Skip to main content

Deciphering The Fed's Changing Views

August 7: "Economic growth was moderate during the first half of the year. Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy."

(Still thinks economic expansion will continue, and hence keeping inflationary pressures at bay would be a big priority. Strong belief in the resilience of firm US jobs market and a strong global economy helping things along)

August 17: "Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward. In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably. The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets."

(More concerns on subprime mess due to leverage effect and the fact that no one knows how many hedge funds were affected. No panic yet but genuine care taken to try and ensure the mortgage business and credit lending does not seize up. Hints that the Fed might take extravagant steps to stave off recessionary repercusiions)

September 18: "Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time."

The statements last night were an eye-opener, much like seeing Pakistan beat Australia in the 20-20 cricket tournament in South Africa las night. There is an open admission that the subprime and housing correction may get worse before things improve. The key word in the above para is "forestall" or rather "to help forestall". This shows acceptance of a dire situation. This implies accepting that pockets of the US economy will be affected, and more importantly, clearly shows that the Fed is very committed to cut rates even more aggressively in the months ahead, if necessary. That is probably the key message from the Fed last night.

As usual, everyone should gear up for a robust last quarter. The markets should get their groove back.

Comments

kiff said…
just found ur blog. keep up this good job
ikanair said…
Ahh... when the authorities tell you not to panic and everything is ok, then the opposite is true.

Bullshit can carry you to the top, but not keep you there forever.

Years of feeding on bullshit(low interest rate doled out by the FED) have created a consumer/lenders and a government with no appreciation of risk.

The debt of the US government/lenders and consumers must be paid+interest, but with whose's money?

As always, the poor get poorer.

I put my money on KLSE reaching 800 point by end of November.

The (un)holy trinity
1. US subprime
2. US consumer
3. Shanghai stock exchange

now waiting for the third.

Popular posts from this blog

My Master, A National Treasure

REPOST:  Its been more than two years since I posted on my sifu. This is probably the most significant posting I had done thus far that does not involve business or politics. My circle of close friends and business colleagues have benefited significantly from his treatment.


My Master, Dr. Law Chin Han (from my iPhone)

Where shall I start? OK, just based on real life experiences of those who are close to me. The entire Tong family (Bukit Kiara Properties) absolutely swear that he is the master of masters when it comes to acupuncture (and dentistry as well). To me, you can probably find many great dentists, but to find a real Master in acupuncture, thats a whole different ballgame.


I am not big aficionado of Chinese medicine or acupuncture initially. I guess you have to go through the whole shebang to appreciate the real life changing effects from a master.


My business partner and very close friend went to him after 15 years of persistent gout problem, he will get his heavy attacks at least…

PUC - An Assessment

PUC has tried to reinvent itself following the untimely passing of its founder last year. His younger brother, who was highly successful in his own right, was running Pictureworks in a number of countries in Asia.

The Shares Price Rise & Possible Catalysts

Share price has broken its all time high comfortably. The rise has been steady and not at all volatile, accompanied by steady volume, which would indicate longer term investors and some funds already accumulating nd not selling back to the market.


Potential Catalyst #1

The just launched Presto app. Tried it and went to the briefing. Its a game changer for PUC for sure. They have already indicated that the e-wallet will be launched only in 1Q2018. Now what is Presto, why Presto. Its very much like Lazada or eBay or Alibaba. Lazada is a platform for retailers to sell, full stop. eBay is more for the personal one man operations. Alibaba is more for wholesalers and distributors.

Presto links retailers/f&b/services originators with en…

How Long Will The Bull Lasts For Malaysia

Are we in a bull run? Of course we are. Not to labour the point but I highlighted the start of the bull run back in January this year... and got a lot of naysayers but never mind:






























p/s: needless to say, this is Jing Tian ... beautiful face and a certain kind of freshness in her looks and acting career thus far



http://malaysiafinance.blogspot.my/2016/12/bank-negara-may-have-switched-on-bull.html


I would like to extend my prediction that the bull run for Bursa stocks should continue to run well till the end of the year. What we are seeing for the past 3 weeks was a general lull where volume suddenly shrunk but the general trend is still intact. My reasons for saying so:

a) the overall equity markets globally will be supported by a benign recovery complemented by a timid approach to raising rates by most central banks

b) thanks to a drastic bear run for most commodities, and to a lesser extent some oil & gas players, the undertone for "cost of materials" have been weak and has pr…