Why central banks need to hold gold way down or get it up to $10,000
Trade Protectionism Looms Next as Central Banks Exhaust QE
By Ambrose Evans-Pritchard
The Telegraph, London
Sunday, February 24, 2013
Officials at the US Federal Reserve may be more worried than they have let on about the treacherous task of extricating America from quantitative easing. This is an unsettling twist, with global implications.
A new paper for the US Monetary Policy Forum and published by the Fed warns that the institution’s capital base could be wiped out “several times” once borrowing costs start to rise in earnest.
A mere whiff of inflation or more likely stagflation would cause a bond market rout, leaving the Fed nursing escalating losses on its $2.9 trillion holdings. This portfolio is rising by $85 billion each month under QE3. The longer it goes on, the greater the risk. Exit will become much harder by 2014.
... Dispatch continues at link
My daughter has just landed her first salaried job as a new RN at age 47.A 401k plan is offered managed by Fidelity. Her company matches half up to 6%. She has asked my advise as to how much and where to invest. Other than SS which she and hubby have contributed to as self employed, they have no retirement plan. I bet they will work past their 60’s.
She knows her mom started work around 40, about 1979, invested in a 403B in TR Price funds for 18 years and has a nice pot now in her 70’s. My daughter knows I have managed these funds for my wife and wants my advice.
I want FReepers’ advise, thank you very much.
I believe the upside is all the way gone out of the market for now. It all flamed out over the past few days and the news and more importantly the sentiment has turned. Maybe you can pick some winners, but IMO the odds are generally against you. I bought some crash puts very late last year which got devastated in the past little runup but are now showing green, though still underwater.
Let us recall that the market sits atop well more than a double since SP 666 March 09, 2009. And let us recall that this kind of hiccup preceded the huge dump into that date...in early March of that year.
A good way to learn to spot economic propaganda is to read headlines and scan through articles from some of the larger, more established market media sites. Some investment managers/advisors do favor bigger investors.
One feel-bad truth: yes, lower the US dollar much, and investors will see less in returns. But prop the dollar unnaturally high in this global economy, and activity in the US will eventually shut down (fewer employees spending and fewer exports, few or no returns or pensions for increasing numbers of pensioners). There’s generally less risk in engaging, to cautious extents, a currency war started by other nations. Might get cheaper fuel for imports and tourism revenues (recirculating debt), too, for a very short time, but near future consequences can be harsh, to say the least.
I’m not advocating for the debt regime. We need to produce more useful things by far (sustainable and real revenues). That’s one answer, but a moral people can produce more than others and are much more likely to try.
NYSE MAC DESK MID-DAY MARKET UPDATE:
DOW 13,879 (+95 points), S&P500 1493 (+5 handles), Crude $92.50/barrel (-$0.60)
MARKET DRIVERS: (Stocks are rebounding moderately following yesterdays late, steep slide as traders point to positive earnings, bullish economic data and - perhaps most decisively - Fed Chairman Bernankes testimony to the Senate Banking Committee.)
In his much-anticipated semiannual monetary policy report to Congress, Fed Chairman Bernanke today defended the central banks unprecedented asset purchases; saying they are supporting the expansion with little risk of inflation or asset- price bubbles.
The Conference Boards index of consumer confidence surged to 69.6 in February from a downwardly revised 58.4 in January. Overall this was much better than the expected 62.0 reading.
According to the Commerce Department, new home sales surged by 15.6% in January to an annualized rate of 437,000; far-exceeding the consensus estimate of a 380,000 rate. The monthly gain was the biggest since 1993! (Very positive surprise.)
The Richmond Fed Manufacturing Survey for January had a reading of +6.0, versus expectations for -4.0. (Positive surprise.)
On the earnings-front, Home Depot reported Q4 EPS of 68c; handily topping the Streets consensus of 64c/share. The company also beat on the top-line, ($18.24B, vs. consensus of $17.69B).
Have to admit; we were certain that the market would give us a higher bounce than weve seen so far in todays session especially after yesterdays late-day debacle Our reasoning? Uncle Benny, as many traders affectionately refer to our Fed Chairman, in todays D.C. testimony, certainly stayed the course and should have put to rest the FOMC minutes-induced fears/panic of last week Specifically, and to summarize todays testimony, (consider this the Cliffs Notes Version):
1.- Contrary to what many had feared, the Fed Chairman has not at all changed his dovish positions. He said “the labor market generally remains weak” and that “overall inflation remains low,” indicating he is little inclined to begin raising rates or stop asset purchases.
2.- Lest there is any doubt about where he stands on continuing asset purchases, Bernanke said, “In the current environment, the benefits of asset purchases and of policy accommodation more generally are clear: Monetary policy is providing important support to the recovery,” noting the improvement in housing and auto sales.
3.- Furthermore, The benefits of low rates outweigh the risks. As for the concern that the Fed was encouraging the creation of asset bubbles, Bernanke said, “Although a long period of low rates could encourage excessive risk-taking...to this point we do not see the potential costs of the increased risk-taking in some financial market as outweighing the benefits of promoting a stronger economic recovery and more-rapid job creation.”
4.- Lastly, in the Q&A period, when asked if the Fed would be able to unwind its $3 trillion balance sheet, Bernanke said, “We have the technical means to unwind it at the appropriate time” by selling or retaining assets.
