The Bernank explains his toolbox

he did the first option today. can you guess what comes next?

 

Once the temporary shocks that have been holding down economic activity pass, we expect to again see the effects of policy accommodation reflected in stronger economic activity and job creation. However, given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate.

On the one hand, the possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support. Even with the federal funds rate close to zero, we have a number of ways in which we could act to ease financial conditions further. One option would be to provide more explicit guidance about the period over which the federal funds rate and the balance sheet would remain at their current levels. Another approach would be to initiate more securities purchases or to increase the average maturity of our holdings. The Federal Reserve could also reduce the 25 basis point rate of interest it pays to banks on their reserves, thereby putting downward pressure on short-term rates more generally. Of course, our experience with these policies remains relatively limited, and employing them would entail potential risks and costs. However, prudent planning requires that we evaluate the efficacy of these and other potential alternatives for deploying additional stimulus if conditions warrant.

Bounce, Stride Angle, Toe Lift, and more … RUNNING STYLE

When I run, I run bare­foot. This makes me more effi­cient than a ver­sion of me that wears shoes. I attribute my lack of injuries, bet­ter recov­ery, less tired­ness to run­ning bare­foot. If you are a seri­ous run­ner, look into it. It was one of the smartest things I did. Run­ning shoes have a lot of spiel about “cor­rect­ing prona­tion” and stuff like that. But that’s how you run nat­u­rally and shoes by cor­rect­ing your stride often end up caus­ing a lot of injuries. Shin splints, for exam­ple, are one of the most com­mon ones. But a more generic issue that shoes cause is not giv­ing you feed­back when you are run­ning poorly. All the padding, espe­cially in the heels (why do you need so much heel padding if heel strik­ing is taboo?), doesn’t tell you “Hey idiot! You keep land­ing on your heels”. Instead, this pain man­i­fests in knee pain, shin splints etc. If you run bare­foot and land on your heels, you know imme­di­ately. And you have no option but to run in a more effi­cient man­ner. But as I keep repeat­ing, what worked for me need not work for you.

via Bounce, Stride Angle, Toe Lift, and more. Oh my, what happened to plain old heel striking? | Arvind Ashok.

NASA’S SUCCESSFUL QUANTIFYING OF COMEDY TIMING (By Penn Jillette and Teller) • Set Your Motherfucker to “Receive”.

this makes me so sad that i have missed the shuttle launch era …

 

Excerpt from “How To Play In Traffic”, Penn Jillette and Teller, 1997 (out of print).  This is long, but for my money, it’s the best thing about the space shuttle ever written.

via NASA’S SUCCESSFUL QUANTIFYING OF COMEDY TIMING (By Penn Jillette and Teller) • Set Your Motherfucker to “Receive”..

How Plan B found the Droid I was looking for

a great tale of technology and detective work …

I’ve carried a smartphone of some sort for nearly 7 years now without ever losing one or having one of those close calls that scare you into thinking carefully about recovery options. So when I collapsed into a cab at San Diego airport just after midnight last Friday, my Droid was enjoying the woefully inadequate protection it was accustomed to: a loose pocket in the front of my cargo shorts. At least that’s where it was supposed to be.

via How Plan B found the Droid I was looking for.

The Most Important Call of the Year: “I’ve Got All The Clarity I Need”

The Most Important Call of the Year: “I’ve Got All The Clarity I Need”

