Enviado: 12/3/2008 12:19Transcrevo aqui a Newsletter que recebo do Navellier. É mais uma opinião, interessante do meu ponto de vista, que aqui vos deixo...
" Dow Soars 416 Pts on Creative Federal Reserve Move
Reno, NV (Marketmail) - March 11, 2008
U.S. stocks rocketed higher today after the Federal Reserve and four other central banks unleashed new strategies to stem the credit crunch that has been threatening the U.S. and global economies.
The Dow surged 416 points, or 3.55%, the S&P 500 jumped 47 points, or 3.71%, and the Nasdaq bounced 86 points, or 3.98%.
Trading was heavy, with many battered financial stocks leading the way. Citigroup was up more than 9%, Bank of America nearly 7%, and JPMorgan about 6.5%.
The Federal Reserve has been challenged during the past few months to revitalize GDP growth to avoid a recession, but without creating runaway inflation in the process.
Unfortunately, the Fed's traditional method of lowering interest rates to galvanize economic growth has been pushing the dollar's value substantially lower against other key currencies. As a result, commodity inflation has been running amok, with oil, food, gasoline, and metals prices going through the roof.
Meanwhile, the lowering of interest rates has yet to show a material effect on growth, largely due to the credit crisis that turned into a credit crunch.
As a result, the Fed has been flirting with stagflation (no economic growth with high inflation) as it lowers short-term interest rates.
Stagflation is a terrible environment for investors and lower-to-middle class consumers. Stocks suffer from the lack of economic growth, bonds from high inflation, and the majority of consumers from the taxing effect that higher food and energy prices bring (little or no money left for discretionary spending).
Essentially, the Fed has been forced to either abandon inflation fears and focus on repairing growth near term, which is a tightrope act, or get creative. It chose to get creative.
The Fed and four other central banks significantly increased loans of cash and Treasuries to banks to assuage the credit crunch. Here's what happened.
· The Fed tripled "swap" agreements with the European Central Bank and Swiss National Bank to $30 billion and $6 billion, respectively.
· The Fed created a new program, the Term Securities Lending Facility, where it will lend up to $200 billion in U.S. Treasuries to banks for 28-day periods in exchange for other securities used as collateral, such as federal agency debt, federal agency residential mortgage backed securities, and non-agency AAA/Aaa- rated private label residential mortgage backed securities. In other words, the Fed is swapping U.S. Treasuries for all the mortgage backed securities (MBS) that no one else wants. The clever part of this plan is the Fed will not be adding any money to the system, so it should not contribute to the runaway inflation that has been developing.
"The Fed hopes it can surgically direct relief to the pockets of the financial market that need it most. That would lessen the pressure for more aggressive use of the blunter instrument of interest rate cuts, which carries with it the risk of inflaming inflationary psychology such as through a weaker dollar or higher commodity prices," reported Greg Ip at The Wall Street Journal.
The caveat to this scenario is the Fed is only temporarily (28 days) removing the problem securities (MBS) from the banks' balance sheets. It's possible that these hard to price, illiquid securities could still be problematic when they are returned to the banks.
However, insiders say the Fed is willing to continue the functions of the Term Securities Lending Facility as long as needed. If that's the case, the Fed's involvement could bring stabilization to the MBS market over time.
What's unclear, though, is the value that will be assigned to the MBS when the banks exchange them with the Fed for Treasuries. Will they be priced at face value, or marked to market?
There's a huge difference between the two. After all, the banks plan on loaning the Treasuries they will receive from the Fed for cash. This is how the Fed plans on shoring up the banks' balance sheets without having to "print" money and further stoke inflation.
As such, if the MBS are priced to market, the banks will not generate nearly as much cash.
This is a clarification point that needs to be addressed. Our guess is the price will be somewhere close to market prices since the Fed already indicated that the reason it did not purchase outright the MBS from the banks and completely eliminate them from their balance sheets to begin with is it "wanted to increase liquidity and the regular functioning of markets, not determine appropriate prices or directly affect them," said Bloomberg News.
CONCLUSION
The Fed got creative and Wall Street loved it, but we wonder how investors will react if the Fed now decides not to lower interest rates as much as expected (75 basis points) on March 18. That could be interesting.
However, now that the Fed is being proactive and creative, we think a lot of the risk has been removed from the market. As such, we believe that conservative stock investors will likely feel better about dollar-cost averaging at these levels, and moderate-to- aggressive investors will likely feel more inclined to take bigger positions.
The bottom line is the Fed put together a solid plan today and bargain hunters pounced on stocks. What's more, this wasn't just a short-covering rally. The fundamentally superior stocks did very well. Yea!
We therefore believe that, given the strength of today's rally, a successful retest of the lows has occurred and lower lows could be avoided.
We'll keep you posted.
Navellier & Associates
Patrick O'Connor
Marketmail Managing Editor "
Será mesmo verdade que não iremos testar os novos mínimos ??? Quem tem uma bola cristal?
