Weak Retail Numbers = More Fed Pumping | TigerDroppings.com
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Lsut81
USA Fan
Member since Jun 2005
65657 posts

Weak Retail Numbers = More Fed Pumping

quote:

U.S. retail sales rose 0.4% in June and just 0.1% excluding autos, with both measures well below consensus estimates. The report raises new questions about the strength of the U.S. economy, the health of consumers and the timing of any Federal Reserve ‘tapering.’

First and foremost, the data provide further evidence the U.S. economy wasn’t growing very fast in the second quarter with “a very real possibility that Q2 GDP will be less than 1%” when the next revision is posted on July 31, writes Dan Greenhaus, chief global strategist at BTIG. “The number one takeaway from today’s report is that the consumer was a bit weaker than expected in the second quarter.”


LINK


I Love Bama
Alabama Fan
Alabama
Member since Nov 2007
33680 posts

re: Weak Retail Numbers = More Fed Pumping
I would like to hear the finance experts on this board explain their predictions of what if any fallout will occur from this perpetual pumping.


GFunk
LSU Fan
Denham Springs
Member since Feb 2011
9358 posts

re: Weak Retail Numbers = More Fed Pumping
quote:

I Love Bama
quote:


I would like to hear the finance experts on this board explain their predictions of what if any fallout will occur from this perpetual pumping.


Not an expert by any stretch, but I'm just glad I parked a few stacks of Benji's in those Iraqi Dinar...


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wegotdatwood
Member since Aug 2009
17094 posts

re: Weak Retail Numbers = More Fed Pumping
Have a few friends at Sam's freaking the hell out. They said Costco's numbers were horrible. Said their bosses are pissed, numbers won't be good.



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oR33Do
Memphis Fan
Tuscaloosa
Member since Oct 2012
12296 posts
Online

re: Weak Retail Numbers = More Fed Pumping
quote:

I would like to hear the finance experts on this board explain their predictions of what if any fallout will occur from this perpetual pumping.



Not an expert either, but hyper inflation is a huge possibility.


BennyAndTheInkJets
Arkansas Fan
NYC / Orange County
Member since Nov 2010
4215 posts

re: Weak Retail Numbers = More Fed Pumping
quote:

Not an expert either, but hyper inflation is a huge possibility.

PCE inflation readings are at their lowest levels in history, hyper inflation is not a huge possiblity by any means. Money supply is a very misconstrued notion, obviously you need velocity to pick up before actual inflation kicks in, but even the notion of the "money supply" needs to be deconstructed before you get a true feeling for whats in the system. Much of the built up M2 is still in bank deposits, very easily controlled by the Fed. They can raise reserve requirements, or just repo back as much of the funds that they want back to themselves. In application they will just communicate the repo way before actually doing it to not disrupt the banks. Until there is a broad, meaningful pickup in lending by the average consumer then its going to be difficult to see 3+% inflation.


BennyAndTheInkJets
Arkansas Fan
NYC / Orange County
Member since Nov 2010
4215 posts

re: Weak Retail Numbers = More Fed Pumping
quote:

I would like to hear the finance experts on this board explain their predictions of what if any fallout will occur from this perpetual pumping.

They're going to start tapering regardless, where they end purchases is up in the air but I can almost guarantee that they will start tapering purchases this year. They can still buy the same amount of duration in the market while tapering as well, Treasury issuance has declined with the budget deficit and mortgage origination has dropped recently. Technically if the Fed continues to buy at the same levels then they will end up buying even more supply from the market. At the end of this year the Fed will own anywhere between 30-45% of all Treasuries maturing in over 3 years, if they keep buying at the same rate they will essentially "break" the Treasury market.

In terms of fallout, I mean we've seen several negative side effects already. Eventually when you start tapering (or actually communicate the tapering in reality) these purchases it will affect the market, and it sure as frick did in May and June. Rates blew out and liquidity was sucked out of the market, some classes like ABS went completely dry. TIPS became extremely illiquid, and emerging market got crushed to the point that Brazil even lowered their 6% tax on foreign investment to curb the outflows (which investors actually took advantage of to take more cash out). This sell-off was greatly exacerbated by the amount of leveraged and negatively convex players in the market that had forced technical selling. At the end of the day though, this was necessary. Tapering is priced in, hell I'd say even an ending to purchases is priced in and before Bernanke's speech last week a rate hike was priced into Eurodollars around the 4Q14 area. I would bet anything that at the beginning of 2015 the Fed will still have a 0-0.25% FFR target.