So, did the market misread the FOMC minutes last week?? It definitely seems like the case. By the way, on a bit of a shoking note, the Italian stock market dropped the equivalent of 640 Dow points this morning on the uncertainty surrounding their election results So, I guess +96 points looks pretty good after all(!) Moving on, the Dow is drifting to session-highs, while volume is at an average level, with ~250M shares on the tape at this time Internally, breadth is mixed with issues and volume bearish while new highs to new lows are bullish (positive divergence). Advancing Issues: 1400 / Declining Issues: 1457 — for a ratio of 1.0 to 1. Advancing Volume: 119,998,000 / Declining Volume: 152,003,000 — for a ratio of 0.8 to 1. New 52-Week Highs: 64 / New 52-Week Lows: 38 Meanwhile, in the pits, were hearing that some large hedge funds may be showing some serious interest in Gold Prices have fallen 5.3% this year and are down 16% from a record closing high of $1,888.70 set in August 2011. As always, we will keep you posted Have a tremendous day!
Sector Highlights brought to you by http://www.streetaccount.com/
Consumer discretionary outperforming with the S&P Consumer Discretionary Index +0.5%
o Homebuilders topping gains after a round of strong housing data. HOV +5.2%, PHM +4.7%, SPF +4.7%, and DHI +2.8% leading the way higher.
o Retail outperforming with the RTH +0.8%. M +2.9% the standout of the department stores after beating earnings expectations and issuing Q1 EPS guidance above consensus. JCP (3.8%) the laggard after UBS reiterated its sell rating on the stock. HD +5.2% and LL +1.1% the notable performers among the housing-related names. The former beat earnings expectations, increased its dividend by 34.5% and authorized a $17B share repurchase program. Discounters led higher by TGT +1.3%. Apparel names outperforming, led by WTSL +2.1%, EXPR +1.3%, GPS +1.1% and ARO +0.6%. RSH +3% and FRED +2.5% the other notable gainers in the space. RSH reported earnings this morning.
o Restaurants outperforming. CBRL +9.2% in focus after reporting better-than-expected earnings and raising FY EPS guidance. PNRA +1.3%, EAT +1.3%, DIN +1.1% and TXRH +1% the other notable gainers. DNKN (1.3%) the laggard.
o Gaming space underperforming, led lower by LVS (1.7%) and MGM (1.2%).
Industrials outperforming with the S&P Industrials Index +0.3%
Building materials outperforming. Note a round of upbeat housing data this morning. MAS +3.2% and USG +2.9% topping gains.
Multis mostly higher. DOV +0.9%, GE +0.8%, LII +0.8% and UTX +0.6% the notable outperformers. ROK (0.4%) the laggard.
Transports mixed. EXPD (4.8%) the notable performer after missing earnings expectations. Railways mixed, with no names trading outside of 1% on either side, as NSC (0.6%) lags and GWR +0.9% tops gains. Airlines underperforming, led lower by UAL (2.4%), DAL (1.9%) and LCC (1.8%).
Machinery mostly lower. CNH +1.4% topping gains. NAV (2.2%) and MTW (1.3%) leading the way lower.
Semis outperforming with the SOX +0.3%. AIXG +3.9%, INTC +2.7%, SNDK +2.2%, RBCN +2% and ARMH +1.4% leading the way to the upside. Note AIXG received a repeat order for CRIUS II-L production systems from FOREPI. Stifel commented on INTC, saying it believes ALTR +1.9% is making the move to INTC from long time foundry TSMC because the company continues to deliver lower cost per transistor. SNDK upgraded at RBC Capital, citing the company’s move to a solutions company and sees better gross margin profile and additional stability in earnings power. AMD (2.8%), CRUS (2.5%), ATML (2.5%) and ONNN (1.1%) the notable decliners. ATML and LSI (1%) were downgraded at FBR Capital this morning.
Hardware outperforming. WDC +2.5% and STX +1.5% the notable gainers. BBRY (4%) and AAPL (0.9%) the laggards. Note DigiTimes reported that LG Display panel shipments for 9.7 inch iPads fell by 90% to 0.6M in Jan, though sources say the drop is due to growing popularity in the iPad mini and higher demand for low-priced tablets.
Internet space mostly lower. BIDU +1.5% and P +0.9% topping gains. OTR Global had a positive note out on P following checks. GRPN (2.3%), OPEN (1.9%) and MWW (1.2%) the notable performers to the downside.
WTI crude trading lower (0.6%) to $92.51.
E&Ps underperforming with the EPX (0.7%). FST (4%), NFX (3.1%), SM (2.6%) and DVN (2%) leading the way lower. Note SM continuing its move lower from yesterday after it was downgraded at BMO Capital. CHK +2.5% the only name trading up >1%. Note the stock outperforming despite a downgrade at Johnson Rice.
Coal equities underperforming. ANR (3.3%) and WLT (2.7%) the laggards. CLD +1.2% the notable gainer.
Refiners mixed. HFC (3.6%) the notable performer in the space after reporting earnings. TSO +1.1% the only notable name trading higher.
Integrateds outperforming. CVX +0.5% and COP +0.4% leading the way higher. OXY (0.7%) the notable decliner.
Banks underperforming with the BKX (0.4%). Money-center names mixed, with C (1.5%) and JPM (1.4%) trading lower and BAC +0.4% outperforming. Note JPM is holding its investor day this morning. The company said it expects approximately 15 bps of additional cumulative NIM compression through 1Q14. Regional names mostly lower. ZION (1.3%) the laggard. Upside limited with USB +0.5% topping gains. JEF +1.8% the notable performer among the investment banks.
Insurers underperforming. GNW (2.2%) and MET (1.9%) the notable decliners among the life insurers. PL +0.4% topping gains.
Asset managers mostly lower. WDR (2.3%), APO (2%), BX (1.8%) and IVZ (1.4%) leading the way to the downside. JNS +0.6% the notable outperformer.
Tech outperforming with the S&P Information Technology Index +0.2%
Energy underperforming with the S&P Energy Index +0.03%
Financials the worst performer with the S&P Financials Index (0.2%)