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Five Things You Need to Know: Hike!, Survey Says..., UFO Spotted in Europe, Prioritization, Minyan/Not a Minyan


What you need to know (and what it means)!


Minyanville's Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. 25, 50, Hike!

Today the Federal Reserve Open Market Committee is expected to announce a 25 basis point rate hike at 2:15 p.m. What to expect?

  • Today the FOMC will raise interest rates for the 17th consecutive meeting.
  • The language in the May 10 statement was: "The Committee judges that some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information."
  • This "data-dependent" language was intended to allow the Fed leeway to pause given economic risks (read: apparent stagflation) accompanied by evidence of rising core inflation.
  • Some have suggested the Fed may choose to raise 50 basis points, but that to us is extraordinarily unlikely.
  • Just as unlikely is any change to the statement that removes the forward-looking inflationary risk mantra.
  • In our view, this "more of the same" from the Fed, accompanied by technically oversold conditions in equities, points to "upside risk" in the near-term.
  • Minyanville Professor Woody Dorsey this morning on the Buzz & Banter noted that some reprieve is already happening. "Even the Bear needs a holiday," he said. However, he added, rate hike number 18 in August could be a different story.

2. Survey says...

By a 65 percent to 22 percent margin, Americans oppose another rate increase by the central bank, according to a Bloomberg/Los Angeles Times poll.

  • The results are nearly identical to a similar poll by the Los Angeles Times in May 2000, after five increases that brought the benchmark rate to 6 percent, Bloomberg said.
  • The Fed saw that poll and responded... by raising 50 basis points to 6.5%.
  • The results of the most recent poll fell along economic lines. Among those households with incomes exceeding $100,000, 39 percent favored higher rates; for those making $40,000 to $60,000, it was only 13 percent in favor of higher rates.
  • The current cycle of rate 16 consecutive (after today, 17) rate hikes began in June 2004, when the benchmark rate was at a 45-year-low of 1 percent.
  • Hmmm, so people are growing antsy about diminishing liquidity growth and 17 consecutive rate hikes now beginning to eat into their housing prices? Go figure.
  • "Excuse me, Mr. Fed Chairman, but look at your shoes. I believe you may have stepped in some wealth effect."

Survey says... the Fed should pause some....
before family's feud... like Richard Dawson.

3. UFO Spotted in Europe

M3, the ECB's preferred measure of money supply, an unidentifiable inflating object here in the United States, rose 8.9% in May, the European Central Bank said.

  • M3 growth accelerated over April's revised rate of 8.7%.
  • The three-month average of the annual growth rate of M3 over the March-May period stood at 8.7%, compared with 8.4% in February-April
  • While the growth rate matched most economists expectations, it is well above what the ECB itself has claimed is its target M3 growth rate of 4.5%.
  • M3 money supply expansion has exceeded 4.5 percent every month since May 2001.
  • Meanwhile, loans to the private sector grew 11.4% year-on-year in May, unchanged from April.
  • The ECB has increased interest rates by 25 basis points once a quarter since December.
  • Recently, as noted by Five Things, ECB President Jean-Claude Trichet said the ECB is "permanently alert" to inflationary pressures.
  • Trichet will deliver a speech in Munich later today.

4. Prioritization

A flu outbreak killing 70 million people worldwide may cause global economic losses of as much as $2 trillion, a world bank official said according to Bloomberg.

  • Dude, seriously, get a grip. 70 million people? If a flu outbreak kills 70 million people the "economic losses" will be the least of our problems.

5. Minyanville Presents Minyan/Not a Minyan

Anyone can be a Minyan. The Minyanville community is open to all. Unfortunately, however, not everyone has chosen to become a Minyan. Below are some examples.

Minyan: Hoofy the Bull Not a Minyan: Red Bull

Minyan: Gold Bar Not a Minyan: Liquidity Bar
Ben S. Bernanke

Minyan: Minaya Not a Minyan: Mikulik

Minyan: Snapper Not a Minyan: Snippy

Minyan: Demi Not a Minyan: Britney

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