Archive for September, 2011

• Cyclicals Plunge to a New Low
  Eddy Elfenbein, September 22nd, 2011 at 11:22 am

  

• What Operation Twist Means for Gold
  Eddy Elfenbein, September 22nd, 2011 at 11:09 am

  In this post, I’m going to explain why I’m right and Larry Summers is wrong.

  On a point of economics.

  Last October, I unveiled my model for the price of gold (or as I like to think of it, a model for a model). I’m happy to see that the model has held up well since then. It’s one thing to predict the past, but it’s quite another thing for a model to hold up in your out-of-sample period.

  However, my gold model is more than just back-testing data. The key insight is that Gibson’s Paradox never went away. It still exists, just in a different form. I got this idea from a 1988 paper by Larry Summers and Robert Barsky, “Gibson’s Paradox and the Gold Standard.”

  Where I differ from Summers and Barsky is that I focused on short-term interest rates while they focused on long-term rates. Well, with Operation Twist we got a perfect test of who’s right.

  The Fed’s new plan is to sell short-term Treasury bills and buy long-term Treasury bonds. This means that long-rates will be pushed down and short-rates will be pushed up. If gold rises, then Barsky and Summers are right; if gold falls, then I’m right.

  Gold is down about $80 today to around $1,730 per ounce.

  I said in my original post that the price of gold is basically a political decision. The Fed can change the game anytime they want to. I can’t say whether this will lead to a long-term decline in gold. That will depend on inflation and interest rates. But for now, the gold market is clearly observing the short end of the yield curve.

  Here’s a look at my original post:

  One of the most controversial topics in investing is the price of gold. Eleven years ago, gold dropped as low as $252 per ounce. Since then, the yellow metal has risen more than five-fold, easily outpacing the major stock market indexes—and it seems to move higher every day.

  Some goldbugs say this is only the beginning and that gold will soon break $2,000, then $5,000 and then $10,000 per ounce.

  But the question is, “How can anyone reasonably calculate what the price of gold is?” For stocks, we have all sorts of ratios. Sure, those ratios can be off…but at least they’re something. With gold, we have nothing. After all, gold is just a rock (ok ok, an element).

  How the heck can we even begin to analyze gold’s value? There’s an old joke that the price of gold is understood by exactly two people in the entire world. They both work for the Bank of England and they disagree.

  In this post, I want to put forth a possible model for evaluating the price of gold. The purpose of the model isn’t to say where gold will go but to look at the underlying factors that drive gold. Let me caution that as with any model, this model has its flaws, but that doesn’t mean it isn’t useful.

  The key to understanding the gold market is to understand that it’s not really about gold at all. Instead, it’s about currencies, and in our case that means the dollar. Gold is really the anti-currency. It serves a valuable purpose in that it keeps all the other currencies honest (or exposes their dishonesty).

  This may sound odd but every currency has an interest rate tied to it. In essence, that interest rate is what the currency is all about. All those dollar bills in your wallet have an interest rate tied to them. The euro, the pound and the yen also all have interest rates tied to them.

  Before I get to my model, I want to take a step back for a moment and discuss a strange paradox in economics known as Gibson’s Paradox. This is one the most puzzling topics in economics. Gibson’s Paradox is the observation that interest rates tend to follow the general price level and not the rate of inflation. That’s very strange because it seems obvious that as inflation rises, interest rates ought to keep up. And as inflation falls back, rates should move back as well. But historically, that wasn’t the case.

  Instead, interest rates rose as prices rose, and rates only fell when there was deflation. This paradox has totally baffled economists for years. Yet it really does exist. John Maynard Keynes called it “one of the most completely established empirical facts in the whole field of quantitative economics.” Milton Friedman and Anna Schwartz said that “the Gibsonian Paradox remains an empirical phenomenon without a theoretical explanation.”

  Even many of today’s prominent economists have tried to tackle Gibson’s Paradox. In 1977, Robert Shiller and Jeremy Siegel wrote a paper on the topic. In 1988 Robert Barsky and none other than Larry Summers took on the paradox in their paper “Gibson’s Paradox and the Gold Standard,” and it’s this paper that I want to focus on. (By the way, in this paper the authors thank future econobloggers Greg Mankiw and Brad DeLong.)

