The Fed says the economy is doing awful and it pumps $85 billion a month in. The stockmarket booms.
The Fed says the economy is doing better and the stockmarket crashes (like yesterday).
Go figure.
Yesterday was awful.But other days have been awful too in this rumor-rife, but, on balance rising market.
Nothing the Fed said or didn’t say yesterday has changed my mind about being substantially invested in equities.
Let’s look at what the Fed said yesterday, and add a few semi-informed comments:
Information received since the Federal Open Market Committee met in May suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. (Unemployment is increasingly hard to get a handle on because of the explosion of the cashless society. — Harry) Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. (That’s the Fed digging at the Sequester, which has cut government spending.)Partly reflecting transitory influences, inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable. (The Fed wants us to have 2% inflation, because it’s deathly afraid of what happens when you have deflation, viz. Japan’s 20-lost years. Personally I think we have oodles of inflation. It’s all in how you measure it. It’s actually good if some things deflate, like computer memory.)
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. (The Fed wants price stability and inflation. Go figure.) The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate (what other policy tools?), until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives. (The Fed’s printing of $85 billion a month in money has worked in the U.S. In other countries, you’d have hyper-inflation See picture below.)
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative (not a word you’ll find in any dictionary — it’s Fed-Speak) stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. (They’re obsessive about 2% inflation. Of course, it’s a nonsense statistic. It all depends what you measure. If you include rents in New York City, you’d have hyper-inflation already. Rents in downtown Detroit may be a different story.)
Suffice, I’m staying on course looking for great stocks and dips.
Where do I find upcoming IPOs? There’s a mini-boom in IPOs. Many have done well, e.g.
For a list of upcoming IPOs, go to Renaissance Capital IPO Home. Click here.
Useful computer tips:
+ Windows Explorer will open where you want it. Right click. Get to Properties. Change Target to whatever you want. I use c:\AllHarry, which is the main folder I have everything under, viz:
+ Need to figure an IRR? Other useful calculations, also. Go here
+ If you’re traveling overseas, unsubscribe now from many of your non-preferred vendors.
Study finds this simple trick stops athletes choking under pressure.
Clench your left hand into a fist. Hold it for 30 seconds. It doesn’t work with your right fist.
I bet it works in business also.
Weekend reading:
+ I’ll Have What She’s Having. `What Do Women Want?‘ by Daniel Bergner. Read the New York Times’ fascinating review. Click here.
+ Apple to launch its own “personalized search engine” — to compete with Google? For more, click here.
How not to raise money for your shiny new company.
+ Don’t do investor presentations while you’re on a cell phone, a cordless phone or a speakerphone.
+ Don’t make video presentations when you’re not shaven, tieless and wearing a genuinely awful plaid shirt. God invented the tie for a reason. It makes you look serious. Investors want serious. Money is serious.
+ Don’t say things about your competitors that any moron (i.e. me) can check on the Internet with a five-second Google search.
You do not want to hear about the drek I’ve been subjected to recently. Fact is there are great ideas around and oodles of money looking to invest. Test your ideas and your presentation on your friends first.
The latest Borowitz Report is seriously sick.
U.S. Promises Smooth Transfer of Quagmire from Afghanistan to Syria
DAMASCUS (The Borowitz Report)-Supporters of the United States’ twelve-year quagmire in Afghanistan cheered the news today that the U.S. would strive to achieve a seamless transfer of that quagmire to Syria, effective immediately.
Army Gen. Martin Dempsey, the Chairman of the Joint Chiefs of Staff, sought to reassure those who were concerned that the U.S. withdrawal of troops from Afghanistan signalled a wavering of the nation’s commitment to being mired in open-ended military muddles.
“I can tell you, right here and right now, that the U.S. is every bit as determined to engage in an ill-defined, ill-advised and seemingly interminable mission in Syria as we were in Afghanistan,” Gen. Dempsey said. “All that’s changing is the Zip Code.”
General Dempsey said that the same tribal hatreds, sectarian violence, and untrustworthy alliances that made Afghanistan a quicksand-like morass are very much in evidence in Syria: “I am confident that we could be involved in Syria for many, many years before figuring out why we are there.”
Harland Dorrinson, executive director of the National Quagmire Institute, a think tank dedicated to promoting the United States’ involvement in intractable conflicts around the globe, said he found General Dempsey’s words about Syria reassuring: “I felt a lot better after hearing what he had to say, and I know a lot of defense contractors felt the same way.”
Favorite recent New Yorker cartoons.
Harry Newton who treasures his worthless Zimbabwe money. I think this is the biggest note ever printed.
After listening to Bernanke yesterday, I am confused why the market faltered. It should bounce back…on another note, Bernanke has a very interesting way he responds to questions. He never actually answers the question that is being asked. He has a very tactful way of circumventing a tough question with positive responses that don’t really answer the main question. A good example of this is when he was asked why he thinks there has been a increase in the 10yr treasury rate. Very fascinating to listen him answer questions because he goes about it differently than a politician.
“It’s should bounce back.” Nice call, dummy – it’s down over 2%.
““I can tell you, right here and right now, that the U.S. is every bit as determined to engage in an ill-defined, ill-advised and seemingly interminable mission in Syria as we were in Afghanistan,” Gen. Dempsey said. “All that’s changing is the Zip Code.”
Harry, Satire is only funny because it’s mostly true. This is funny.