Thursday, October 4, 2007
Fisher Points to the Elephant in the Room
Richard Fisher, president Federal Reserve Bank of Dallas, on inflation statistics: "Many of the arguments for excluding food and energy—in particular, the statistical arguments—are based on the notion that an exceptionally large price increase today will be offset, somewhere down the road, by an exceptionally large price decline. But suppose the increases in food and energy prices we've been seeing over the past few years represent longer-lived trends, rather than transitory blips. The arguments made for excluding food and energy prices would be on shaky ground. To put it more succinctly, we risk throwing out the signal along with the noise." ReadFullTextHere
Sunday, September 30, 2007
Weekend Wrap-Up
This week the dollar got pounded. Long term rates remain higher than when Ben cut. Gold, oil and commodities in general are soaring. Housing remains in the toilet, yawn. The economy is slowing. These are the important things to watch going forward.
It seemed a foregone conclusion that the Fed would panic in the face of a slowing economy. However, the specific circumstances under which the Fed eased are very ominous. Oil is at an all-time high (in nominal terms). The dollar was sitting right at long term support following near perpetual weakness. Then they aggravated their gaffe by cutting more than expected. You hear Bernanke and these "governors" talking about managing "inflation expectations". They don't even manage inflation anymore but expectations? That should be easy since none of them see any inflation going forward. Absurd (bordering on criminal). Will they have the audacity to cut again?
The major stock indices have rebounded sharply. Momentum names remain strong. However, I suspect we will see continued weakness in the banks which is similar to what we saw trigger the last sell off. I remain skeptical but if banks go higher and the tape is making new highs I will remain cautiously long. Regardless, the play here is gold. Oil. Nothing fancy. Respect the market and don't let out too much rope.
Next week features an employment report Friday. It is fair to expect fireworks. This is truly a battle of the arrogant undefeated bulls and demoralized perpetually derided bears.
It seemed a foregone conclusion that the Fed would panic in the face of a slowing economy. However, the specific circumstances under which the Fed eased are very ominous. Oil is at an all-time high (in nominal terms). The dollar was sitting right at long term support following near perpetual weakness. Then they aggravated their gaffe by cutting more than expected. You hear Bernanke and these "governors" talking about managing "inflation expectations". They don't even manage inflation anymore but expectations? That should be easy since none of them see any inflation going forward. Absurd (bordering on criminal). Will they have the audacity to cut again?
The major stock indices have rebounded sharply. Momentum names remain strong. However, I suspect we will see continued weakness in the banks which is similar to what we saw trigger the last sell off. I remain skeptical but if banks go higher and the tape is making new highs I will remain cautiously long. Regardless, the play here is gold. Oil. Nothing fancy. Respect the market and don't let out too much rope.
Next week features an employment report Friday. It is fair to expect fireworks. This is truly a battle of the arrogant undefeated bulls and demoralized perpetually derided bears.
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