Wednesday, September 21, 2011

Market News and Notable links

Operation Twist: As more-or-less expected by market forecasters, the FOMC announced it would buy $400B of Treasuries , but stocks plunged to session lows and Treasuries rallied. The FOMC emphasized "significant downside risks" to the economy and investors may have latched on to this statement along with the usual “sell on the news” trading. And there was no asset purchase surprise either. IOER (Interest on Excess reserves) was left unchanged, but the Fed announced plans to reinvest prepayments of agency debt and MBS back into agency MBS (support for the housing sector and hints of coordinated action on housing with the Whitehouse?).

The 30y yield fell over 20 bps to below 3% at one point. 10y yields slid 8bps to 1.86%. The VIX, Yen, and DXY were up. Gold finished down below $1800. The Canadian dollar closed below parity for 1st time since January 31, 2011. The financial sector closed at 2011 lows after its 4.94% decline.

·         Roger Altman (founder of Evercore): America and Europe are on the verge of disastrous recession
·         Burton Malkiel (author of A Random Walk Down Wall Street): Emerging stocks offer better returns and less risk based on lower debt levels, demographics, abundance of natural resources, and valuations.
·         Jeremy Grantham was interviewed in Marketwatch. “If we adjust earnings to normal and apply an average P/E, you can finally build a decent portfolio today of global equities at a respectable long-term return”
·         Barron’s interviews Jim Grant of Grant’s Interest Rate Observer. He is still bullish on Gold, gold stocks and blue chips, bearish on China, thinks the Euro will break up, and has given up on Japanese stocks.

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