Fed Pledges Asset Repurchases with No Limit
The US Federal Reserve went “all in” this morning. US Stock futures were limit down last night as House Democrats killed a deal with bipartisan support in the Senate. The problem with fiscal policy and stimulus is you need both the Republicans and Democrats in both chambers to come together. It sounds like both parties are in agreement in the Senate, which is an easier task than the House. I think a deal gets done but it takes time. During the depths of the subprime crisis it was the Republicans in the House who voted down TARP and that was eventually passed and successful. I expect the House Democrats to come around this week just like the House Republicans did in October of 2008.
Step #1 of a recovery is always Monetary Policy. This is usually dictated by the Fed and the Treasury. We are basically back to full throttle QE, just like in the subprime crisis. The Fed will step in and buy distressed assets. That will include all types of bonds, note and paper. This is a big deal.
Step #2 of a recovery is Fiscal Policy stimulus. This is what is going on in Congress right now. The Fed and Treasury act faster because politics is not involved. We all know Congress is a completely different animal. It is also a more important stimulus in this particular situation. The Fed can keep the banking system going but it is Congress that can make sure that business and the economy don’t collapse.
For example, they could provide direct cash stimulus/support to businesses and citizens. They can take over or support businesses that are at risk of bankruptcy (think Boeing or an airliner that is now shut down indefinitely). They can forgive income tax, push tax day back to July, and a whole number of other programs. It is a big undertaking and it takes time to sort out. Both parties have special interests that fund their campaigns to get elected, so don’t be surprised to see some pork in these deals too.
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Ag & Energy Markets
All markets should recover this morning with the Fed announcement and hope of fiscal deal this week. We this be a dead cat bounce, the start of the recovery higher, or the confirmation of a bottom and consolidation period? We’ll find out. I am not a seller of anything. I think crude oil and cattle have the most long term potential. Keep your positions small and start looking for value.
I Am Working From My Home Office
You can call my office number 312-706-7610 and it will roll to my cell phone. My cell is 312-651-4621 and you can reach me there too. Anything I can do in Chicago I can do from my home office, so feel free to call, text, or email anytime. Stay safe and lets hope for better news and developments soon.
What I’m Doing at Home with the Family
Card Games – I played Rummy with my older kids this weekend It was a big hit. My 9 year old liked it and my 11 year old loved it. I think we found a winner and I just found a card game rules book we had boxed up in the garage. These kids are going to learn how to play hearts, spades, euckre, pitch, and gin rummy. I think for my 5 and 7 year old I’ll show them go fish, old maid, war, and crazy eights.
Bicycle has a great website with all rules for different card games. You can click here to check it out.
Cooking – The weather looks like it is warming up this week and it could be in the 60s out in the Chicago suburbs. I’m thinking about firing up the old smoker and doing a pork shoulder. Why not? It’s not like I’m going anywhere…
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Craig Turner – Commodity Futures Broker
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