use every
tool at his disposal to avert further deflation in the economy. They
don't call him Helicopter Ben for nuthin.'

2. The Fed wants to lower long rates so that household mortgage and
corporate borrowing costs come down and the economy gets to carry a
lighter debt-service burden. Long rates are stubbornly high despite
near zero short rates. The spread between 10-year Treasurys and Fed
funds is at record levels (nearing 4%).

Refinancing is going to be a booming business for quite a while, I
think.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aMct2sgbT1XE

..-=d00b
..

BuffetHater
March 19th 09, 02:26 PM
ANYONE that has fought the fed since last Sept is a huge winner.

The thousand point bounce we are witnessing is the fed applying $3T to
a
failing and faltering global economy. There will be the tiny short
term rally
followed by a sell in may decline to the 5K level.

FWIW when i see a 300 point dow swing along with a $70 gold swing,
I still see fear and greed at extremes. Besides, what does the fed
do
next? Hire 10MM fed governors?

The average bear market would run till November 2009. Is this one
average?

We have seen huge destruction in wealth and confidence. Old guy
savers
like moi have had the crap beat out of rates of return on savings and
there
is no way on earth the public is going back to stocks until its too
late !!!

No one is discussing the baby boomers change in survival modes, the
cuts
to interest earned incomes or a thousand tax increases that will be
needed
to service the chinese debts.

uncle_vito
March 20th 09, 01:40 AM
Not to mention the health insurance that Obama wants to give to every Tom,
Dick and Harry or is it Wang, Wong, and Rodriquez.

I still believe in stocks. Just the right ones. USO is worth way more than
gold. We know oil is going to get back to $100/bbl. That is a doubling.
Good luck for gold to double.

Vito



"BuffetHater" > wrote in message
...
> ANYONE that has fought the fed since last Sept is a huge winner.
>
> The thousand point bounce we are witnessing is the fed applying $3T to
> a
> failing and faltering global economy. There will be the tiny short
> term rally
> followed by a sell in may decline to the 5K level.
>
> FWIW when i see a 300 point dow swing along with a $70 gold swing,
> I still see fear and greed at extremes. Besides, what does the fed
> do
> next? Hire 10MM fed governors?
>
> The average bear market would run till November 2009. Is this one
> average?
>
> We have seen huge destruction in wealth and confidence. Old guy
> savers
> like moi have had the crap beat out of rates of return on savings and
> there
> is no way on earth the public is going back to stocks until its too
> late !!!
>
> No one is discussing the baby boomers change in survival modes, the
> cuts
> to interest earned incomes or a thousand tax increases that will be
> needed
> to service the chinese debts.
>