Too much pressure from the incumbents in power leading up to an election and from the real estate industrial complex
Goodbye dollar. Hello gold. 9 to 1 though? Man, that's amazing.
Fed Leaves Key Interest Rate Unchanged After Long Stretch of Hikes
WASHINGTON (AP) -- The Federal Reserve on Tuesday left a key interest rate unchanged, marking at least a temporary pause in what had been the longest unbroken stretch of Fed rate increases in recent history.
The Fed's rate-setting committee voted 9 to 1 to leave the federal funds rate, the interest banks charge on overnight loans, at 5.25 percent. It was the first time the Fed had met and not raised rates in more than two years.
However, the relief for millions of business and consumer borrowers could be only temporary.
The central bank said that "some inflation risks remains," holding out the possibility that it could resume raising rates at future meetings.
August 08, 2006
FLASH: Ben blinked
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If this does not unleash the price of gold, I give up!
The Dollar collapse will now begin....................
The FED was the last line in stopping the plunge.
Not much. Housing is a dead duck.
Cool. Now Ben, start the pumping. let's start with 2 trillion dollars over 6 months.. till elections. then you can start raising again. excellent.
Well Thatbigwindow:
It represents a small psychological comfort to the holders of ARMs who might mistakenly believe that interest rate adjustments up might ease. But, more than likely, as many default on their mortgages and lenders reactively/proactively tighten lending standards, there will continue to be increasing pain for those with adjustable mortgages. The real estate bubble has popped and this FED respite will not change the inevitable declines in home RE markets for the next few years. Famed economist Swantar likened the effect of the FED overnight lending rate on mortgage rates to the impact of a mouse's fart in a hurricane.
My bet is... No crash.
It's a rigged game at this point.
It also takes away another realtor BS statement like...better buy now before interest rates go up again.
More ponzi..hold rates, but increase the cost at the pump 2 fold..this hold really does not mean squat, but for all you ARM holders out there get out as fast as you can while the gettin is good.
Oil the next bubble?
Bernanke is Greenspans puppy. Greenspan has talked about destroying the dollar to "repair" imbalances.
So that tells me very weak dollar BUT may contract money supply to control inflation.
If they do that, I have no problem. BUT, if they continue to pump money into the system, inflation will take off like a rocket even from today's position and stagnation will become a norm.
NOTHING BUT PERMA BULL LOSERS ON TV. INFLATION IS RAMPANT. WE NEED 5YRS OF DEFLATION JUST TO REVERT TO THE MEAN
gutless, just gutless.
And so, how did the markets react?
They got what they wanted, right?
Down 61 pts at 3:22pm.
the government likes inflation, they owe alot of money.
Wow, what was he thinking?! He obviously wants to weaker our dollar further, jackass!
dragasoni.blogspot.com
-Dragasoni-
Party Time. Send me those dollars! I'll take em and buy whatever! Who gives a crap about paying the piper, today it's party time!
Thank you Ben and housing bubble - gold is on the launch pad and I will be retired (albeit in a mad max world) in under 5.
Why is everyone here so against ARMS? Are you going to live in your current home for the next 15 or 30 yrs? If you are then by all means get yourself a fixed rate mortgage. But if you plan on living in your home for less than 5yrs its not a bad option as long as you bought a home you could really afford.
Benny says... Better get your dollars into assets before it’s too late! We are going to take another 50% of your cash value while you sleep and buy Israel some more missiles. Less than 2 years left to wipe out the Middle East so we can boom and expand the workforce output. We have a capitalistic government more than a capitalistic society.
The Fed has lost its mysteriousness when bloggers can take votes on action, with their readers, some of whom are better informed than others -- and then confidently ascribe all kinds of motives to the Fed governors after the fact. The Fed looks at a lot of data and makes a call on the economy, using best judgment in an uncertain environment. They do not talk to political consultants in making these decisions. The Fed is independent of the political system: that's the point of the Fed. That the Fed has a political agenda is a myth perpetrated by people whose cynicism and willingness to assert an opinion exceeds their knowledge about the subject. Read one good book on the Fed before you think you can game the system. It's actually very dry, very technical work. The FOMC is not "Crossfire" despite what you may have heard.
They looked at conflicting, uncertain data and they made a prudent call. If the data changes, they will raise again in the fall.
