Wednesday, March 31, 2010
But there are - or at least have been periodically - interim deflation... episodes all along the way during our inflationary continuum. What troubles me now is that I am seeing some analysis out there talking about how Bernanke defeated inflation by debasing currency; how he proved he can do it and he will do it again at the drop of a hat.
My point here is that he is not super man. Bernanke can do what his funding mechanism tells him he can do, and that mechanism is the treasury markets and in particular, longer term treasuries on which all sorts of asset markets are dependent, like the oh so important mortgage market and all those related bailouts.
So please bulls, inflationists and fly guys, do not just talk about continued inflationary policy unless you are willing to explain the exact mechanisms through which the Fed is going to inflate. The Fed is not all-powerful; rather, it is like a vampire that sucks the blood out of a healthy and productive system. The life blood of the system now is the confidence - such as it is - in the US Treasury market.
Tuesday, March 30, 2010
On the fundamental side, there is serious drama playing out and a thin layer of industrial metal fitted atop the cranium might help deflect some evil rays. I have been critical of GATA and other entities that stir gold bugs' oh so stir-able emotions. But in light of the Ponzi scheme that anybody in their right mind should know are modern currencies of confidence, this interview on King World News is must listening in my opinion.
We are in Wonderland and there are some corrupt entities writing the story that many take for granted as "the market".
See the Andrew Maguire/King World News Audio linked here.
Before I take off my tin lid, I will again remind you that forces are at work - whatever they may be; technical, manipulative, or just fate - to separate people from their free-willed ability to protect themselves against a terminal system.
Monday, March 29, 2010
Ten Year Yield Inverted H&S
When viewing the current market situation through a lens of inflationary policy vs. natural deflationary forces seeking to correct sublime levels of excess, a geek like me looks at the chart of the TNX and is absolutely transfixed.
Pictures like this, rather than the likes of the nominal Dow above are a big reason for the ongoing ‘risk is high’ droning in NFTRH. It is no coincidence that the risk profile was raised from the previous bullish stance as the TNX spiked to form the neck line at 4% in late spring/early summer, 2009.
The crux of the issue is that a breakout from the Inverted Head & Shoulders targets 6%. A correlated rate on the 30 year bond that we usually watch is close to 7% off of a potential H&S of its own. The problem is that these levels trigger our biggest picture monthly ‘line in the sand’, the 100 month exponential moving average, which changes something that has been assumed for decades (the US government’s ability to use its treasury bonds, its confidence, to inflate at will by selling debt and printing money). The implication is that the change would be a secular thing, possibly introducing a hyperinflationary spiral.
I must admit to being confused by Captain Bernanke’s ‘damn the torpedoes’ inflationary approach in the face of a bond market on the verge of rebellion while certain Fed members sound increasingly hawkish tones. The wizard’s ‘backbone’ is that line – the monthly EMA 100 – under which treasury yields have remained for all those decades of confidence. The neck line shown above, if broken, triggers a level that busts the backbone.
We are at an extremely high risk juncture for both hyperinflation and deflation, because we are right on the line between the two with no confirmation yet as to which way this thing is going to break. Some Fed officials have expressed concerns that relate to the picture above, but thus far, the one who matters most, Bernanke remains unconvinced that inflation will become a problem.
Sunday, March 28, 2010
FYI, good article at Zero Hedge re: long-running NFTRH thesis of "deflation scare" levers being pulled: As the Fed Runs Out of Low-Rate Options, the UST is Likely Considering an Orchestrated Move of Risky Assets Into Bills
Regards, Ray V
I am going to dispense with the 'NFTRH 1 Year Ago' segment from here on because you get the point; NFTRH is interested in carrying forward a sensible market dialogue over long stretches of time and being right in the big picture. Also, speaking of time, I do not have enough of it to be going through that exercise.
The above-linked Zero Hedge post is vital reading and indeed articulates in detail the mechanics that would go into NFTRH's long standing "deflation lever" thesis centering upon the treasury market and the Fed's ability to continue inflating. In other words, the LINE IN THE SAND which must not break lest holy inflationary hell be unleashed.
