(an intersibling email)
>
> On 3/3/08, seth wrote:
> who is buying 2 year notes at 1.63????
> seth
>
simple:
high food and gas prices= weaker consumer= fed cutting rates = weaker $= even higher food and gas prices= even weaker consumer = fed cutting rates even more= even weaker $… = prices at infinity and rates at minus infinity
get long!!!
(an interoffice email)
On Thu, Feb 28, 2008 at 9:38 AM, Karim wrote:
- Housing and business capex weaker than originally estimated; exports stronger
- All above offset to leave gwth at 0.6% annualized in Q4
Yes, nominal growth falls to 3.3% from 6.0% in Q3 as well.
- More important news is claims, which corroborate recent weak survey data (Conf Board, ISM)
- Initial now at 373k (prior revised from 349k to 354k)
- Continuing up 21k on week to a new cycle high of 2807k
- Higher continuing claims reflect lack of hiring, higher initial claims reflect new layoffs
Yes, up in a new range. Q1 looking near zero as widely anticipated. Exports may be strong enough to keep the economy out of recession, but not much more without a March recovery.
Crude back over $100, $ down some, commodities up some, etc.
Weakness and inflation continue.
(an interoffice email)
Yes, and he reaffirmed that he’s using the futures prices to predict where prices are going. He pointed to crude being at $95 in the back months and stated that translates to a forecast for prices to come down from current levels.
Also indicated the lower dollar is useful for bringing down the trade deficit. This ‘works’ for as long as US labor costs are ‘well anchored’. Congress didn’t grasp this part, as it no doubt would have evoked quite an outcry if they had understood it.
Bernanke plainly stated he considered export growth a desired outcome versus domestic consumption.
Initial claims telling today. Other numbers point to surprises on the upside. This could be partially tempered by Q4 GDP being revised up.
FF futures already discounting cuts to below 2% over the next six months.
While crude inventories are up, markets are saying it’s ‘desired’ inventory as the term structure is still backwardated and WTI is still higher than Brent.
On Wed, Feb 27, 2008 at 12:32 PM, Karim wrote:
All you need to know about BB’s testimony courtesy of the Xinhua news agency:
WASHINGTON, Feb 27, 2008 (Xinhua via COMTEX) — Federal Reserve Chairman Ben
Bernanke told Congress on Wednesday the central bank will again lower interest
rates to boost U.S. economy.
ÂÂÂ
Other highlights:
ÂÂÂ
Commenting on new Fed forecasts from last week:
The risks to this outlook remain to the downside. The risks include the possibilities that the housing market or labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further.
ÂÂÂ
… financial markets continue to be under considerable stress
ÂÂÂ
Important comment on the time frame over which policy should aim to attain objective inflation rates
The inflation projections submitted by FOMC participants for 2010–which ranged from 1.5 percent to 2.0 percent for overall PCE inflation–were importantly influenced by participants’ judgments about the measured rates of inflation consistent with the Federal Reserve’s dual mandate and about the time frame over which policy should aim to attain those rates.
ÂÂÂ
Concluding comments highlight downside risks to growth and inflation pressures but when addressing ACTION, only mentions supporting growth and providing insurance against downside risks.
A critical task for the Federal Reserve over the course of this year will be to assess whether the stance of monetary policy is properly calibrated to foster our mandated objectives of maximum employment and price stability in an environment of downside risks to growth, stressed financial conditions, and inflation pressures. In particular, the FOMC will need to judge whether the policy actions taken thus far are having their intended effects. Monetary policy works with a lag. Therefore, our policy stance must be determined in light of the medium-term forecast for real activity and inflation as well as the risks to that forecast. Although the FOMC participants’ economic projections envision an improving economic picture, it is important to recognize that downside risks to growth remain. The FOMC will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks.
ÂÂÂ
Data-wise, more of the same:
Dear Philip,
Seems there’s a break between Mishkin and Kohn that previously wasn’t there.
Markets are thinking Kohn supports a 50 cut and that he and Bernanke are alligned.
Today Bernanke may show whether he leans towards Mishkin, the co academic, or Kohn, more the practitioner.
