- CNBC – Steve Liesman: An Aggressive Fed? More of the Street Betting On It
The survey found that about a third of the economists, fund managers and strategists who responded to the survey see the Fed hiking interest rates this year, double the percentage from the March survey. About 27 percent believe the Fed will begin selling assets in the second half of 2011, to reduce the size of its portfolio, up from around 16 percent in the prior survey. … Slightly more than half of the 69 respondents believe Fed policy is now “too accomodative,” up from 44 percent in March. The percentage who believe the Fed has policy “just right” declined to 42 percent from 50 percent. … A robust 78 percent said they believed that the press conferences, to be held four times a year, would make Fed policy more clear. Just 7 percent thought it would lead to greater policy confusion. But 47 percent said the press conference would create greater volatility in the stock and bond markets with 41 percent believing there would be no market impact. … The outlook for a third round of quantitative easing remains muted. Only about a quarter of respondents believe the Fed will continue to buy assets after the expiration in June of the Fed’s current quantitative easing program to purchase $600 billion of treasuries. On average they expect around $50 billion of additional purchases.
Comment
- MarketWatch – David Stockman: Crony capitalism strikes again
The Federal Reserve juices speculators
In the last few weeks alone, it launched two more financial sector pumping operations which will harm the real economy, even as these actions juice Wall Street’s speculative humors. First, joining the central banking cartels’ market rigging operation in support of the yen, the Fed helped bail-out carry traders from a savage short-covering squeeze. Then, green lighting the big banks for another go-round of the dividend and share-buyback scam, it handsomely rewarded options traders who had been front-running this announcement for weeks. Indeed, this sort of action is so blatant that the Fed might as well just look for a financial vein in the vicinity of 200 West St., and proceed straight-away to mainline the trading desks located there. In any event, the yen intervention certainly had nothing to do with the evident distress of the Japanese people. What happened is that one of the potent engines of the global carry-trade — the massive use of the yen as a zero cost funding currency — backfired violently in response to the unexpected disasters in Japan. Accordingly, this should have been a moment of condign punishment — wiping out years of speculative gains in heavily leveraged commodity and emerging market currency and equity wagers, and putting two-way risk back into the markets for so-called risk assets. Instead, once again, speculators were reassured that in the global financial casino operated by the world’s central bankers, the house is always there for them—this time with an exchange rate cap on what would otherwise have been a catastrophic surge in their yen funding costs.
Steve Liesman described this group of 69 respondents as having “a predilection to support the Federal Reserve.” In other words, these are Federal Reserve supporters who generally go along with whatever the Federal Reserve suggests. However, as our poll to the upper right shows and our discussion earlier this week detailed, many traders do not see it this way.
The Federal Reserve might be surrounding themselves with yes-men which is clouding their view from what Wall Street really thinks. Consider:
Members of the Federal Reserve would do themselves a great service in talking to more people with dissenting views, if for no other reason than to understand an opposing viewpoint. Surrounding themselves with sympathizers has repeatedly led to problems in the past and we fear it will again in the immediate future.
Here is the type of person the Federal Reserve needs to talk too.