"If this does not unleash the price of gold, I give up!
Tuesday, August 08, 2006 7:28:47 PM "
Do not underestimate efforts by the plunge protection team to preserve the dollar's image as long as possible. www.itulip.com has some good reading about Paulson, flawed gov't stats and market manipulation. By the way, the last time the Fed's gold was inventoried was during Eisenhower's administration. I wonder how much is left?
The Buyers market has returned? NAR should be disbanded.
Absolutely. When you owe trillions of dollars in debt, what better tactic is there then to pay back your trillions with dollars that are worth half of their previous value? Genius! Pure genuius, I tellyou. Too bad the dollar investments (real estate, 401K , mutual funds, stock, bonds) of the average American family will be all but destroyed in the process. Way to go, Ben!
Prolonging the agony. Instead of ripping that bandaid off all at once, it will be a loooong, sloooooow, pull, taking lots of little hairs with it.
why would it unleash the price of gold? gold is bad investment if the economy slows...
a pause is good for the dollar...dollar is attracted to growth...as long as the fed doesnt kill the economy, the economy will attract a bid in the dollar...where else you gonna invest..
Metals prices.
Sorry, boys, the global economy is set to slow for the next 2-3 years, compounded by the Boomer demographic drag. A dramatic slowdown in economic growth, and the likelihood of a hard landing, will reduce the demand for commodities and credit-money, resulting in a decline in commodities prices and a marked deceleration of real US M2 growth. The slower money growth and velocity means that cash will be king, that is, the US$ will outperform stocks, bonds, real estate, and commodities, as will Treasury prices.
Get ready for a big decline in commodities prices, including golf and silver. Gold is heading below $500 and silver below $5.
Sorry, goldbugs.
"If this does not unleash the price of gold, I give up!"
It didn't yet. Man, I was $5 away from buying 15 more coins a week or two ago. Darn.
Guess ben saw that housing fell off of the cliff, and so with it the entire world economy
wonder when he'll lower rates next?
I was amazed to see the Economist Mag saying that the Fed should continue to increase the Fed rate. So easy for them to think their economy in Britain is in so much better shape when they hold matchboxes for the price of our McMansions.
The Fed response may have been lame but with the unpredictable delay in the impact on rate rises and the war in Lebanon it might be a sound move since they can continue rate increases at the next meeting and if things look like they are out of control go for a big 1/2 point raise.
Why is everyone here so against ARMS? Are you going to live in your current home for the next 15 or 30 yrs? If you are then by all means get yourself a fixed rate mortgage. But if you plan on living in your home for less than 5yrs its not a bad option as long as you bought a home you could really afford.
We have a similar situation as 70-80 yrs. ago. During the 1920s to WW II, most mortgage loans were 5 years in duration, callable, and requiring 30-50% down; but, they were often refinanced and at rates of 4-5%. The avg. house cost no more than 1.5-2 times income, which was not taxed much, and there were no mortgage or property tax deductions. Of course, the Home Loand Bank Board changed all that during part of the 1930s New Deal and permanently after WW II. IOW, housing has become increasingly socialized to the point where there is virtual complete gov't subsidy of private lender and realtor profits and socialization of risks/losses. It allows commercial banks to create double-digit real estate loan growth in perpetuity, and the gov't comes in every decade or so and bails everything out by papering over losses after the growth reaches an exponential magnitude and slows for 5-6 yrs. or more.
We are precisely at another such inflection point in the longer cycle when exponential growth slows and decelerates with a housing bust.
The Fed is independent of the political system: that's the point of the Fed." "
Yes, totally independent and private.
According to the United States Court of Appeals, Ninth
Decided April 19, 1982.
Lewis v. United States, 680 F.2d 1239 (1982)
"Examining the organization and function of the Federal Reserve Banks, and applying the relevant factors, we conclude that the Reserve Banks are not federal instrumentalities for purpose of the FTCA, but are independent, privately owned and locally controlled corporations."
Yes, even though their name is “Federal” they are PRIVATE. Just like “Federal” Express…
Ben is a weak girly man. Inflation has won this round. He gave in too easily to the talking heads.
history will not judge today's action kindly
something about a fiddle
" Ben is a weak girly man. Inflation has won this round. He gave in too easily to the talking heads."
