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Morning Notes For November 4th 2010 at Trader’s Narrative

Morning Notes For November 4th 2010

The following is a guest post by a buy-side analyst working in a US asset management firm. The author’s comments are in italics. I welcome your feedback in the comments:

  • The FOMC has announced that the second phase of quantitative easing will involve the purchase of US$600 billion in longer-term Treasurys by the end of Q2 2011, at a pace of about US$75 billion each month – Roubini Global Economics
  • Mortgage Refinancing applications decline 6.4%, but remain at lofty levels – Mortgage Banker’s Association

Mortgage Applications to Refinance an existing mortgage
mortgage applicationf refinance existing mortgage Nov 2010

  • “Higher bonuses for Wall St.” – it’s bonus article season – the Journal says Wall St. bonuses are on pace to rise 5% this year; increases coming from hedge funds, retail bank, and PE while bond/stock trading will see declines (bond traders will see 25-30% declines while stock traders will see down 20-25%). – WSJ
  • Bernanke oped in the Washington Post“What We Did And Why”– the Fed’s objectives of jobs and inflation are both less than optimal, prompting the FOMC to take further action. “The FOMC decided this week that, with unemployment high and inflation very low, further support to the economy is needed. With short-term interest rates already about as low as they can go, the FOMC agreed to deliver that support by purchasing additional longer-term securities, as it did in 2008 and 2009″ “This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth” “Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending” – WP
  • IMF chief economist said the world economy would grow at a 3-4% rate in 2010 and at a similar rate in 2011. AFP
  • China repeats that US “dollar printing” is a huge risk – an advisor to the PBOC on Thursday repeated that the Fed’s “unbridled” printing of dollars is the biggest risk to the global economy. “As long as the world exercises no restraint in issuing global currencies such as the dollar then the occurrence of another crisis is inevitable, as quite a few wise Westerners lament,” – Reuters

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