Bernanke

[Samildanach]

Anyone have any opinion on which way Bernanke will go for an interest rate hike?
I suspect he may signal a pause tommorrow. America had a little bad news today in terms of inflation data but I suspect thats just the oil prices filtering through due to the current situation in the middle east.

[bishop]

if you look at all the core indicators focused on inflation, it seems that the fed might have to continue increasing interest rates more than the market expects.

wholesale prices took an unexpectedly high jump in the latest report - and is evidence that higher energy costs are being absorbed into prices for virtually all consumer products (including food).. this increase is the main reason why the market's been hurting in recent days imo.

at it's not likely that higher interest rates will do much of anything to effect energy costs. i think bernanke should take a chill pill and let some of the trailing data to accumulate before issuing further rate hikes.

[Samildanach]

I agree, I think he will signal a pause tommorrow as he will realise this as well. Apparently the market is predicting a 70% chance that he will signal a rate hike tommorrow. I don't agree.
I think he will signal a pause as he also realises what you have just stated above, which in theory means the dollar should drop tommorrow vs the pound and the Euro IMO.
He has already proven he is tough on inflation but I think a rise in interest rates at this stage would be a mistake due to the cooling housing market, he needs to let the situation in the middle east settle a bit then check the new data.

[bishop]

i dunno.. i have this feeling that he will raise rates and maintain the current message of "we'll set interest rates according to the most recent data available"...

i have read some articles talking about an increase in foreclosures. obviously all the speculators who bought houses with interest-only mortgages (or even variable rate mortgages) are feeling a serious pinch right now.. plus, the market in general has little appetite for bullish speculation and is moving towards a strong focus on fundamentals (the market only does this when it believes a recession or slowdown is coming).

we can agree that the fed should stop raising rates for now - but will he? it wouldn't be the first time that the fed has opted to incite a recession in order to stave off inflation. and in this case, the inflationary pressures are extremely strong, and nearly impossible to contain via interest rates.

[zynner]

Quote by: Samildanach Anyone have any opinion on which way Bernanke will go for an interest rate hike? I suspect he may signal a pause tommorrow. America had a little bad news today in terms of inflation data but I suspect thats just the oil prices filtering through due to the current situation in the middle east.

Bernanke is only giving Senate testimony tomorrow; it's not a Fed meeting. So, no official action will be taken, though he's likely to put his foot in his mouth, one way or the other. ;-)

By now, he should be gunshy about saying a damn thing -- he's kinda screwed things up early on. So, I wouldn't be surprised if he's as plain as vanilla.

Doesn't really matter much, though. We're in a bear market now, which started a few months ago. Even if the market rallies on his testimony, it will be short-lived.

People are not factoring in just how tough things might get, but the market is (that's why its selling off). Retail stocks, housing stocks, pretty much every sector is getting hit. The market is forecasting a slowdown in the economy (which, btw, will mean the November elections could be right around the time that bad economic news is making it into the living rooms of Ma and Pa America). Higher interest rates are (in part) killing off the real estate market.

One thing people forget (or don't know) is that 40% of ALL jobs created in the USA since 2001 were in the real estate industry -- construction, brokerage, mortgages. On top of that, adjustable rate loans and no down payment loans have taken over the industry (80% of all new homes in California were purchased with an adjustable rate last year).

When the housing market finally gets hit, so will all those jobs.

Alan Greenspan is to blame, not Bernanke, but people will forget that.

Bernanke might want to pause somewhere just to show he's "on top of things" but he really has no choice. Inflation is already here and Bernanke is of the school that says you raise interest rates to "attack inflation."

If rates do go up another 2-3%, the US federal debt could collapse. If they don't go up but other countries do continue to raise their rates, the US dollar could collapse. If everybody works together and nobody raises, then the built-in inflation could be even worse.

Have a nice day. ;-)

~ zynner

[bishop]

interesting, and depressing, little fact about the debt here... we borrow $1 billion a day to keep the lights on.. and, we pay $0.5 billion a day in interest payments.

also, the fastest growing portion of the federal budget is debt service.

and, in bush's years in office he's accumulated more foreign-held debt than ALL previous presidents combined.


quite a track record right there..


http://www.house.gov/apps/list/heari...ownreport.html

[Samildanach]

Well so far the market seems to be accumulating dollars in anticipation that he is going to signal a rate rise.....I am however going to buy the cable. I have to go with my original prediction but I may jump out fairly early if things start going to s$%t.

[Samildanach]

Either way oil should be going up. BP just closed 12 wells today and the ongoing crisis in the middle east pretty much assures things are only going to get worse.

http://newsvote.bbc.co.uk/1/hi/business/5193442.stm

[Samildanach]

Bernanke is only giving Senate testimony tomorrow

Deosn't matter that its not a rate hike. Anything Bernanke says or does will be monitored carefully and the market will react to it.

