Friday, September 14, 2007

The Next Week - FRB - OED - Alan Greenspan

They’re just dicking around with numbers in a system that’s so complex it defies quantification — this is probably worse than doing nothing. - The Chairman MaoXian

Sept. 13 (Bloomberg) -- Alan Greenspan trusted his instincts. Ben Bernanke trusts the MAQS.

For the past several days, the MAQS -- a group of analysts in the Federal Reserve's Macroeconomic and Quantitative Studies unit -- have run a series of what-if scenarios on the U.S. economy that will play a critical role in next week's interest- rate decision.

The distinction between Bernanke and Greenspan, 81, has roots in their different resumes and competing views about managing risk and uncertainty. Greenspan was a business economist before he became Fed chairman in 1987 -- one of his offices was on Wall Street -- and he read the economy like an income statement. His decisions were often based on close readings of disparate data, and his methods defied quantification. Greenspan's memoirs of his years at the Fed will be released on Sept. 17, the eve of the rate decision.

Bernanke, a former head of the economics department at Princeton University, has spent most of his career in academia. His analysis is based on models, and he has greater confidence in forecasts and statistical methods

The simulations will supplement the forecast handed to policy makers at the start of their Sept. 18 meeting and may determine the size of the rate cut almost universally predicted by Wall Street economists.

Statistical modelers such as Bernanke have their own icon to draw on: the 18th century British mathematician and Presbyterian minister Thomas Bayes. Bayesians are more likely to quantify uncertainty by deriving probabilities. There is also a role for constant updating with new information to hone a forecast. Bayesian theory is used in hurricane tracking, for example.

NOTE: This will finally be hashed in Wednesday's Stock Market - EXCEPT - it's not that simple - Friday, next, is Options Expirations Day - Large options traders and writers (big brokerage houses, etc) will try to "pin" stock prices - pinning is trying to freeze a certain price until sometime near the end of Friday's trading.

So, next week is a good week to stay in Cash (Cash is a position) and The Monday, after Monday Next, after All the big publications do their thing, and the talking heads swear they never said what they said the week before - So Monday September 24th would be a good time...OH? The large funds will be doing window dressing for their 3rd quarter ending 6 days later. Then we are officially in 3rd Quarter Earnings Season October 1st......It's effect will change everything...Then - we should (Maybe) begin one of the great recessions and devaluation of the $1, and maybe we'll finally see $100 oil. Oh, it's not that dark, things have a way of working out.

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