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aliveandkicking

USA Pessimisim is overdone. Financially speaking things are getting better

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We now look like we are beginning to enter into the next phase of this crisis where QE purchases end and QE winds down with maturities over very many years. The Feds balance sheet is in pretty good shape since most of the feds agency MBS has been recent originations, non-performing loans get removed from their pools, and in the wider context the bad agency MBS years are now three years behind us. Even FHA loans have been well performing since the end of 2009, and similarly Fannie and Freddie MBS is now a much better quality than those earlier years. Therefore if inflation did take off big time the Feds still have the ability to resolve it without too much difficulty, since these performing loans will get sold for the right price with manageable losses for the US.

 

So possibly this year we see QE purchases reduced and sometime in 2014 purchases end, and not long after that we are going to see the first of the small short term interest rate rises, and the longer term rates will begin rising as soon as QE purchases are reduced.

 

EHSInvMonthJan2013.jpg

 

MBANDS2.JPG

 

MBANDSQ42012.jpg

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Where have you been, AAK ?

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You mean what planet am i on? Or where am i coming from?

Both?

Either?

 

The "supply" is being absorbed fast - thanks to low rates.

But I wonder how much is still hidden

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For sure there are many reasons why there will not be a strong recovery. One reason is the one i just highlighted where improving conditions result in higher interest rates in an economic situation where only low rates are enabling the weak recovery that exists. Thing could be worse though.

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We are still likely to see an inflationary recessionary type environment so it is hard to see Gold doing badly over the next ten years. Gold going thru 2000 in the next 5 years seems very believable to me. Interest rates are likely to be very low for a very long time.

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Financially getting better in my terms is that the US does experience economic improvements on main street for a number of years compared to the pessimistic scenario where things only get worse on main street.

 

The final outcome is a different story, essentially unknoweable, but certainly not one where there are great outcomes visible today, knowing what we know today.. But I do think that it is possible that US decline could last longer than many of us will live.

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Here's an effort that Obama got behind that sounds a bit half-@ssed to me...

 

MP3 : http://podcastdownload.npr.org/anon.npr-podcasts/podcast/330/510053/172894041/WBUR_172894041.mp3

 

 

The call for federal investment in new manufacturing innovation hubs across the country.

Would they make the U.S. more competitive? Should we spend the money? Where?

From:

WBUR,WBUR FM,On Point from WBUR,Boston,Massachusetts

 

3-D printers are only a small part of the answer

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Lot of talk about QE being phased out sooner rather than later but this talk seems way ahead of current realities. Just talk of QE being tapered, is having a very significant impact upon longer term rates such as mortgage rates.

 

I expect Bernanke is going to talk about low inflation, the impact of tax increases, and the deficit declining too fast given the very weak economy. He will also probably make it clear that QE in future could go either up or down depending upon each FOMC assessment and exceptional policy will be in place for a very long time.

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This is just a SCARE imho.

I think the real destruction may come later - but this may roll for a while

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