cnbc fed survey - january 29, 2013

7/29/2019 CNBC Fed Survey - January 29, 2013

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CNBC Fed Survey January 29, 2013Page 1 of 39

FED SURVEYJanuary 29, 2013

These survey results represent the opinions 52 of the nations top money managers, investment

strategists, and professional economists.

They responded to CNBCs invitation to participate in our online survey. Their responses were collecte

on January 23-26, 2013. Participants were not required to answer every question.

Results are also shown for identical questions in earlier surveys.

This is not intended to be a scientific poll and its results should not be extrapolated beyond those whodid accept our invitation.

1.For all of 2013, what is the total amount of additional assetpurchases the Federal Reserve will have made?

0%

5%

10%

15%

20%

25%

30%

35%

Billlions of dollars

Average:$858.8 billion


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2.When do you expect the Federal Reserve will completely stoppurchasing assets?

0%

5%

10%

15%

20%

25%

30%

35%

2013 -Q1

2013 -Q2

2013 -Q3

2013 -Q4

2014 -Q1

2014 -Q2

2014 -Q3

2014 -Q4

2015 orlater

Average:November

2013


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3.The Federal Reserve will:

22%

76%

2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

End its purchases in a

single month

Gradually reduce (taper)

its purchases

Don't know/unsure


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(For those who believed the Fed will taper) In what month do

you expect the Fed to begin tapering its purchases?

0%

5%

10%

15%

20%

25%

Average:December 2013


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4.At what unemployment rate will the Fed halt its assetpurchases?

In December survey, 6% of respondents selected Fed purchases will not react to theunemployment rate. That option was not available in the January survey.

0%

10%

20%

30%

40%

50%

60%

December 11, 2012 January 29, 2013

AveragesDecember: 6.5%January: 6.8%


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5.At what inflation rate will the Fed halt its asset purchases?

In December survey, 20% of respondents selected Fed purchases will not react to theinflation rate That option was not available in the January survey.

0%

5%

10%

15%

20%

25%

30%

35%

40%


AveragesDecember: 3.4%January: 2.6%


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6.The Fed is now tying its policies to economic targets ratherthan a calendar date. In general:

84%

6%

10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Linking policy to economictargets leads to better

monetary policy

Linking policy to calendardates leads to better

monetary policy

Don't know/unsure


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7.When it comes to the Feds use of economic targetsspecifically:

Comments on Questions 6 & 7:

Dan Greenhaus, BTIG: Too many people think the economic targets ar"triggers" rather than "references" and the Fed doesnt appear to be doinenough to counter this erroneous view.

38%

48%

10%

4%

0%

10%

20%

30%

40%

50%

60%

The Fed is clear The Fed could bemore clear

The Fed is not clearat all

Don't know/unsure


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David Kotok, Cumberland Advisors: 6.5 percent unemployment is

clear. Inflation level of 2.5 percent is fuzzy. Clarity would require moredefinition.

Mike Dueker, Russell Investments: Questions 6 and 7 shoulddistinguish between nominal and real economic targets; specifying a realvariable, such as unemployment, is a bad idea - too much like the 1970sIt would be a fine idea to target nominal GDP growth at 4.5-5 percent.

John Augustine, Fifth Third Asset Management: The Fed is complici

in financial repression and will continue to be until such time that thefederal government brings its balance sheet under control. That is what driving Fed policy more than the economy.

Subodh Kumar, Subodh Kumar & Associates: News conferences havnot led to clarity.

Stuart Hoffman, PNC: Some ambiguity around below a 6.5 percentunemployment rate and above a 2.5 percent inflation outlook is

necessary.

Rob Morgan, Fulcrum Securities: The Fed using economic targets todrive the economy is similar to using a rear-view mirror to drive a car.

Joel Naroff, Naroff Economic Advisors: The Fed has indicated that jubecause a target is hit, that doesn't mean policy will automatically bechanged. The Committee should make it clearer that is what they will doand what they are referring to as most people still think the targets are

hard targets.

Scott Wren, Wells Fargo Advisors: Using a specific target is a badidea....a general target area gives the Fed more flexibility.


