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.

Foreign Fund Still Keep Buying Into Malaysia Share Market

Foreign fund investor become big buyer in Malaysia share market. Printed money from US and Euro is flowing into Malaysia in high rate. All this money did not invest in direct economic they just floating in the market.

Fed would print new money to buy long-term mortgage

Commodity and stock prices turned higher Wednesday afternoon after reports that the Federal Reserve is considering a “sterilized” form of bond buying. The Wall Street Journal reported that under the potential program, “The Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates. The aim of such an approach would be to relieve anxieties that money printing could fuel inflation later, a fear widely expressed by critics of the Fed’s previous efforts to aid the recovery.”

As for the broader equity markets, the S&P 500 Index rallied 0.7% to 1,353.09

Greece is “very close to running out of alternatives” besides leaving the euro zone

Dr. Paul Krugman, the Princeton professor who won the Nobel Prize in economics in 2008, warned Europe that Greece is “very close to running out of alternatives” besides leaving the euro zone.

Krugman’s comments – coming yesterday in Lisbon, Portugal – followed Germany’s approval of a second financial bailout package for Greece.  In addition, Standard & Poor’s downgraded the Greek sovereign debt rating to “Selective Default.”  According to a Bloomberg report, “S&P dropped Greece’s rating from CC, two levels above default, after the government added clauses to its debt designed to mop up investors unwilling to take part in a bond exchange.”

Other highlights from the report included:
Krugman also said that Portugal, which along with Ireland and Greece has received an international bailout, is not at the same stage as Greece and “with luck it never will be.” Still, it’s “hard to believe” the country will return to bond markets in 2013, he said.
It’s a “highly implausible proposition,” Krugman said. “What will have happened in 19 months?  The major events that will certainly have happened are a European recession and an outright undisguised Greek default and possibly a Greek exit from the euro. And none of these are going to make it easier for Portugal.”

Krugman said that euro membership has turned out to be “unfortunate,” exposing peripheral economies to “extreme risk with no easy way out.” The Nobel-prize laureate said tougher budget cuts won’t help these countries as “some austerity is necessary but calls for ever more austerity are very disruptive.”

“It may be that in the end, there might come a decision that the euro was a mistake,” Krugman said. “That’s going to be difficult for anyone to acknowledge” and should come in a time of crisis for Europe but it’s a “very real possibility.”

Asked about Chinese aid for Europe, Krugman said that it’s not needed as the resources to solve the debt turmoil are “all here in Europe.” U.S. Treasury Secretary Timothy F. Geithner said in a Feb. 25 speech in Mexico that the region needs to make its crisis-fighting commitments “credible.”

HLBank In A Good Look

HLBank is a very good counter to invest because this bank is same like PBBank. However if to buy into it still need to wait for the index big dip.