Tuesday, August 10, 2010

FOMC Decision

Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated.

To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature

Thomas M. Hoening was again the lone FOMC dissenter. Since Helicopter Ben uttered the phrase 'nascent recovery' on Capital Hill, cryptic language has proceeded. Clarity from the FED going into the 4th quarter is unquestionably salient. Perhaps, we (market participants) should sit tight until Jackson Hole concludes. Surely, transparency will become abundantly apparent after the curtains close at the Committee's annual Wyoming refuge.

Uncertainty is apparent in risk/reward security markets. At this point in time, The FED maintains relevance and reverence on the Streets plastered with Investment Banks rather than cafe's and bakeries. Ergo, Monetary Policy must remain stable as U.S. fiscal policy shifts political party lines. The Bush tax cuts abide while politicians play musical chairs.

Something tells me Precious and Industrial metals may be the best play in the 4th quarter as risk aversion reigns supreme. Unless of coarse one likes Government Debt.

Related ETF's: iShares Barclays 10-20 Year Treasury Bond Fund (TLH:US), GS Connect S&P GSCI Enhanced Commodity Total Return Strategy Index ETN (GSC:US), ETFS Palladium Trust (PALL:US), E-TRACS UBS Long Platinum ETN (PTM:US)

Literature: Karl R. Popper's The Open Society and Its Enemies 2 Hegel and Marx

Sports: T-Mac finally gets another shot. Former Superstar Tracey McGrady officially Signed with the Detroit Pistons today. Detroit's backcourt is crowded.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: Analyze Capital

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