Meanwhile, another ‘inflation day’ with oil and commodities up, $ down, and headlines like ‘Honda says no recession in US.’
All the best,
Warren
On 27 Feb 2008 09:09:43 +0000, Prof. P. Arestis
>
> Dear Warren,
>
> Many thanks.
>
> > Do you think Kohn’s speech indicates he’s ready to cut another half point
> > on Mar 18?
>
> I think the simple answer to the question is probably no with a question
> mark. I say this in the sense that before March 18 we will probably hear
> more about Kohn’s views, which may be clearer in terms of whether he is
> ready for another half point reduction. However, in terms of the analysis
> he offered in the piece you kindly sent me I did not see anything that
> suggested half point cut, although there is plenty in the piece to suggest
> that he is in favour of more cuts. I say this in that although he sees
> problems with the real economy he is also mindful of inflation, but he is
> not an ‘inflation nutter’ as some others are. So at this stage I believe he
> will go for a cut but not as much as half point.
>
> What do you think?
>
> Best wishes, Philip
(an email)
> On Feb 19, 2008 10:03 AM, Mike wrote:
> Warren, note spec comments and dollar issues, a big hurdle to overcome
> if they go the other way …
> Mike
Hi Mike,
Agreed the dollar may have bottomed. Seems to have reached a level where exports are now growing at about 13% which maybe is the right number to accommodate the pressure from the non resident sector to slow it’s accumulation of $US financial assets.
However I continue to conclude the price of crude is being set by the Saudi’s/Russians acting as swing producer, and that there is sufficient demand to keep them in the driver’s seat. Quantity pumped keeps creeping up at current prices, with Saudis last reporting 9.2 million bpd output.
Crude at 98.70 now. Note crude goes up on news a refinery is down, when refineries are the only buyers of crude, so in fact it’s going up for other reasons (price setting by the swing producer?). Also, WTI is now ahead of Brent, indicating whatever was causing the sag in WTI vs Brent is over. WTI would ordinarily trade higher than Brent due to shipping charges.
Warren
(an interoffice email)
Deep,
Interesting!
In the case of a bank failure, Spain still is the entity that would
repay depositors. To get the funds Spain would somehow liquidate the
failed bank. If the loss was large enough so that Spain couldn’t
raise the funds to pay off the depositors (via both liquidating the
bank and attempting to borrow in the credit markets) payment to the
depositors would be delayed until Spain did raise the funds.
The ECB would either return the mtg collateral to Spain for payment,
or, if Spain would not or could not receive the collateral vs payment,
the ECB would liquidate the collateral and hold Spain responsible for
any deficiency balance.
This makes the ECB much like any other depositor, but with collateral
as security.
It does not reduce the risk of loss to bank shareholders should the
mtgs not perform.
It does not remove ultimate liability from Spain.
It does not involve risk to the ECB beyond that of Spain paying for
any deficiency, and presumably the ECB isn’t loaning at 100% of market
value.
It does not create a ‘moral hazard’ issue as bank shareholders and
Spain are still in first loss position for any loan losses.
It does prevent a disruptive ‘fire sale’ from ‘technical volatility’
of forced liquidations.
It does provide bank funding at the ECB’s target rate for interbank
lending, which is what the target is all about, so that seems ok?
I have no problem with institutional structure that doesn’t use the
liability side as a source of ‘market discipline’ and instead uses
capital requirements/ratios/gap rules, etc. and regulates the asset
side as well?
And with the right haircuts and regs funding non bank mtg production
can likewise suit public purpose.
>Spanish banks funding mtgs at the ECB
>
> Shortcut to:
> http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/01/28/bcnspa
> in128.xml
>
>
>
On Jan 28, 2008 4:26 PM, Mike wrote:
> bottom line if trade deficit shrinks via export strength that has to be
> extremely dollar bullish-which has all sorts of implications (both of
> you are saying the same thing in that respect)…
sort of. it is shrinking as they are puking $ financial assets to
people who will take them to buy our stuff. so the dollar doesn’t go
up until they use up some of their $ assets and slow down their desire
to get out of them. think of it as an inventory liquidation of $
assets held abroad that drives the dollar down far enough to be able
to sell their $ to someone who wants to buy US goods and services or
US assets.
that’s the exit channel for $ held by non residents. for the US the
process is inflationary and expansionary- good for earnings and gdp.
