“A new survey of top economists shows the majority believe the Federal Reserve will continue its bond-buying spree through the end of 2013 in its lengthening effort to spur economic growth.
USA Today polled 46 economists to get their take on the Fed’s pump-priming program.
Sixty percent forecasted the Fed will keep buying long-term Treasury bonds until after Jan. 1, 2014, and 58 percent said the Fed will likewise keep buying mortgage-backed securities (MBS) past that date…”
Comments »“U.S. banks have improved their finances to the point that their capital positions are better than at any time in more than 40 years, former FDIC Chairman William Isaac tells Newsmax TV in an exclusive interview. However, he adds that the Federal Reserve’s ultra-low interest rate policy poses problems for the industry.
“Banks have done really well over the past year, and that’s because they have rebuilt their balance sheets,” says Isaac, now senior managing director of FTI Consulting. “Their capital is stronger than it’s been in my career [more than 40 years]. They’re doing really well.”
The KBW Bank (stock) Index has soared 21.8 percent during the past year.
But that doesn’t mean banks are on easy street, Isaac says. First, the near-record-low level of interest rates makes it hard for them to make money, he says.
In addition, much of their recent income has stemmed from the release of the plentiful loan-loss reserves they built up during the 2008-09 financial crisis and its aftermath….”
Full article and video interview
Comments »“After the financial collapse in 2008, it suddenly became very in vogue to talk about whether the US was going to become “Japan,” a country synonymous with horrible growth and horrible economic policy for years.
The advantage that the US had was that it got to see the Japanese tragedy play out, and learn from Japan’s mistakes.
Fortunately, Federal Reserve chairman Ben Bernanke followed Japan closely and was determined not to make the same errors.
One of Japan’s biggest mistakes? It wasn’t nearly as aggressive as it needed to be, early on, in terms of monetary easing. It also engaged in premature fiscal austerity….”
Comments »WTI is down over $2 while gold is down $22+ falling through the death cross.
Comments »“New York City is continuing to make its mark in the startup community.
In the last year, big-name companies spent $8.3 billion on mergers and acquisition deals in 100 New York-based startups, according to a recent report by PrivCo.
That tally put New York right behind the heart of the tech industry, Silicon Valley, where 226 deals totaled $21.5 billion.
After speaking with VCs and entrepreneurs, and scoping out AngelList, we selected 25 early stage startups that are generating a lot of buzz in the tech community.”
Full article and look at the newest startups
“Prime Minister Shinzo Abe will be accompanied by his top currency official when he visits the U.S. to meet with President Barack Obama, as Japan tries to limit international friction over a weakening yen.
Vice Finance Minister Takehiko Nakao is part of a delegation arriving in Washington tomorrow, according to two officials with knowledge of the matter who asked not to be named because of government policy. Usually, a more junior official, the director-general of the international bureau, would accompany Abe on such a trip, two officials said.
Abe’s first visit to the U.S. since becoming prime minister in December comes amid international concern at the speed of the yen’s decline and Japanese officials indicating acceptable levels for the currency. U.S. Treasury Undersecretary Lael Brainard has welcomed Japan’s efforts to “reinvigorate growth,” while saying that nations need to avoid “loose talk about currencies.” …”
Comments »“Last week, President Obama mentioned signing a free trade agreement with the European Union in his state of the union address.
As with anything, the benefits of such an agreement comes with its costs.
Morgan Stanley commodities analyst Adam Longson believes that the this is the path to higher natural gas prices.
Longson writes in a note today that opening up a new market would be a boon for natgas producers as prices rise with the new demand….”
Comments »“With talk of “tail risks” – like a hard landing in China, the U.S. going over the “fiscal cliff,” or a country exiting the euro – fading from the collective discussion, arguably the biggest open question for markets right now is when the Federal Reserve will begin to tighten monetary policy.
Deutsche Bank economist Joe LaVorgna thinks the central bank could be ready to start slowing its quantitative easing program as early as June.
In a note to clients today, LaVorgna writes:
The Fed unexpectedly began discussing when to diminish and terminate QE at last December’s FOMC meeting. These deliberations no doubt continued at the January meeting for which we get the minutes today. We do not expect the minutes to suggest the Fed is quite ready to slow the pace of its $85 billion per month of open-ended Treasury and mortgage purchases. After all, policymakers did not have the February employment report when they met in late January, which showed decent job growth—nonfarm payrolls were up +157k—and sizeable upward revisions—the level of December 2012 employment is now about 650k higher than what was first reported.
Simply put, not enough changed in the economic outlook between December and January to constitute a material change in the Fed’s economic and financial assessment. However, based on our GDP, unemployment and inflation forecasts, we believe policymakers will eventually announce their intention to slow the pace of QE by June and to halt QE altogether by the end of December….”