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James Paulsen, Wells Capital Management: I like the Fed using

economic targets to set policy but not one of the most "lagging" economreports (the unemployment rate). Rather, a much better policyprescription would be for the Fed to use a combo of real GDP and inflatio(or a good leading proxy) or just nominal GDP growth.

Bob Baur, Principal Global Investors: Linking policy to economictargets leads to monetary policy falling behind, especially when thetargets are lagging indicators like inflation and unemployment.

Neal Soss, Credit Suisse: The Fed has left itself a great deal of policydiscretion, even as it has defined quantitative economic thresholds.

Diane Swonk, Mesirow Financial: The Fed has four decisions: when tostop expanding its balance sheet, when to stop backfilling expiring assetsfrom its balance sheet, when to shrink its balance sheet, and when toraise rates. Its important to understand the subtleties of those actionsand who is voting when.

Donald Luskin, Trend Macrolytics: The reality is that the Fed canchange its targets at any time, so what's the point really?

John Kattar, Ardent Asset Advisors: I'm sure I'm in the minority, butdon't like the link to economic targets because I believe it is too open-ended and dangerous. I prefer the closure that calendar dates provide,while not precluding the option that policy can be extended if conditionswarrant.

Lynn Reaser, Point Loma Nazarene University: The Fed is notconsistent in using economic targets. It has set them as the primarytriggers for changing the fed funds target, but is maintaining more generstatements (substantial improvement in the labor market) to guide theduration of its QE program.


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Stephen Gallagher, Societe Generale: In question two, you asked

when the Fed will completely stop asset purchases. I interpreted this ascompletely stopping net purchases. The Fed will continue buying toreplace maturing Treasury and agency securities for some time longer.Also on gradual tapering, I assume more of a two-step process, endingagency-MBS purchases first, followed by Treasury purchases later. That not gradual in my mind, but it is not all at once either.

Mark Vitner, Wells Fargo: The Fed has given us no indication ofwhether they will react to changes in the economy or try to anticipate

them. Monetary policy works with a lag!

John Silvia, Wells Fargo: What is the benchmark for inflation?

Stephen Stanley, Pierpont Securities: I don't find the economicthreshold approach particularly appealing but it is better than the date-based approach.

Barry Knapp, Barclays PLC: Very skeptical on the stability of the Philli

Curve - HH was bad public policy.

John Lonski, Moodys: The interpretation of targets varies. What ifinflation surges because of an unsustainable jump in energy prices, as in2008? What if the unemployment rate is skewed lower by an unexpectedswelling of labor force dropouts?

Joseph LaVorgna, Deutsche Bank: The Fed has remained sufficientlybroad in its economic targets in order to maintain flexibility.


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8.Do you believe further quantitative easing can help lower theunemployment rate?

36%

59%

5%

37%

59%

4%

34%

58%

8%

0%

10%

20%

30%

40%

50%

60%

70%

Yes No Don't know/unsure

Sept 12, 2012 Dec 11 Jan 29, 2013


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Do you believe further quantitative easing can help mortgage

rates?

59%

33%

9%

54%

42%

4%

0%

10%

20%

30%

40%

50%

60%

70%




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Do you believe further quantitative easing can help lower bond

yields?

58%

30%

13%

47% 47%

6%

0%

10%

20%

30%

40%

50%

60%

70%




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Do you believe further quantitative easing can help increase

stock prices?

69%

20%

10%

0%

10%

20%

30%

40%

50%

60%

70%

80%



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9.Would further purchases of government or mortgage-backedsecurities by the Fed impair market pricing and overallfunctioning?

43%

52%

5%

59%

28%

13%

40%

16%

36%

8%

0%

10%

20%

30%

40%

50%

60%

70%

Yes No It already is Don't know/unsure

September 12, 2012 December 11, 2012 January 29, 2013


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10.Would further QE cause inflation?