 We have, in the past, highlighted in these virtual pages the comments of David Farr, the outspoken and common-sense-laden CEO of Emerson Electric Co.
 Readers not familiar with Emerson should become familiar with it, for in its long history (it was founded in 1890) Emerson has outperformed its more famous relative, General Electric (founded two years later), by a wide margin…and never needing taxpayer dollars to bail itself out from bad decisions like Jack Welch’s bad decision to turn GE from a company that made stuff for Main Street to a company that ‘made the numbers’ for Wall Street, using GE Finance as a perpetual motion machine that lasted only as long as the credit cycle lasted.
 We once talked to an ex-executive at Emerson about the GE comparison.  He said to us: “You know we used to have a finance operation like GE, right?”  We said, “No, what happened to it?” He said, “We shut it down.”  We asked “Why?”  He said, “Because our CEO decided it was too risky.”  That’s the kind of CEO the ‘beat-the-numbers’ folks at GE could have used.
 In any event, Farr runs one of the most value-added earnings calls of the season, offering frank and unvarnished observations about not only Emerson’s far-flung operations, but also about the operating environment in which the company lives.
 And that environment is not getting any prettier, if yesterday’s call is any indication.  Indeed, we think yesterday’s call was the single most important this season, and perhaps this year-to-date.
 Now, for a full flavor of Farr’s comments, readers ought to get a hold of the full earnings transcript—or, better yet, listen to a replay of the call itself.
 But the heart of the call came two-thirds of the way through the Q&A, when he was asked by one of Wall Street’s Finest what triggered Emerson’s recent warning that growth was slowing, and whether it stemmed from the need for greater clarity out of Washington.
 Here’s what Farr said:
 “I just look at the order pace. I think the biggest issue that I’m watching right now is they’re not really — either in the US or Europe really addressing the gut issues. The US have enormous regulations coming at us right now.
 “There’s — the incentive to invest in the United States is negative and from my perspective.
 “People talk about ‘we want clarity’. I’ve got all the clarity I need. They’re spending, they’re regulating us, the tax rates, they’re talking about raising the tax rate.
 “Our tax rate this year will be around — in the US will be around 36%. We’ll pay in US taxes this year over $500 million, actually pay the US government over $500 million, and they say they want to raise it even more. And so I’m looking at that as a — I run a Company, I have a lot of money to invest and I look at that and I say I’m not going to invest it here and I think customers — I think a lot of customers have the same concern.
 “And then when you have a company like Boeing, you’re talking about one of the iconic US companies gets sued by the federal government. If that doesn’t get your attention, nothing will. They get sued for investing $2 billion in South Carolina. Last time I saw South Carolina was a part of the United States of America and you get sued for that. I tell what you, the CEO, you get my attention.”
Let’s hope Farr’s comment get some attention where it matters.

via Jeff Matthews Is Not Making This Up: The Most Important Call of the Year: “I’ve Got All The Clarity I Need”.

got gold? here are my stock picks

my list of 7 gold stocks to hold for the next few years

NMC.TO   NEWMONT MINING CORP. OF CDA LTD 53.67
G.TO          GOLDCORP INC 46.31
AEM.TO    AGNICO-EAGLE MINES LTD. 56.99
YRI.TO      YAMANA GOLD INC 13.43
GORO       Gold Resource Corporation 23.37
NGD.TO    NEW GOLD INC. 10.00
EGU.TO    EUROPEAN GOLDFIELDS LIMITED 10.73

http://finance.yahoo.com/q/cq?d=v4&s=NMC.TO,G.TO,AEM.TO,YRI.TO,GORO,NGD.TO,EGU.TO

 

David Rosenberg: “we’re in a depression”

I spoke with David Rosenberg, chief economist at Gluskin Sheff, today to get his take on what’s happening in the markets after Friday’s US credit rating downgrade by the S&P. Here are the highlights of our conversation.

What’s the biggest surprise of the S&P downgrade of the US’s credit rating?
The timing of it. They already had stated their intention, but the timing of it was early.

Why did it come early?
The budget agreement to get the debt ceiling raised is light.

What are the consequences of this?
In a real economic sense, the impact is fairly small. We have to remember it’s a split rating. Moody’s and Fitch have not downgraded the U.S.

What are the global consequences of the US downgrade?
If the U.S. isn’t AAA, it begs the question who is? The real consequences run a lot deeper than the U.S.

What will be more consequential is if France loses their AAA rating. If the U.S. isn’t AAA then I can’t see France having a AAA rating. And if France isn’t AAA you can kiss the European Stability Fund good-bye. Because the ball will then be in Germany’s court and I’m not so sure that the country will be able to bail out the entire euro zone.

So you’re more concerned about the economic situation in Europe than the U.S.?
The crisis of confidence is stemming from the eurozone – not the U.S.