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US Federal Reserve officials fear a backlash from paying billions of dollars to commercial banks when the time comes to raise interest rates.
The growth of the Fed’s balance sheet means it could pay $50bn-$75bn a year in interest on bank reserves at the same time as it makes losses and has to stop sending money to the Treasury.
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [email protected] to buy additional rights. http://www.ft.com/cms/s/0/9b245cd6-79e1-11e2-b377-00144feabdc0.html#ixzz2LN1O4sqM
Officials at the US central bank fear it could create a public-relations nightmare after the Fed was lambasted for rescuing banks during the financial crisis. It is one factor prompting some inside the Fed to reconsider the eventual “exit strategy” from easy monetary policy.
In an interview with the Financial Times, James Bullard, president of the St Louis Fed, said: “If you think of the profitability of the biggest banks, if you’re going to talk about paying them something of the order of $50bn – well that’s more than the entire profits of the largest banks.”
Mr Bullard said that neither interest paid to banks nor possible losses on exit made any difference to the substance of monetary policy.
“I think it’s more just a question of the optics, and how you’re going to play the optics,” he added, referring to the perception of losses by the central bank. “And since it shouldn’t matter in a monetary policy sense you might as well play the optics in a better way than the one we’ve got planned.”
All banks hold reserves at the Fed. The central bank has boosted its balance sheet to more than $3tn as it buys assets to drive down long-term interest rates through its programme of quantitative easing.”
Comments »UBS, CBI, MDR, KBR, FWLT, FLR, ACM, TPC,
“It has been estimated that $2.75 trillion will need to be invested in America’s aging infrastructure by 2020 to get our crumbling roads, bridges, highways, water systems and power grids back up to par. We have already offered up our own list of 11 companies that will win from the infrastructure rebuild. Now we have found a new list of infrastructure winners, and the overlap is minimal.
Many politicians in Washington, D.C., have howled over the lack of infrastructure spending, despite almost $1 trillion in stimulus being thrown at the economy since the Great Recession started in 2008. Did the president finally hint in last week’s State of the Union speech that long-awaited funding may be headed to infrastructure repair soon? Despite political posturing, both parties concede that infrastructure spending is a necessity.
Comments »“I’ve seen a common theme in the comments section from the “America is falling into an abyss” crowd – the recent rise in food stamp usage. Without getting political, I figured I’d take a look at the raw data and see what we could conclude. Here goes nothing.
First of all, food stamp usage ALWAYS rises in a recession so the recent surge is not remotely surprising. As you can see in Figure 1 below, every recession since the 1970′s (when this data is first available) has seen a sharp increase in food stamp usage. I used a year over year rate of change in order to compare the current environment on an apples to apples basis with past events. It’s too easy to look at the “record high” or the headline figure in food stamps and simply conclude that things are worse than they’ve ever been. The reality is that food stamps rose at about a 20% year over year rate at the worst point in the current recession and has since declined to a 4.25% year over year pace. So, the rate of change is still positive, but it’s come way down from its worst levels….”
Comments »“SAN FRANCISCOMicrosoft (MSFT) is so confident it has the Internet’s best email service that it is about to spend at least $30 million to send its message across the U.S.
The barrage begins Tuesday when Microsoft’s twist on email, Outlook.com, escalates an assault on rival services from Google Inc., Yahoo Inc., AOL Inc. and a long list of Internet service providers.
As part of the process, all users of Microsoft’s Hotmail and other email services operating under different domains such as MSN.com will be automatically converted to Outlook.com by the summer, if they don’t voluntarily switch before then. All the old messages, contacts and settings in the old inboxes will be exported to Outlook.com. Users will also be able to keep their old addresses.
Email remains a key battleground, even at a time when more people are texting each other on phones.
People still regularly check their inboxes, albeit increasingly on their smartphones. The recurring email habit provides Internet companies a way to keep people coming back to websites. It gives people a reason to log in during their visits so it’s easier for email providers to track their activities. Frequent visits and personal identification are two of the keys to selling ads, the main way most websites make money.
That’s why Microsoft, Google and Yahoo have been retooling their email services in recent months….”
Comments »“Stocks have soared 128 percent during the bull market that began in March 2009, and equity guru Laszlo Birinyi, president of Birinyi Associates, expects the party to continue for one to three more years.
He doesn’t pay attention to many of the fundamental factors that influence other prognosticators. Instead, he puts market statistics together with some of his own judgments, The New York Times reports.
For example, Birinyi looks at investment flows into and out of stocks, and he monitors business news to discern investors’ mood.
“We don’t worry about the cosmic issues that a lot of people get concerned about,” Birinyi tells The Times. “We worry about the stock market ticker. And it’s telling us the market is going up.”
For one to three more years anyway.
Bull markets have four phases, with the final one being exuberance, he says. That’s the phase we just began, Birinyi says.