35%

46%

9%

11%

44%

36%

6%

14%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Yes No It already is Don't know/unsure



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11.When it comes to the debate over the U.S. debt ceiling, do yobelieve the Congress will:

86%

8%6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Increase the debt ceilingevery time it is reached

this year

Refuse at some point thisyear to raise it

Don't know/unsure


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12.When it comes to spending cuts, do you believe the UnitedStates needs to:

59%

18%20%

2%0%

0%

10%

20%

30%

40%

50%

60%

70%

Enact spending

cuts this year

that take effectthis year

Enact spending

cuts this year

that take effectnext year

Enact spending

cuts that take

effect in 2015or later

Does not need

to enact any

spending cuts

Don't

know/unsure


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13.When it comes to revenue increases, do you believe theUnited States needs to:

16% 16%14%

53%

0%0%

10%

20%

30%

40%

50%

60%

Enact revenue

increases this

year that takeeffect this year

Enact revenue

increases this

year that takeeffect next year

Enact revenue

increases that

take effect in2015 or later

Does not need

to enact any

revenueincreases

Don't

know/unsure


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14.What impact, if any, do you believe recent revenue increaseswill have on U.S. GDP this year?

0%

5%

10%

15%

20%

25%

30%

35%

Average:-0.6%


22/39



15.When it comes to the budget deficit, do you believe the UniteStates:

80%

16%

4%0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Should urgently

enact a plan that

puts it on a pathtoward a

sustainable budgetdeficit

Has at least a

couple of years

before it must enactsuch a plan

Does not need to

enact a plan that

puts it on a pathtoward a

sustainable budgetdeficit

Don't know/unsure


23/39



16.When it comes to Europe, do you believe the lack of a currencrisis mentality is:

30%

62%

8%

0%

10%

20%

30%

40%

50%

60%

70%

A sign of real progress Only temporary Don't know/unsure


24/39



17.Where do you expect the S&P 500 stock index will be on ?

1451

1497

1480

1505

1547

June 30, 2013 December 31, 2013

July 31 2012 Sept 12 Dec 11 Jan 29 2013


25/39



18.What do you expect the yield on the 10-year Treasury notewill be on ?

1.98%2.06%

1.90%

2.09%

2.31%

June 30, 2013 December 31, 2013

July 31 2012 Sept 12 Dec 11 Jan 29 2013


26/39



19.What is your forecast for the year-over-year percentagechange in real U.S. GDP for ?

+2.59%

+2.74%

+2.55%

+2.26%

+2.21%

+1.91%

+2.08%

+2.56%

2013

2014

January 23, 2012 March 16 April 24 July 31 Sept 12 Dec 11 Jan 29, 2013


27/39



20.When do you think the FOMC will first increase the fed fundsrate?

Dont know/unsureDec 11 survey: 9%

Jan 29 survey: 4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%


Averages:Dec 11: 2015 - Q1Jan 29: 2015 - Q1


28/39



21.When do you think the Federal Reserve will make its firstplanned decrease in the size of its balance sheet?

Dont know/unsureDec 11 survey: 15%

Jan 29 survey: 6%

0%

2%

4%

6%

8%

10%

12%

14%

16%


Averages:Dec 11:

2014 - Q4

Jan 29:2015 - Q1


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22.Where do you expect the fed funds target rate will be on ?

0.41%

0.42%

0.27%

0.20%

0.33%

0.14%

0.27%

0.16%

0.21%

0.16%

0.17%

0.0% 0.1% 0.2% 0.3% 0.4% 0.5%

June 302013

Dec 31

2013

Jan 23 2012 March 16 April 24 July 31 Sept 12 Dec 11 Jan 29 2013


30/39



23.In the next 12 months, what percent probability do you placeon the U.S. entering recession? (0%=No chance of recession,100%=Certainty of recession)

34.0%

36.1%

25.5%

20.3%

19.1%

20.6%

25.9%

26.0%

28.5%

20.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Aug11,

2011

Sept19

Oct 31 Jan23,

2012

March16

April24

July31

Sept12

Dec 11 Jan29,

2013


31/39



24.What is the single biggest threat facing the U.S. economicrecovery?

Other responses:

Political miscalculation

Gridlock in DC Washington paralysis on fiscal issues Stop. There are no fracking headwinds for the economy

this year

Fiscal overkill in general; taxes, spending cuts,regulatory overreach, and continuing policy uncertainty

China

10%

42%

20%

0%2%

0%2%

6% 6%

12%

0%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


32/39



25.What grade would you give to outgoing TreasurySecretary Timothy Geithner?

