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American Capital Agency Corp. Message Board

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  • yourbestfriendintheworld yourbestfriendintheworld Feb 14, 2011 12:13 PM Flag

    Viewing AGNC's positive outlook

    I don't doubt the Fed is keeping consumer sentiment in mind. But Bernanke just started a new term a year ago, and isn't due for reappointment until 2014. He gets to keep his job whether Obama or (insert name of one of the loopy right-wing nutjobs being touted for the nomination here) is President.

    The only thing that gets Fed chairmen fired is decrepitude and the perception of total incompetence.

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    • jackhiller@ymail.com jackhiller Feb 14, 2011 1:09 PM Flag

      You are making a mistake by personalizing on the Chairman's job tenure. The Fed as an institution is under pressure for the range of authority and visibility, with the Pres and Treasury Secretary calling the shots, backed by the Senate Dem mnajority. For example, Ron Paul as a politician, and William Russell (surely the dean of all current incvestment advisors) argue the Fed should be revoked as a twentieth Century experiment gone bad.

      The Fed historically works with and supports its current Administration. And the Chairman has been unusually outspoken with clarity on the subject of the need to sustain a very low short rate until the economy and employment are healthy and inflation must then next be combated with a higher rate.

      The low short rate, under Fed management, will continue at least until the 2012 election--unless the economy does a magical improvement. In the meanwhile, the long rates will head higher, unless a double dip or worse is in sight, which is not the case now for most economists in and out of the Gov.

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      • yourbestfriendintheworld yourbestfriendintheworld Feb 14, 2011 3:19 PM Flag

        The fed makes its decisions with input from everyone including the administration. It works with the administration and regulates it (can you imagine federal bank policy if the President were able to simply push the rates around?)

        The only way rates will be kept this low through 2012 is if the economy doesn't show signs of broad price and wage increase.

        What's significant to AGNC is home sales, which regressed to the pre-bubble curve about 16 months ago and have been volatile but generally following that curve, albeit slightly below it because of the massive excess build-out during the bubble. Lenders are still picky (as they should be, since their internal finances are still somewhat fat with risk, despite bailout efforts), but cash buyers are coming out as a result of the relative depression. If you have or can get money, you're buying for much less than you would have if the bubble hadn't happened, and that's driving sales and soaking up liquid capital. We may see that discount reduced to equilibrium soon, and then the banks' and cash-holders' money will start looking for other places to go.

        That's when we can expect broad price increases. But whether we'll see broad wage increses depends on wether as a nation we're still capable of competing. We shipped a lot of our technological superiority to the other side of the world in the past decade. I doubt there's a place in America that could actually build an iPad, much less for what they cost now.

        So the fed may or may not have a good reason to keep rates low all the way through the elections, but I'm pretty sure they don't play power politics with it. Because, as I said, they win reappointments no matter who they help win power.

 
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