JOBS REPORT MEANS FED RAISES RATES SOONER
5 December 2009 by Cullen Roche
4 Comments
As we opined on Friday, the good jobs report might not necessarily be a good thing for this liquidity driven market:
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Comments
A “good jobs report” is bad for the market. Is an improving economy bad for the market or the possibility of one?
I opined on another thread, but I just cannot see raising rates until 2011. There is a huge wave of option-arm resets and CRE that needs to get refi’d. Until then, I don’t think here’s gonna be much out of the fed.
And they know it.
History tells us they will raise rates when they have to (fiscal, dollar crisis) or when some aspect of inflation (e.g. california vs. alabama, oil vs industrial wage) gets out of hand. The first is hard to predict … the second is a bit easier, although occasionally the Fed has made an early policy booboo — they are more likely to make a late booboo. But, who knows, maybe “this time is different”. Maybe they will actually use those Goldman guys to bring some trading tactics into play to keep people from exploiting the Fed put; maybe they will do a trial balloon 0.25% hike just to see the market reaction; maybe this time they will actually target asset inflation/speculation. Maybe.
Neither the US economy in general nor the Federal Government in particular can afford higher rates. Period.
Anyway, nothing – absolutely nothing – in the jobs data even begins to hint at a need for higher rates. Great opportunity for the Fed and the bullion banks to take a crack at gold, though.