Thursday, June 26, 2008

Ben, please HIKE the rates, NOW.

Check out oil and commodity, if this doesn't stick to price expectation I don't know what will. A foregone opportunity to do the right thing will cost 3-5x as much to do everytime you forgo the chance to hike rate. ( Please read the bottom of this letter to see that I am willing to bet my entire long investments to prove that I am not shooting my mouth off. )

Why not hike now? Stock and momentum investment (including commodities!!!) will drop, who knows where, but at least, Sir Ben, I would still be employed and business is gonna be able to run without haemorrhaging cash and without fudging accounting #s.

Who cares about the stock price? The CEO who awarded himself 40 million shares? C'mon sir you know better than that.

Please, please, hike the rate now.

Signed,

A concerned bank insider/citizen who preferred losing his stock investments than losing his job.

10 comments:

Penn said...

Check out the action in SMN today. It seems like people are beginning to price in the hike

alcan said...

I don't think the Fed will raise rates at this time, otherwise "price expectations" of their masters' companies will not be contained to the bottom side. I think they are playing a game of chicken with the rest of the world - they are hoping that some other country will blow up first before the US consumer does and that this event will convince commodity "speculators" of the inevitable demand destruction that will come.

MTGSPY said...

that's not correct. Everybody else is ahead in controlling the inflation running amok. BRK's boss today complained (remember how cashflows are eroded the most by inflation?) in an article.

If you happen to be long anything at the time IMB or BKUNA is taken by FDIC, my sources told me it's nearly done deal.

Like I always said, look around. All the people I know are getting bonus slashed, fired, talking to headhunters in desperation, losing 80% of their stock holdings, and houses are literlly cut in half. And yet they are still overvalued.

I will write a story in this blog soon and you will see what I mean, as that story becomes more and more prevalent among decision makers (notice the word "imbalance" lately? Don't take that lightly, it has everything to do with all of us commonfolks as much as the sovereigns).

Talk to your favorite headhunters. See what I mean.

alcan said...

mtgspy,

Don't get me wrong. I believe, like many who frequent yours and Greenies' site, that we are heading for disastrous economic times. Furthermore, everytime I hear the morons on CNBC questioning what should be done about rising energy costs, I yell forlornly that they should double the Fed Funds rate NOW (just now Robert Reich is calling for more interest rate cuts and stimulus packages to further devalue the dollar). My local newspaper published my letter (called the Gang of Three) to the editor this weekend railing against the biggest price fixers and speculators responsible for rising oil prices - Bernanke, Mishkin and Kohn. But this private bank will do what it sees is in the best interest of JPM, Citi, GS, etc., not you nor me nor your colleagues who have been fired.

As for everybody else being ahead in controling inflation, if I understand you correctly, I don't think this is true. I don't think that it is even possible for most countries with monetary and/or economic ties to the US to escape price inflation as long as the Fed keeps interest rates so low and continues to monetize worthless mortgages from Stockton and credit cards from JCP. Again, I think their plan is to continue flooding the world with US credit until it takes down some country/countries (socially or economically), resulting in significant economic contraction outside the US with resultant fall in price inflation.

MTGSPY said...

"The currency advanced the most in three months on optimism the central bank will keep raising interest rates after boosting its benchmark to a one-year high on June 5 to curb inflation at the fastest in 20 months"

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aoDEF2J2C9nM

Even those poor bastards know what will be waiting at the end of the tunnel if they didn't.

There's more, and I encourage you to use bloomberg search and type in your favorite currencies to see for yourself.

alcan said...

I think we are arguing about the wrong thing. Based on the information available to me from the outside, I think that a rate increase would be beneficial for the economy at this point as falling prices for food and energy would potentially permit increased discretionay spending.

Nevertheless, Ben & Co. will do what they think is right for their interests, not what I, you, Indonesia, Mexico nor Australia think is right. After today, I am almost 100% cash; I would LOVE for them to raise interest rates.

I think they should have raised rates last August and sent a clear message about moral hazard but, alas, to no avail because my interests/desires are not those of Ben.

As I think you would agree and as Santelli has hinted, Steve Leisman is the spokesman for the Fed and is sent out to spread their gospel and test the waters regarding their future actions. They dragged him out on Fast Money to placate the markets and no mention was made of interest rate hikes.

Here is what a think may be a somewhat similar analogy. By 1945, after the failure of the Ardennes offensive, Hitler knew that Germany under him was done. His only hope was to hang on as long as possible hoping that, as the Allies and Russian lines approached, their unholy alliance would implode and he could secure a seperate peace. He was counting on their alliance blowing up before he was forced to blow up his brains with his Luger (or Walther PPK, who remembers). IN HIS VIEW OF THE WORLD (but not necessarily in the best interests of his subjects), this was the only option FOR HIM.

MTGSPY said...

very interesting thoughts. It appears, that you are the more bearish sir. If your view is correct, the end is faster and more drastic that what I have written so far. I hope you are right because I want all the mess to get flushed out as fast as possible with all the perps.

alcan said...

I am EXTREMELY bearish. I was long the stock market well into 2007; I was not in the camp of people like Mish and Fleckenstein at that time. I sensed something was wrong in late January and sold BAC and NCC at that time; in retrospect, pure luck as I knew and understood then a fraction of what I know now (however, dutch auctions like NCC did have always raised red flags for me; a convenient way for management to quietly head for the exits). By July, though, I knew something was wrong and started calling for a depression-style downturn after AHM blew up that weekend in July. Of course, none of my colleagues understood/cared/believed except for my partner in my office (most people in the medical field are clueless in these matters) at that time; now they are asking questions/advice.

Whatever the stock market does and how it plays out is only a secondary concern for me; we all now where it is heading. I am much more concerned about the economic and social consequences of what is coming. Also concerned about to convert my current assets to something that will survive all of this. I have never had a sleepless night before last summer. I fear/believe that, when this all done, we are going to see/experience/hear things such as:
- New Deal #2
- one time tax on IRAs/401Ks
- massive bailouts for pension plans that are probably full of toxic financial "investments"
- failed bank deposits converted into bonds payable back over a number of years (for reference, see Canada's solution to their ABCP problem)
- possible currency collapse next year
- "Depression Gardens" (I've already got mine; the first crop has been excellent this year, I must add!)
- a form of nationalized healthcare

And, I haven't even gotten to the tinfoil parts yet!

During his slew of meetings that fateful week in August 2007, behind closed doors, Ben saw something that scared him and I think we have an idea what it may have been. Whatever it was, in HIS opinion, it was and is still more dangerous then $6/gallon gas and $7 per gallon milk.

alcan said...

A few more things mtgspy:

There was nothing in Kohn's speech today to suggest a rate hike nor anything other than slight concern for rising price inflation.

I am sure you have read Bernanke's 2002 speech about deflation. Based on what he described then, he has only just begun dipping into his bag o' tricks. Just imagine what the other plans in that article would do to the USD and subsequent food/energy prices.

If they where forced to act to temporarily curb inflation expectations, I would expect them to directly target the price of oil via their various "agents". They are a nefarious lot and I wouldn't put anything past them.

Finally, there will be (and already are) more calls for more stimulus packages. Who is going to pay for them? The Gulf States are going to need lots of cash flow to fund their purchase of US Treasuries. How better to raise revenue to pay for these stimulus checks? After all, you can just blame this energy tax on those evil speculators, those awful Arab states and the onerous oil companies instead of blaming Congress for raising taxes.

MTGSPY said...

watch oil this morning?
Every one month they postpone hiking rates they will pay with at least THREE. You can take that to the bank.