First Quarter GDP Revised Down To 1.8%

[Kushinator]

No negative feedback loop when the Fed is buying 85 billion a month of these securities.

That is not correct. The Fed does not buy $85 billion a month.

 

[DA60]

What is your opinion on current earnings multiples?

I never follow earnings multiples/P/E ratios.

 

[Kushinator]

I never follow earnings multiples/P/E ratios.

So why should i take your opinion seriously given that you openly admit to not knowing that current market prices for equities are justified given the amount of money the respective companies are making?

 

[iliveonramen]

Why would a socialist/Marxist oppose government intervention in the free market, that is what socialist/Marxist is all about.

Why do you think a socialist/Marxist would support intervening and alleviating the pain from a Capitalist economic crash?

 

[Fenton]

Banks
don't lend money with reserves in
mind. Banks make a loan, and then only afterwards reconcile their reserve holdings. Generally this is done through interbank lending. So a bank will make a loan, and if it determines that it doesn't meet the required reserve amount, will borrow the needed amount to satisfy the requirement in the interbank market. So bank reserves and its lending practices are not really closely connected. Further, reserves just sit in an account at the Fed or internally at the bank. They never enter the economy.



Nobody - not even Bernanke - has denied that chasing funds out of bonds led them to be invested elsewhere.

They currently are holding nearly record reserves, so not much inter-bank lending going on and instead the FED is paying them interest on their near record reserves ( since 2008 ) to manipulate short term interest rates.

Getting paid to have their doors open essentially as they get to keep their depositors money for free.

Chasing funds out of bonds WAS THE POINT of QE. Lower yields/ interest rates removes inherent risk on private securities but bonds stayed strong due to the fact many investors simply wanted to protect their principle.

All it did was inflate equities, assets and primary bond values and it did it by monetizing nearly 3/4 of our short term debt.

It's so f***king stupid. Investors with one foot out the door waiting for any semblance of a stopping of QE so they can sell their overvalued assets.

And all of this was isolated to the markets

 

[DA60]

So why should i take your opinion seriously given that you openly admit to not knowing that current market prices for equities are justified given the amount of money the respective companies are making?

This subject is not about what companies are making (their earnings).

It is about the speculative bubble that is being formed in the equities market in large part due to central bank interventions.

People did not head for the exits last week because earnings reports were down and/or P/E ratios looked bad.

They did so because Bernanke coughed and they semi-panicked.

And NO FACTOR these days affects the markets more then what the Fed will or will not OR might or might not do.

And that's the problem - the fundamentals have gone out the window.



And save the semi-melodramatics please - like you ever take my opinion seriously anyway.

 

[Fenton]

So why should i take your opinion
seriously given that you openly admit to not knowing that current market prices for equities are justified given the amount of money the respective companies are making?

Bull sh**.

Explain the sell off that happened a couple of weeks ago.

Expain bond yields climbing.

With just the HINT that he may be tapering off QE later this year the market dropped.

Those " profits " should have led to more stabillity, but no, the markets rise is directly attributed to the FEDs unprecendented QE.

QE 3 because the thrid times the chatm...I guess

 

[DA60]

Bull sh**.

Explain the sell off that happened a couple of weeks ago.

Expain bond yields climbing.

With just the HINT that he may be tapering off QE later this year the market dropped.

Those " profits " should have led to more stabillity, but no, the markets rise is directly attributed to the FEDs unprecendented QE.

QE 3 because the thrid times the chatm...I guess

Exactly.

Check every major change in the markets in the last 2+ years.

The VAST majority of them are due to market concerns about what the Fed did/does or might/might not do.

Anyone who says otherwise is simply not following the markets and/or is not understanding them.

If Bernanke announced today that the Fed is ending QE immediately - the markets would plummet like a 10 ton weight was attached to them.


The real proof as to how much the markets are dependent on the Fed is that if major government data comes in too positive, the markets react generally negatively because it gives them fear that this good news will cause the Fed to 'taper' (the word Wall Street seems to fear most these days) QE sooner rather then later.

I mean that is just messed up - if data is too good, the markets don't like it.

That's today's economic world.

 

[Fenton]

Exactly.

Check every major change in the
markets in the last 2+ years.

