Bill Cara: Mugarian and Saut on the right track, Tues., Apr. 18, 2006, 3:07 PM

« Enbridge favored by UBS, Tues., Apr. 18, 2006, 1:48 PM | Main | Cara 100 for China rings the bell, Tues., Apr. 18, 2006, 6:20 PM »

April 18, 2006

Mugarian and Saut on the right track, Tues., Apr. 18, 2006, 3:07 PM

John Mugaran, and others like me, has taken offence to the "New" Fed dropping M3. So much for the enhanced transparency the Administration promised, and Ben Bernanke promised.

A reader pointed out: "M-3 and 1.5 trillion created out of thin air, per year!"

Bill, an excellent article today in John Mugarian's blog by Jeffrey Saut at Raymond James - a must read. In my book, we still have both negative short term and long term real interest rates. So, while the Fed has been raising interest rates, they been doing massive repos - no transparency as we both said over and over. Stock earnings look great if you lie about inflation and most of those earnings are inflation. Stagflation in still there, which they are "trying to manage". /Alan

I guess when you are in as much trouble as these people in Washington are, you'll stoop to any depths to try to recover. You might even lie to the Little People that interest rate increases might very well stop now.

Oil prices and metals prices are going through the roof, but the Admin and the Fed say not to worry " rates are coming down soon.

Meanwhile without Fed repo data how would we know what's really going on? But, while quantitative easing could now cease without us knowing, the Fed could be stroking the public by saying that interest rates don't have to go up any more, and that your house mortgage is safe, yada yada.

But when the other shoe drops " as Bernanke surely knows will happen when he pulls the reins on M3 without us knowing " not only will oil and metals prices come down, but the stock market is going to crash.

Can't you just hear the man saying, "Don't blame me!"? Wait for it. Interest rates are going to drop... along with your wealth.

I find this all such a joke. why would interest rates drop when Crude Oil sits at $71.50 and $GOLD is at $624.30?

When does the nonsense stop? When, for example, does CNBC take Kudlow off the air and put on legitimate academic discussion?

I'll tell you when. It'll be when "We're going to be transparent!" actually becomes believable. It'll be when the whole game of deceit stops.

It'll be when employed CEO's don't hit billion dollar pay packages (as happened today), and the SEC steps in and says "Whoa! Is this what the shareholders really want? Or is this just more deceit?"

Don't hold your breath.

Posted by Posted by Bill Cara on April 18, 2006 03:07:17 PM | Category: Cara Today in the Market

Discourse

"These things end badly."

Bill, do they actually think there is a way out of this? That they can just keep inflating, lying about inflation ("managing inflation expectations"), switching the asset class that is most bubbly from stocks to RE, back to stocks and on and on and on like some giant game of Hide the Pea? Where are the adults in the room?

What does gold do here? Go to $650? RSIs of 95? The rest of the PM complex? I gues I don't need RGLD as my "tell" anymore. How does all this square with "no inflation"?

How do they sit around and allow the $USD to be trashed? What about the welcome mat for the Chinese Premiere? Think he is going to have any patience for Mr. Schumer and friends with the dollar in free fall? Dont we, uh, kinda need them right now? I'm with you. This is such a joke. But I do not know whether to laugh or cry.

Posted by: MarkM at April 18, 2006 3:54 PM [link]

Some responsible thinking by Ron Sen:

"The Federal Reserve has spoken. I guess it takes a while to sculpt those stone tablets after the Fed meeting.

Today the SPX and the RUT are both up over 2 standard deviations of price, based on volatility band data. No froth there.

Data dependent rate decisions. Okay. I guess that maybe market 'froth' would be a data point, too. Supposedly, Ben 'Guten'Bergnanke is a student of history and fears any impediment to liquidity. This would certainly explain the monetary policy.

I'm an atheist with respect to Federal Reserve Board members as contemporary banking gods. Every 'cycle' brings new issues concerning supply, demand, and participation in global markets. I do believe Vernon Smith's behavioral finance work that says that participants will try to recreate bubbles, with the expectation that they can 'get out' before they collapse.

All I can say is 'how did that work out for you last time?'"

WELL SAID.

Posted by: MarkM at April 18, 2006 3:57 PM [link]

Isn't Ron terrific?
http://www.ronsen.blogspot.com/