  Summers and Barsky explain that the Gibson Paradox does indeed exist. They also say that it’s not connected with nominal interest rates but with real (meaning after-inflation) interest rates. The catch is that the paradox only works under a gold standard. Once the gold standard is gone, the Gibson Paradox fades away.

  It’s my hypothesis that Summers and Barsky are on to something and that we can use their insight to build a model for the price of gold. The key is that gold is tied to real interest rates. Where I differ from them is that I use real short-term interest rates whereas they focused on long-term rates.

  Here’s how it works. I’ve done some back-testing and found that the magic number is 2% (I’m dumbing this down for ease of explanation). Whenever the dollar’s real short-term interest rate is below 2%, gold rallies. Whenever the real short-term rate is above 2%, the price of gold falls. Gold holds steady at the equilibrium rate of 2%. It’s my contention that this was what the Gibson Paradox was all about since the price of gold was tied to the general price level.

  Now here’s the kicker: there’s a lot of volatility in this relationship. According to my backtest, for every one percentage point real rates differ from 2%, gold moves by eight times that amount per year. So if the real rates are at 1%, gold will move up at an 8% annualized rate. If real rates are at 0%, then gold will move up at a 16% rate (that’s been about the story for the past decade). Conversely, if the real rate jumps to 3%, then gold will drop at an 8% rate.

  Here’s what the model looks like against gold over the past two decades:

  

  The relationship isn’t perfect but it’s held up fairly well over the past 15 years or so. The same dynamic seems at work in the 15 years before that, but I think the ratios are different.

  In effect, gold acts like a highly-leveraged short position in U.S. Treasury bills and the breakeven point is 2% (or more precisely, a short on short-term TIPs).

  Let me make this clear that this is just a model and I’m not trying to explain 100% of gold’s movement. Gold is subject to a high degree of volatility and speculation. Geopolitical events, for example, can impact the price of gold. I would also imagine that at some point, gold could break a replacement price where it became so expensive that another commodity would replace its function in industry, and the price would suffer.

  Instead of explaining all of gold, my aim is to pinpoint the underlying factors that are strongly correlated with gold. The number and ratios I used (2% break-even and 8-to-1 ratio) seem to have the strongest correlation for recent history. How did I arrive at them? Simple trial and error. The true numbers may be off and I’ll leave the fine-tuning for someone else.

  In my view, there are a few key takeaways.

  The first and perhaps the most significant is that gold isn’t tied to inflation. It’s tied to low real rates which are often the by-product of inflation. Right now we have rising gold and low inflation. This isn’t a contradiction. (John Hempton wrote about this recently.)

  The second point is that when real rates are low, the price of gold can rise very, very rapidly.

  The third is that when real rates are high, gold can fall very, very quickly.

  Fourth, there’s no reason for there to be a relationship between equity prices and gold (like the Dow-to-gold ratio).

  Fifth, the TIPs yield curve indicates that low real rates may last for a few more years.

  The final point is that the price of gold is essentially political. If a central banker has the will to raise real rates as Volcker did 30 years ago, then the price of gold can be crushed.

  Technical note: If you want to see how the heck I got these numbers, please see this spreadsheet.

  Column A is the date.
  Column B is an index of real returns for T-bills I got from the latest Ibbotson Yearbook. It goes through the end of last year.
  Column C is a 2% trendline.
  Column D is adjusting B by C.
  Column E is inverting Column D since we’re shorting.
  Column F computes the monthly change the levered up 8-to-1.
  Column G is the Model with a starting price of $275 (in red).
  Column H is the price of gold. It goes up to last September.