Numerical average based on A=4, B=3, C=2, D=1, F=0

11%

28%

40%

11% 11%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

A B C D F

Average:2.2


33/39



26.How do you grade the choice of White House Chief ofStaff Jack Lew to be Treasury Secretary?

Numerical average based on A=4, B=3, C=2, D=1, F=0

4%

28%

39%

15%

13%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

A B C D F

Average:2.0


34/39



27.What is your primary area of interest?

Comments:

Bob Baur, Principal Global Investors: There is a decent chance

that the U.S. economy will get up a head of steam sometime in thesecond half and above trend growth early in 2014. Headwinds arefading and pent-up demand is surfacing.

Robert Brusca, Fact and Opinion Economics: God help us.

Mike Dueker, Russell Investments: The Fed should stop using areal variable (the unemployment rate) as a trigger for monetarypolicy and announce that the reason for quantitative easing is to get

nominal GDP growth up to 4.5-5 percent. This rate of nominalspending growth would fit with the dual mandate by aiming at 2percent trend inflation and leaving room for at least 2.5 percent realgrowth. The key feature is that it is a nominal target that allowsmarket forces to determine the precise division of nominal spendinginto inflation and real growth. This nominal target is both a good

Economics

57%

Equities

20%

Fixed Income

8%

Currencies2% Other

12%


35/39



way to explain why the first fed funds rate hike is unlikely before2015 and to explain why the Fed is currently in an asset-purchase

program - because nominal GDP growth has not made the grade inthis recovery.

Mike Englund, Action Economics: The primary headwindrestraining U.S. investment, confidence, and GDP growth ismounting U.S. government insolvency combined with a lack ofpolitical inertia for addressing it that leaves an expectational blackhole at the end of this cycle. If federal budgets can't get downsizedsharply before the next recession, the cycle will end with a sharp

dollar drop, inflation and interest rate rise, and deficit surge thatleave little incentive for business to "lever up" now.

Kevin Giddis, Raymond James/Morgan Keegan: We are clearlyseeing a shift of market focus from an economic concern to a fiscalconcern. This is actually good news, because instead of beingworried about "if" there will be economic growth, we have shifted tobeing concerned with "sustaining" economic growth.

Stuart Hoffman, PNC: Defanged fiscal cliff and debt ceiling-induced Treasury default will not suck the life blood out of an anemicU.S. expansion.

Lee Hoskins, Pacific Research Institute: Federal Reserve policyis turning into a riddle wrapped in a conundrum.

Barry Knapp, Barclays PLC: Due to a combination of regulatoryconstraints and monetary policy efficacy limitations, I do not believe

the Fed can reduce the effective mortgage rate or the primary-secondary spread. They can reduce the real Treasury rate butprobably not the nominal rate. They can boost valuation of stockswith bond-like characteristics but not the cyclical sectors or thebroad indices.


36/39



David Kotok, Cumberland Advisors: Add uncertainty index toyour questionnaire. It is rising and now has become a widely

watched indicator. DoesGoodhart's lawnow apply?

Subodh Kumar, Subodh Kumar & Associates: Urgency remainsfor fiscal restructuring in U.S. and Europe and export/domestic re-balance in China. Investors should be less complacent than currentbond and stock markets indicate.

John Lonski, Moody's: Possible policy mistakes in the U.S. andEurope are the biggest risk to the adequacy of economic growth in

2013.

Drew Matus, UBS Investment Research: The advantage theUnited States has with regard to its fiscal situation is that, if enacted,a long-term plan would allow the Fed to accrue the benefits themarket provides to the fiscally responsible long before any tighteningwould take place.

Rob Morgan, Fulcrum Securities: Fed QE programs will end this

year, and there is an outside chance rates will be hiked this year aswell.