Did bond indices in the U.S. get changed? No. Did banks have to go out and raise capital against bond indices? No. So what is the big deal? It’s a bit of a tempest in a teapot. The U.S. has a split rating. Full stop.

Sounds like the downgrade is not as bad as everyone thinks.
It’s like when Canada got downgraded in 1994. It lit a fire under the seats of the policymakers.

I take it you’re one of many who think policy makers in the U.S. are failing?
The whole point of QE2 was to inflate assets. But QE’s are a bit of a band-aid solution. At best, QE buys you a little bit of time. Once the policy stimulus wears off, the economy sputters. The Bush tax cuts did a better job of stimulating the economy than the tax rebates did from last year.

What can be done now?
On the fiscal side, it’s too late. Nothing on the fiscal side will help the economy.

What should have been done?
What would have helped is a real energy policy combined with a jobs policy.

What happened to real energy policy? If we had a permanent shift to shale gas, that would have helped the economy. We thought we weren’t going to see gas prices go back up into the $100s, but they did. Gas prices and oil prices have gone back up. A permanent decrease in energy costs would be really beneficial and help the bottom line in Washington.

You mentioned a jobs policy as well.
We have a youth unemployment rate of over 20% and a general unemployment rate at 9%. What happened to the war on unemployment from two years ago?

So nothing more can be done in terms of fiscal policy?
The U.S. is a fiscal basket case. We have fiscal deficits that would have made FDR blush.

It’s very limited what can be done in terms of fiscal policy now. We now have double the inventory of unsold homes on the market. How does the Fed address that? The Fed has limited policy capabilities.

What should be done with all the foreclosed homes?
The U.S. should find a way to absorb the huge backlog of foreclosed homes — buy them up and give them to investors to rent.

What would help in the meantime?
What would help is a bipartisan move to eliminate tax expenditures and loopholes. The U.S. has a tax system that doesn’t produce revenues efficiently. It should not have mortgage deductions. Canada did it; the U.S. can do it. The U.S. should also cut its top marginal rates.

When do you think any sort of meaningful reform will happen?
Any real meaningful structural shift won’t happen until after 2012. 2012 is going to be the most critical election of the past three or four decades in terms of fiscal policy.

We have deflation, a credit collapse, an ongoing decline in assets and real estate prices. Along with a global debt crisis. It’s like musical chairs. The debt keeps getting transferred; not expunged.

So what if we had a 12-24 months rally in the equity markets? The same thing happened in the 1930s, when there was a recovery from 1933 to 1936. This is not Japan all over again. What we are in now is probably a modern day depression. The great recession is a polite way of saying a depression – economists are polite people.

So the markets are saying we’re in a depression?
That’s why you have gold at $1700 an ounce. That’s why 10-year Treasury bond yields are lower now. The bond market is saying we are in for weak growth. Gold is saying the government is going to try to reinflate their way out of it.

What can we expect to further happen while riding out the recession/depression?
Growth rates are going to be much weaker globally. There is going to be a prolonged period of very weak activity. Consumer confidence is lower today than after the 1987 crash and after 9/11.

How do we get back to a sustainable bull market and expansion?
In the end, you print money.

When do you think we will come out of this depression?
We are still experiencing aftershocks from the bubble. This is not a plain vanilla recession; this is a balance sheet recession. Balance sheet recessions typically last 5-7 years on average so if this recession started in 2007 then we have until 2012 or 2014 before the recession starts to turnaround. Compound that with rest of the world facing economic downturns as well and it could last even longer.

How are your portfolios fairing?
Things are turning out how we expected them to — we are positioned for this. We’ve been patient all year long. We never bought into the sustainability of QE2. Preserving capital and minimizing our risk on portfolios paid off well.

Lots of portfolio managers are going to have forced selling because they bought at rock bottom. We’re going to be buying what they’re selling. We took advantage of the mispricing in the market. There’s tremendous opportunity when the baby is being thrown out with the bath water. When the markets are at their highs, you can capitalize on that excess supply. When they are at their lows, there’s an excess of worry so there are attractive buying opportunities. We are licking our chops and sharpening our pencils.

via Market musings with David Rosenberg: we’re in a depression | The Great Debate.