DJ: US growth is modest, says Fed as it keeps stimulus in place

[CityFarmer]

Rating agency's view is consistent with others...

Outlook for US states improves after five years: Moody’s

WASHINGTON — Moody’s Investors Service yesterday revised its outlook for American states to stable from negative, marking a significant improvement in its assessment of state finances after cutting its outlook for the sector more than five years ago.

The rating agency said that the uncertainty surrounding United States federal budget cuts has diminished, revenue growth for many states has exceeded expectations and budget reserves are continuing to grow.

Even as it marked better days for state budgets, Moody’s warned the sector faces economic and fiscal risks. Federal deficit reduction, especially cutbacks in government employment and procurement, could create an economic drag, while employment remains below its pre-recession peak, it said.

http://www.todayonline.com/business/outl...ars-moodys

[freedom]

Think a lot of investors don't understand why FED will keep its program running for much longer. Yes, FED will taper, but not remove QEs or shrink its balance sheet.

Though US banks are recovering, they are lending more to the economy. Due to capital limitation, they can only lend as much as their capital allows them and Basel III is coming with more capital requirement. However, the shadow banking system(money market funds/ABS etc) is not providing the same amount of credit into the economy as pre-crisis.

So FED has to make up for that loss of credit in the economy. Until private credit can recover to pre-crisis level, it is unlikely for FED to shrink its balance sheet.

[CityFarmer]

The minutes doesn't offer clarity, but more speculation...

It is more meaningful to speculate the rate, than to speculate the timing, IMO. I am more incline to believe that a gradual reduce...

US Fed minutes offer few clues on when QE3 flow will ease

WASHINGTON — A few Federal Reserve officials thought last month it would soon be time to slow the pace of their bond buying “somewhat” but others counselled patience, according to meeting minutes that offered little hint on when the United States central bank might reduce its support for the US economy.

The minutes of the Fed’s meeting on July 30 and 31, released yesterday, showed that almost all of the 12 members of the policy-making Federal Open Market Committee agreed changing the stimulus was not yet appropriate.

Investors are anxiously waiting to see when the Fed will start to slow its US$85 billion (S$109 billion) monthly asset purchases, with most predicting next month as the beginning of the end of the aggressive quantitative easing programme, known as QE3.

The minutes provided few clues on the potential timing for a reduction and did not mention September specifically, but they did little to dissuade predictions

http://www.todayonline.com/business/us-f...-will-ease

[TheMillennium]

The minutes doesn't offer clarity, but more speculation...

It is more meaningful to speculate the rate, than to speculate the timing, IMO. I am more incline to believe that a gradual reduce...

US Fed minutes offer few clues on when QE3 flow will ease

WASHINGTON — A few Federal Reserve officials thought last month it would soon be time to slow the pace of their bond buying “somewhat” but others counselled patience, according to meeting minutes that offered little hint on when the United States central bank might reduce its support for the US economy.

The minutes of the Fed’s meeting on July 30 and 31, released yesterday, showed that almost all of the 12 members of the policy-making Federal Open Market Committee agreed changing the stimulus was not yet appropriate.

Investors are anxiously waiting to see when the Fed will start to slow its US$85 billion (S$109 billion) monthly asset purchases, with most predicting next month as the beginning of the end of the aggressive quantitative easing programme, known as QE3.

The minutes provided few clues on the potential timing for a reduction and did not mention September specifically, but they did little to dissuade predictions

http://www.todayonline.com/business/us-f...-will-ease

How come Today's view seems different?

Fed Minutes
Minutes released yesterday from the Federal Open Market Committee’s July meeting showed officials were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond buying this year, with a few saying tapering might be needed soon.

http://www.bloomberg.com/news/2013-08-22...pport.html


My comprehension of english is not good, could someone please explain to me? Thanks.

[AlphaQuant]

My comprehension of english is not good, could someone please explain to me? Thanks.

you can read the minutes here (but it is lengthy)

http://www.federalreserve.gov/monetarypo...130731.pdf

Goldman has a pretty good writeup on it

http://www.zerohedge.com/news/2013-08-21...-september

After reading through everything, my only conclusion is that "it is going to be volatile". There are other factors coming up e.g. the Debt ceiling in Sep ahead of the new fiscal yr in Oct, the new Fed chair etc. Personally i think the Fed will prob want to do something in Sep (since the market has already priced it in so might as well do something small to test waters) - but there are other things in the horizon coming up so nothing goes in a straight line (well, at least for me).