Joel Naroff, Naroff Economic Advisors: Instead of focusing onthe negatives coming from the tax increases and spending cuts weshould consider the positive impacts on business investment andhiring from the removal of the uncertainties that constrainedactivities over the past six months. Faster job growth andrebounding capital expenditures could overcome the slowdown that

the tax increases and likely spending cuts present.

James Paulsen, Wells Capital Management: I think the Fed canstill argue it needs to be accommodative (growth is still too slow andunemployment is still too high) but I don't think the Fed can supportan argument that it still needs to implement "crisis-like" policies in
http://en.wikipedia.org/wiki/Goodhart's_lawhttp://en.wikipedia.org/wiki/Goodhart's_lawhttp://en.wikipedia.org/wiki/Goodhart's_lawhttp://en.wikipedia.org/wiki/Goodhart's_law


37/39



an economy which is no longer in crisis. Why continue to employNational Emergency-like policies (like zero interest rate pledges,

alternative asset purchases, continuing to expand a massive balancesheet) when there is no longer a national emergency? Why won'tthe Fed "normalize" policy (even if the normal policy is stillaccommodative) in an economy which is still challenged but nolonger in crisis? If they did this - stayed accommodative but only ina more normal recovery sense - I think business, consumer andinvestor confidence would improve significantly. That wouldultimately be more effective in promoting growth than any monetarypolicy the Fed is currently employing.

Lynn Reaser, Point Loma Nazarene University: The Fed's use ofQE has both helped the housing market with low mortgage rates andboosted stocks and household wealth. But it could be a high-riskstrategy by spawning either another asset price bubble or futureinflation. The "exit" strategy could be even more difficult than the"fix-it" strategy the Fed has deployed to help the economy andfinancial markets. The ultimate need to rein in the balance sheetand raise interest rates could be both economically and political

treacherous.

John Roberts, Hilliard Lyons: With the recovery now becominglong in the tooth, we believe that a significant recession could be inthe cards by the latter half of 2014. Regulatory/policy mistakes thatthe Fed cannot overcome are the most likely genesis for such arecession at this point, although we also cannot discount aregression to the mean on profit margins causing a profit slowdownand a resulting economic malaise.

Chris Rupkey, Bank of Tokyo-Mitsubishi: Description of theeconomy should see just minor changes and the write-ups areincreasingly irrelevant as policy is on autopilot until unemploymentgets to 6.5 percent. We are thinking George dissents picking up thetorch passed from Hoenig. It is questionable if the man from St.


38/39



Louis takes a step out of the pack and registers anovote. It's abig step. Novotes still don't go down well at the Board no matter

how many times members say they are grateful for outlier opinions.They are in their own bubble down there talking to themselves andconvinced in the rightness of their cause. Sometimes I think theywill keep rates low until poverty in America is eliminated. Not verycentral bankery.

John Silvia, Wells Fargo: The Fed needs to clarify the inflationtarget and stick with it.

Hank Smith, Haverford Investments: Taxes and regulations arebig potential threats to GDP growth. But the biggest threats areexternal shocks which by definition are unknowable andunforecastable.

Neal Soss, Credit Suisse: Stopping asset purchases well beforethe end of 2013 likely requires more robust job performance thanweve seen to date. But continued labor market improvements, evensluggish ones, may warrant trimming the Feds $85 billion monthly

shopping budget, perhaps as soon as mid-year.

Diane Swonk, Mesirow Financial: Lew is important because he isa budget guy, and as much as he may not have done a dealrecently, he has negotiated bi-partisan deficit reduction. He knowsboth sides of the ledger must be addressed.

Mark Vitner, Wells Fargo: Growth should strengthen once weclear the fiscal hurdles at the start of the year. Businesses are

extremely tentative, however, and generally suspicious ofWashington. Few feel like taking big risks.

Scott Wren, Wells Fargo Advisors: While the U.S. can borrowgobs of money at low rates now and the equity market has tradedhigher with the Fed's help, I think sooner than later the market will


39/39


begin to demand that our elected officials begin to address the debtand deficit. Clearly, at some point, the financial markets will become

unsettled as our debt skyrockets and our refunding needs balloon.As history shows, markets can go from jubilant to panic-mode in theblink of an eye.

cnbc fed survey - january 29, 2013

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