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Posted
Oct 13 2009, 12:05 PM
by
Anthony Mirhaydari
Rating:
Money Blog: Top Stocks Blog - MSN Money
While the primary trend for stocks continues to arch skyward, we are beginning to see equity traders react to some new developments over in the world of fixed-income, commodities, and currencies. This has made for choppy trading over the last few days.
Much of the catalyst for the recent gains in equities has been the depreciation of the U.S. dollar. Traders are using the greenback as a funding currency in carry trades with riskier, higher yielding assets because of super-low U.S. interest rates. They borrow dollars cheaply, sell them short, and use the proceeds to buy commodities and bonds in countries like Brazil and Australia.
They can do this with confidence because of the apparent support for dollar devaluation among officials in Washington -- who are hoping to boost employment by reviving the competitiveness of our exports -- along with prolonged support for low rates at the Federal Reserve.
With so much leverage at work
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Posted
Oct 08 2009, 10:43 AM
by
Anthony Mirhaydari
Rating:
Money Blog: Top Stocks Blog - MSN Money
After removing the inflationary effects of the Fed's dollar printing, stocks are now sitting at the lows reached after the swoon in early September. By looking at the relative performance of the S&P 500 to gold futures, investors are nearing something of a decision point.
One of two things can happen from here. Gold, which blasted to a new high of $1,044 on Wednesday, could continue to outpace stocks. Or we could see gold cool off and stocks start posting some real, inflation-adjusted gains.
My guess is the September lows for the stock-to-gold ratio will serve as critical support for another move higher. Why? Well the two big movements in the gold-adjusted S&P 500 occurred between
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Posted
Oct 05 2009, 12:04 PM
by
Anthony Mirhaydari
Rating:
Money Blog: Top Stocks Blog - MSN Money
Stocks should soon start enjoying the benefits of a renewed surge in liquidity courtesy of the Federal Reserve.
Although the Fed pulled the punch bowl away in one area, by announcing the discontinuation of its direct debt purchases back on September 23, it has quietly been gunning the money supply. Clearly something has Ben Bernanke & Co. worried. Maybe it was Friday's terrible jobs report.
As you can see in the chart below, the effective Federal Funds rate -- which is the short-term inter-bank lending rate that the Fed targets -- has plummeted over the past few weeks.
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Posted
Sep 23 2009, 02:08 PM
by
Anthony Mirhaydari
Rating:
Money Blog: Top Stocks Blog - MSN Money
Well, that was interesting. After the Federal Reserve announced on Wednesday it would leave interest rates unchanged, stocks initially bounded higher before abruptly shifting direction and screaming lower. The bulls gunned the Dow Industrial Average achingly close to the 10,000 level before things fell apart.
At issue wasn't the Fed's target policy rate, which affects short-term interest rates. Instead, traders were apparently concerned that Fed chairman Ben Bernanke and his cohorts failed to expand its direct purchases of mortgages and government debt. This will likely result in higher long-term rates.
You see, the Federal Reserve has been engaging in unorthodox monetary policy over the past 9 months via "Permanent Open Market Operations," or POMO. Fed traders were authorized in March to spend some $300 billion to buy U.S. Treasury debt and $1.45 trillion to buy mortgage-backed securities and debt from government-controlled housing lenders Fannie Mae and Freddie Mac. With the original budget on the Treasury allocation nearly exhausted, many wondered if the Fed will let the program expire, or renew it. Today we got our answer and Wall Street didn't like it.
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Posted
Aug 25 2009, 03:48 AM
by
Douglas McIntyre
Rating:
Money Blog: Top Stocks Blog - MSN Money
The number of reasons for President Obama to reappoint Ben Bernanke as Fed chairman greatly outnumber the reasons for letting him go and putting someone like Larry Summers in his place.
Bernanke is viewed as the hero of the great recession, the only man who bridged the two administrations in a time when the credit and financial markets were failing. Secretaries Paulson and Geithner may get high grades for their work in saving the banks and making money available to the capital markets, but at best they can only split any accolades
Bernanke was on deck for the entire storm. But, it is easy to forget that he took his job on February 1, 2006 which means that he was serving as Fed chief as the clouds were forming. He did little or nothing during 2006 and early 2007 to anticipate or hold off the disaster.
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Posted
Jul 28 2009, 03:54 AM
by
Douglas McIntyre
Rating:
Money Blog: Top Stocks Blog - MSN Money
The idea of Fed chairman Ben Bernanke at a town hall meeting being covered by PBS made some Washington observers shudder. Others just assumed that Bernanke wanted to take a victory lap to celebrate the end of a recession many economists believe he was critical in halting.