[KopiKat]

My comprehension of english is not good, could someone please explain to me? Thanks.

you can read the minutes here (but it is lengthy)

http://www.federalreserve.gov/monetarypo...130731.pdf

Goldman has a pretty good writeup on it

http://www.zerohedge.com/news/2013-08-21...-september

After reading through everything, my only conclusion is that "it is going to be volatile". There are other factors coming up e.g. the Debt ceiling in Sep ahead of the new fiscal yr in Oct, the new Fed chair etc. Personally i think the Fed will prob want to do something in Sep (since the market has already priced it in so might as well do something small to test waters) - but there are other things in the horizon coming up so nothing goes in a straight line (well, at least for me).

Thanks for the links. First time in my life reading Fed minutes... A good cure for insomnia!

My laymen reading,

Up till pg 9, the minutes gives me a better appreciation of the different economic indicators and external / domestic factors / variables they're looking at and how these are performing + trend and inter-dependencies. Most seems to be positive, although they're wary of potential new / old threats that may affect the current progress.

The official statement is on pg 9-10. The conclusion is that some of the key indicators like Labour (Unemployment Rate) has not hit their target and they'll continue with their purchasing program.

If everything goes smoothly enough and their key indicators are hit, the plan on their moderating program is in pg 7 (easing start in later part of year and end ~mid-'14).

But, the above is not set in stone and they remain flexible to react and change according to the environment plus any new threats that may arise eg. Asia economic downturn.

[Ben]

It is more meaningful to speculate the rate, than to speculate the timing, IMO. I am more incline to believe that a gradual reduce...

I fully agree with you. And if the reduction is lesser (consensus amount is $10B) than expected, or even in line with expectation, it could well spark a mini rally.

[weijian]

The minutes doesn't offer clarity, but more speculation...

It is more meaningful to speculate the rate, than to speculate the timing, IMO. I am more incline to believe that a gradual reduce...

It's MOST meaningful to ignore all these speculation of how much and when, but just continue to focus on valuations and margin of safety?

Of course, in theory that is MOST meaningful and should be done. In practice, it's much harder..

[CityFarmer]

The minutes doesn't offer clarity, but more speculation...

It is more meaningful to speculate the rate, than to speculate the timing, IMO. I am more incline to believe that a gradual reduce...

It's MOST meaningful to ignore all these speculation of how much and when, but just continue to focus on valuations and margin of safety?

Of course, in theory that is MOST meaningful and should be done. In practice, it's much harder..

IMO, top-down research should complements the bottom-up one, in order to do a good job on valuation, thus determine an accurate desired margin of safety...

Speculating is OK if it is "forecasting" in disguise, but definitely not "gambling" in disguise...IMO

[weijian]

The minutes doesn't offer clarity, but more speculation...

It is more meaningful to speculate the rate, than to speculate the timing, IMO. I am more incline to believe that a gradual reduce...

It's MOST meaningful to ignore all these speculation of how much and when, but just continue to focus on valuations and margin of safety?

Of course, in theory that is MOST meaningful and should be done. In practice, it's much harder..

IMO, top-down research should complements the bottom-up one, in order to do a good job on valuation, thus determine an accurate desired margin of safety...

Speculating is OK if it is "forecasting" in disguise, but definitely not "gambling" in disguise...IMO

hi Cityfarmer, thanks for your reply. We definitely need a top-down and bottom up approach to determine valuations and margin of safety.

There are already too many intelligent people speculating over FED rates of 'when and how much'. My only opinion is that my speculative capability is much lower than the median capability. This self realization made me realize that it is quite a futile exercise to 2nd guess what Helicopter Ben will be doing. Instead, i will simply just take the stance that 'when rates are already so low, the ONLY way is up!' - ie, easy way out.

I believe our emotional/intellectual reservoir to be finite. I am saving up those reserves for a better day when others have exhausted theirs!