The VAST majority of them are due to market concerns about what the Fed did/does or might/might not do.

Anyone who says otherwise is simply not following the markets and/or is not understanding them.

Kush's priority is defending the destructive policies of this President.

To the point of pretense.

Of course assets and equities are overvalued due to the FEDs QE.

 

[Kushinator]

They currently are holding nearly record reserves, so not much inter-bank lending going on and instead the FED is paying them interest on their near record reserves ( since 2008 ) to manipulate short term interest rates.

There is lots of interbank lending. In fact, one could argue (although i believe it misses the forest for the trees) that prop-desks facilitate the majority of interbank lending. This is especially true for reserve members of foreign origin. But.... Banks make money from lending. And it is common knowledge that they would rather lend to the government than lend to people and (small) businesses.

All it did was inflate equities, assets and primary bond values and it did it by monetizing nearly 3/4 of our short term debt.

You have to assume that without Fed intervention, banks would not be hoarding Treasuries. Yet when financial markets make the greatest "risk-dump" in more than 80 years, it is simply unrealistic.

Investors with one foot out the door waiting for any semblance of a stopping of QE so they can sell their overvalued assets.

This is new stuff, investors have never had to navigate such an environment. The sentiment you describe got many people burned as of late, as market participants incorrectly interpreted Fed language and started selling Treasuries. Now, it is that much cheaper (actually, it is more profitable) for the Fed to conduct future asset purchases. Volatility should subside as market makers and speculators learn how to trade in such environment.

 

[Kushinator]

This subject is not about what companies are making (their earnings).

It is about the speculative bubble that is being formed in the equities market in large part due to central bank interventions.

People did not head for the exits last week because earnings reports were down and/or P/E ratios looked bad.

They did so because Bernanke coughed and they semi-panicked.

And NO FACTOR these days affects the markets more then what the Fed will or will not OR might or might not do.

And that's the problem - the fundamentals have gone out the window.

Addressed in another post.

And where did I ever say you should (or that I even care much) whether you take my opinion seriously or not?

Why do you make your position so transparent (as well as oversupplied) if you did not wish it to be taken seriously? It would seem it is just to be argumentative.

And save the semi-melodramatics please - like you ever take my opinion seriously anyway.

I take it as you genuinely believe what you are posting. Stating that highly profitable companies are overvalued based on an impending open-ended market crash is at best fringe conspiracy. You would have some merit IFF earnings multiples were much higher, providing substance that "the Fed is the U.S. economy".

 

[Kushinator]

Explain the sell off that happened a couple of weeks ago.

Market participants with little experience in navigating a dynamic zero interest rate environment. Alot of people lost money a couple of weeks ago (lots of it!).

Expain bond yields climbing.

Improved economic activity.

With just the HINT that he may be tapering off QE later this year the market dropped.

WHY.... WOULD.... THE.... FED.... TAPER.... LATER.... THIS.... YEAR???????? why?

Those " profits " should have led to more stabillity, but no, the markets rise is directly attributed to the FEDs unprecendented QE.

Not so. Dividends are down, hiring is down, and firms have taken on a fortress mentality when it comes to their balance sheets. The psychological ramifications of 2008/2009 have had a long lasting impact.

 

[Kushinator]

Kush's priority is defending the destructive policies of this President.

These policies would have been in place regardless of the administration. The only difference would be in terms of the where the proceeds from deficits end up.

To the point of pretense.

Of course assets and equities are overvalued due to the FEDs QE.

Based on earnings alone, equities cannot be considered overvalued. Given the state of cash on corporate balance sheets, equities cannot be considered overvalued.

 

[DA60]

Why do you make your position so transparent (as well as oversupplied) if you did not wish it to be taken seriously? It would seem it is just to be argumentative.

I did not say I do not wish to be taken seriously.

You people really should learn exactitude.

I said:

And where did I ever say you should (or that I even care much) whether you take my opinion seriously or not?

The key word there is 'you'.

I did not say 'everyone' or 'anyone' - I said 'you'.

I mean no offense, but I really care little what closed minded people think about my posts.

Nor do i like wasting much time debating with them - I sometimes make an exception when I am bored or the mood strikes me.

And I believe on this subject that you are closed minded (as are many on this site it seems).