• Morning News: September 22, 2011
  Eddy Elfenbein, September 22nd, 2011 at 5:21 am

  Fed Outlook, China Rattle Investors

  Constraints on Central Banks Leave Markets Adrift

  Greece Cuts Wages, Pensions to Ensure Aid Payment

  Italian Yield Spread Rises to Euro-Era High

  Asia’s Millionaires Form Family Offices

  Canadian Dollar Slides To Near 2011 Lows On US Fed’s Operation Twist

  Crude Oil Down After Fed Meeting; Shrugs Off U.S. Data

  Fed Sees ‘Significant’ Risks as It Eases Policy

  United Technologies Agrees to Buy Goodrich for $16.5 Billion

  Ouster of Hewlett-Packard C.E.O. Is Expected

  Logitech Issues Third Profit Warning In Six Months

  BofA’s Drop Below Citi Credit Rating Foreseen: Chart of the Day

  U.A.W. Shelves Chrysler Talks and Turns to Ford

  Joyless Holiday Retail Forecast

  Jeff Miller: More Causal Confusion: The FOMC Decision and the Market Reaction

  Phil Pearlman: Network TV Fall Line Up All About Mathematics

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• Investor Quiz
  Eddy Elfenbein, September 21st, 2011 at 11:39 pm

  Can you tell when the Fed’s announcement came out? Look real hard!

  

  The gold line is the S&P 500 and the black line is the Long-Term T-Bond ETF ($TLT).

• Oracle’s Earnings Call
  Eddy Elfenbein, September 21st, 2011 at 5:15 pm

  Here’s the guidance portion from yesterday’s earnings call from Oracle ($ORCL), courtesy of Seeking Alpha:

  Now to the guidance. And as many of you remember, we had a great second quarter last year with New License up 21% on a non-GAAP basis and up 33% and GAAP EPS up 27%. So let me just say that again. New License was up 21%, non-GAAP EPS was up 33% and GAAP EPS was up 27%. So those are pretty tough comparisons, and we don’t expect much help from currency because at this point, it looks like only 1% stays where it is.

  New Software License revenue growth is expected to range from 6% to 16% in growth. Hardware Product revenue growth is expected to range from flat to negative 5%. However, we do expect gross margins and profitability of our overall Hardware business to improve during the quarter as we continue to move away from selling low-margin commodity servers and focus on selling engineered systems like Exadata, Exalogic and SPARC Solaris system.

  Total revenue growth on a non-GAAP basis is expected to range from 4% to 8%. On a GAAP basis, we expect total revenue growth of 5% to 9%. Non-GAAP EPS is expected to be somewhere between $0.56 and $0.58, up from $0.51 last year. GAAP EPS is expected to be $0.44 to $0.46. This guidance assumes a GAAP and non-GAAP tax rate of 27%. Of course, it may end up being different.

• Bed Bath & Beyond Beats and Guides Higher. Again.
  Eddy Elfenbein, September 21st, 2011 at 4:36 pm

  Wow! Bed Bath & Beyond ($BBBY) did it again.

  The company just reported fiscal Q2 earnings of 93 cents per share which was a full nine cents more than Wall Street was expecting. This was another outstanding quarter for them. Three months ago when the last earnings report came out, the company told us to expect Q2 earnings to range between 77 and 82 cents per share (I had expected a range of 80 to 85 cents per share).

  Well, they blew that forecast out of the water! For last year’s Q2, they earned 70 cents per share. For this year’s Q2, net sales rose 8.2% to $2.314 billion. The all-important comparable store sales figure was 5.6%. Those are solid numbers. Year-over-year operating and net margins increased for the 10th-straight quarter.

  For Q3, the current quarter, Bed Bath & Beyond projects earnings of 82 to 87 cents per share. The Street was at 86 cents. BBBY also raised their full-year guidance to earnings growth of 22% to 25%.

  If you’re keeping score at home, this is the second time that BBBY has raised their full-year growth forecast this year. They went from forecasting an earnings increase of 10% – 15% to a revised range of 15% – 20% to the current range of 22% – 25%.

  Let’s look at the numbers: For 2010, Bed Bath & Beyond earned $3.07 per share, so the updated forecast translates to a range of $3.74 – $3.84 per share.

  Just to give you an example of how strong business has been, let’s compare this past quarter’s numbers with the one from exactly two years ago. In two years, sales are up 20.8%. Net margins have increased from 7.1% to 9.9%. That turns a 20.8% sales increase into a 69.2% profit increase.

