Tag Archives: Federal Reserve

Weekend Reading

Quote of the Week:

As commercials for Fram oil filters used to say, “You can pay me now or pay me later.” In our case today, “pay me later” is a perpetuation of weak banks, substandard growth, persistent unemployment and stymied productivity. Better to do takeunders of banks now than to hire an undertaker for the whole U.S. economy later. ~Andy Kessler

Links for the Week ending Nov-20, 2010 Read more of this post

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Hussman: Bubble, Crash, Bubble, Crash, Bubble…

Hussman’s weekly market comment is a must read. He does not mince words in arguing that QE is utterly misguided and Bernanke’s leadership at the Fed has bordered on criminal. Excerpts below (emphasis mine) but please read the entire comment.

Given that interest rates are already quite depressed, Bernanke seems to be grasping at straws in justifying QE2 on the basis further slight reductions in yields. As for Bernanke’s case for creating wealth effects via the stock market, one might look at this logic and conclude that while it may or may not be valid, the argument is at least the subject of reasonable debate. But that would not be true. Rather, these are undoubtedly among the most ignorant remarks ever made by a central banker.

We will continue this cycle until we catch on. The problem isn’t only that the Fed is treating the symptoms instead of the disease. Rather, by irresponsibly promoting reckless speculation, misallocation of capital, moral hazard (careless lending without repercussions), and illusory “wealth effects,” the Fed has become the disease.

Source: Hussman Funds

QE2 through the lens of QE1

A survey released yesterday on the subject of the markets’ expectation for the future size Federal Reserve balance sheet has me curious regarding what another round of quantitative easing (QE) would mean for the equity markets. 70% of survey respondents believe the Federal Reserve will resume QE with the average expected increase in balance sheet size being $500 billion.

Several people have already weighed in with their opinion on what QE2 would mean for the markets. David Tepper, president & founder of Appaloosa Management, says there are only two scenarios (h/t pragcap.com):

1) The economy improves and stocks rise. OR

2) The economy will decline and the Fed will induce a rally in stocks via QE. Read more of this post

Big Banks Loosen Lending Standards: Does it Matter?

The front page of the Wall Street Journal today proclaimed that “Big Banks Loosen Lending Standards”. Further reading revels that while credit standards are becoming more liberal, demand is still weak; especially among businesses with annual sales less than $50 million.

So the question is, will the easing of lending supply also spur demand or will the deleveraging trend (see below) continue within this key driver of economic growth, the small business?

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