This equity boom is far, FAR more to do with the Fed then fundamentals.

You don't agree - I really don't care much.

Again, no offense.


Have a nice day.

 

[Kushinator]

Have a nice day.

The standard response from DA60 when he cannot support his positions with anything other than... his opinion.:yawn:

 

[Fenton]

There is lots of interbank lending. In fact, one could argue (although i believe it
misses the forest for the trees) that prop-desks facilitate the majority of interbank lending. This is especially true for reserve members of foreign origin. But.... Banks make money from lending. And it is common knowledge that they would rather lend to the government than lend to people and (small) businesses.



You have to assume that without Fed intervention, banks would not be hoarding Treasuries. Yet when financial markets make the greatest "risk-dump" in more than 80 years, it is simply unrealistic.



This is new stuff, investors have never had to navigate such an environment. The sentiment you describe got many people burned as of late, as market participants incorrectly interpreted Fed language and started selling Treasuries. Now, it is that much cheaper (actually, it is more profitable) for the Fed to conduct future asset purchases. Volatility should subside as market makers and speculators learn how to trade in such environment.

Banks would rather get a gauranteed return on their priniciple than push it out into a economy that after 5 years and nearly 7 TRILLION dollars in new debt and 4 TRILLION dollars in QE just had it's GDP revised down to 1.8%.

Having the option to by-pass the private sector is counter intuitive to the initial reasons for Bernakes QE.

To free up credit for the private sector, not the Government. Banks LIKE small reserves since it enables increased inter-bank lending which is less risky but Obama's economic policies have really only given the banks one option and it's why our econony after 5 years is stagnant

Hell, take away the massive stimulus and QE and it's shrinking. It's a poor excuse for economic policy.

And your'e right, this is unprecedented. Obama's in Africa and targeting one of our largest exports when famies are struggling and the middle class is shrinking.

The press with some exception is too indebted to call this what it is, a failure with highly dangerous and destructive FED policy and investors are ready to bail not because this has never happened before, they're ready to bail because they put their priniciple before their unconditional support for a unqualified President.

Money talks, Obama love walks.

 

[Fenton]

These policies would have been in place
regardless of the administration. The only difference would be in terms of the where the proceeds from deficits end up.



Based on earnings alone, equities cannot be considered overvalued. Given the state of cash on corporate balance sheets, equities cannot be considered overvalued.

Then explain the sell off.

NOT because investors reacted to a Corporate take over, or some CEOs questionable ethical behaviour, but because of Bernake's statement that he MIGHT wind down QE later this year.

Kush, everybody with maybe one or two exceptions was down.

 

[DA60]

The standard response from DA60 when he cannot support his positions with anything other than... his opinion.:yawn:

So now you are putting words in people's mouths and talking to yourself - noted.


And I already supported my 'position' on this.

Go back and check every major S&P adjustment over the last 2+ years and you will see that the vast majority will correspond to Fed announcements and/or Fed rumours of tapering/increasing QE.

That is not good enough for you - guess how much I care?


Have a VERY nice day.

 

[Kushinator]

Banks would rather get a gauranteed return on their priniciple than push it out into a economy that after 5 years and nearly 7 TRILLION dollars in new debt and 4 TRILLION dollars in QE just had it's GDP revised down to 1.8%.

Quarter 1 GDP was revised down, but this is to be expected given the slow down in Federal spending and tax increases.

Having the option to by-pass the private sector is counter intuitive to the initial reasons for Bernakes QE.

Open market operations require private sector participation. Not sure what you are getting at....

To free up credit for the private sector, not the Government. Banks LIKE small reserves since it enables increased inter-bank lending which is less risky but Obama's economic policies have really only given the banks one option and it's why our econony after 5 years is stagnant

What?:lol: Banks like to have excess reserves as close to zero as possible because it reduces their inflation risk and cost risk (in terms of opportunity). LOL, interbank lending is simply the byproduct of such environment. The profit margins from interbank lending pale in comparison to what can be made in overnight swaps and commercial paper markets, not to mention the spreads created by lending to their own depositors.

Hell, take away the massive stimulus and QE and it's shrinking. It's a poor excuse for economic policy.