One or two members of the press had the effrontery to say that Bernanke was trying to draw attention to himself and the fine job he has done because the president will make a decision about who will run the Fed starting in January. These people are assuming that Bernanke is “campaigning” for the job, as if he needed to after his remarkable actions of the last year.
No one could have imagined when the news came out that Bernanke was barnstorming on public television that an influential Gallup poll would show that Americans trust the Fed less than any other agency among nine that were part of questions put to 1,018 people from July 10-12. Only 30% of those asked said the Fed was doing an “excellent or good” job. The figure was 53% when Alan Greenspan was chief in 2003. His star has fallen considerably since then which makes the results of the survey about the Fed’s role today even more shocking.
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Posted
May 14 2009, 08:18 AM
by
Andrew Rosenbaum
Rating:
Money Blog: Top Stocks Blog - MSN Money
What happened to our economic recovery? Recovery was supposed to be right around the corner, right?
The Federal Reserve and Treasury Secretary Timothy Geithner keep telling us that things will definitely get better soon -- the Fed says growth should start in the third quarter of this year.
But the most important indicators of that recovery are going in the wrong direction. Retail sales are down. The housing market is stagnant. Mortgage rates have moved higher.
Where are those "green shoots" of recovery that Fed Chairman Ben Bernanke is always talking about? Have they gone brown?
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Posted
May 06 2009, 08:33 AM
by
Andrew Horowitz
Rating:
Money Blog: Top Stocks Blog - MSN Money
 Many analysts believe regulators will require banks to maintain tangible common equity (TCE), one of the most conservative measures of capital, equal to 4% of their risk-weighted assets over the next two years, to withstand losses in case the recession worsens. The tests, originally scheduled for release May 4, are set to be disclosed after U.S. markets close on May 7, according to a government official who spoke on condition of anonymity (although we are hearing that it could be as late as Friday).
The list attached shows our calculation of TCE and a Quality Rating that we put on each. This rating includes both the Tier 1 and the TCE weighted as the U.S. government (FED and Treasury) look at those two along with expected income and delinquency rates to determine how much "stress" these institutions can endure.
From our side, it looks like a whitewash as everything is being done to make it appear as though many of the insolvent banks are actually in good shape. In fact, just this morning, it was said that the $34 billion of new capital that Bank of America needs can be partially offset by future earnings projections. How ridiculous indeed...!
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Posted
Apr 30 2009, 03:43 AM
by
Douglas McIntyre
Rating:
Money Blog: Top Stocks Blog - MSN Money
The market continues to stage an improbable rally which should have been affected by concerns about the spread of the Swine flu virus and the fact that several large American banks may need tremendous infusions of capital. GDP numbers issued by the government were also shockingly bad. The economy contracted 6.1% in the first quarter which was more than any of the estimates of sane analysts. This GDP drop followed a drop of 6.3% in the last quarter of 2008. Experts tried to calm the masses by saying that some of the fall-off was due to a dip in inventories. That could mean that as those inventories are replenished in this quarter, economic activity will pick up. The logic is circular to the extent that a poor GDP figure is a sign that the economy may not pick up and hence, inventories will not be replaced.
One of the reasons that GDP did so poorly is that capital expenditures fell at an annual rate of 38%. A fair portion of that drop was due to slow activity in the housing market. Recent figures on home sales should cause any capable analyst to believe that housing will not be a source of any hope for a recovery.
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Posted
Mar 25 2009, 04:12 AM
by
Douglas McIntyre
Rating:
Money Blog: Top Stocks Blog - MSN Money
The transformation of Treasury Secretary Timothy Geithner will be remembered for its speed and unexpectedness. Just four weeks ago, on the heels of a failed presentation of the Administration’s plan to help shore up banks, he was considered indecisive and incompetent. There were calls for him to step down until the President voiced support for his Treasury Secretary on a television talk show.
Geithner left his whipping-boy costume in the closet when he presented the specifics of his plan to get the private sector to participate in buying toxic assets. The financial world was focused on the reaction to his speech and, before he had even given it, the markets began a furious rally. Once he stepped away from the microphones, the buying of equities accelerated.
Geithner’s success in convincing the world that hedge funds would use government money to buy bank paper of questionable value was all the more extraordinary because so few experts believe the plan has any chance of working. It may be that the markets have been through such a long cycle of hopelessness that they are ready to grasp at any straw.
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