A lot of Fed officials released official reports and said official things to Congress over the last two days. Here’s a wrap up: First, the Fed “is in no rush to decide the appropriate size of its balance sheet, but if it ultimately shrinks it to a pre-crisis size, the process could take the better part of a decade, Fed Chair Janet Yellen said on Thursday…While the central bank could sell the mortgage-based bonds it has accumulated, in the past it has telegraphed that it would more likely simply stop re-investing funds from expired assets and then, over years, let the assets run off the balance sheet naturally.” Meanwhile, Yellen pointed out long-term unemployment and income inequality as two “disturbing trends” but basically says they are out of the Fed’s hands. Also, the Fed seems pretty content with its grip on short-term interest rates: “As of April, total reserves at the Fed amounted to about $2.66 trillion — only about $80 billion was actually required — up from about $1.83 trillion in April of last year…Interest on the reserves is ‘one of the tools they’ll use in normalizing monetary policy in the years to come…In order for that to be effective, you need to at least have some banks willing to take money from non-bank institutions and leave it on deposit at the Fed, and that’s how it transmits itself to the broader system.’” Speaking of which, the Fed is conducting “another series of eight operations offering seven-day term deposits through its Term Deposit Facility (TDF).” Meanwhile, the fed has proposed a new rule to limit the size of merged banks: “The rule would prohibit a bank merger if the new company’s liabilities exceed 10 percent of the aggregate consolidated liabilities of all financial companies…Companies subject to the rule would be depository institutions, bank holding companies, savings and loan holding companies, foreign banking organizations, companies that control insured depository institutions, and non-bank financial companies designated ‘as systemic’.” Also, “the Federal Reserve says that while it clearly takes stock of the weather’s impact on the economy…climate change and its impact is currently a background concern.” The same could be said for Americans in general, really. Overall, Yellen ain’t too worried about another financial meltdown, then again that’s basically her job. Also, Yellen Wants A Community Banker On The Federal Reserve Board…
Monumental Shifts On The Horizon For Crude Oil And Internet
The Obama administration could make some pretty significant decisions pretty soon regarding domestic energy and the shale oil boom. Not only are they expected to make a decision on the Keystone pipeline (keep in mind: it’s an election year), but a senior official says “the White House is examining the longstanding US ban on exports of crude oil (alt).” Furthermore, they are “‘taking an active look’ at the strains caused by the US shale oil boom…The oil industry is conflicted, with producers firmly supporting freer trade in crude and refineries divided on whether to keep the export ban.” Interestingly enough, the senior official tasked with revealing all this used to lead a think-tank in Washington which supports the ban on crude oil exports. Meanwhile, the internet and media may change forever this summer: “It is entirely possible that 2014 will end with the traditional cable bundle broken, a fundamental change to the free and open internet, and the emergence of Comcast as a telecom behemoth more powerful than the old AT&T even dared to dream. It is also possible the complete opposite of those things will happen.”
The Wall Street Journal says “the total value of assets at all the state-backed and privately-held bad banks set up in Europe since 2008 has now gone through the $2.5 trillion mark, making them collectively bigger than J.P. Morgan Chase & Co., which had a balance sheet of just over $2.4 trillion at the end of last year.”
According to three accounting professors studying brokerage stock reports, “We fail to find significant differences in the quality of paid-for analyst research relative to matched sell-side analyst research in terms of bias, accuracy, or ability to distinguish favorable from unfavorable future performance.” One conclusion to this could be: “Our results suggest paid-for research offers potential benefits to investors in small-and mid-cap equity markets where sell-side coverage has declined.” Another conclusion might be: sell-side researchers aren’t getting paid enough by the companies they follow. This is pretty funny: “One limitation in the study’s analysis, which the professors duly noted: About 75 percent of the paid-for stock recommendations and earnings forecasts in the authors’ sample came from two firms, J.M. Dutton & Associates and Taglich Brothers.” I’m assuming the professors were paid to duly note that small companies should be giving more money to Dutton and Taglich for their “as-good-as-sell-side” quality reports.
Quote of the day: “Now, granted, the bank isn’t Buzzfeed.”