Bobbys Corner-Open Market-December.13.2011

Good Morning:

The greenback lost steam overnight-as investors look ahead at the Fed’s policy meeting today.  Many market participants are anticipating that the Fed will reiterate their pledge to keep interest rates at record lows.  Most feel that the Fed will not reduce any of the stimuli that they have in place.  They may possibly be able to slow down their asset purchase program, but I do not think they will do that quickly.
The FOMC will have their rate decision and comments at 2:15 PM this afternoon.

In news over the pond: 
Comments from ECB member Makuch that the ECB can’t carry out massive bond purchases-as the EU treaty does not allow the ECB to act like the US Fed. 
The markets did see the ECB out in the market buying Italian bonds today.
With banks in Europe under pressure from regulators to boost their capital reserves, many major European banks are selling some of their best businesses so that they can raise the much needed capital.  This practice will most definitely hurt future long term profits, but the banks have no choice at this time.

November Retail Sales rose .2% versus .6% in October.

Oil and Silver are higher, while Gold is flat.

Asian equity markets were lower-but Europe and US Futures are in positive territory.

HAVE A GREAT DAY & GOOD LUCK

Fed’s Plosser on the Wires

Says:

• Rate path would allow FOMC to communicate more clearly
• Fed should publish path of interest rates
• ‘not privy’ to discussion on swap rate cuts
• ‘Labor market is in fact healing’
• Labor market ‘not as dire’ as many feared
• Economy continuing at ‘moderate slog’
• No ‘magic bullet’ for Europe
• ‘No evidence’ U.S. firms have funding problems

Fed’s Bullard on the Wires

Says

• He supports central banks ‘swap arrangement’
• He supported Bernanke on dollar swaps
• ‘Prudent’ to ‘bolster’ position via swaps
• So far we are not as bad as 2008-2009
• Liquidity facilities could be reopened if needed
• Bernanke has been ‘very innovative’ in policy
• Europe unlikely to be solved by ‘silver bullet’
• Europe crisis wont ‘go away very quickly’
• Europe crisis about excessive government borrowing
• ‘Notion’ that ECB can run to rescue

Feds Lockhart ‘Skeptical’ More Bond-Buying Will Help Economy

More from Lockhart:

• IMF sees no case for central banks to consider capital flows
• Asset purchases not a ‘potent policy option’
• Sees ‘moderate growth’ in 2012, slow progress on jobs
• US GDP growing at 2.5%-3% pace in 4th quarter
• No option ‘should be taken off the table’
• He’s concerned about market contagion from Europe
• Bond buying may be appropriate in other circumstances
• Votes on monetary policy in 2012
• Enhancing Fed communication ‘worthy priority’
• ‘Skeptical’ more bond-buying will help economy

Fed Chairman Bernanke Speaks From Washington

Says:

• Sees more accomodative financial conditions
• Fed ‘prepared to adjust’ holdings
• Longer-Run estimates inherently uncertain
• Mandate consistent inflation is 2% or ‘bit less’
• Oil down from peaks
• FOMC expects only ‘moderate pace’ of growth
• Jobless rate to gradually decline in coming quarters
• FOMC expects unemployment to fall only gradually
• ‘Pace of progress is likely to be frustratingly slow’
• Will monitor Europe closely
• Europe debt crisis may harm, confidence, growth
• ‘Inflation appears to have  moderated’
• Fed seeks to enhance communication clarity
• FOMC did not make decision on communications

US Chicago Fed National Activity Data Due at 8:30AM

Fed Chairman Bernanke Speaks at Conference In Boston

Says:

• Flexible inflation goal not enough to ensure stability
• Fed is more transparent on outlook, policy
• Crisis to have profound, lasting economic impact
• Applying lessons of crisis to ‘take some time’
• Does not discuss economic outlook
• Fed to increasingly use communication ‘tools’
• Fed seeks to increase clarity about policy goals

Feds Fisher on the Wires

Says:

• Twist to expose fed to losses when rates rise
• Banks earning power will come under added pressure
• Fed policy ‘has yet to show evidence of working
• Operation twist will increase incentives to save
• Further monetary accommodation ‘pushing on string’
• FOMC policies may work against job creation
• Benefits of operation twist don’t outweigh costs

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