Tuesday, August 30, 2011

More Than Two Shakes and You are Playing with It

Just swamped at work as of late. Just have not been able to get the time to do much else during the day. I am going to need this long weekend for sure.

More Than Two Shakes and You are Playing with It
We have gone from headlines on Friday screaming "FED signals no more QE" to having it all but guaranteed by today. That was fast.

One of the three dissenters on the last FED meeting was Minneapolis Fed's Kocherlakota. Not anymore via Zero Hedge:
Minneapolis Fed's Kocherlakota Down, Two Dissenters To Go Until QE3

On CNBC today FED member Charles Evans was even more upfront about what he thinks the FED needs to do:
Fed’s Evans backs more easing

So QE1 sort of worked, QE2 was a total failure so I guess going to the well again makes sense right? My dad always said "More than two shakes and you are playing with it". The FED seems intent of playing with their monetary tools again.

Looking around, it is not like the commodity complex has been crushed price wise. What are you paying for gas? Still high right? It's will go higher. Food prices are still elevated as well. This is not the same environment as last summer when everything had been poleaxed.

I am against anymore FED intervention but it's coming anyway. Last post I went over why I thought long trades were safer and why. The run up to the September FED meeting should provide a lift, but the S&P is already withing 40 points of the 1250-1260 area. Headwinds after the month of August will come in the form of bad data on many fronts. What will prove more important going forward? New easing or a crumbling macro picture?

Last year after QE2 the hope that things would get better held firm and even though its took many months for economic numbers to improve, most were willing to wait. After the fizzle of QE2, will they wait again? Biggest question going forward here is what the half life of QE3 is going to be.

Have a good night.

4 comments:

Stagflationary Mark said...

Old school: Measure twice, cut once.

New school: Measure once, cut as many times as is needed.

Hahaha! ;)

getyourselfconnected said...

Nice, seems that is the plan.

Stagflationary Mark said...

We're probably both giving the Fed too much credit.

Literally.

Thank you. Thank you very much. I'll be performing here all evening. ;)

GawainsGhost said...

QE1 was a failure because it treated a solvency problem as a liquidity problem. Dumping money into bankrupt institutions does nothing to solve the solvency problem. All that money only went to propping up failed banks, including several foreign banks, so they could continue to lie about their asset values.

Ditto for QE2. Same song, second verse, it doesn't get better but it will get worse.

QE3? If you shake it more than twice, you aren't just playing with it, you're jacking off. After you shot your wad on the first shake. Something about beating a dead horse is like stroking a limp . . .