Monday, July 15, 2013

Doug Noland weekly comments

"Significant Fed balance sheet expansions should be temporary and then reversed as soon as possible. The Fed should refrain from non-crisis asset purchases/liquidity injections – and should limit its open-market activity to Treasury bills. The Fed should not accommodate a doubling of mortgage debt in six years. It shouldn’t then accommodate a doubling of federal debt in four. Fed policymaking should not unduly impact system Credit and resource allocation – albeit to housing or, more recently, the federal government.

The Fed should avoid the slippery slope of intervening in the markets in the name of promoting economic growth. Its policies shouldn’t distort market risk perceptions or the pricing of finance. This will only fuel asset inflation, Credit Bubbles and the misallocation of real and financial resources. The Fed should not accommodate persistently large current account deficits. These only promote liquidity excesses and global financial and economic imbalances. The Fed must never set off on an experimental path, but should instead strive toward a stable and conservative rules-based policy regime. "

When I began writing about the financial landscape and markets some 15 years ago, I never envisioned we would arrive at a place like now exists. A place where the FED and other CB'S are in the drivers seat and are leading the LEMMINGS right over the cliff! And they mostly all follow as there is little left as alternative.

A HUGE mispricing of risk exists today, and there is a HUGE disconnect between the markets and REALITY. Don't you know at some point in the future reality will meet head on with perceptions?

5 years into their programs, the FED cannot come off its QE and ZERO rate programs? With stocks at new RECORD HIGHS, the FED cannot signal the end of its easing campaign? The economy cannot survive on its own 2 feet?

With just a mention and a SNIFF of the FED changing its direction, or even SLOWING down its QE program, the market had a VIOLENT reaction and interest rates jumped.

Now, a few calming words, status quo forever, and the VIX which measure volatility and FEAR has fallen back and the market has recouped all its losses.....sounds normal to me.....

What I THINK you have just witnessed is a WARNING SHOT......if you choose to not heed the warning then IMHO you are no more than the gambler at the craps table in a nice run who throws the dice one more time, double or with the FED no one can possibly lose but the SAVERS!

WHAT POLICY that encoruages an ALL IN mentality is a good one, will end well? 0% rates doesn't encourage the Government to any fiscal restraint, and doesn't pay deposits a thing.

When "ALL ARE IN", there is nary anyone left to get in, and the opening for the exit door is rarified thin.

Fox news reported over the weekend that Small Business are not encouraged, nor optimistic about the future. For every 3 businesses hiring, 4 are firing. In another sign of pessimism, inventories fell and that will take a bite out of next reading of GDP.

"DON'T FIGHT THE FED", well that works for awhile doesn't it? But I think they tried to signal all good things come to an end, and the market didn't like it one bit. SO it appears it backed off sending signals they might end the ENDLESS MONEY PRINTING SCHEME.

Something about the FED policy in uncharted territory and untried experiements in FED MONETARY AND INT RATE POLICY I find worrisome...maybe it's just me.



Anonymous said...


Lessons Not Learned

Calling same top over and over and over and over and over and over and over and over and over and over and over and over and over and over year after year after year after year after year after year after year after year.

Anonymous said...

Here you go again. "The fed is killing us".

Everything is just fine and what the fed is doing is working and was completely necessary.