Bernanke isn't "fighting" inflation, inflation is a central part of the plan to blow off all of those obligations that are hanging so ominously over debtors. All you deflationary depression guys are wrong -- Americans in 2006 will never endure the real hardships needed to fix this mess.
Bernanke will talk tough while allowing inflation and a falling dollar to clear away those debts. It might take five to ten years, but that is where we're headed.
BB lacks resolve. The only hawkish statement in the press release was: some further firming may be required in the future (sic) Anyway, I think they feel that the housing bubble will pop on its own now. The bond market is steady at about 5%. That is as good as they can hope for, given the circumstances. Inflation is beyond the fed's control. The US$ is out in the world in abundance already. The price of transportation fuels (i.e. everything) is going up regardless. Why should they further broadcast to the rest of the world that they are irrelevant, or pop a housing bubble that will already pop on its own? Further tightening will only serve to stall a gutless US economy, something that helps no one.
cool inflation to year to year caculator.
http://www.westegg.com/inflation/
"Sorry, goldbugs."
What I have learned about this group is there appear to be a majority of posters who cannot or will not connect the dots.
Gold will soar - know why?
Oil is gonna soar - know why?
We are at peak - simply supply and demand my friends.
So Russia, China, Ven, Canada, the whole freaking world is waiting for the one made rush out the dollar door and into the gold door - know why?
On Aug 15 , 1971 Nixon said "c ya" to the gold standard and tied the dollar to oil.
It would benefit some to consider for one moment that oil is toast and EVERYTHING is connected to what oil does.
Higher oil prices are disinflationary or deflationary 18 months or more hence. One thing the central bankers can't do is monetize oil (as they can gov't and agency paper).
If the US$ tanks further, oil and other commodities prices continue higher and stop the global economy cold. But the US$ won't tank from here (not for a year or more) because real money growth is slow or negative yoy, which is not bearish for the US$ or bullish for commodities.
Also, at this pt. in the cycle, the Fed tightening actually causes peak cyclical inflation, forcing costs higher and firms to begin cutting expenditures and payrolls.
Stocks, corp. bonds, and commodities are dead money, so take profits. The US$ Index is headed to 100-105, and Treasurys are in a new cyclical bull market.
Anonymous said...
It also takes away another realtor BS statement like...better buy now before interest rates go up again.
That's ok, we can come with more BS statements. That's what marketing is all about (right, keith?).
How's this one...
Buy now before home prices start to shoot upward again.
;)
If this does not unleash the price of gold, I give up!
Gold will crash. Now you have the expert opinion you were looking for.
For gold to crash, the current holders would have to sell off their holdings faster than new demand wants it.
Large banks in China, Russia, and elsewhere have expressed interest in holding more gold.
There could be manipulation which would force a discount. (Short selling is one way.)
Gold will be volatile, but I highly doubt it would crash. If it does, I'd love to load up even more.
I also doubt I'll become rich with my metal holding. If I do, I'll switch to another asset class.
So do you think the dollar will finally move one way or the other off the Euro?
You're right Old_Fart. If you plan to live in your house for less than 7 years, ARMs is not a bad choice. What our fellow HP bloggers were against are the stupid people who bought at INFLATED (overvalued) prices secured by ARMs & IO.
The Fed is independent of the political system:
I beg to differ, Not only is it politically corrupt, it is a politically appointed seat.
Mark My Words -
THERE WILL BE NO HOUSING BUBBLE CRASH!
Your "Elected" Officials will not allow it instead the real value of your home will crash in real terms as the dollar crashes.
Your 1 bedroom starter condo in Florida will still cost $400K but your Honda Civic will cost $100K, Beer will be $20 per bottle, Gas will be $10 per gallon....
...oh and your salary will remain the same! blah ha ha ha ha ha
Americans are toast, keep voting Republican!
RE my earlier post on ARMS:
I meant to say a 5YR-7YR FIXED ARM, not a monthly adjustable, neg am. Sorry for the mistake.
NEW YORK -- Shares of homebuilders declined Tuesday, after the Federal Reserve paused in two straight years of interest hikes.
The Fed left its target rate unchanged at 5.25 percent, saying inflation seems likely to moderate over time. The central bank also said "some inflation risks remain," indicating it could resume raising rates.
