jdcpapa wrote:Higgenbotham wrote:Fed watchers will be looking for hints of a stronger easing move in Bernanke’s next speech on Aug. 26 at the central bank’s policy retreat in Jackson Hole, Wyo.
The goal posts are up.
..............short term head games!
True, I would say the crisis has more or less begun but the market will breathe in and out. The Fed will apparently play that for all it's worth, as they should.
This news indicates the fringe market watchers (like us) and the Fed have both spotted the hurricane and agree on when it might make landfall (
August 26) and how much damage there might be (2 years worth). The Fed has put an action plan into place to minimize the damage. Whether it will work or not is unknown, but the new known is that the Fed is aware and moving. Notably, some market watchers are a bit shocked at the rabbit that the Fed pulled out of its hat because it smacks of desperation, and some on the Fed committee are dissenting. Dissent has been building inside the Fed for months, as we noted 7 or 8 months ago. Mr Plosser fired the opening salvo during a speech in Chile where he stated the Fed should not be trying to prop up real estate prices. He was a dissenter today.
http://www.philadelphiafed.org/publicat ... -chile.cfm
January 17, 2011 Speech
Charles Plosser wrote:I believe we have come to expect too much from monetary policy. Indeed, broadening its scope can actually diminish its effectiveness. When monetary policy over-reaches and fails to deliver desired, but unattainable, outcomes, its credibility is undermined. That makes it more difficult to deliver on the goal it is actually capable of meeting. Moreover, when the central bank is asked to implement policies more appropriately assigned to fiscal authorities, the independence of monetary policy from the political process is put at risk, which also undercuts the effectiveness of monetary policy.
Charles Plosser wrote:Nonetheless, the notion persists that activist monetary policy can help stabilize the macroeconomy against a wide array of shocks, such as a sharp rise in the price of oil or a sharp drop in the price of housing. In my view, monetary policy’s ability to neutralize the real economic consequences of such shocks is actually quite limited. Successfully implementing such an economic stabilization policy requires predicting the state of the economy more than a year in advance and anticipating the nature, timing, and likely impact of future shocks. The truth is that economists simply do not possess the knowledge to make such forecasts with the degree of precision that would be needed to offset the economic shocks. Attempts to stabilize the economy will, more likely than not, end up providing stimulus when none is needed, or vice versa. It also risks distorting price signals and thus resource allocations, adding to instability. So asking monetary policy to do what it cannot do with aggressive attempts at stabilization can actually increase economic instability rather than reduce it.
Therefore, in most cases the effects of shocks to the economy simply have to play out over time as markets adjust to a new equilibrium. Monetary policy is likely to have little ability to hasten that adjustment. In fact, policy actions could actually make things worse over time. For example, monetary policy cannot retrain a workforce or help reallocate jobs to lower unemployment. It cannot help keep gasoline prices at low levels when the price of crude oil rises to high levels. And monetary policy cannot reverse the sharp decline in house prices when the economy has significantly over-invested in housing. In all of these cases, monetary policy cannot eliminate the need for households or businesses to make the necessary real adjustments when such shocks occur.
Getting back to trading strategies, in my view, the assumption has to be made that the Fed can kick the can through the end of
August and avoid a crash. I personally will not be shorting anytime soon in front of the locomotive that was unleashed today. The S&P futures moved up 9.5% from low to high today and sit near their high now. With the market down 20% in 2 weeks and already on hair trigger alert so to speak, it doesn't take much to trigger a buying panic.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.
