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Alliancebernstein Income Fund Message Board

  • c_wallis_jr c_wallis_jr Aug 5, 2013 1:56 PM Flag

    Do people really think the Fed is going to promote higher interest rates given the following?

    The broadest measure of unemployment U6, which includes the unemployed and those underemployed, increased 4.1% to 15.2%. U6 has increased 6.2 % during the last two mouths. Additionally, gross domestic product, a measure of the nation's economic output, grew at a mere 1.4 percent annual rate in the first half of the year, down from 2.5 percent in the same period of 2012.

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    • So we have
      -a sharp rise in U6-broadest measure of unemployment and underemployment- in the last two months (14.3% to 15.2%)
      - a 36% decline in GDP growth from the same period in 2012.
      -a disappointing 162,000 jobs created in July,
      -four low-paying sectors — retail, restaurants, temporary staffing firms and home health care — accounting for 60% of the jobs in July
      -the ranks of part-timers swelling by 791,000 vs.187,000 for full-timers since March 2013.
      YOU THINK THAT FED POLICY WILL SUBSTANTIALLY RAISE RATES THAT WILL INCREASE BORROWING COSTS FOR HOMEOWNERS, CONSUMERS, SMALL BUSINESSES AND LARGE BUSINESSES, AND THE GOVERNMENT ITSELF??

      • 1 Reply to c_wallis_jr
      • As I said, I think it's possible.

        Didn't mention another problem with Quantitative Easing, because it's more obscure and difficult.
        From yesterday's Zerohedge: " as deficits decline, as they have been in the US for the past few quarter (at least until the housing picture inevitably deteriorates again and the GSEs go from source of government funding back to use, and the demographic crunch hits in 2015 and deficits explode higher once again), ongoing monetization means collapsing the high quality collateral pool of assets far more than the TBAC advises. In fact, it is the TBAC that is pulling the strings on the Fed and making it clear, as it did in May, that the Fed has no choice but to taper as long as deficits don't return on their normal, upward trajectory (whether this means a war is inevitable to boost contracting defense spending remains to be decided). "

        My point is that the possibility of the Fed curtailing its accommodative policies is real, whether or not
        the slack is taken up on the fiscal level. That event would likely be transformational for both debt
        and equity.

        Best to think a little defensively now, imo.

    • It's possible they will, if only for the reason given in my last msg. It's become increasingly obvious that
      quantitative easing is now benefiting mainly those who don't need it--those with wealth in the form
      of financial market assets.

      Many good articles in favor of the "taper" concept now. CF: Steven Roach's "Breaking Bad
      Habits" at Project Syndicate.

      Even Lacy Hunt, who believes deflationary/depressionary conditions will hold sway for some
      time, regards the quantitative easing concept as ineffective.

      IMO, make no mistake: bonds will be sold hard should the tapering begin. In that sense,
      Bernanke's wrong: a reduction in Fed buying is most definitely tantamount to a rate
      increase.

      My two cents and That's All Folks.....

 
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