"The rates pause suggests that the Fed sees the slowdown in housing causing a greater risk than core inflation," said Zacks Equity Research housing analyst Mario Ricchio.
He noted that June housing starts declined 11 percent, while issuance of new housing permits also declined 15 percent in the month, compared to the June 2005 period. In addition, cancellation of housing contracts are on the rise, he said.
Hovnanian Enterprises Inc. on Friday issued a third-quarter profit warning, citing a slowing industry and higher cancellations.
Higher interest rates for banks result in higher mortgages, making a purchase harder for potential home buyers.
"We are in the beginning stages of a housing market slowdown," said Ricchio. "We believe the Fed sees that accelerating in the second half of 2006. The worst is yet to come."
Ricchio said if the Fed does lift the rate in the future, that will indicate it has switched its priority concern back to overall inflation from the housing market.
Prudential Equity Group Chief Investment Strategist Ed Keon called the pause a "slight positive."
"It is my guess that they will not hike again and that the next move is more likely to be a cut rather than a further hike," he wrote in an e-mail message. "There is still the possibility that we are heading into recession, but our reading of the economic data suggests this in not likely."
On the New York Stock Exchange, shares of Hovnanian Enterprises Inc. closed down $1.39, or 4.8 percent, at $27.54, D.R. Horton Inc. fell 86 cents, or 3.8 percent, to close at $21.91, KB Home declined $2.08, or 4.5 percent, ending at $44.45, while Centex Corp. lost $1.33, or 2.6 percent, at $49.30.
Toll Brothers Inc. shed $1.34, or 4.8 percent, to close at $26.58, and Pulte Homes Inc. dropped $1.09, or 3.5 percent, to end at $30, also on the NYSE.
Comstock Homebuilding Companies fell $1.45, or 26 percent, to $4.06 on the Nasdaq.
The Euro has improved slowly but surely against USD. My average cost per Euro was about 124.50, and it is currently at about 128.50.
Perhaps by the end of the year, the Euro will reach 131. I'm not expecting any major moves this year. But if something breaks out, I do not want to miss it.
Leiberman must be shamed out of politics entirely. No point waisting resources fighting a two front battle in CT. Whatsmore this should be easy. He has shown that his interest is primarily holding onto the power that voters once gave him. His sense of entitlement will be an easy target to hit.
I was on yahoo reading the message board on Countrywide Financial CFC and came across a old video
of Christopher Thornberg April 2006 Economic Round Table.
http://video.google.com/videoplay?docid=-2640239019877885520&q=UCLA+Anderson+real+estate
In summary Thornberg more or less said that house prices won't fall but track sideways as wage catch up.
Then I read the reply to this message http://messages.finance.yahoo.com/Financial/Consumer_Financial_Services/threadview?m=tm&bn=3223&tid=27034&mid=27034&tof=5&frt=2
"What Wall St. Realizes about CFC"
This got me ask more questions like.
Isn't falling commodities prices a leading indicator to slowing GDP?
Isn't slowing GDP a leading indicator to weaker corporate earning?
Isn't a stronger dollar in a weaker economy a leading indicator to a flight to safety?
Don't Gold raise in periods of Inflationary and Depressionary Expectation and fall in periods of Recession?
Did the Fed pause today because they see a recession coming?
How do wage catch up to housing price of the last several years if the US is going into another recessions?
"Yes, even though their name is “Federal” they are PRIVATE. Just like “Federal” Express…"
You are only half-right. More a private/public hybrid. The CEO and Board of Federal Express are not appointed by the President of the United States and confirmed by the Senate.
foobeca said...
"Bahahahahahaha, the FED is a privately-owned bank that makes decisions based on what is best for it and its member banks."
What was that sound? Are you a sheep? The Fed is a public/private hybrid, with governors appointed by the presidnet. See answer above.
"Congress could get rid of the Federal "Reserve" system at any time. If they're so independent of politics, how come Bernanke is called to testify before congress every month or so?"
He's appointed, he's a major policymaker. Let me turn your argument around. If the Fed is so non-independent of the government, why not just let the president (or Sec Treasury) determine money supply, Fed funds rate, etc, directly? Why go thru the rigamarole?
"Maybe not Crossfire, but "how do we screw them today and get away with it?""
This is pure paranoia. Is the CIA beaming messages into your brain, as well?