Cumprimentos e BN!
PAL
" Dow Soars 416 Pts on Creative Federal Reserve Move
Reno, NV (Marketmail) - March 11, 2008
U.S. stocks rocketed higher today after the Federal Reserve and four other central banks unleashed new strategies to stem the credit crunch that has been threatening the U.S. and global economies.
The Dow surged 416 points, or 3.55%, the S&P 500 jumped 47 points, or 3.71%, and the Nasdaq bounced 86 points, or 3.98%.
Trading was heavy, with many battered financial stocks leading the way. Citigroup was up more than 9%, Bank of America nearly 7%, and JPMorgan about 6.5%.
The Federal Reserve has been challenged during the past few months to revitalize GDP growth to avoid a recession, but without creating runaway inflation in the process.
Unfortunately, the Fed's traditional method of lowering interest rates to galvanize economic growth has been pushing the dollar's value substantially lower against other key currencies. As a result, commodity inflation has been running amok, with oil, food, gasoline, and metals prices going through the roof.
Meanwhile, the lowering of interest rates has yet to show a material effect on growth, largely due to the credit crisis that turned into a credit crunch.
As a result, the Fed has been flirting with stagflation (no economic growth with high inflation) as it lowers short-term interest rates.
Stagflation is a terrible environment for investors and lower-to-middle class consumers. Stocks suffer from the lack of economic growth, bonds from high inflation, and the majority of consumers from the taxing effect that higher food and energy prices bring (little or no money left for discretionary spending).
Essentially, the Fed has been forced to either abandon inflation fears and focus on repairing growth near term, which is a tightrope act, or get creative. It chose to get creative.
The Fed and four other central banks significantly increased loans of cash and Treasuries to banks to assuage the credit crunch. Here's what happened.
· The Fed tripled "swap" agreements with the European Central Bank and Swiss National Bank to $30 billion and $6 billion, respectively.
· The Fed created a new program, the Term Securities Lending Facility, where it will lend up to $200 billion in U.S. Treasuries to banks for 28-day periods in exchange for other securities used as collateral, such as federal agency debt, federal agency residential mortgage backed securities, and non-agency AAA/Aaa- rated private label residential mortgage backed securities. In other words, the Fed is swapping U.S. Treasuries for all the mortgage backed securities (MBS) that no one else wants. The clever part of this plan is the Fed will not be adding any money to the system, so it should not contribute to the runaway inflation that has been developing.
"The Fed hopes it can surgically direct relief to the pockets of the financial market that need it most. That would lessen the pressure for more aggressive use of the blunter instrument of interest rate cuts, which carries with it the risk of inflaming inflationary psychology such as through a weaker dollar or higher commodity prices," reported Greg Ip at The Wall Street Journal.
The caveat to this scenario is the Fed is only temporarily (28 days) removing the problem securities (MBS) from the banks' balance sheets. It's possible that these hard to price, illiquid securities could still be problematic when they are returned to the banks.
However, insiders say the Fed is willing to continue the functions of the Term Securities Lending Facility as long as needed. If that's the case, the Fed's involvement could bring stabilization to the MBS market over time.
What's unclear, though, is the value that will be assigned to the MBS when the banks exchange them with the Fed for Treasuries. Will they be priced at face value, or marked to market?
There's a huge difference between the two. After all, the banks plan on loaning the Treasuries they will receive from the Fed for cash. This is how the Fed plans on shoring up the banks' balance sheets without having to "print" money and further stoke inflation.
As such, if the MBS are priced to market, the banks will not generate nearly as much cash.
This is a clarification point that needs to be addressed. Our guess is the price will be somewhere close to market prices since the Fed already indicated that the reason it did not purchase outright the MBS from the banks and completely eliminate them from their balance sheets to begin with is it "wanted to increase liquidity and the regular functioning of markets, not determine appropriate prices or directly affect them," said Bloomberg News.
CONCLUSION
The Fed got creative and Wall Street loved it, but we wonder how investors will react if the Fed now decides not to lower interest rates as much as expected (75 basis points) on March 18. That could be interesting.
However, now that the Fed is being proactive and creative, we think a lot of the risk has been removed from the market. As such, we believe that conservative stock investors will likely feel better about dollar-cost averaging at these levels, and moderate-to- aggressive investors will likely feel more inclined to take bigger positions.
The bottom line is the Fed put together a solid plan today and bargain hunters pounced on stocks. What's more, this wasn't just a short-covering rally. The fundamentally superior stocks did very well. Yea!
We therefore believe that, given the strength of today's rally, a successful retest of the lows has occurred and lower lows could be avoided.
We'll keep you posted.
Navellier & Associates
Patrick O'Connor
Marketmail Managing Editor "
Será mesmo verdade que não iremos testar os novos mínimos ??? Quem tem uma bola cristal?
Cumprimentos e BN!
PAL