But the inflation keeps the US domestic real consumption lower than
otherwise.
When the ‘$ inventory liquidation’ by foreigners starts to slow the $
starts to bounce back.
warren
♥
(an email)
THANKS, DAVID, COMMENTS BELOW IN CAPS
>   Subject: UN Warns of Biofuels’ Environmental Risk
>
>
>  By MICHAEL CASEY
>  AP Environmental Writer
>  BANGKOK, Thailand
>
>  The world’s rush to embrace biofuels is causing a spike in the price of corn
>  and other crops
THE REASON THE PRICE IS GOING UP IS THAT HUNGRY PEOPLE ARE COMPETING
FOR WHAT’S LEFT TO EAT AFTER THE ACREAGE GOES TO FUEL PRODUCTION
and could worsen water shortages and force poor communities off
>  their land, a U.N. official said Wednesday.
FORCING PEOPLE OFF THE LAND IS SECONDARY TO FOOD AND WATER SHORTAGES?
>  Foremost among the concerns is increased competition for agricultural land,
>  which Suzuki warned has already caused a rise in corn prices in the United
>  States and Mexico and could lead to food shortages in developing countries.
>
>  She also said China and India could face worsening water shortages because
>  biofuels require large amounts of water, while forests in Indonesia and
>  Malaysia could face threats from the expansion of palm oil plantations.
also:
The New York Times
Governments in Europe and elsewhere have begun rolling back generous,
across-the-board subsidies for biofuels, acknowledging that the
environmental benefits of these fuels have often been overstated.
SEEMS THAT THE POTENTIAL TO STARVE TENS OF MILLIONS OF PEOPLE TO DEATH
TAKES SECOND PLACE TO ENVIRONMENTAL CONCERNS.
UNTIL THAT HAPPENS, GOVTS WILL PROBABLY CONTINUE THE CURRENT LEVEL OF
SUPPORT AND KEEP FOOD PRICES LINKED TO FUEL,
THIS IS PROBLEMATIC FOR THE FED AS CPI WILL KEEP RISING WITH GASOLINE
PRICES, WHICH WILL DRAG FOOD ALONG WITH IT. AND BOTH OF THESE FEED
INTO THE COST SIDE AND PUSH UP CORE MEASURES AS WELL.
♥
(an email)
On Jan 23, 2008 8:51 PM, Joshua wrote:
>
> Economy is in dire condition?!?!?! Look at today’s earnings reports and
> forecasts…anecdotal, but not so dire at all!
Yes, they’ve been forecasting recession for about a year and it keeps getting put off a quarter.
Now the term is morphing to ‘growth recession’ which mean growth slows for a few quarters.
Hardly the stuff of rate cuts for a mainstream economist when inflation is ripping.
warren
> Subject: BTIG Earnings Recap for January 23, 2008
>
> Stocks staged a late day rally (biggest in 2 months) on a report NY
> regulators met with banks to discuss aid for bond insurers. Trading on
> earnings (6:15pm): COF +0.30 (+0.7%), CTXS -1.02 (-3.2%), EBAY -1.63
> (-6.7%), FFIV +3.91 (+19.4%), GILD -0.81 (-1.8%), ISIL -0.72 (-3.1%) , NFLX
> -0.06 (-0.25%), PLCM +1.72 (+7.7%), QCOM +2.67 (+7.3%), QLGC +0.17 (+1.3%),
> SANM +0.04 (+2.8%), SYMC +1.40 (+9.1%) and WDC +1.36 (+5.5%). Expected to
> report in the morning: ABC, BAX, COL, CY, DHR, ED, F, HSY, KMB, LCC, LMT,
> MHP, NOK, NOC, NUE, POT, RESP, SPWR, T, TXT, UNP and XRX. Economic data for
> tomorrow includes Initial Claims for 1/19, December Existing Home Sales and
> Crude Inventories for 1/19.
