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Craig Dismuke, Vining Sparks SVP and chief economic strategist, on why he is rooting for bad jobs data on Friday so the Federal Reserve will make a mo...
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-- for bad news it could force the Fed's hand joining us now is that Craig dispute senior vice president chief economic strategist at mining sparks.
-- what number you -- in command on Friday and what numbers the trigger point where we think the Fed will have to do something more with QE3.
Well good morning and thanks for having us on.
We're looking for anywhere from eighty to 90000 and payroll growth.
-- the market right now is expecting around a 100000.
And you can argue that anything below -- 150000.
Is going to -- the Fed.
More into and in the more stimulus OK so the thought here is that.
A bad number comes to out that the Fed -- has a little panic and decides who got to print more easy money and they do some kind of QE3.
To.
To lower those longer term rates.
I know it's a very basic simple question but.
Why is -- that stock should -- off if the Fed does that when we think -- ultimately is selling the seeds of our economic disaster to have too much money flooding around the planet.
Sure well.
It's it.
If you get another weak number the Fed is already starting to look more -- starting starting to talk about possibly needing more quantitative easing.
They have extended Operation Twist at the last meeting they've they've really run their course the bad as much as they can do so -- more accommodation that they do will be new easing.
And if you look at what happened with QE wanting -- -- to -- we have two examples a look back at -- for the past couple years.
After the announcement of QE1 stocks went up 58%.
I was QE2 they ran up 26%.
The treasury yields they sold off and yields -- higher the -- -- went up 200 basis points with QE1 in 66 basis points with QE2.
So the way the markets respond to the Fed coming in and supporting the market as you see.
A little bit of more risk appetite -- -- Stocks running up -- -- commodity prices going up inflation expectations going up.
Because they're expanding the monetary base an -- treasury yields going down so certainly.
If we have a really bad report on Friday -- it does increase the chance the Fed comes in and does more easing.
And if you see that then and I think you're seeing some that this morning after yesterday's ISM report.
Yet today you're seeing stocks higher you're seeing gold higher.
And so it and then bond yields a little bit higher -- I think you're already seeing the start -- -- them.
OK so that's the way stock for react and then just one last longer term question given that QE1.
Sent stocks up but didn't revive the economy same for QE2 will actually work.
Oh that's -- great argument I would say no I think that it's -- at the point where more monetary policy more accommodation isn't going to help.
But at the end of the day the Fed has a mandate their mandate is to obtain the maximum out of of of employment without pushing inflation.
-- maintain.
A stable prices OK and are given that mandate it's really the only option they have guide published on luck thank you very much -- -- for being with us.
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