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Senior Advisor

Interesting Morgan Stanley statement on Fed policy

"We are not convinced that there is necessarily a strong and
statistically significant relationship between the liquidity
injections associated with QE and the strong performance of
commodity prices that we’ve witnessed over the past couple of
years."

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13 Replies
Frequent Visitor

Re: Interesting Morgan Stanley statement on Fed policy

Maybe instead of stating the obvious they should be explaining why they defaulted on $3.3B in debt on their Tokyo offices or how two of their executive's wives ended up with $220M in Tarp funds.

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Veteran Advisor

Re: Interesting Morgan Stanley statement on Fed policy

So when gasoline stocks in Feb were at an all time high Gas should have been in the dumper instead of pushing 3.50 around here.  IF it is supply and demand than why don't we have a real price that is the same for other times in history with the same stocks burden?

 

Morgan Stanley as an oracle of thought and truth is prolly fishing at the shallow end of the advisor pool!

Instead chart the dollars decline against all the major commodities that have risen and you can find an unbelievable coorelation.  Oh by the way we dropped below trend line in the 3 year chart yestereday.

 

Obviously our commodities sold off but there was no fundemaental reason for the selloff either. so we must asume that yesterday was about profit taking before the end of the month. Maybe there is more to come thru Fri. But that should set us up for big gains agaian next week.

 

With the consumer noticably cutting back now on their driving we can see that this economy is about to slow way down. What do you think  Bomber Ben will do then?

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Veteran Advisor

Re: Interesting Morgan Stanley statement on Fed policy

A report today is expected to show the first quarter economic activity was slowed by high gasoline prices. Meanwhile, things have gotten so bad, Wal-Mart is going to start selling, again, rifles, shotguns and ammunitions to attract more customers. Gold hit a reecord Wednesday of $1,516.70 an ounce, maybe they should start selling bullion?


Mike

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Re: Interesting Morgan Stanley statement on Fed policy

Here's an easy test of the thesis (that won't happen).

 

If Bernanke had announced that the Fed would immediately begin sopping up QE purchases at the same rate that they injected them, what do you think the CRB index would do?

 

I'm thinking it would be down about 20% in short order but obviously in the absence of a real world test my opinion is worth what yer payin'.

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Senior Contributor

Re: Interesting Morgan Stanley statement on Fed policy

MS is correct. People go nuts over QEII or this or that and have no sense of quantitative perspective. The US economy is 15,000 $$billions, does the purchase of 300B in treasuries mean lot?

 

Domestic wheat use at 1 billion bu at 7$, 7B annual isn’t even on the map. 7B is .2% of one week US output.  Raw commodities become less and less and less of the economy. Raw commodities in toal are 1.5% of GDP.

 

SRW is 1.52 off its high, tight corn can’t artificially hold it up forever!!.

 

Harvest horizon gets  closer, closer, closer!

 

Next year I another year.

 

If the FED and crazed specs need long SRW futures, help supply their desires and get paid extra.

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Veteran Contributor

Re: Interesting Morgan Stanley statement on Fed policy

If we got paid in gold vs dollars we would be getting less then we did 10 years ago.  At $2.00 corn and $300 gold it would take 150 bu to buy an oz of gold.  At $7.50 corn and $1515 gold it would take 202 bu of corn to buy and oz of gold.  With the millions of things that go into price you could easily find a corelation to the fed and commodity price, but the people who make the argument that it is all about supply and demand and millions of people world wide are moving into the middle class and using more commodities also have a pretty vailid point.  I think it would be hard to argue that both don't have an effect on price, the problem comes when you try figure out how much effect either one has into toady's price.

Btw Morgan Stanley is probably making plenty of money off of Fed policy.  Nothing like borrowing from the government for free and loaning it back to them for a profit.  Pretty easy to make money when the government gives you a deal you can't hardly lose with.

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Senior Contributor

Re: Interesting Morgan Stanley statement on Fed policy

It is of little coincidence that when the dollar was making an all time low, commodities like grains; oil; and such were making all time highs.  As we get closer and closer to the all time low in the dollar once again, commodities are once again near all time highs.  In times of high growth, two things normally ring true:  cheap fuel and cheap food.  This is what makes all the stimulus money this much more bizarre because in order to have both cheap fuel and cheap food we must have a strong dollar.  This morning I read where 18.3% of personal income in the U.S. is now derived from food stamps while just 50.5% of personal income is derived from wages.  Wages make up the lowest percentage of personal income since records have been kept which was 1929. 

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Senior Advisor

Re: Interesting Morgan Stanley statement on Fed policy

The one glaring problem with this analysis, and I've pointed it out many times, is that how do you NOT explain the influence of grain inventories, and the parallels with prices at other times when then inventories were similar? The implication is that regardless of inventories the prices of grains would be the same because of the influence of the Fed.

 

I just think that contention would be bizarre. The Fed explanation as used by these extreme arguments completely discounts current supply and demand in global trade in this era. If it doesn't fit the Fed argument then it's of no concern. Sorry, don't buy this approach.

 

It smacks of convenience and ideology - needing the explanation to support a personal world view.

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Senior Advisor

Re: Interesting Morgan Stanley statement on Fed policy

The level of wages of income doesn't surprise me at all. With a huge amount of wealth held by a small percentage the income would be on ROI. Wages would be inconsequential. Is SS counted as wages? No, is my guess. Retirement?

 

 

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