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hardnox604008
Advisor

Fed's Fisher comments big deal

Fed regional governor Fisher says that with the string of better data, QE3 isn't going to happen.

 

As markets float higher on the $2 trillion in liquidity that the BOJ and ECB have pumped into the global system over the last 2 months it might be that it's "that's all folks."

 

Looking forward, I think that if markets get spongy in a timeframe that is closer to the election and the Fed did a QE, the partisan hue and cry would be such that the Fed would put its own existence at risk (some say that isn't a bad thing).

 

The big internal contradiction is still present- oil is at $105 and last time I visited over at Forum the boyz were sharpening their knives for payback over when the commodity vigilantes nailed the Bush Administration on their money pumping efforts. Even current oil prices are likely a drag on the economy going forward and if you hit the system with a big QE it is $147 then $33 deja vu.

 

Interesting to watch them walk the tightrope. I won't discount the capacity to extend and pretend but the wire is going to get a bit bouncy at some point and I'm still guessing it doesn't stay nice and smooth all the way to November.

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6 Replies
GoredHusker
Senior Contributor

Re: Fed's Fisher comments big deal

At one time, I thought QE3 was a forgone conclusion.  However, I have had a change of thought.  Typically, QE3 would have been a forgone conclusion; but one must keep in mind this is an election year.  With all the trumped up economic data being published, it will be extremely difficult for QE3 to occur and extremely unpopular.  The one major headwind right now is Europe.  While it hasn't been reported yet, they are in a recession.  Will it drag us into a recession?  I don't know for sure yet on that one, but I think there's a 90 percent chance we end 2012 in a recession if the average gasoline price rises to and stays at 4 bucks for three months this summer.  I'm of the opinion that most of everything going on with Iran is nothing more than sabre rattling and fearmongering.  I highly doubt here in the heartland we ever see 5 buck gas this summer. 

 

What all of this probably does is keep the funds and money on the sideline.  I doubt they have the apetite for the risk in this environment.  One could easily make a case for corn to either drop a couple bucks or go up a couple bucks given certain circumstances.  There's a lot of uneasiness right now, and I don't see this clearing up for a while.  It wouldn't surprise me one bit to see a year similar to 2008.  The difference this time around is traders I would hope are better prepared.  If I had any guts at all, I'd probably be shorting the Dow in here near 13,000.   

 

 

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hardnox604008
Advisor

Re: Fed's Fisher comments big deal

Hi Gored,

 

I'm agreeing with you, not making fun at all, but the great statement is that "Europe is in a recession but nobody knows it yet."

 

Europe hard date is bad but the German Business Managers Sentiment Index came out "better than expected" and the world is a wonderful place. I guess German business managers are just happy that the places they formerly sold things to in order to build their huge current account surplus have been fixed in a manner that they won't be buying anything for a very long time. Go figure.

 

But in talking head world, market action drives commentary so things are mostly good, they must be because markets are rising.

 

But the oil market is rising too- just like it did at the tail end of the Bush attempt to levitate all assets by trashing the dollar. And if anyone recalls, there was a whole lot of hopey talk about how housing doesn't go down and the US consumer is remarkably resilient even into the summer of 2008. BTW, of course commodities made their secular top in that timeframe.

 

Central bank liquidity drives market action until the momo's can't sell something to each other any longer. Not insignificant to note that the retail stock investor has apparently left the building permanently- few widows and orphans left to pump and dump on.

 

As to grains, it is pointless to make predictions when market action is basically dictated by central bank interventions. I'd have to say that for the most part I'm underwhelmed by grain action relative to what is going on elsewhere but we are in a seasonally weak period so I'm not real brave on the matter.

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Palouser
Senior Advisor

Re: Fed's Fisher comments big deal

OK, after all the cliches and mumbo jumbo - tell me, what's going to happen. 

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hardnox604008
Advisor

Re: Fed's Fisher comments big deal

If the econocrats can keep kicking the can down the road there will ba a tailwind to commodities.

 

If they hit one or more of the abundant potholes, there will be downdrafts.

 

I think there's at least a 50% chance that Greece will default by March 20th but the eurocrats seem to beleive that they've pushed enough liquidity into the system to avoid contagion. We'll see.

 

If there is more contagion, QE3 from the US is probably back on the table.

 

Thus, the point is that there is no point prediciting a market that is primarily driven by central bank interventions.

 

As to the fundamental view- markets are probably priced about "right."  When spec liquidity is spunky, markets are well bid. When panic hits, they aren't until the next intervention comes.

 

The one thing that seems likely is that grains aren't going into run away mode like 2008 without additional fundamental input.

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GoredHusker
Senior Contributor

Re: Fed's Fisher comments big deal

I agree that grains more than likely won't run away like they did in 2008, but I would also add that corn at least won't fall like it did towards the end of 2008 either.  The 2008 corn market was all built on hope because we had well more than an ample supply.  This year in terms of old crop corn, we do not have an abundant supply.  The futures could very well get blown up like 08', but if this happens basis will do the job.  It is quite possible there will be at least a few locations that run completely out of corn before new crop harvest. 

 

I'm not making a prediction on Greece other than I believe there's a 100 percent chance they default in the next two years.  However, I don't think Greece or a Greek default will be the catalyst for the next major implosion.  Portugal is next on the chopping block.  After Portugal, Spain and/or Italy is next.  Europe has major problems, and I'm not convinced Greece is their biggest problem. 

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Artifice
Senior Contributor

Re: Fed's Fisher comments big deal

how big is greece,

if their debt goes to .5,how muchg is that

 

vs world gdp

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