  Here’s a look at BBBY’s quarterly numbers for the past few years:

  Quarter	Sales	Gross Profit	Operating Profit	Net Profit	EPS
  May-99	$356,633	$146,214	$28,015	$17,883	$0.06
  Aug-99	$451,715	$185,570	$53,580	$33,247	$0.12
  Nov-00	$480,145	$196,784	$50,607	$31,707	$0.11
  Feb-00	$569,012	$238,233	$77,138	$48,392	$0.17
  May-00	$459,163	$187,293	$36,339	$23,364	$0.08
  Aug-00	$589,381	$241,284	$70,009	$43,578	$0.15
  Nov-01	$602,004	$246,080	$64,592	$40,665	$0.14
  Feb-01	$746,107	$311,802	$101,898	$64,315	$0.22
  May-01	$575,833	$234,959	$45,602	$30,007	$0.10
  Aug-01	$713,636	$291,342	$84,672	$53,954	$0.18
  Nov-02	$759,438	$311,030	$83,749	$52,964	$0.18
  Feb-02	$879,055	$370,235	$132,077	$82,674	$0.28
  May-02	$776,798	$318,362	$72,701	$46,299	$0.15
  Aug-02	$903,044	$370,335	$119,687	$75,459	$0.25
  Nov-03	$936,030	$386,224	$119,228	$75,112	$0.25
  Feb-03	$1,049,292	$443,626	$168,441	$105,309	$0.35
  May-03	$893,868	$367,180	$90,450	$57,508	$0.19
  Aug-03	$1,111,445	$459,145	$155,867	$97,208	$0.32
  Nov-04	$1,174,740	$486,987	$161,459	$100,506	$0.33
  Feb-04	$1,297,928	$563,352	$231,567	$144,248	$0.47
  May-04	$1,100,917	$456,774	$128,707	$82,049	$0.27
  Aug-04	$1,273,960	$530,829	$189,108	$120,008	$0.39
  Nov-05	$1,305,155	$548,152	$190,978	$121,927	$0.40
  Feb-05	$1,467,646	$650,546	$283,621	$180,980	$0.59
  May-05	$1,244,421	$520,781	$150,884	$98,903	$0.33
  Aug-05	$1,431,182	$601,784	$217,877	$141,402	$0.47
  Nov-06	$1,448,680	$615,363	$205,493	$134,620	$0.45
  Feb-06	$1,685,279	$747,820	$304,917	$197,922	$0.67
  May-06	$1,395,963	$590,098	$148,750	$100,431	$0.35
  Aug-06	$1,607,239	$678,249	$219,622	$145,535	$0.51
  Nov-07	$1,619,240	$704,073	$211,134	$142,436	$0.50
  Feb-07	$1,994,987	$862,982	$309,895	$205,842	$0.72
  May-07	$1,553,293	$646,109	$154,391	$104,647	$0.38
  Aug-07	$1,767,716	$732,158	$211,037	$147,008	$0.55
  Nov-08	$1,794,747	$747,866	$203,152	$138,232	$0.52
  Feb-08	$1,933,186	$799,098	$259,442	$172,921	$0.66
  May-08	$1,648,491	$656,000	$118,819	$76,777	$0.30
  Aug-08	$1,853,892	$739,321	$187,421	$119,268	$0.46
  Nov-08	$1,782,683	$692,857	$136,374	$87,700	$0.34
  Feb-09	$1,923,274	$785,058	$231,282	$141,378	$0.55
  May-09	$1,694,340	$666,818	$142,304	$87,172	$0.34
  Aug-09	$1,914,909	$773,393	$222,031	$135,531	$0.52
  Nov-09	$1,975,465	$812,412	$245,611	$151,288	$0.58
  Feb-10	$2,244,079	$955,496	$370,741	$226,042	$0.86
  May-10	$1,923,051	$775,036	$225,394	$137,553	$0.52
  Aug-10	$2,136,730	$874,918	$296,902	$181,755	$0.70
  Nov-10	$2,193,755	$896,508	$305,110	$188,574	$0.74
  Feb-11	$2,504,967	$1,076,467	$461,052	$283,451	$1.12
  May-11	$2,109,951	$857,572	$288,948	$180,578	$0.72
  Aug-11	$2,314,064	$950,999	$371,636	$229,372	$0.93

  Here’s a look at the company’s recent trailing four-quarter earnings-per-share trend. As you can see, BBBY has bounced back very well since the recession.