In terms of longer term buying, we don't really know but the close to consensus is that the Fed would continue to diverge economics from markets as has been the case the past couple years, and many would argue this would break the markets. Many would argue that it gives the ultimate blank check to politicians (and others would argue its been that way for a while). My biggest worry would be the first argument, as this year the market has lived in opposite day with economics. If you get bad numbers, people expect the Fed to continue purchases so markets go up, while if you get good numbers, markets go down as this would spur the Fed to taper purchases. Doc's analogy that I've ran with is that QE is ICU, you can't keep a patient in a comma forever. You have to bring them out and let them live again otherwise you just have a zombie. Eventually markets have to be dictated by economics.


wegotdatwood
Member since Aug 2009
17094 posts

re: Weak Retail Numbers = More Fed Pumping
So, what are you buying? Gold?


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I Love Bama
Alabama Fan
Alabama
Member since Nov 2007
33680 posts

re: Weak Retail Numbers = More Fed Pumping
Good shite right there. Thanks


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MoreOrLes
LSU Fan
Member since Nov 2008
18197 posts
Online

re: Weak Retail Numbers = More Fed Pumping
Disclosure....Im about the furthest thing from an expert.

quote:

Doc's analogy that I've ran with is that QE is ICU, you can't keep a patient in a comma forever. You have to bring them out and let them live again otherwise you just have a zombie. Eventually markets have to be dictated by economics.


I prefer looking at QE like crack......try to quit and there will be at least withdrawals. Its not going to be fun or pleasant.
This post was edited on 7/15 at 6:52 pm


BennyAndTheInkJets
Arkansas Fan
NYC / Orange County
Member since Nov 2010
4215 posts

re: Weak Retail Numbers = More Fed Pumping
quote:

I prefer looking at QE like crack......try to quit and there will be at least withdrawals. Its not going to be fun or pleasant.

That's one way as well, some of my colleagues (and myself) used to call it financial heroin, then we had to start explaining QE/ZIRP to clients. I actually misquoted myself there, QE is surgery and ZIRP is ICU. You have to put someone out before you can do surgery, however you have to make surgery effective. You can't do too much as the patient's natural processes may be permanently affected. However, you can't do too little as the surgery will be ineffective (Japan). Also, when surgery is done, you can't just bring them back immediately, you have to give the body time to rest. Similar to raising rates after ending QE, can't do it all at once as it would be too much to rattle the markets.


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Coeur du Tigre
LSU Fan
Waiting for Geauxdeaux.
Member since Nov 2008
387 posts

re: Weak Retail Numbers = More Fed Pumping
Thread of the Month, thanks Benny.

quote:

Until there is a broad, meaningful pickup in lending by the average consumer then its going to be difficult to see 3+% inflation.


Which Federal Reserve Data series would be best to track consumer borrowing as meaningful velocity in this regard?



ThaBigFella
LSU Fan
baton rouge
Member since Apr 2006
2043 posts

re: Weak Retail Numbers = More Fed Pumping
Bernanke speaks tomorrow at 8:30 in the morning which is odd bc he usually speaks at 10. Does this mean he's doing it early to give wall street a chance to get ready?

Could he possibly have bad news tomorrow?


LSURussian
LSU Fan
Member since Feb 2005
85143 posts

re: Weak Retail Numbers = More Fed Pumping
He's announcing he will not accept reappointment for another term.


ThaBigFella
LSU Fan
baton rouge
Member since Apr 2006
2043 posts

re: Weak Retail Numbers = More Fed Pumping
will this be bad news russian? uncle ben is propping the house of cards up and im very happy with the results!


OnTheBrink
Alabama Fan
TN
Member since Mar 2012
4518 posts

re: Weak Retail Numbers = More Fed Pumping
It was known he was leaving unless I am mistaken.


ThaBigFella
LSU Fan
baton rouge
Member since Apr 2006
2043 posts

re: Weak Retail Numbers = More Fed Pumping
is there anywhere where we can get a schedule of future bernanke speeches, I hate being on pins and needles before he announces something which seems like every week!


wegotdatwood
Member since Aug 2009
17094 posts

re: Weak Retail Numbers = More Fed Pumping
Any front runners to replace him?


Rivers perhaps?


OnTheBrink
Alabama Fan
TN
Member since Mar 2012
4518 posts

re: Weak Retail Numbers = More Fed Pumping
According to an Irish bookie, Janet Yellen is a 4 to 1 favorite.


LSURussian
LSU Fan
Member since Feb 2005
85143 posts

re: Weak Retail Numbers = More Fed Pumping
Larry Summers


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