“This is a point where people say, yes, the economy isn’t going into recession right away, companies are making money, interest rates are not going through the roof and all the concerns we have had for some time perhaps were too negative.”
When that exuberance gets irrational, it’s time to head for the hills, he suggests.
“The market isn’t like the New York subway system. There isn’t another train coming right after this one. This is it, this is the last train. You’d better get on board,” he warns….”
Comments »” “Currency wars” are all the rage right now.
In Japan, Switzerland, and the U.K., currencies are rapidly falling, and many are accusing these countries of purposely depressing their currencies in order to boost exports at the expense of other nations.
One could argue that this is the case in Japan. However, reality may be decidedly less exciting.
In a note to clients this morning, Goldman Sachs analyst Kamakshya Trivedi says the evidence points to a much more basic phenomenon: these countries are simply trying to boost stagnant economies via monetary easing.
The title of Trivedi’s report is perfect: Currency Wars? No, Just Monetary Easing.
It’s true that a side-effect of these monetary actions actions is, of course, a weaker currency – but that’s only a secondary phenomenon.
The real story is the attempt by various countries (notably Japan) to lower real interest rates, writes Trivedi….”
Comments »“U.S. commodities regulators are examining sharp price swings in the natural-gas market during the past year that came just before the public announcement of weekly gas-inventory data, a person familiar with the situation said.
Officials in the Commodity Futures Trading Commission’s market-oversight division have intensified since late last year their customary review of market data in an effort to detect suspicious trading strategies around the reports by the U.S. Energy Information Administration.
The expanded scrutiny of the natural-gas market is “more than just the routine oversight and surveillance,” the person said. Regulators are examining trading activity by specific firms, and the CFTC’s commissioners have been briefed on the matter, this person added….”
Comments »” “It’s not going away, it’s going to get worse,” is how PIMCO’s Mohamed El-Erian warns Yahoo’s Lauren Lyster about central bank policy and the currency wars that are so much in discussion currently. Central banks have been compelled to undertake unconventional measures, things they haven’t done before, because other policymakers are not stepping up to take responsibility on the fiscal side. These implicit devaluations and beggar-thy-neighbor policies force a lot of liquidity into the system and by pushing up asset prices, central banks believe, create a ‘weath effect’. It can also trigger “animal spirits” – we get all excited and invest more.
The hitch, El-Erian says, is that in the process, central banks may “break” something. A currency war would fall into this camp. So it’s “high-risk, high-reward and no one can tell for sure which way it’s going to tip,” he says.
In terms of equity markets, El-Erian says investors are split into two camps….”
Full article and video interview
Comments »“Recently I was asked to give a presentation on the current state of the global economy to a local group of concerned citizens here in Northwest Montana. I was happy to oblige but when composing my bullet points I realized that, in truth, there were no legitimate economic numbers to examine anymore. You see, financial analysts have traditionally used multiple indicators of employment, profit, savings, credit, supply, and demand in their efforts to divine the often obscured facts of our financial system. The problem is, nearly every index we used in the past, every measure of capital flow and industry, is absolutely useless today.
We now live in an entirely fabricated fiscal environment. Every aspect of it is filtered, muddled, molded, and manipulated before our eyes ever get to study the stats. The metaphor may be overused, but our economic system has become an absolute “matrix”. All that we see and hear has been homogenized and all truth has been sterilized away. There is nothing to investigate anymore. It is like awaking in the middle of a vast and hallucinatory live action theater production, complete with performers, props, and sound effects, all designed to confuse us and do us harm. In the end, trying to make sense of the illusion is a waste of time. All we can do is look for the exits…
There is some tangible reality out there, but it is difficult to find, and there are few if any mainstream numbers to verify. One has to remember always that the fundamental world of money and trade revolves around real people and real circumstances. No matter how corrupt our economic system is, as long as there are human beings, there will always be supply and demand that cannot be hidden. We have to look past the “official numbers” and look at the roots of trade. Where has demand fallen? Where has supply diminished? Where are the tangible goods and needs and how have they changed?
Let’s first start with the mainstream version of our system, looking at each aspect of the economy that no longer represents the truth of our situation…
Employment, Savings, And Debt
Much of this information is old news to those of us in the Liberty Movement, who tracked the progress of the global collapse long before the general public even knew of its existence. However, it is useful to take a step back and look at the basic picture every once in a while.
According to numbers issued by the Department of Labor, weekly unemployment reports have dropped to a five year low, and the overall employment rate is holding at 7.9%. This would seem to be a vast improvement over the dreadful bloodletting in the system only a few years ago. Has the private Federal Reserve and the Obama Administration really done it? Have they turned back the tide on the greatest fiscal crisis the U.S. has seen since the Depression?
No. They haven’t. ….”
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