Last week I posted my views on the "Dueling Fed Governors" which can be found here.
http://traderdannorcini.blogspot.com/2011/04/federal-reserve-confusion-i-dont-think.html
In that post I explained my rationale for what the apparent conflict between the various Federal Reserve Governors is designed to do, namely, keep the speculative community off balance and unable to lean too hard on either the Dollar or the long bond.
You will recall that we were first treated to the "hawks" sounding the warning that QE was going to be coming to an end June 30 with one going as far as saying that the last $100 billion out of the proposed $600 billion in Treasury purchases would not be needed.
That talk was enough to RESCUE the DOLLAR from crashing through the 75 level on the chart. In my view that was exactly what it was supposed to do.
Then they had to deal with the fallout to the long bond market which careened lower on the talk. So what do they do? Why send out a dovish member of the FOMC naturally. He sounds the warning that the US economic recovery is too fragile to rule out any end to QE at this stage thus forcing the long bond market to rise and rescuing it.
To add further impetus to his thoughts another dove comes out today and sounds the same message as New York Fed Governor Dudley last week.
Today we are treated to Atlanta Fed Governor Lockhart.
Here is the full story:
http://www.bloomberg.com/news/2011-04-04/dollar-falls-versus-yen-on-speculation-fed-will-keep-borrowing-costs-low.html
His comments were enough to push the long bond higher.
I think it is important for the readers to understand that nothing these guys do or say is without signficance and without coordination. I repeat here for the sake of emphasis: THE ENTIRE PURPOSE OF THE FED GOVERNORS AT THIS POINT IS TO KEEP THE SPECULATIVE COMMUNITY OFF BALANCE AND UNCERTAIN OF POLICY CHANGES IN ORDER TO PREVENT THEM FROM THROWING THEIR FULL FIREPOWER AT EITHER THE US DOLLAR AND SINKING IT TO A CRISIS LEVEL OR THE LONG BOND MARKET AND PRECIPITATING A SHARP RISE IN LONG TERM INTEREST RATES.'
As much as I despise Central Bankers, they are not stupid. They know full well (or they learn very quickly) that the speculator is the segment of the market that they need to tame if they are going to have any sort of control over the markets. Witness the greenlight they gave to this community by announcing both QE and QE2. It was designed to encourage buying across both stock and commodity prices to stave off deflation and encourage inflation.
Now that the specs have done their masters' bidding, these same masters must keep their leash restrained lest they run wild and confound their purposes. Keep these things in mind when you see this apparent confusion being sown by the various Fed governors.
Personally I find it extremely repulsive that we have reached the point in our nation's economic history when the markets sit around and listen to the sayings of mere mortals as if they are some sort of demi-gods in order to decide when and where to commit investment capital. There is something horribly wrong with this. One can only wish that our citizens will at some point rise up and demand an end to this entity called the Federal Reserve.
Monday, April 4, 2011
Corn Prices match all time high set in 2008 - Gasoline and Crude keep Rising
Front month corn futures hit $7.65 this morning, matching the all time high price set back in 2008. I keep focusing on this particular grain because its price determines to a large extent the price of beef, pork and chicken that consumer are going to end up paying at the grocery store.
If this was not enough of a shock - gasoline prices hit a fresh 32 month high this morning.
Crude oil is over $108 while Brent is over $120.
If this was not enough of a shock - gasoline prices hit a fresh 32 month high this morning.
Crude oil is over $108 while Brent is over $120.
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