Parsing the Fed June 28, 2007 4:30pm by Barry Ritholtz Some interesting changes in the Fed statement, via the public side of the WSJ: Click thru for the full parsing . . . Spread the wealth. twitter facebook linkedin What's been said: Discussions found on the web: Catalyst Investor commented on Jun 28 Awhile back I looked up ‘moderate’ in the dictionary so I could understand exactly what the Fed was saying. 1. kept or keeping within reasonable or proper limits; not extreme, excessive, or intense: a moderate price. 2. of medium quantity, extent, or amount: a moderate income. 3. mediocre or fair: moderate talent. Moderate growth in the first half. That can be 0.7% or it can be 2.5%. rex commented on Jun 28 The key word here is ‘sustained.’ The Fed may be happy with core inflation at 2%, but only if it stays there for a while. Note that the Fed continues to mention core inflation; there’s no hint whatsoever that the committee has abandoned the core rate as a way of gauging future headline inflation. Read more on MarketWatch here: http://tinyurl.com/2sq6qz KP commented on Jun 28 Sooner or later(when the mob w/ pitch forks arrives) the Fed is going to have let Food and Energy back in their version of reality. ManhattanGuy commented on Jun 28 RIMM reported excellent quarter today. Tech is going to pull the market higher. This is going to be a great summer for the bulls. Sorry MS. sweeny texas commented on Jun 28 Let me see if I’ve got this straight. GDP is running at .7%, middle class jobs are disappearing, the cost of surviving is skyrocketing, the housing market is imploding, and the savings rate is at depression-era levels. But the Fed basically said in it’s statement that things are fine, move along. Somethin’ don’t jive. Can you enlighten me, ManhattanGuy? Winston Munn commented on Jun 28 Fed-Schmed. Let’s take a closer look at the real world of finance and disappearing liquidity. Russ Winter points out: “Thursday, June 28th, 2007 at 7:48 AM China in my view has finally made a decisive move to sterilize the massive USD trade inflows. If I understand this story correctly, last night they announced plans to sell $200 billion in Yuan bonds to soak up liquidity from the domestic system. Picture this as similar to a reverse coupon pass or open market operation in the US, where the Fed sells securities instead of buying them.” And these noteworthy items from the same source. “-Catalyst Paper Corp., citing “adverse” market conditions, scrapped a $200 million offering of junk bonds the Canadian company planned to use for funding its business and other investments or acquisitions. – Underwriters delayed the launch of a buyout-financing deal for Myers Industries Inc. in the hope that the market would settle down in coming days. Late in the day, Magnum Coal Co. became the latest company to postpone a junk-bond offering, this one for $350 million. – In Europe, Arcelor Finance, the borrowing vehicle for Arcelor SA, which is being acquired by Mittal Steel Co., put off its plans to issue more than $1.34 billion in bonds, citing the turbulent debt market. In Malaysia, shipping company MISC Bhd. put plans for a $750 million bond offering on the back burner. – MISC, the world’s biggest owner of liquefied gas tankers, day shelved its $750m bond offering. – June 28 (Bloomberg) — Carlyle Group, the buyout firm run by David Rubenstein, postponed a planned $415 million initial public offering of a fund that invests in bonds backed by mortgages after a slump in the U.S. subprime market. Terms appear to be revised as private equity is starting to face an “investor” revolt. And another subprime hedge fund is shutting down, as capital is suddenly becoming a coward. Live by the sword, die by the sword. June 28 (Bloomberg) – Caliber Global Investment Ltd., a $908 million fund invested in subprime mortgage debt, will close as losses widen on defaulted U.S. home loans.” The noose of credit crunch has tightened around this market’s neck – now it only remains to see which set of circumstances acts as the hangman to pull the lever on the trapdoor. My money is on three little words: Mark-to-market. wunsacon commented on Jun 28 Winston, might some UST buyers instead buy China’s bonds, pushing up yields on UST’s? Eclectic commented on Jun 28 Hot off the presses! http://www.msnbc.msn.com/id/19492758/ If you remember, Scrushy beat the rap with Healthsouth, but he f’d up with federal bribery charges in Alabama. 82 months in the pen. Eclectic commented on Jun 28 http://www.wsfa.com/Global/story.asp?S=6720706 Michael Donnelly commented on Jun 28 The Fed is implicitly expecting far weaker growth the rest of this year. Today’s statement said the first half of the year was moderate growth. Assuming the 2nd quarter was 3.0%, the first half growth was 1.7%, and they expect moderate growth in the second half as well. If that means another 1.7% for the 2H they are predicting 1.25% in the 3rd & 4th quarters. Ouch. GDP would be 1.8% for the year, our softest landing ever was 2.5%, everything worst than that resulted in a recession. Winston Munn commented on Jun 28 Wunsacon – I don’t have all the particulars, but if the story is accurate in that the reason is to deplete domestic liquidity then I would doubt foreign investment would be encouraged. Of equal interest to me is how swiftly and dramatically LBO deals have fallen over the past 3 weeks – from 84 three weeks ago to just a handful this week – and investors are starting to ask for covenants as well – another way of tightening lending standards. A debt-driven economy does not thrive in a tight credit world. ac commented on Jun 29 Please MG, the bull run looks over, much like it looked over February 2000. Tech? You think that is impressive? Please sir, do not post non-sense. lurker commented on Jun 29 MG should never be discouraged from posting his opinion—gotta have someone on the other side of the trade, right? ManhattanGuy commented on Jun 29 All I see is a bunch of doomsday calling socialists and communists on this blog. Why don’t you move over to France or Canada? wunsacon commented on Jun 29 The 1st Amendment doesn’t say “you’re free to move to another country if a self-appointed arbiter doesn’t like your ideas”. But, if that’s the way *you* think, you could practice what you preach and move to a country that enforces group think to your liking. Francois commented on Jun 29 “socialists and communists on this blog” MG…do you even know what is a socialist? Oh! I get it now. It’s gotta be anyone who disagree even with <1% of your political philosophy. Francois PS: Do not mistake me for a French. Estragon commented on Jun 29 ManhattanGuy: Last I checked, both Canada and France had center-right governments. Never let the facts get in the way of a good rant though, eh? Winston Munn commented on Jun 30 Gee, you would think a guy who quotes from the FMOC all the time would like communists and socialists – the concept of a Central Bank is right out of The Communist Manifesto, while Keynesian philosophy is based on government interventions in the economy – not exactly a laissez faire approach. I also don’t see the point in moving to another country when our leaders are doing such an outstanding job of bringing Brazil-style poverty and class seperation here for us. 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