"The FED has a very, very poor track record. The dollar has lost 94% of its value since the FED's inception in 1913. The Great Depression occured on their watch as did the mess in 1982 and the stock and housing bubbles."
Yes, there's a business cycle. You could also point to the huge American economic successes over this period. I think the Fed's record has been, objectively speaking, a little better than you suggest.
"Their goal is to make inflation as close to zero as possible and to have full employment. They have failed miserably so many times."
Again, based on what? What country has done a better job? We have had low inflation, relatively low unemployment... In 1975 who would have predicted the performance of the US economy through the end of the century? Here's my point: it's laughable when you have meathead bloggers and John Q. Citizen, who is largely misinformed, heaping ridicule on the Fed when he doesn't really grasp the rudiments of monetary policy. We do that to the manager of the Yankees (Dodgers, etc fill in the blanks) but no one takes us seriously. We shouldn't take you seriously here either.
Oil the next bubble?
Yep, you bet. The US and world economies are slowing and we will use less of it; period. These high prices are and will bring more conservation. In addition, there are billions invested in these "commodity" funds that will have to liquidate and sell crude futures and energy stocks when the music stops. There will be a day when crude is down $20. All the rookies like Keith see no downside in metals and crude. When this happenes, you know it's a bubble.
Again, based on what? What country has done a better job? We have had low inflation, relatively low unemployment... In 1975 who would have predicted the performance of the US economy through the end of the century? Here's my point: it's laughable when you have meathead bloggers and John Q. Citizen, who is largely misinformed, heaping ridicule on the Fed when he doesn't really grasp the rudiments of monetary policy.
And who are you from the stand point of credentials? Just curious. I am not college educated in finance. I am creative. I am here to learn and I cannot get enough of this information from all of you people smarter than me. I have really learned a LOT! Sometimes I do not understand what you are writing and I have to filter the BS from what I think is fact, but I would like to know the source of your finance genius.
Thanks, and I am not kidding.
For example, I never knew how much Boomers were hated until I found this sight!
Never knew what Fed Bank was, Never heard of Peak Oil and never followed the stock market until I found HP.
I have however had a house burn down, another destroyed by FL weather, and have been in a 5 year battle with the Homeowners insurance company for a home that was paid for, whilst RE went through the roof. I was compensated 2 months ago in 2001 home values, and two days later my rental burned and my new car exploded. I will make very smart financial moves now on thanks to Keith and his bloggers!
Thanks Keith for letting us common people participate, even though it is kinda depressing sometimes, I laugh so much some days at your community's attitude!
"Yes, even though their name is “Federal” they are PRIVATE. Just like “Federal” Express…"
You are only half-right. More a private/public hybrid. The CEO and Board of Federal Express are not appointed by the President of the United States and confirmed by the Senate.
we jews were influential in creating the fed by way of the bank of england and the inter-marriage of the french and hanoverian rothschilds with the british royals. we saw in the late 19th century that the british empire would give way to american empire (we saw to it). now that we've profitted from war and american empire, we are building synogogues and hebrew schools in china, singapore, and india, learning and teaching our children mandarin and hindi, and establishing financial companies and co-opting wealthy indians and chinese to shift our influence and power to asia from the uk and north america. as we pull our money out of the uk and north america over time, we will enable china to overtake europe and north america to be the next global hegemon. we don't need to take over china and asia by military force; rather, give us an entre into the financial system and we will control it within a generation or two at the most. chinese-jews are the next cultural phenomenon to overtake global culture: chinese-jews playing mozart, beethoven, and bach, attending boarding schools, and pushing fiat money, deficit spending, and war between anglo-american empire and the middle east and asia.
you have been warned.
shalom.
First of all, Gold will crash that is if you bought it during its last breakout which was in at the end of 2005 where it tested 500 twice. The problem is that is that earlier, gold was in a channel between 350-400 and then another channel 400-450 for much of the '03-'04 and '04-'05 time frames. The fundamentals for gold investing were always there after it had reached its bear market low of 250 ala '99/'00, however, it's not a fully liquid and bullish monetary unit yet, like the SA Rand (related to precious metals/minerals) or the Euro (the anti-USD). So, if it crashes, it'll fall into another channel which will probably be between 475 and 525 for another year or so as the Fed (and ECB, BOJ) tighten rates.
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