Stocks & Equities

Investors locked in some of the recent gains by world stocks and bonds on Wednesday as they waited to see what the mood was at the most recent meetings of the U.S. Federal Reserve and the Bank of England.

European shares fell for a second straight day, then stabilized. Overnight losses on Wall Street and in Asia, along with concerns about company earnings, kept investors cautious.

Focus was largely on events later in the day. The Bank of England will publish minutes of its recent meeting at 0930 GMT (4:30 EDT). Then come U.S. retail sales data and eagerly awaited October minutes from the Fed.

Fed Chairman Ben Bernanke set the tone on Tuesday when he said the U.S. central bank will keep monetary policy ultra-easy as long as needed.

The dollar .DXY sagged after the comments but began firming up as European trading gained pace. The euro still hovered near a three-week high.

“It confirms our view that the Fed will be extremely careful in taking away accommodative monetary policy and that tapering will begin by March at the earliest,” said Elwin de Groot, an economist and strategist at Rabobank.

“Even though it feels like things may not go further, this policy will simply sustain it. And it is difficult to fight against it, so we could see a further narrowing of spreads and riskier asset prices going higher.”

…..market action in Britain  China HERE

Federal Reserve Chairman Ben S. Bernanke said the Fed will probably hold down its target interest rate long after ending $85 billion in monthly bond buying, and possibly after unemployment falls below 6.5 percent.

“The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after” the jobless rate breaches the Fed’s 6.5 percent threshold, Bernanke said yesterday in a speech to economists in Washington. A “preponderance of data” will be needed to begin removing accommodation, he said.

….read more HERE

A Limited Central Bank

Posted by John Mauldin - Outside the Box

on Wednesday, 20 November 2013 11:02

This week’s Outside the Box is unusual, even for a letter that is noted for its unusual offerings. It is a speech from last week by Charles I. Plosser, President of the Federal Reserve Bank of Philadelphia at (surprisingly to me) the Cato Institute’s 31st Annual Monetary Conference, Washington, DC.

I suppose that if Dallas Fed President Richard Fisher had delivered this speech I would not be terribly surprised. I suspect there are some other Federal Reserve officials here and there whoare in sympathy with this view Plosser presents here, but for quite some time no serious Fed official has outlined the need for a limited Federal Reserve in the way Plosser does today. He essentially proposes four limits on the US Federal Reserve:

 

  • First, limit the Fed’s monetary policy goals to a narrow mandate in which price stability is the sole, or at least the primary, objective;
  • Second, limit the types of assets that the Fed can hold on its balance sheet to Treasury securities;
  • Third, limit the Fed’s discretion in monetary policymaking by requiring a systematic, rule-like approach;
  • And fourth, limit the boundaries of its lender-of-last-resort credit extension.

 

“These steps would yield a more limited central bank. In doing so, they would help preserve the central bank’s independence, thereby improving the effectiveness of monetary policy, and they would make it easier for the public to hold the Fed accountable for its policy decisions.”

Some of you will want to read this deeply, but everyone should read the beginning and ending. I find this one of the most hopeful documents I have read in a long time. Think about the position of the person who delivered the speech. You are not alone in your desire to rein in the Fed.

Two points before we turn to the speech. Both Fisher and Plosser will be voting members of the FOMC this coming year. Look at the lineup and the philosophical monetary view of each of the members of the FOMC. Next year we could actually see three dissenting votes if things are not moving in a positive direction, although another serious proponent of monetary easing is being added to the Committee, so it may be that nothing will really change.

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I am not seriously suggesting that the reigning economic theory that directs the action of the Fed is going to change anytime soon, but you will see assorted academics espousing a different viewpoint here and there. I think there may come a time in the not-too-distant future when the current Keynesian viewpoint is going to be somewhat discredited and people will be open to a new way to run things. This will not happen due to some great shift in philosophical views but because the current system has the potential to create some rather serious problems in the future. This is part of the message in my latest book, Code Red.