NFTRH78 out now, and it certainly does ruminate on the treasury market. I may excerpt this bit in the next couple days. It is the most profound oncoming signal that the simple chart geek has ever witnessed in the financial markets.
Later... off to make my kids pancakes.
Friday, March 26, 2010
Thursday, March 25, 2010
This is not an attempt at timing and I certainly do not want to dissuade anybody from attending a good party. But I can only manage my own funds and write a newsletter telling my views. It is up to the individual to decide how they view things.
I am so bearish now I can taste it. There, no more namby pamby wishy washy stuff. Patience and balance are the words.
Edit (5:41) See, all I had to do was declare myself to reverse this pig. I do declare, I am bearish baby, regardless of whether this mess holds the downward reversal or not. Dow did not quite make it to the projected upside target, but it came close enough for government work. Much to write about where my mindset is at in NFTRH78.
Customer: "Oh, you don't say. I heard the same thing at a cocktail social the other night. I also hear tell that commodities are hot again."
Shoe shine boy: "You in? I'm in, you gotta be in it to win it."
Up today, the government peddles 32b worth of 7 year notes, so the iShares 7-10 year treasury fund IEF gets the main chart. In the lower panels are the IEI 3-7 year and TLT long bond funds.
Before we look at the chart, a question; what exactly does it tell us when the inflators attempt to find buyers for their bonds (def- 1: a binding security; firm assurance: My word is my bond. 2: a sealed instrument under which a person, corporation or government guarantees to pay a stated sum on or before a specified day. 3: any written obligation under seal) and with long term interest rates already approaching 'big picture' tolerance levels (that would be the err, barn door) rates rise strongly on auction day?
It tells me there is a problem with a lack of confidence in the US treasury (no shit?), but that the policy of low short rates (despite market pressures on the freer long end and despite economic/asset recovery) and a firm 'inflate or die' attitude to continue funding this macro experiment continues unabated. They are pushing the tachometer into the red in a tacit statement of "We are America, and what the F are you going to do about it anyway?"
Is it possible that the world - given the unraveling of the euro amid the failed experiments popping up over there with greater frequency - is submitting to the US and the too big to fail owner of the reserve currency simply knows it can take and take and take? And the US' subjects just line up for more, albeit at higher rates of interest?
Hey look, I am just a blogger trying to figure out the meaning of some very confusing questions and conflicts, just like you. So on to the chart. What I find here is surprisingly bullish - for treasuries (and for the still open deflation impulse scenario).
7-10 year treasuries are in a nice symmetrical triangle, which is a continuation pattern. No breakout yet, but if the break is to the upside, expect a strong move with upside follow-through.
The next panel is the home of the 5 year treasury bond and its pals on the short to medium end. Ascending triangle - bullish continuation as long as lower line holds. A break of the top line brings on a strong move higher. It's just about done coiling and will break one way or the other shortly.
Finally, in the lower panel is our long bond proxy, the iShares TLT 20+ year fund. Below the lower trend line we go into Wonderland, uncharted inflationary territory. But what's this? TLT has creeped out of the weekly downtrend while holding the 'barn door' line. There is little downside tolerance left. We are there folks; on the cusp of having some big ongoing questions answered. Recall that if you flip TLT over, it looks like a bullish inverted head & shoulders. Talk about drama?
Don't you just love the markets?
Wednesday, March 24, 2010
Okay, so I am a perma-bear if that is what some readers would like to believe. But the chart is the chart. I would much rather have a bright big picture in which to conduct business and live life. But this picture states that the most dumb ass of money is buying here. And that's just the technicals.
Now, the gold stocks could plunge below TRIX/MACD zero and join the rest of the mess in a bear market, but they have not yet done so. The charts are the charts.
The broad markets are probably not going to crash as the perma-bears would like, but a hard correction can come at any time given the sentiment profile, extended valuations and 'down the rabbit hole'-like wonderment of the ongoing rally in hope and economies all due to the magic of monetary inflation.
The gold miners led the whole mess off of the crash bottom and one wonders if they, now followed by commodities might be leading an interim correction before reflate-o-rama round 2. Throwing a kink into the works remains the 10 and 30 year bond yields which look bullish as hell. It is still a good bet that policy makers don't like seeing that and if they break out, the barn door comes down, I would think led by gold and da minas.
