Sept 22. More QE…later
Fed’s statement was a bit downbeat, saying inflation had fallen below a level consistent with its mandate. Interest rate futures took a quick dip as new QE was not announced, but then rallied sharply as the door was left open for further stimulus. Call it the Barny Fife Fed, nervously determining when his one bullet should be loaded. Hoenig seen muttering and kicking garbage pails on way out of meeting.
–Gold got the message, having been down $7 pre-FOMC and shooting up to +$10 in late trading. (Higher yet this morning, as are silver, copper, etc).
–October treasury options still active with TYZ knocking on the 125.5 strike after the FOMC. TYZ rallied over a point from the low, closing at 2.60%. Two year note is now hovering just above 40 bps. Stocks initially rallied but then gave back gains. If zero rates and QE were the answer for stocks then the Nikkei would be up at 30000 instead of 9600. Japan is also hinting at more easing steps as its economy has slowed, and Kan suggests more yen intervention is possible. Let’s all try to devalue and we can convince the populace that our economic policies are working when corn is $10 and rice doubles again. I would posit that crude oil’s 2007 run up to $140 was one of the catalysts for the subprime unravel. What’s the world going to look like when basic food prices follow that trajectory? Let them eat cake…
–Interesting story in Chicago Tribune about unemployed (99ers) becoming a political force, banding together to lobby for more extensions. I almost dismissed this piece, but it highlights how the internet and blogs are a unifying agent…people previously met in small employment workshops but now can be connected in a much more powerful way.
–A couple of notes about TYV option open interest: 126.5 calls have 187k open while 127.5 c have 156k. Gravitate toward 126.5 by Friday expiration? I think that’s around 2.45%.
–Larry Summers out after elections, corp exec in? Who would want that job?
–Good news from WSJ this morning: Corporate default rates have plunged from 14.6% (Nov 2009) to around 3% as both rates and spreads fell. It’s amazing how the corporate sector restructures and adapts.
–Microsoft issuing more debt and raising its dividend…returning capital to shareholders (so that they can buy AAPL).
