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Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Monday, July 25, 2005

Short Rates & Bank Liquidity

With the economy expanding and business short term loan
demand in a pronounced uptrend, The Fed still has
significant leeway to push rates higher without having
to drain the reserve base. A 4.00 - 4.25% FFR still looks
OK for year's end.

The banks remain in good shape as far as liquidity is
concerned. I define "liquidity at the margin" as the
ratio of C&I loans to US Gov't. securities holdings.
That ratio now stands at .85. This compares to a
reading of 1.48 at the last top in C&I demand in
March, 2001.

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