Boiler Room: The Official Stock Market Discussion

[Domingo Halliburton]

Vito Corleone has spoken

Goldman’s Blankfein on September Rate Hike: ‘I Wouldn’t Do It’

well commodities and emerging markets seem to be acting like there is not going to be a rate hike. at least for today anyways.

 

[GoogleMe]

Q&A: Lawrence Summers and Why It’s Too Early to Raise Rates

 

[GoogleMe]

Monetary policy should seek to avoid major surprises | Larry Summers

Monetary policy should seek to avoid major surprises

In recent writings, I have laid out the strategic case against the Federal Reserve tightening this week. There is a compelling tactical case as well.

Monetary policy should seek to avoid major surprises. Right now the fed funds futures market is assigning only a 28 percent chance to a September tightening. In the last 20 years, the Fed has never tightened without guiding the futures market to at least a 70 percent chance of a tightening. So a move now, given how expectations have been managed, would be an extraordinary shock at a highly uncertain time.

To find a relevant precedent, one has to go back to 1994, when the Fed raised rates by 25 bps despite the market assigning only about a 30 percent chance (around what is expected now) of a tightening. What followed was dubbed by Fortune Magazine as the “Bond Market Massacre.” Over the ensuing nine months, the interest rate on the 10-year bond rose by 2.2 percentage points — nearly twice as big an increase as any subsequently — with mortgage rates rising in tandem. Volatility spiked dramaticallyacross the world, and Orange County had the then-largest municipal bankruptcy in U.S. history. Mexico and Argentina moved towards financial crisis.

There is a point here quite separate from the issue of what monetary policy should be. Communication is a key part of the art of monetary policy. The Fed for a generation has caused its tightening moves to be anticipated because it learned from the 1994 experience. The same approach should be taken going forward. Even if it were otherwise a good idea to tighten, no adequate predicate has been laid for a rate increase this week.

 

[Domingo Halliburton]

Q&A: Lawrence Summers and Why It’s Too Early to Raise Rates

I remember a couple years ago when Obama was picking a successor to Bernanke the market was terrified he'd pick Larry Summers because he'd be too hawkish.

 

[Domingo Halliburton]

selling September puts on the VIX with strikes in the teens looks like a good bet. VIX is still above "Greece may default levels" and the board is so backwards that it will take a higher sustained market to get down there to those levels and it will most likely take weeks to do so.

$VIX settlement is 22.38, about 59% Sept. $VIX call options expire worthless, while 75% of $VIX put options expire worthless

 

[GoogleMe]

I remember a couple years ago when Obama was picking a successor to Bernanke the market was terrified he'd pick Larry Summers because he'd be too hawkish.

probably the same reason Obama picked Geithner over summers for treasury sec

 

[Domingo Halliburton]

probably the same reason Obama picked Geithner over summers for treasury sec

well Summers was Treasury Secretary in the late 90s and advised Clinton not to regulate the derivatives markets. I don't know what the rules are on being nominated again for the same position but he would have never been approved.

 

[Domingo Halliburton]

we're all green. australia, korea, japan, china, india, taiwan

 

[Domingo Halliburton]

zero hedge is saying if you read between the lines of Hilsenrath's quotes earlier today there is no rate hike.

 

[Futuristic Eskimo]

zero hedge is saying if you read between the lines of Hilsenrath's quotes earlier today there is no rate hike.

 

[Domingo Halliburton]

Jon Hilsenrath: For Yellen, who likes to arrive 3 hrs early for a flight, raising rates without preparing marktes would be out of character

 

[calixprynce]

zero hedge is saying if you read between the lines of Hilsenrath's quotes earlier today there is no rate hike.

Better not be

Wonder when they'll release the TRNs

 

[ADevilYouKhow]

 

[Futuristic Eskimo]

One of the FOMC members saying no hike until 2017? Ridiculous

 

[Domingo Halliburton]

regional banks and the USD (obviously) not liking this decision.