You prove my point for me. That the economy requires stimulus and credit easing to sustain growth is all the reason for its very existence.

 

[Kushinator]

And I already supported my 'position' on this.

Stating your opinion and then affirming it with another opinion is not support. Neither is linking to mises.org, cato, or zerohedge.

Go back and check every major S&P adjustment over the last 2+ years and you will see that the vast majority will correspond to Fed announcements and/or Fed rumours of tapering/increasing QE.

Show me where!

That is not good enough for you - guess how much I care?

You have not supported anything. You made a vague claim and failed to support it. When i do take on proving a negative, you shift back to defending your opinion and tell me to have a nice day.

Have a VERY nice day.

Oh so typical!

 

[Kushinator]

Then explain the sell off.

Speculation.

NOT because investors reacted to a Corporate take over, or some CEOs questionable ethical behaviour, but because of Bernake's statement that he MIGHT wind down QE later this year.

He has reiterated the Fed's position ad nausium: they will not taper until the economy is on solid ground. They even explicitly tied the unemployment rate to their time scale, 6.5%. A great deal of volatility will be required to price interest rates in a QE-less environment.

Kush, everybody with maybe one or two exceptions was down.

what are you talking about? In the future, please address my comments one at a time. It is time consuming trying to figure out which of my comment warrants your response.

 

[DA60]

Stating your opinion and then affirming it with another opinion is not support. Neither is linking to mises.org, cato, or zerohedge.

That is the stupidest point I have read today.

Those sites often just post statistics - usually from reputable/government sources.

So a chart from the U.S. government that is posted on ZH is not support?

But if the same chart is posted on it's own - it is support?

Okaaaaaaaay.

Show me where!

That's for you to do pal.

I and Fenton already used the example of last week.

And just look at the change in the stock market for every major Fed announcement or change in QE.

This should be RIDICULOUSLY OBVIOUS to you.

Not enough - just Google 'FED driving markets'...they can explain it better then I can.


You are just not getting it are you -

I do not respect your opinions or your knowledge level or your objectiveness (rather - lack thereof) on economics.

Why on Earth would I waste my time trying to convince someone like that of anything?

I guess you just like debating because you are bored or something.

Well, I have other things I would rather do.

We are done on this for now.


Have a nice day.

 

[Kushinator]

That is the stupidest point I have read today.

Those sites often just post statistics - usually from reputable/government sources.

So a chart from the U.S. government that is posted on ZH is not support?

But if it's posted on it's own - it is support?

Okaaaaaaaay.

Calm down killer. They are fringe sites at best.

That's for you to do pal.

As expected, you cannot support your position. This is the type of reaction i come to expect; all opinion, no substance.

I and Fenton already used the example of last week.

Where? Why not link the post?

I do not respect your opinions or your knowledge level or your objectiveness (rather - lack thereof) on economics.

Why on Earth would I waste my time trying to convince someone like that of anything?

This is not about convincing, it is about being able to support your positions based on financial and economic analysis. You're just a one trick pony; all doom and gloom. And when someone asks you to support something, you attempt to place your burden of proof on others. Weak.

Have a nice day.

You've said that 3 times already.

 

[DA60]

Speculation.

You want me to post great details to explain my position - and this is how you respond to his question?

Lol.

Noted.




Have a nice day.

 

[Fenton]

Quarter 1 GDP was revised down, but this is to be expected given the slow down
in Federal spending and tax increases.



Open market operations require private sector participation. Not sure what you are getting at....



What?:lol: Banks like to have excess reserves as close to zero as possible because it reduces their inflation risk and cost risk (in terms of opportunity). LOL, interbank lending is simply the byproduct of such environment. The profit margins from interbank lending pale in comparison to what can be made in overnight swaps and commercial paper markets, not to mention the spreads created by lending to their own depositors.



You prove my point for me. That the economy requires stimulus and credit easing to sustain growth is all the reason for its very existence.

There's no private market participation for a very good reason Kush.

There are Consequences to electing a Jr Senator with a radical ideology and little to no experience who's jobs initiatives consisted of building a manufacturing base for a product that there was little demand for.

And with little forethought given to the Chineses ability to undercut our cost.

That plus a horrible law that mandates arbitrary and rising cost for hundreds of Millions of Americans.