Ed’s Daily Notes for August 13th

CNBC: A ‘dove-nado’ of Fed speak could be more powerful than QE

An interesting view on the upcoming Federal Reserve’s QE tapering:

Two Federal Reserve economists are telling the Street what it already suspected: Dovish talk may be even more powerful than quantitative easing.

In a research note, the economists wrote that the Federal Reserve’s asset purchases, or quantitative easing, probably provided a “modest boost to economic growth and inflation.” However, the effects of QE would depend in large part on the Fed’s interest-rate guidance, the note said.

“[E]stimates from a macroeconomic model suggest that such interest- rate forward guidance probably has greater effects than signals about the amount of assets purchased,” the economists wrote in the paper, released by the San Francisco Federal Reserve.

…The Fed economists pointed to QE2, a $600 billion large scale asset-purchase program, noting it added about 0.13 percentage points to real growth in late 2010 and 0.03 percentage points to inflation.

“Our analysis suggests that forward guidance is essential for quantitative easing to be effective. Without forward guidance, QE2 would have added only 0.04 percentage point to GDP growth and 0.02 to inflation,” the economists wrote in the paper.

Considering the bond market’s reaction to the Fed’s tapering announcement, I would say there are other side effects to be considered. If treasuries start rising, that will increase the cost of the U.S. debt, which will in turn create a drag on the economy. An argument can be made that QE didn’t pump the economy, but it might have prevented other economic problems.

Don’t get me wrong: I am no fan of QE. I think it masks our economic problems. But I am in the minority with the view that sometimes we need to let the economy heal itself.

CNBC (via Yahoo Finance): High-speed tube travel not as crazy as it sounds

There has been a lot of chatter about Tesla CEO Elon Musk’s idea for a “hyperloop”. While I like the idea, I think we are at least a decade or longer from seeing any progress made on it. As the article above points out, there is still a ton of government bureaucracy to go through. I wouldn’t look for investments in it yet, because I doubt the private sector could accomplish this without strong government backing.

Wall Street Cheat Sheet: Silver Wheaton Earnings Preview

Something for me to look forward to, as I have Silver Wheaton in my 401k:

Silver Wheaton (NYSE:SLW) will report earnings after markets close on Wednesday, August 14th.

…Analysts expect earnings of $0.26 per share on revenues of $194.17 million.