This is Part 2 of a guest contribution by David Kotok* and Bob Eisenbeis** of Cumberland Advisors. (Click here for Part 1.)

Note to Readers:  This is the second of our two-part commentary on the Fed’s exit strategy and the role the Fed has played in complicating its own operating strategies and ability to conduct monetary policy.

In their Wall St. Journal op-ed entitled “The BLOB That Ate Monetary Policy” (September 27, 2009), the Dallas Fed’s Fisher and Rosenblum use the movie metaphor of the BLOB to describe the “too big to fail” banks.  They argue that these BLOBs stood in the way of the Fed’s monetary policy’s low interest rates and thereby “gummed up” the “monetary policy channel,” which would otherwise be able to stimulate economic activity.

The op-ed doesn’t name names.  But we will.  If you examine the list of the Fed’s primary

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This is Part 1 of a guest contribution by David Kotok* and Bob Eisenbeis** of Cumberland Advisors. (Part 2 follows tomorrow.)

Note to Readers:  This is the first of a two-part commentary motivated by speeches and editorials from Federal Reserve officials about possible exit strategies from its current quantitative easing policies.  We comment on some problems that the strategies may pose.  We also identify subsidies in the Fed’s current policies.  In part two we comment on the Fed’s own operating policies that may have played an important role in creating the too-big-to-fail problem.  This last issue was overlooked by the Dallas Fed’s Fisher and Rosenblum in their WSJ op-ed piece of September 27, 2009.  They lamented the bottleneck that the concentration of banking resources now creates as the Fed attempts to exit its QE strategy.  They fail to mention how the Fed’s determination of primary-dealer status has

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I've gotten a few questions from readers and colleagues about what sources I turn to for information about the markets, exchange-traded funds and related topics.

The list is long and varied, and ebbs and flows over time. But here are some of the sources (public, private and otherwise) that I turn to in my day-to-day reading. I'm sure I'm leaving out quite a few sites, but this at least is a partial list.

NATIONAL PUBLICATIONS

IndexUniverse.com and IndexUniverse.eu: It goes without saying that IndexUniverse.com and IndexUniverse.eu are the best sites on the Web for information about ETFs and how they are used in portfolios.

IndexUniverse.com

IndexUniverse.eu

Slate/The Big Money: Those two Web sites aside, I start my day at Slate.com, and its sister finance site The Big Money. I find the daily news summary (and weekly magazine summaries) the best meta-journalism on the Web. They offer

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Notes from the Investment Underground Friday, April 17, 2009 Palermo Viejo, Buenos Aires, Argentina

Here comes subprime II… 3 toxic time bombs to come… The Richebächer legacy lives on… “Scamonomics” explored… Goldman bites the hand that feeds it… TARP loses 75% of taxpayers’ money… How to get $4,201 in your pocket by June 4… Banks’ top 4 accounting gimmicks… Short squeeze pushes market higher… John O’Neill on government’s deceit… James Dale Davidson: How to grab 19% yields on Treasurys (if you’ve got government connections)…  And more!

*** Rob Parenteau, the editor of the reincarnated Richebächer Letter, warns that we are in for the second wave of these toxic mortgages ahead. The first time subprime mortgages reset at a higher rate was in 2008 and the subsequent flurry of defaults sent banks into a tailspin.

Well, get ready, warns Rob. We still have “Option ARM” and “Alt-A” loan resets

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I'm glad you've seen the light, Jim.

 

It takes a big man to admit when he is wrong, and to yield to the wisdom of a younger generation.

Since you asked so nicely what I see in my great crystal ball, I'll tell you. But first, a clarification:

I didn't say that oil would fall to $25/barrel. I said that it could, and that it was nearly as likely to fall to $25/barrel as it was to go back to $100/barrel. I still think that's true, and with oil trading at $38.77/barrel, the market seems to agree.

Looking forward, I'll reiterate my other comment from before: I think the Dow will see 10,000 before it sees 6,000. I think that the direction and size of the fiscal stimulus is overwhelming right now, and that Helicopter Ben and his compadres at other central banks around the world will succeed in restarting

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