QE3 will work under the right circumstances. But I don’t believe such circumstances prevail at this time

“As popular as it might be in some quarters to rule out further LSAPs (QE3, as it is known), I do not think this option can be taken off the table. QE3 will work under the right circumstances. But I don’t believe such circumstances prevail at this time.”

The above commentary was from a speech this morning by Dennis Lockhart – President of the Federal Reserve Bank of Atlanta – at the Institute of Regulation & Risk in Tokyo, Japan. There, Lockhart argued that although the U.S. economy is in a “phase…when sustained monetary accommodation is warranted to keep the U.S. economic recovery going,” the current environment does not warrant a third round of money printing, at least not yet.

Additional highlights from the Atlanta Fed President’s speech included:
“Circumstances today in the United States call for continued measured efforts to quicken the pace of recovery and shrink unemployment, while keeping inflation controlled and close to the FOMC’s official target of 2 percent. Those efforts for the time being should fall in the realm of communications. Current economic data continue to be a mix of positives and negatives. Consumer activity is continuing to grow, and manufacturing is expanding. At the same time, we’ve seen a recent slowdown in business investment, and the pace of job creation has weakened.”

“There are larger-than-normal risks to my outlook, however. Chief among them is the potential for broad spillover from Europe to the U.S. and global economy resulting from financial system disruption as well as further economic slowdown.”

Beige Book - continued to expand at a modest to moderate pace from mid-February through late March

The release of the Federal Reserve’s Beige Book on Wednesday afternoon indicated that the U.S. economy “continued to expand at a modest to moderate pace from mid-February through late March.”
Highlights from the Beige Book – a collection of economic reports from each regional branch of the U.S. central bank – included:
- Manufacturing continued to expand in most Districts, with gains noted in automotive and high-technology industries.
- Manufacturers in many Districts expressed optimism about near-term growth prospects, but they are somewhat concerned about rising petroleum prices.
- While the near-term outlook for household spending was encouraging, contacts in several Districts expressed concerns that rising gas prices could limit discretionary spending in the months to come.
- Residential real estate showed some improvement, with many contacts citing expansion in the construction of multi-family housing.
- Banking conditions were largely stable, with some improvement seen in loan demand. Several Districts reported increased credit quality.
- Hiring was steady or showed a modest increase across many Districts.
- Overall price inflation was modest. However, contacts in many Districts commented on rising transportation costs due to higher fuel prices.

Fed Policies creating enormous amounts of paper

“By creating enormous amounts of paper, and hoarding higher duration securities like Treasury securities, the Fed is trying to force investors into risky assets until the prospective returns on all competing assets are driven so low that investors and banks holding cash are willing to just sit on it. In short, the Fed has focused its efforts on creating a bubble in risky assets, on the misguided, semi-psychotic, and empirically disprovable notion that this will make people feel wealthier and get them to spend and borrow – despite the fact that their incomes can’t support it without massive government transfer payments.”

The above commentary is from the Hussman Funds’ latest Weekly Market Comment, entitled “A False Sense of Security.” As is evident from the content, Dr. John Hussman is not a big fan of Ben Bernanke and his monetary policies.  In his piece, the long-time Fed critic and investor discussed his particularly dire outlook for the markets in light of “an unusually hostile set of indicator syndromes, most notably, an ‘overvalued, overbought, overbullish, rising-yields’ syndrome that has historically been unfavorable for stocks regardless of prevailing Fed policy or trend-following indicators.”

“2012 Won’t Look so Bad,” But U.S. Recession by 2014

Legendary investor Jim Rogers predicted more challenging times ahead for the U.S. economy, although he does not seem them occurring this year.

Rogers discussed his latest outlook for the financial markets and economy. “The overall situation is getting much worse because the debt is going through the roof for all of us,” he contended. “You should be worried about 2013, 2014 but overall 2012 won’t look so bad.”
Rogers also noted that “Profitability for American companies is at an all time high if you measure return on equity. Some people anticipate that profits cannot get much better but even if they do they can’t last much longer.”

With regard to where he’s investing currently, Rogers stated that “I personally invest in real assets. If the economy improves I’ll make money because the demand for those assets will increase. On the other side, when governments get in trouble they print more money and when they do that you can protect yourself by owning real assets.”

Fed’s Dudley displayed a particularly cautious stance on the state of the U.S. economy

William Dudley, President of the Federal Reserve Bank of New York, displayed a particularly cautious stance on the state of the U.S. economy in a speech this morning.

In prepared remarks at the Long Island Association in Melville, New York, Dudley stated that while recent U.S. economic data has shown considerable improvement, “it is far too soon to conclude that we are out of the woods.”

“Real economic activity has yet to be strong enough on a sustained basis to make a big dent in the overall amount of slack in the U.S. economy,” the New York Fed President added. “While it is true that growth was stronger in the fourth quarter, most of that growth was due to inventory accumulation. Growth of final sales was actually quite weak. Historically, a quarter in which inventory investment makes a significant growth contribution is typically followed by a quarter in which that growth contribution is modest or even negative. That appears to be what is shaping up for the first quarter of this year.”

Dudley – known as one of the most dovish members of the Federal Open Market Committee (FOMC), along with Chairman Ben Bernanke – went on to pour some cold water on the better than expected employment data of late.

“Although the sharp decline in the unemployment from 9 percent last September to 8.3 percent in February suggests we are doing better than that, it is important to recognize that about half of that decline was due to a declining labor force participation rate.  In fact, had the labor force participation rate not declined from around 66 percent in mid-2008 to under 64 percent in February, the unemployment rate would still be over 10 percent. Also, it appears that productivity growth has slumped recently. Although that means that a given amount of growth translates into bigger employment gains, it certainly is not an unmitigated good development.”

Gold Price Consolidates, QE3 Coming by June?

 The Goldman economist went on to raise the issue that “The economic indicators are improving, financial conditions remain accommodative, and inflation is at or above the Fed’s target. So why should they ease further?”  He responded by noting that “The improvement might not last; Even if the improvement does last, faster growth would be desirable to push down the unemployment rate more quickly; and not easing might be equivalent to tightening” due to his contention that the “bond market currently discounts some probability of QE3.”

Hatzius subsequently addressed another point of contention by asking “Wouldn’t QE3 be inconsistent with the Fed’s observed reaction function over the past few years?”  While he acknowledged that “at some level” it would be inconsistent, the Goldman Sachs economist noted that the FOMC currently contains even more dovish members than in past years.  Additionally, Hatzius noted that “At the January 25 FOMC press conference, Chairman Bernanke seemed to indicate a materially lower threshold for additional easing when he said that he saw a ‘very strong case’ for more easing if the economy evolved in line with the SEP projections–which projected neither a large inflation undershoot nor a growth slowdown.”

In sum, if Hatzius’ forecast proves correct, the gold price is likely to receive a considerable tailwind in the form of further money printing by the Fed.  Furthermore, judging by the prior two rounds of QE, the recent weakness in the price of gold is likely to be viewed as another correction before the yellow metal’s bull market resumes.

CIMB Price Move Close To 200MA

CIMB price had move up slowly however with such good news for good earning the share price did not react like usual ( like MayBank & PBBank).

Now the price is close to 200MA, if the price broken this level than price will surely move up but if not this spell bearish for the long term investment.