As for the chart, it is constructive that the slower (than MACD) TRIX smooths things out, declines to major bull market support and triggers up.
That Didn't Take Long
But let me be clear, this has been in the works since last year. It is not a knee jerk reaction by insurance companies based on ObamaCare recently rammed through congress. We became aware that our insurance was getting cranked through the roof back in December. It all depends on when your (or your company's) particular plan renews.
So this is yet another opportunity to tune down the angry noise and realize that the insurance companies - even as their Washington lobbyists worked feverishly to mitigate damage and perhaps even make things beneficial - had long since put the fix in. It is just that many Americans and the companies they work for have not yet been slapped in the face with it.
Renewals are happening each month. I have three friends who own businesses. One of them recently got his 38% increase and registered his disbelief. I welcomed him to the club. The other two were saying they have good agents and all is fine. I said "when do you renew?" and they said May. I almost felt bad bursting their bubble.
This will not be good for the economy; this will not be good for anybody. But let's attempt to realize that the corporations put the fix to this thing long ago in what some might call conspiratorial fashion. It didn't just spring forth on Monday post-congress.
Right now a world full of assets are being micromanaged higher by bull wiseguys touting peak oil, peak resources and hyperinflation. On the stock side, pitch men - who were nowhere to be found at the bottom of Peak Angst '09 - enable the dumbest of money to capitulate to the upside right into the highest risk profile of the entire recovery.
Meanwhile, there is gold. The chart hasn't changed, nor has our upside target above 1300 off of the bullish ascending and symmetrical triangles. But if you do not know who you are as an investor, if you listen to the competing blow horns, you will be long gone before it ever gets there; shaken out on a simple re-test of support.
So, pretty please... just try to keep casino mentality under wraps, tune down the noise and realize that there is a continuum in progress here and it is not necessarily on your preferred schedule. You don't have to subscribe to my newsletter because really, all I am doing there is implementing the first part of this paragraph in greater detail. Half the battle is perspective in a world where debt money is competitively degraded to keep economies afloat.
If you have been around the blog for a while, you know we have been through this drill before. The world again laughs at Prechter, he of the persuasive argument. I have little doubt he will again come front and center and when he does, the majority will become hysterical. Opportunity awaits. Prechter represents the lever, the deflation impulse. Chicken shit policy makers would pull that lever and introduce the next cycle.
This stuff plays out over time and again, may not be per an individual's preferred schedule. Misperceptions need a good long while to get firmly entrenched.
Tuesday, March 23, 2010
Monday, March 22, 2010
In the newsletter, we have watched a big picture 'bull signal' take shape for many months now. Specifically, this was represented by the ability of the broad SPX to do exactly what it had done at the launch of the previous cyclical bull; rise above the 20 month exponential moving average, grapple around with it for a few months, and hold above it. Check. There is no debate, the SPX (along with many other markets) has registered cyclical bull signal. The question now becomes 'for how long?'
The chart shows a 62% Fibonacci retracement target of 1224, which not coincidentally is the ultimate NFTRH upside target set over a year ago. But before we pat the newsletter on the back we note that two major potential interim scenarios have been carried forward that have not come to pass; one a classic A-B-C correction upwards (cyclical bull) off of the impulsive decline of 2008, and the other stating that the initial crash leg was itself an 'A' of a massive A-B-C correction downward off of the previous cyclical bull market that manifested out of previous inflationary monetary policies. The 'bullish scenario' required a 'healthy' correction mid-stream on the way to 1224.
Given the declining volume (conviction?), given the fact that the dumbest of money (per NFTRH's always-watched sentiment indicators) is ever braver as prices rise and given the fact that the cycle has not paused for a 'healthy' correction, even as the ultimate target is approached... given that a thick band of visual resistance resides at and above the 62% Fib, almost by definition right minded investors (as opposed to day traders and assorted other 'players') must be in risk mode now. The easy money was made already folks.
Harping on risk does not help me sell newsletters, but it is the only thing I can do because that is what I see. The important thing is to manage risk vs. reward over the entirety of cycles, not to swing spastically along with the markets. Low risk opportunities will come, but unfortunately many people will not be prepared as the noise of the day - let's use today's Dow Theory bull signal as an example - will have already given them permission to go with the flow.