[bishop]

Quote by: samil Either way oil should be going up. BP just closed 12 wells today and the ongoing crisis in the middle east pretty much assures things are only going to get worse.

oil going up in price is almost as certain as the sun rising in the morning.. and as unfortunate as it is, higher interest rates will have little impact on oil prices. (the only potential impact is because OPEC is amongst the top 5 foreign buyers of u.s. debt.)

so, bernanke spoke this morning.. inflation's still a big concern, and it doesn't look like he's close to finished increasing interest rates...

http://money.cnn.com/2006/07/19/news...mony/index.htm

Federal Reserve Chairman Ben Bernanke warned Wednesday stubbornly high inflation could harm the U.S. economy and that the U.S. central bank must guard against rising prices taking hold. Bernanke said while the Fed was forecasting cooler economic growth and some moderation in inflation next year, the central bank remained worried about pricey oil and tight labor markets and the risk they might foster expectations for rising prices. "Persistently higher inflation would erode the performance of the real economy and would be costly to reverse," Bernanke said in testimony prepared for delivery to the Senate Banking Committee. "The Federal Reserve must take account of these risks in making its policy decisions." The Fed chief, who took office Feb. 1, issued the stern inflation warning as he presented the central bank's twice-yearly report on monetary policy and the economy. He said the economy appeared to be "in a period of transition" to more moderate growth from a swift advance earlier in the year. He said this should gradually help ratchet down some of the price pressures the economy was facing. Still, Bernanke said Fed officials must take other potential outcomes into account as they considered the appropriate level for U.S. interest rates. "We must consider not only what appears to be the most likely outcome, but also the risks to that outlook and the costs that would be incurred should any of those risks be realized," he said.

personally, i don't think we'll see an end to rate hikes until the fed has sufficiently killed the gold rally..

[Samildanach]

so, bernanke spoke this morning.. inflation's still a big concern, and it doesn't look like he's close to finished increasing interest rates...

Hmmmm, I suspect a rate hike is implied at some point but he wasn't sounding very hawkish about it by any means....it sounds like its more of a wait and see what happens now the housing market is cooling, hopefully it will filter through to the inflation figures before the next fed meeting....at least to me.
The markets also took it that way. The dollar dropped like a stone against pretty much every other currency after his report. The cable went up about 100 points so I was happy at the end of the day.

http://www.fxstreet.com/news/forex-n...c-3600c79a1b7b

[bishop]

heh.. he seemed hawkish enough to me.. all the economic data out there points to sustained inflation. perhaps once the interest rates are finally digested, we'll see this situation change (interest rate hikes take about 1 year to be "digested").

i gotta say, i'm feeling pretty bearish about the future. the fed simply cannot let inflation continue to grow like this - even if it means that they have to induce a recession to contain it. the alternative would be much worse...

my stocks also performed well on today's news.. the lowest gainers were 4%, the highest, 10.5%.

[zynner]

The market was ready for a bounce, anyway. It started rallying late yesterday. It opened up this morning and continued. Bernanke is just the flavor of the day to "explain" it.

The market, however, is in bear mode. This rally will be short-lived.

~ zynner

[Samildanach]

I don't know that the fed really has much of a choice. Interest rates are not going to contain this situation and Bernanke knows it.
The only NICE solution really is to get this middle east crisis sorted out even if it means putting the hard word on Israel. I wouldn't be surprised if that was happening behind the scenes.
That should allow the price of oil to fall and that should kill inflation right in its tracks but its getting Hisbollah to cooperate thats the big problem so Israel is going to have to make some concessions IMO.
Either way they need to do it in the next couple of weeks or the s%^t is really going to hit the fan. I'm not a big fan of inducing a recession unless its absolutely unavoidable.

[Samildanach]

I tried the stock market but couldn't really get to grips with it. It seems like there was far too much work involved with reading and screening for my liking...I'm kinda lazy when it comes right down to it. :)

[bishop]

Quote by: zynner The market was ready for a bounce, anyway. It started rallying late yesterday. It opened up this morning and continued. Bernanke is just the flavor of the day to "explain" it. The market, however, is in bear mode. This rally will be short-lived. ~ zynner

the market's always slow in the summer, that's nothing new.. it also seems mixed rather than bearish imo. this 3rd quarter isn't all that much different than those of the previous 4 years actually.

profits continue to look good and the economy is still moving quite nicely even though it's slowed down a bit.. i guess it depends on how long your horizons are (or how willing you're willing to hold on to an investment)..

[zynner]

Quote by: zynner The market, however, is in bear mode. This rally will be short-lived.

Told ya. ;-)

~ zynner

[bishop]

are you a day trader?

all of this going on right now is little more than noise..

[firefox]

I'm into commodidies right now myself. Anyone know of any good mutual funds or ETFs related to oil or water/basic food items that I can get in on for $2,000 or less (that's all I have)? Thanks.

[bishop]

http://finance.yahoo.com/q?s=PXJ
http://finance.yahoo.com/q?s=PXE
http://finance.yahoo.com/q?s=PBW

personally, i would just stash the money in a cd for the next 2 months.. you could try and gamble in this market, but it probably won't pay off unless you're extremely lucky.

of course, $2,000 isn't much to lose, so you could buy one of them, but don't expect to make a quick buck on it..