2012 March 13 | timiacono.com

The policy making committee of the Federal Reserve gathered today in Washington to pass judgment on the state of the economy and the stock market certainly liked what it heard, though precious metals markets surely did not.

Fed Rate Cutting CyclesAs expected, there were no changes to short-term interest rates, existing policies were unchanged, and no new policy moves were announced.

The Fed acknowledged an improving labor market and rising oil prices while also downplaying the threat of spillover effects from Europe, that is, now that the European Central Bank has finally seen fit to print up more than a trillion dollars for the greater good.

“Steady as she goes” is what equity markets were waiting to hear and they responded accordingly (Susie Gharib and Tom Hudson no doubt had twinkles in their eyes on PBS’s Nightly Business Report) while gold and silver traders were again disappointed to hear nary a mention of further central bank money printing on this side of the Atlantic and many of them exited positions as a result.

None of that should come as much of a surprise.

But, what was interesting about today’s meeting was that the policy statement released after its conclusion had a few subtle changes as annotated in the graphic below, something that has been the exception to the rule lately.

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Stressing Over the Fed Stress Test Scenario

Late yesterday, the Federal Reserve released details of its stress test scenarios for the nation’s too-big-to-fail banks and they included the worst case (a.k.a. nightmare or doomsday) scenario summarized below from this story at CNBC:

The results of the stress tests are slated for release on Thursday (don’t look for any big banks to fail badly) and, given all the bad press that Bank of America has received in recent months about its long-term viability, it should be interesting to see how it fares.

Of course, if banks’ assets had to be marked to market, few of them would likely pass this or any other stress test, however, that’s just a minor detail.

Rising Prices, Weather Drive Retail Sales

The Commerce Department reported(.pdf) that big increases in gasoline station sales and automobile sales drove overall retail sales in the U.S. higher by 1.1 percent in February following an upwardly revised gain of 0.6 percent in January.

Excluding motor vehicles, retail sales rose 0.9 percent last month and, excluding both autos and gasoline, sales rose just 0.6 percent.

Surging pump prices more than offset falling demand as gasoline station sales jumped 3.3 percent in February after an increase of 1.9 percent the month prior. Motor vehicle sales rose 1.6 percent last month following a decline of 1.6 percent in January.

February Retail Sales

Clothing sales rose 1.8 percent, however, here too, rising prices played a significant role in the sales gains as the Labor Department recently reported that, over the last three months, the cost of apparel has been rising at an annual rate of more than 5 percent.

An unusually warm and dry winter has also spurred many purchases at home improvement stores, as sale there rose 1.4 percent for the second month in a row. Recall that the retail sales figures are adjusted for seasonal variations and holidays, but not rising prices, all of which makes the February surge less than what it appears.

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Tuesday Morning Links

MUST READS
Fed Unveils Doomsday Scenario for Banks – CNBC
Fed to release results of bank stress tests – Washington Post
Fed seen biding time in order to assess jobs gains – Reuters
Inflation Solution: Will the Fed Cage the Hawks? – Fiscal Times
Rage continues to grow over bank foreclosure deal – CNN/Money
Deeply underwater homeowners to get most aid from mortgage deal – LA Times
Bailout can make Greek debt sustainable, but risks remain: EU/IMF – Reuters
Job Insecurity, Debt Weigh on Retirement Confidence, Savings – EBRI
Rubin Says He Has Too Many Dollars 13 Years After Departing Treasury – Bloomberg
How the Depression Made Keynesians of Capitalists – Bloomberg
The Myth of the Non-Paying 47 Percent – CBPP
Losing the Belt – Krugman, NY Times

MARKETS/INVESTING
Oil rises to $107 on improving economy – AP
Gold erases gains ahead of FOMC – MarketWatch
Hedge Funds for Everyone? Don’t Hold Your Breath – CNBC
Gasoline and diesel prices continue rising – LA Times
10 reasons Wall Street will hit bottom, crash – MarketWatch
Here Are The Four Things That Keep Bank Of America Up At Night – Zero Hedge
Forget China. ‘Hard Landing’ in US, Europe: Strategist – CNBC
Speculators reduce gold, silver bullish bets: CFTC data – Commodity Online
Not a stellar year ahead for gold, but still positive – Mineweb
Gold Gets Support in Long-Term Uptrend from Alan Greenspan – GoldSilver.com
What Force in the World Could Take Gold Down $100? – Daily Capitalist
On gold and the risk of being right – Fleckenstein, MSN Money

ECONOMY/WORLD/HOUSING/BANKING
Recent Job Gains Are Real and They’re Spectacular -WSJ
Hiring plans strongest since ‘08: Manpower – MarketWatch
U.K. Inflation basket: iPads are in, step ladders are out – Telegraph
Spain Faces Deeper Deficit Cuts, Juncker Calls Rajoy Plan Dead – Bloomberg
Germany Fails To Meet Its Own Austerity Goals – Spiegel
German investor confidence most in 21 months – BBC
A Rising Tide Lifts Rents, Sinks Home Values – WSJ
Home repossessions set to jump in 2012 – Housing Wire
New Rent Report Suggests Possible Bubble – CNBC
Fed to Release Stress Test Results Thursday Afternoon – WSJ
ZIRP Has a Big Hidden Cost To U.S. Savers – NY Sun

 
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