I used to subscribe to Robert Prechter precisely so I could take in his bearish precious metals analysis even as I remained bullishly deployed. It simply made me stronger in my convictions if I could feed rational but contrary ideas into my decision making. Similarly, 'high risk' does not mean 'don't play', it simply means risk is much higher at SPX 1160 than it was at 666, when virtually the entire investing world was seeing the sign of the devil - enabled by the mass media.
Before this post gets too long winded - and there is a lot more to consider about the ongoing market reaction to historic inflationary policy - let's have a look at a couple important money supply graphs.
Do you see what I see? Do you see ramped up money supply off of the initial downturn in the credit bubble leading directly into the first red circled flattening phase as the markets shook off policy makers and attempted to purify themselves?
Do you see incredible subsequent inflationary panic (this was our investment opportunity for late 2008 in the precious metals and 2009 for the stuff inflationary policies were actually aimed at - assets of all kinds) and money supply ramp up? Do you see money supply again flattening and making 2008's red circles look modest by comparison?
Do you see risk yet?
Edit (12:20) A reader writes "I don't understand why this graph doesn't argue for another inflationary spike upcoming like the first time. Why is it different this time?"
My answer is it does argue for another inflationary spike but first it argues for the lever that will pull policy makers to attention and compel them to institute said inflationary spike... in other words, a long awaited deflationary impulse. Just like the first time.
Secondarily, yes I did notice the typo on the chart. It is annoying but it's now set in stone. Dohhh.
Sunday, March 21, 2010
Attn: Subscriber John B. (@flintXXXXXXX.com): This morning's mail was kicked back due to your mail quota having been exceeded. Please contact me for NFTRH77.
Enjoy your Sunday all.
Excerpted from NFTRH25 Dated 3/21/09:
Inflation and Deflation
“To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.” –US Federal Reserve Statement, March 18, 2009
Let the printing begin, or more accurately, continue in ever more intense fashion.
The Fed has chosen the ‘nuclear option’, which of course carries as much ‘all or nothing’ risk as the garden variety call or put option held to expiry on an equity. In this case however, the equity we are talking about is that of the United States’ standing in the world, and this equity (one definition: the monetary value of a property or business beyond any amounts owed on it in mortgages, claims, liens, etc.) is by definition zero, or well below zero considering the massive liabilities attached.
The only reason that the United States is able to maintain the illusion of solvency is because it is merely one insolvent inflator among many, and it has been the top global dog for so many decades – again, the collective mindset still exists in yesterday, and as such, we pursue policy that has been in effect since the creation of the Federal Reserve. We pursue inflationary policy, only this time it is the inflationary policy of incestuously buying up and monetizing our own debt.
Now, I want NFTRH to go beyond the inflation-deflation debate, where proponents on either side fixate on prices. We will instead look at the massive monetary fire hose set on auto pump (new debt) and the equally massive deflationary destruction of existing debt. Inflation and deflation; one cannot exist without the other. You could look at this as a sort of insane balance sheet. Government has limitless ability to print money and as long as it is the popular thing to do (inflation expectations are not even on radar) they have the backing of the citizenry, and the ever more absurd cycles are not likely to end until the majority of people wake up to the idea that monetary policy has long since replaced money and that it is this policy that has prompted ever more intense boom and bust cycles.
Here is a look at the True Money Supply, compliments of http://www.mises.org :
[TMS graph omitted - it was a 'hockey stick']
Per mises.org: The True Money Supply (TMS) was formulated by Murray Rothbard and represents the amount of money in the economy that is available for immediate use in exchange. It has been referred to in the past as the Austrian Money Supply, the Rothbard Money Supply and the True Money Supply. The benefits of TMS over conventional measures calculated by the Federal Reserve are that it counts only immediately available money for exchange and does not double count. MMMF shares are excluded from TMS precisely because they represent equity shares in a portfolio of highly liquid, short-term investments which must be sold in exchange for money before such shares can be redeemed. For a detailed description and explanation of the TMS aggregate, see Salerno (1987) and Shostak (2000). The TMS consists of the following: Currency Component of M1, Total Checkable Deposits, Savings Deposits, U.S. Government Demand Deposits and Note Balances, Demand Deposits Due to Foreign Commercial Banks, and Demand Deposits Due to Foreign Official Institutions.
