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Morning Notes For September 22nd 2010 at Trader’s Narrative

Morning Notes For September 22nd 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 Fed statement yesterday implied the Fed might pursue policies both to bolster the economy and to support a higher inflation rate. It’s the first time the Fed has ever suggested inflation is too low. Even in November 2002, when then Governor Bernanke presented “Deflation, Making Sure It Doesn’t Happen Here,” the speech famous for its helicopters dropping money, the core inflation rate was 2%. It is currently 0.9%, and for the first time we have confirmation from the FOMC that the unofficial target range is indeed 1-2%, as expected. – FTN Financial – it also appears to be a move toward a more ‘rule’ based, less discretionary monetary policy. But perhaps that is reading too much into it.
  • Treasury Secretary Geithner says tougher capital requirements under Basel 3 need not curtail lending, because banks can use future profits to build the required capital cushion. That’s probably right, as US banks are close to compliance now and have eight years to get there. – FTN Financial
  • Lawrence H. Summers, who heads the National Economic Council, will leave that post to return to Harvard University at the end of the year, the White House announced Tuesday. – WP
  • Recession Isn’t Over for Wal-Mart Shoppers – Comments from Walmart CEO, William Simon, “I don’t need to tell you that our customer remains challenged…You need not go farther than one of our stores on midnight at the end of the month. And it’s real interesting to watch, about 11 p.m. customers start to come in and shop, fill their grocery basket with basic items – baby formula, milk, bread, eggs – and continue to shop and mill about the store until midnight when government electronic benefits cards get activated, and then the checkout starts and occurs. And our sales for those first few hours on the first of the month are substantially and significantly higher. “And if you really think about it, the only reason somebody gets out in the middle of the night and buys baby formula is that they need it and they’ve been waiting for it. Otherwise, we’re open 24 hours; come at 5 a.m., come at 7 a.m., come at 10 a.m. But if you’re there at midnight, you’re there for a reason.” – Bloomberg – rather eerie comments

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