A lot of education and change in the system is needed. I want to applaud Alan Howard and his team at Brevan Howard for making one of the largest donations in business education history to Imperial College to establish the new Brevan Howard Centre for Financial Analysis to study exactly these topics and counter what is a particularly bad direction in academia. The two leaders at the new center, Professors Franklin Allen and Douglas Gale, are renowned for their pioneering research into financial crises and market contagion – that is, when relatively small shocks in financial institutions spread and grow, severely damaging the wider economy. This new center will help offer a better perspective. What we teach our kids matters. I hope other major fund managers will join this effort!

And speaking of Code Red, let me pass on a few quick reviews from Amazon:

“Excellent review of our current economic circumstances and what we can do about it to protect our assets. Even better, it is written with the non-economist in mind.”

“I read this book from cover to cover in 24 hours and was glued to every page. Do I know how to protect my saving exactly? No. But I have the critical information necessary to make informed decisions about my investments. My husband recommended this book to me after reading a brief article, and I’m so glad I impulsively bought it. It will definitely change my investment decisions moving forward and perhaps even provide me with more restful nights of sleep.”

You can order your own copy at the Mauldin Economics website or at Amazon, and it is likely at your local book store.

It is getting down to crunch time here in Dallas as far as the move to the new apartment is concerned. Work is coming along and most of it is done, although some things will need to be finished after I move in. Furniture is being delivered and moved in as I write, and today an the new kitchen is being entirely stocked, courtesy of Williams-Sonoma – they’ll be showing up in a few minutes. I am fulfilling a long-held dream (maybe even a fantasy or fetish) of throwing everything out of the kitchen and starting over from scratch. Between my kids and a returning missionary couple, all the old stuff will find a new home, and I will renew my role as chief chef with new relish next week.

I have always maintained that I think I am a pretty good writer but I a brilliant cook. With a new kitchen from top to bottom, I intend to spend more time developing my true talent. Between the new media room and my cooking, I hope I can persuade the kids (and their kids!) to come around more often. Yes, there are a few bumps and issues here and there, but in general life is going well. I just need to get into the gym more. Which we should all probably do!

Your feeling like a kid in a candy store analyst,

John Mauldin, Editor
Outside the Box

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OECD Says CDN Rates to Double

Posted by Julian Beltrame - The Canadian Press

on Wednesday, 20 November 2013 0:09

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Era of low interest rates coming to an end says OECD report, thanks to more stable global economies and predictable growth.

OTTAWA—The Bank of Canada may need to start hiking its trendsetting interest rate within the next year and steadily push it to 2.25 per cent by the end of 2015, according to an international think-tank representing the world’s leading economies.

The central bank has kept its policy rate fixed at one per cent since September 2010, leading to one of the most stable and favourable borrowing environments in many de

But the Organization for Economic Co-operation and Development said in a report Tuesday that with the Canadian and global economies about to return to more stable and predictable growth, that period is coming to an end.

….read more HERE

One of childhood’s happiest memories is flying kites. Now, an American academic is developing a novel idea — underwater kites equipped with turbines to generate electricity from ocean currents.

Ramping up the potential ridicule factor, a number of media outlets reporting on the technology note the proposed underwater kite’s eerie resemblance to the starship “Enterprise.”

But the National Science Foundation is not among the skeptics, having awarded a three-year, $300,000 grant to Worcester Polytechnic Institute for a new research program directed by David J. Olinger, PhD, associate professor of mechanical engineering to research ways to harness ocean currents and tidal flows using the novel technology.

Professor Olinger is convinced of the research’s potential, noting, “Unseen under the waves, winding along coastlines and streaming through underwater channels, there are countless ocean currents and tidal flows that bristle with kinetic energy. And just as wind turbines can convert moving air into electricity, there is the potential to transform these virtually untapped liquid ‘breezes’ into vast amounts of power. For example, it has been estimated that the potential power from the Florida Current, which flows from the Gulf of Mexico into the Atlantic Ocean, is 20 gigawatts—equivalent to about 10 nuclear power plants.”

….more explanation HERE