The rising TMS is the starting point. Now consider that the Fed is getting up into the $Trillions in liabilities following Ben Bernanke’s theories on battling deflation, and there is no doubt that we are inflating. But we are deflating as well. Money is growing exponentially to try to meet the debts that grew exponentially for decades under the guise of a supposedly sound monetary system. Money supply is rising and this money will find its way into the most precious of assets even as the deflation threat keeps many people perceiving safety in cash and government debt.
What the Fed is trying to do is instill confidence that would theoretically carry the ball the rest of the way for the completed ‘Hail Mary’. What they will actually do is blow another in a long line of bubbles, and that bubble may include some commodities, but this being a monetary event on a grand and macro scale, the most likely bubble is… Beuller? Yes, it will be a bubble in the ancient monetary relic from the past, at least in its ratio to everything else, which would translate to well, gold for the bottom lines of the companies that dig it out of the ground. This would all take place as the public slowly realizes how royally their compliance to conventional wisdom has led them astray and as gold rises in all currencies and against all other assets.
That is the longer term. In the short term, as you know, I have been bullish on oil and other positively correlated (to ‘hope’ and the economy) commodities for a several weeks now. But this is a trade only. The battle between inflation and deflation is likely to grind on for a long while before it transitions into a MOAIP (mother of all inflation problems). Maybe as long as it takes the large, potential rising wedge in the US dollar (shown later in the report) to play out.
Instinct is telling me that the usual suspects – the ones who remained trapped aboard the peak oil and energy mania straight on through the initial deflation impulse of the last several months – are more than ready to begin pumping commodities once again. NFTRH is now looking ahead to targets for a top in oil, industrial metals and most importantly, the Silver-Gold ratio, also discussed later in the report. Gold will likely be an underperformer for as long as the hopeful and bullish condition – actually a resetting of sentiment – persists.
If you are reading this newsletter, it is likely because you are not looking for reinforcement of popular beliefs. You are looking for an edge of some sort, a different vantage point. It is helpful not to think in terms of inflation or deflation, but rather in terms of a big picture in which the perceptions of the old world are slated for the scrap heap as we slowly and painfully transition into the new normalcy, while two compelling forces go head on in a battle that is likely to one day end the very system in which they hold sway.
Friday, March 19, 2010
Edit (2:14) Neglected to note that UGL long is against ZSL silver short initiated yesterday.
Edit (3:39) And for the CoT enthusiast, here's the report courtesy of GoldSeek: CoT Gold, Silver & USD report, along with the updated graph that you can find on the right in the links section of the blog any time. Not too bad, speculators shorting a bit and commercials covering - a bit.
Thursday, March 18, 2010
Reviewing older material helps too, and posting that NFTRH71 sample helped me quite a bit as I just got done actually reading it - instead of skimming - and a few things strike me as kind of important. I have added observations based on today's perspective, as opposed to that of February 7.
"In concert with the prospects for the gold price, the 13 to 14 level may yet be seen. But it appears that first the market will pull in the large speculators that dumped out last week right on cue. Silver’s CoT report was very pleasing in that hedge funds and other large speculators were flushed. The expectation is that they will help buy silver back to the neckline for a trade."
We are there but somehow I am in doubt as to whether the rally will terminate obediently per the nearly 6 week old analysis. One thing for sure, the speculative holders are again getting brave and that always provides opportunity ultimately.
"Short term resistance [HUI] is at 420 at which point we could hit some turbulence as day traders take profits. STO grapples with the critical 20 level and fellow short term sensitive indicator CCI has climbed above -100, which is positive. RSI is good to go for a run at the noted level, but MACD remains the holdout. We are in an intermediate term correction and while we might expect MACD to ‘trigger’ up, its status below zero must be removed for the all clear in a bigger picture sense."
Bingo, day traders traded, Huey corrected and then took the next leg up. MACD has gone above zero on the daily, which makes me at least think about the would-be terminal upside targets.