  The red lines represents the high and low ends of the company’s forecast. Judging by the trend, today’s forecast seems rather conservative. Earnings for the first half are up 35% so a forecast of 22% – 25% for the entire year seems very doable.

  

  I’m growing slightly cautious about BBBY’s outlook. Not that things are about to go bad. Instead, I think it’s prudent to assume that the company is closer to the top of its business cycle than the bottom. For example, here’s a look at BBBY’s trailing four-quarter net profit margin:

  

  The net margins seem to top off around 10% or so and we’re getting close to that. This means that the enormous tailwind the earnings get from smaller sales increases will start to fade. Also, the company’s sales growth rate, while still healthy, has noticeably decelerated.

  Don’t be too afraid of a downturn in the earnings cycle. Bear in mind that the earnings peaked in the last cycle 15 quarters ago. Since then, BBBY’s earnings are up close to 62% which is 13.7% annualized. That’s pretty darn good.

  Here’s a key section from the earnings call, courtesy of Seeking Alpha.

  The following are our major planning assumptions for the remainder of fiscal 2011: one, including the 24 stores opened so far this year, we anticipate that the total number of new store openings will now be approximately 40 stores across all of our concepts. Currently, we believe our fiscal 2011’s store openings by concept will be substantially similar to fiscal 2010, with a slight shift to several more buybuy BABY stores and slightly fewer Bed Bath & Beyond stores.

  As the year progresses, and we gain greater visibility, the total number of stores that we will open may be updated. We will continue to place Harmon Face Values health and beauty care offerings in stores across all of our concepts. As always, we remain flexible to take advantage of real estate opportunities that may arise; two, we expect to continue our program of expanding, renovating and/or relocating a number of our stores in fiscal 2011; three, we are modeling a 2 to 4 percentage increase in comparable store sales for the third and fourth quarters of fiscal 2011; four, based on these comparable store sales assumptions, we are modeling consolidated net sales to increase by 5% to 7% in the third quarter and by 4% to 6% in the fourth quarter; five, assuming these sales levels, in addition to planning the continuation of the shift and the mix of merchandise sold to lower margin categories, we are modeling our operating profit margin to slightly leverage for the fiscal third and fourth quarters; six, the third and fourth quarter tax provisions are estimated in the mid-to high 30s percent range — percentage range, with expected variability as taxable events occur; seven, capital expenditures for fiscal 2011, principally for new stores, existing store refurbishment, information technology enhancements, including increased spending on our interactive platforms and other projects, continue to be planned at approximately $250 million, but may reach as high as $300 million, depending on the composition and ultimate timing of projects; eight, depreciation for fiscal 2011 is now estimated to be in the range of approximately $180 million to $190 million; nine, we expect to generate positive operating cash flow in fiscal 2011 and continue to fund operations entirely from internally-generated sources; 10, we expect to continue our share repurchase program, which may be influenced by several factors, including business and market conditions and continue to model completion of the current authorization to early fiscal 2013.

  Based on these and the other planning assumptions, we are now modeling net earnings per diluted share to be in the range of approximately $0.82 to $0.87 for the fiscal third quarter of 2011. For all of fiscal 2011, we are modeling net earnings per diluted share to increase in the range of approximately 22% to 25%, up from the previous model of approximately 15% to 20%.

  Before concluding this afternoon’s call, a few additional comments relative to our recently concluded fiscal second quarter. Our balance sheet and cash flows remain strong. We ended the fiscal second quarter with cash and cash equivalents and investment securities of approximately $1.9 billion.

• Today’s Fed Statement
  Eddy Elfenbein, September 21st, 2011 at 2:23 pm

  Eight minutes late:

  Information received since the Federal Open Market Committee met in August indicates that economic growth remains slow. Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.

  Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

  To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

  To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.

  The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

  The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate.

  Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action were Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who did not support additional policy accommodation at this time.

• GOP Letter to Bernanke
  Eddy Elfenbein, September 21st, 2011 at 1:01 pm

  Here’s the text of the letter sent by top Republicans to Ben Bernanke:

  Dear Chairman Bernanke,

  It is our understanding that the Board Members of the Federal Reserve will meet later this week to consider additional monetary stimulus proposals. We write to express our reservations about any such measures. Respectfully, we submit that the board should resist further extraordinary intervention in the U.S. economy, particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action and quantifiable benefits to the American people.

  It is not clear that the recent round of quantitative easing undertaken by the Federal Reserve has facilitated economic growth or reduced the unemployment rate. To the contrary, there has been significant concern expressed by Federal Reserve Board Members, academics, business leaders, Members of Congress and the public. Although the goal of quantitative easing was, in part, to stabilize the price level against deflationary fears, the Federal Reserve’s actions have likely led to more fluctuations and uncertainty in our already weak economy.

  We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy. Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers. To date, we have seen no evidence that further monetary stimulus will create jobs or provide a sustainable path towards economic recovery.

  Ultimately, the American economy is driven by the confidence of consumers and investors and the innovations of its workers. The American people have reason to be skeptical of the Federal Reserve vastly increasing its role in the economy if measurable outcomes cannot be demonstrated.

  We respectfully request that a copy of this letter be shared with each Member of the Board.

  Sincerely,

  Sen. Mitch McConnell, Rep. John Boehner, Sen. Jon Kyl, Rep. Eric Cantor

  That’s actually far more modest than some folks are making it out to be. Naturally, we’re hearing that this kind of thing is a threat to the Fed’s independence.

  Personally, I think too much is made of the Fed’s “independence.” The Fed isn’t independent — it’s a creation of Congress. The Federal Reserve Act is an act of Congress. As such, I think Congress is free to interfere as much as they want. Basically, if the American people want 20% inflation, they should get it (good and hard).

  What the Fed needs is latitude to carry out its goals, but the goals should unquestionably be from Congress. Another idea of asserting Congressional control is Rep. Barney Frank’s idea to strip voting power from the regional bank presidents.

  The Federal Reserve has seven governors, but the Federal Open Market Committee, which is the interest rate policy group, has 12 members. Those 12 members consist of the seven Fed governors plus five of the 12 regional bank presidents. The head of the New York Fed is always a member but the remaining four slots rotate among the other regional bank presidents.

  As you might expect, since the bank presidents represent their banks, they have historically been in favor of sound money — at least compared with the governors who are appointed by the president.

• Oracle Breaks $30
  Eddy Elfenbein, September 21st, 2011 at 10:34 am

  Despite my over-optimism, shares of Oracle ($ORCL) are having a good morning so far. The stock opened at $29.84 and has been as high as $30.63. Currently, the stock is at $30.21 which is a 6.56% gain from yesterday’s close. I’m still keeping my buy price at $30 per share.

• Morning News: September 21, 2011
  Eddy Elfenbein, September 21st, 2011 at 7:02 am

  Talks End in Greece With No Deal, but Progress Is Reported

  BOE Leans Toward Stimulus

  Russia Faces Recession for Two Years With $50 Oil, IMF Says

  German 2-Year Yields Below 0.5% a Third Day on Greek Loan Talks

  Japan Unveils Measures on Yen Strength

  Lloyd’s of London Pulls Euro Bank Deposits

  Treasury 30-Year Bonds Drop as Investors Cut Holdings Before Fed Statement

  Bernanke Has Few Tools to Heal Economy

  G.O.P. Urges No Further Fed Stimulus

  SABMiller To Buy Foster’s For A$9.9 Billion

  G.M. Plans to Develop Electric Cars With China

  UBS Board to Focus on Postscandal Plan

  Capital One Denies ING Deal Would Make It ‘Too Big to Fail’

  A Banker’s Secret Wealth

  Poker Web Site Cheated Users, U.S. Suit Says

  Paul Kedrosky: Satyajit Das on SocioFinancial Inflections

  Markets CANNOT be Tamed, Only Managed

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