>
> TickerAnnouncementNote
> AMCC+ 1c better, revs better
> AVCT+ 10c better, revs inline
> BKHM+ 5c better, revs betterguides Q3 revs inline
> CAVM+ 1c better, revs better
> CBT+ 24c better, revs better
> CHIC+ 1c better, revs inlineguides Q2 EPS inline
> CNS+ 2c better, revs better
> CTXS+ 6c better, revs betterguides Q1 inline, FY08 inline
> GILD+ 1c better, revs inline
> HXL+ 1c better, revs betterguides FY08 inline
> ISIL+ 1c better, revs betterguides Q1 EPS, revs inline
> KNX+ 1c better, revs better
> LSI+ 6c better, revs betterguides Q1 inline
> MOLX+ 2c better, revs betterguides Q3 EPS inline, revs above
> NFLX+ 10c better, revs inlineguides Q1 EPS inline, revs above; FY08 EPS
> above, revs inline
> NVEC+ 6c better, revs better
> PLCM+ 3c better, revs better
> PLXS+ 2c worse, revs inlineguides Q2 EPS above, revs above
> PRXL+ 1c better, revs betterguides Q3 EPS inline, revs above; guides FY08
> EPS, revs above
> QLGC+ 3c better, revs better
> QTM+ inline, revs lower
> RGA+ 6c better, revs lowerguides FY08 EPS above
> RKT+ 4c better, revs better
> RYL+ 53c (ex-items), vs loss of 17c (First Call), revs better
> SANM+ 1c better, revs betterguides Q2 EPS inline, revs above
> SXL+ 10c better, revs better
> SYMC+ 4c better, revs betterguides Q4 EPS above, revs above
> TSS+ 3c better, revs inlineguides FY08 above, revs inline
> VAR+ 3c worse, revs betterissues Q2, FY08 guidance
> VARI+ 2c better, revs better
> WDC+ 31c better, revs better
> EFII= inline, revs inlinereaffirms Q1 guidance
> FFIV= inline, revs inlineannounces share repurchase up to $200mln
> SRDX= inline, revs better
> ACXM- 2c worse, revs lowerissues FY08 guidance
> CBST- 1c worse, revs inline
> CLDN- 1c worse, revs better
> COF- 3c worse, revs lower
> DGII- 3c worse, revs inlinereaffirms FY08 inline
> EBAY- 4c better, revs betterguides Q1 EPS, revs below; FY08 EPS inline, revs
> below
> MRCY- 9c better, revs inlineguides Q3 EPS, revs below, FY08 EPS, revs below
> MTSC- 10c worse, revs betterreaffirms FY08 guidance
> NE- 1c worse, revs inline
> PSSI- 1c worse, revs inlinereaffirms FY08 EPS guidance
> PTV- 2c better, revs betterguides Q1 EPS below, FY08 EPS, revs inline
> QCOM- 1c worse, revs betterguides Q2 EPS, revs inline; reaffirms FY08 EPS,
> guides FY08 revs inline
> RJF- 11c worse, revs lower
> SOV- 4c worse
> SYK- inline, revs betterguides FY08 inline
> WSTL- loss of 4c vs loss of 6c (may not be comp), revs slightly betterguides
> Q4 below
>
♥
(an email)
On Jan 23, 2008 9:26 AM, Mike wrote:
> Trichet and his standard model are going to engineer a market crash in
> europe it looks like… wonder if he will be FT’s man of the year next
> year?
and he’s playing with fire with the lack of credible deposit insurance in the ecb’s member banks.
buy some 2 year german credit default ins if you haven’t already!
I think the ‘chess move’ here is for the BOJ to start buying $US. They would like to, but don’t want Paulson coming down on them for being ‘currency manipulators.’
If I were Tsy sec I’d be calling the MOF and giving them the green light to buy $US.
by the way, Jack Welch is on CNBC saying gdp is muddling along at 1.5% based on what he hears from corp america. no recession, yet
warren
♥