"To summarize the precious metals complex, the probabilities are good that there will be upside follow-through based on the angst levels that were stirred up in not only the PM’s, but also in the commodity complex and broad global markets. In short, relief is due as the GSR and USD take a break. Taking a broad market view, it looks like a counter- trend rebound could manifest that will ultimately – and cruelly – suck the innocents (and crack users) back in."
I am open to revising the 'terminal rally' [on HUI] stance based on the MACD going up in all time frames. But I will tell you it is easy to be brave or bullish now. It was not so easy on 2/7. It was not so easy in October of 2008. So for now, the script still holds that I do not want to be heavily bullish along with the speculative wise guys. Screw them, they always crash and burn eventually. This is why I hold a core always, as long as I am big picture bullish; I can be less than bullish and still participate as long as the players, touts, trend followers and outright creeps want to play.
"NFTRH bear positions were trimmed Friday. This is in anticipation of a broad global market pump, and to see if we can’t let the precious metals run unrestrained for a bit. I am a nicer person with a sunnier personality when I am not short the market. Spring is coming and we can look forward to renewal; of a secondary impulse of hope that is. Then the hammer should drop once again. I would hope to again be more heavily short (and ill-tempered) at such time."
Party on Garth. I feel bright and sunny now. I just will not let that effect my trading habits. For long term success, you simply must remain apart from the herd.
"This is one of those indicators that does not say ‘a rally will happen’, but rather ‘a necessary indictor is in place that says a rally can happen’. Others include the Investors Intelligence survey of newsletter writers, the AAII survey of individual investors and the NAAIM survey of investment managers all coming strongly off of their recent hyper- bullish status.
Trend followers firmly in retreat, we can rally for a bit."
More important than ever to watch the sentiment indicators. When they double top...
"The BDI shipping index is open to a bull signal as long as a lower low from the September bottom is not registered. Copper meanwhile, is interesting in that it remains below broken support. Perhaps the most egregious mini-bubble needs more work to unwind the casino atmosphere that propelled it to unrealistic Hope ’09 highs. Oil can, and likely will rally for a while here off of support. The broad prognosis for Doctor Copper and friends is to catch a tail wind to the extent that broad global and domestic markets are able to do the same. It would likely be counter-trend, before new lows."
Yup. All making sense here in the grand casino.
Hey, thanks for bearing with me while I self-indulge.
Wednesday, March 17, 2010
If the bullish scenario is to unfold, it might be unrealistic to expect another test of the weekly downtrend line. However, lateral support is shown and if that holds, we lock in a target of 9.5+.
Where did I get JOF? Why, from some research from my broker, Fidelity. They had a pretty neat segment where several of their fund managers gave their ideas for 2010. I read what a global fund manager had to say about Japanese small caps and decided to stalk JOF technically. Nice lower risk bull play (i Bottom Feeder) in a high risk bull world.
I got a little polite criticism from a blog reader last week claiming that my bearish attitude caused me to miss the rally. Au contraire sir. Not only did the portfolios outperform the broad market in 2009, but the most recent rally was managed as well. Hammer time, as they say.
But it doesn't change the risk environment which stinks right now for broad stocks, even as the Dow targets higher levels. NFTRH71 (pdf) was put out just as hammer reversals were showing up all around in February. Back then, all the sentiment tools (literal and figurative) like individual investors, investment managers and newsletter writers were way too bullish; extreme even. In bi-polar fashion they came off this condition with a thud. Now?
Anyway, 71's available as a sample if you want to check it out over here. (Edit) I think I need a vacation. What I meant to say is the sentiment indicators were way too bullish heading into the correction early in the year and then quickly flipped to bearish, enabling a rally.
Tuesday, March 16, 2010
Fear is not to be in the driver's seat when you trade the PM's. Fear rides... anyone remember? Yes Beuller, shotgun. Fear rides shotgun right there with you, but you make him your ally.
And here's the statement, hot off the press. Let's all read together:
(Edit 2:20) In other words, party on Garth... we REALLY want you to. Oh, and pay no attention to that ominous looking pattern on the long bond but you might want to click your heels for good measure.
Release Date: March 16, 2010
For immediate release
Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.
With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.
In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.