Saturday, August 05, 2006
RGE - Why a Fed Pause or Even An Easing Will Not Prevent the Coming U.S. Recession
RGE - Why a Fed Pause or Even An Easing Will Not Prevent the Coming U.S. Recession: "Today Yellen expressed similar serious worries. First, she worried about the downturn in the housing sector becoming disorderly: 'there is more reason to worry that house prices would fall sharply than that they would rise sharply.' Second, she clearly linked the wealth effects of a housing slump to the risk of a sharp fall in consumption. She argued that the flattening – if not falling - price of houses 'makes the chance of a sizable drop-off in consumer spending seem larger than the chance of a big surge.'
Given her statements today, and those by St Louis Fed President Poole suggesting that a tightening on August 8th is only a 50/50 chance now, it is clear that the Fed is really worried about the U.S. slowdown and much more worried about it now than the rising headline and core inflation. "
Given her statements today, and those by St Louis Fed President Poole suggesting that a tightening on August 8th is only a 50/50 chance now, it is clear that the Fed is really worried about the U.S. slowdown and much more worried about it now than the rising headline and core inflation. "
Wednesday, April 27, 2005
Inflation risk?
Mainstream media are once again trying to catch up with the inflation that has been there for quite a while. Headlines of imminent inflation risks can be found almost anywhere.
A contrarian thinking, however, would found some questions
A contrarian thinking, however, would found some questions
- What's the timeframe of the inflation risk?
- How much of it is already reflected in the market?
I used to ignore answers to the first question in my investment decisions like shorting long-term treasuries, only to realize even with substantial pressure, they can stay pretty strong. The explanation, of course, is that the in longer term, the market sometimes anticipate a different inflation rate.
Thursday, January 06, 2005
Fun to see Larry Kudlow so wrong
Time after time you hear comments like those from Larry Kudlow that the supply-side effects will grow the economy without inflationary pressure.
"Since last June the fed funds rate has doubled, but long-term rates have defied conventional wisdom by actually falling. This is a great sign that neither actual nor expected inflation is a problem." Larry Kudlow, November 11, 2004
Less than two months later, just when the market is aspiring for another, the Feds themselves suggested in December the current rate is too low to contain the inflation. Although I do not usually believe the propagandas from the Feds and this might just be another example of them trying their verbal influence of the market, it at least shows the plausibility that the inflation is brewing.
"Since last June the fed funds rate has doubled, but long-term rates have defied conventional wisdom by actually falling. This is a great sign that neither actual nor expected inflation is a problem." Larry Kudlow, November 11, 2004
Less than two months later, just when the market is aspiring for another, the Feds themselves suggested in December the current rate is too low to contain the inflation. Although I do not usually believe the propagandas from the Feds and this might just be another example of them trying their verbal influence of the market, it at least shows the plausibility that the inflation is brewing.
