My overall point is that my crystal ball isn't any clearer than anyone else's, and also that reasonable folk can disagree about what the future will bring.
I wasn't on SI in April/May of this year but I imagine there were folk calling for the S to HTF back then too, just in a different way than is being discussed now.
I can't tell if you're being tongue in cheek or not about the Treasury mailing everyone a check.
As far as TOMOs & TIOs and the 1% rate, etc. - they played a big part in the so called "recovery" after the dot com mess. I'm just plain nowhere near convinced that another inflation rabbit can't and won't be pulled out of the hat, regardless of whether the credit bubble pops or not.
I agree with Russ too on the baby steps, etc. and also won't disagree with them being scared now & in 2002 too. My point wasn't that - it's that *in my opinion* they did know a lot more about what was going on than they let on in public.
We have another two years before we see the transcripts of the 2002 FOMC meetings but here are some quotes from the Dec 2000 meeting:
"Clearly, the pattern in 2000 is outside the range of recent
experience, reflecting something more than normal risk aversion
associated with the window-dressing of year-end balance sheets."
"CHAIRMAN GREENSPAN. Let me ask about the sharp drop in the 10-year swap
differentials associated with the December 5th speech. This is an arbitrage operation. What is it that
makes rates move or can induce that sort of response on an arbitrage operation?
8
MR. FISHER. Well, the whole yield curve began to move. I think the mortgage portfolio
managers looked at your speech and saw in it a mix of a soft landing forecast and an easing forecast
without date specificity. And they came to feel a need to rush and anticipate the hedging needs for
their portfolios this late in the year. And that, I think, drove them to grab whatever assets were
available--whether they were agency debt securities, U.S. Treasuries, or swaps--to move into to
hedge their duration risk.
..."
"MR. FISHER. To elaborate on what I’d hoped to convey in my remarks, I think it’s a
flight to quality issue of the substitution for Treasury bills being much more pronounced. In the
prior years, there’s a sense that the total sum of balance sheet credit to be offered is being
constrained as the intermediaries want to slim down for year-end, affecting both the A1 and the A2
market, though not quite equally. But you can see the impact in the prior years. What is quite
different this year is that there doesn’t seem to be any constraint on the A1/P1 market. So it doesn’t
look like a quantity constraint. It looks like a flight to quality. They’re substituting for Treasury
bills and maybe the A1 market is being pulled down a little by the rally in Treasury bills."
"In addition, we have marked down further our projection for hightech
equipment spending. There has been a gradual evolution in the
stories that have been told about this sector over the past four or five
months. The initial signs of weakness were attributed to firm-specific
problems of market share. Then, the difficulties were ascribed to the
weakness of the euro and the associated softness in profits earned
abroad. Now, with most firms and nearly every market segment
experiencing sales and earnings disappointments, there is more troubling
talk of a global slowdown in demand."
"In revising down our outlook for foreign growth by more than this
one-third rule of thumb would suggest, we have given some weight to
indirect effects not captured in the model. In particular, we think several
developing Asian economies rely heavily on the electronics industries
and will be hit hard, including through indirect financial channels. In
addition, a combination of wealth effects and blows to consumer and
business confidence are expected to reduce the growth of domestic
demand somewhat in several other industrial countries."
"Retailers, not only those in the region but chains that operate nationally, report sharply
lower year-over-year sales. Even with the additional selling days and the extra Saturday between
Thanksgiving and Christmas, sales through the middle of last week were so far below year-earlier
levels that the difference cannot be made up in the remaining selling days. Sales at one company,
Bath and Body, are down 10 percent, and this is the first year-over-year decline in the company's
history."
Those quotes should give you an idea what I'm looking at - there's lots more similar ones in the 84 page transcript. |
